2007 ANALYZING CORPORATE SOCIAL RESPONSIBILITY POLICIES IN AVIATION: A focus on Carbon Offset Programs in Australia
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2007
ANALYZING CORPORATE SOCIAL RESPONSIBILITY
POLICIES IN AVIATION:
A focus on Carbon Offset Programs in Australia
marina
Marina Oosterhuis
1
Title page Analyzing Corporate Social Responsibility Policies in Aviation: A focus on Carbon Offset Programs in Australia. Dissertation. I hereby declare that this dissertation is wholly the work of Marina Oosterhuis. Any other contributors or sources have either been referenced in the prescribed manner or are listed in the acknowledgements together with the nature and the scope of their contribution. M.H. Oosterhuis Student at the NHTV University of Applied Sciences Master program Tourism Destination Management December 2007 Analyzing Corporate Social Responsibility Policies in Aviation: A focus on Carbon Offset Programs in Australia 2
Preface Aviation has always been one of my passions. At the same time I have been worrying about the topic of climate change. My main attitude has been to neglect the topic, but because it has been debated quite vividly during the past year, I considered that it might be an interesting topic for my dissertation. I hope this research contributes to some insights on the practical implementation of climate change measures in the aviation industry. Analyzing Corporate Social Responsibility Policies in Aviation: A focus on Carbon Offset Programs in Australia 3
Executive summary Climate change and aviation is recently a much discussed topic, especially with Al Gore‟s documentary “Inconvenient Truth” about climate change raising an alarm throughout all the Western countries and beyond that. With this growing concern, the contribution of aviation is questioned. Therefore this research study analyzes the corporate social responsibility policies from airlines regarding climate change with the help of passengers‟ perceptions. This study has mainly been the result of desk – research. Also, it includes the results of a survey that was conducted. The concept of climate change is complex. In this research study, it is a long –term change in climate. Aviation is estimated to contribute less than 2% of global CO² emissions, but the likely scenario is that this percentage will rise. Aviation also release non CO² emissions. There are still some major uncertainties in relation to the effect of non - CO² emissions of aircrafts. Other measures that have been implemented to reduce aviation‟s emissions are the Kyoto Protocol and Emissions trading schemes. Through the establishment around the growing controversial contribution of aviation towards climate change, the society demands answers of the aviation industry. This is done through the implementation of corporate social responsibility policies that “prevent” any further climate change. These policies will be examined and evaluated through the corporate sustainability model to establish their dynamic tension. A particular focus will be given towards Virgin Blue‟s corporate social responsibility policies to determine their “correctness” and significance to society. Carbon offset programs is one of the corporate social responsibility policies that the aviation industry is using, to present society itself with the opportunity to offset the carbon emissions generated through flying. The airlines in Australia used for this research study have all implemented a carbon offset program under Greenhouse Friendly certification. This certification includes avoided-forestry, which could induce a growing concern with passengers and might damage the accreditation of the certification. Therefore a project analysis provide detailed information regarding passenger contributions and to where the contribution will be implemented. The air travel calculators that the airlines are using established differences in the total amount of emissions generated by a flight and the contribution that passengers need to make to offset their carbon emissions. A detailed analysis established that non - CO² emissions are not included in the calculation of emissions generated. Therefore passengers do not completely offset their carbon emissions from flights. To establish the passenger perception on carbon offset programs and climate change corporate social responsibility policies, a survey was conducted. The data collection is qualitative and quantitative of nature and discovered that there might be a market for carbon offset programs and airlines could provide a compulsory carbon offset program for passengers to offset emissions. Carbon offset programs might be seen by passengers as a good way to tackle climate change. The conclusions are drawn with the use of the results of research questions. Analyzing Corporate Social Responsibility Policies in Aviation: A focus on Carbon Offset Programs in Australia 4
Table of Contents
Title page ..............................................................................................................................................................................2
Preface ...................................................................................................................................................................................3
Executive summary .........................................................................................................................................................4
Table of Contents .............................................................................................................................................................5
List of figures and tables ...............................................................................................................................................8
1. Introduction .....................................................................................................................................................................9
1.1 Research study .................................................................................................................................................. 10
1.1.1 Goal................................................................................................................................................................. 10
1.1.2 Research Questions ............................................................................................................................... 10
1.2 Outline of the study .......................................................................................................................................... 11
1.3 Research location ............................................................................................................................................. 11
1.4 Constraints on field research ...................................................................................................................... 11
1.5 Methodology ........................................................................................................................................................ 12
1.5.1 Literature research .................................................................................................................................. 13
2. Climate change.......................................................................................................................................................... 14
2.0.1 Intergovernmental Panel on Climate Change............................................................................ 14
2.0.2 IPCC assessment reports .................................................................................................................... 14
2.0.3 The Stern Review .................................................................................................................................... 16
2.1 Aviation‟s Contribution to Climate Change .......................................................................................... 16
2.1.1 Non CO² emissions ................................................................................................................................. 17
2.2 Kyoto Protocol .................................................................................................................................................... 17
2.3 Emissions trading schemes ......................................................................................................................... 18
2.3.1 Open and Closed Schemes ................................................................................................................ 18
2.3.2 Cap and Trade System ......................................................................................................................... 18
2.3.3 Aviation in ETS .......................................................................................................................................... 18
2.3.4 Limitations ETS ......................................................................................................................................... 18
2.3.5 Splitting of Emissions ............................................................................................................................. 19
2.3.6 Legal Battle ................................................................................................................................................. 19
2.3.7 Efficiency ...................................................................................................................................................... 19
2.4 Alternative solutions ........................................................................................................................................ 19
2.4.1 Conclusion ................................................................................................................................................... 20
Analyzing Corporate Social Responsibility Policies in Aviation:
A focus on Carbon Offset Programs in Australia 5
3. Corporate Social Responsibility policies in aviation................................................................................ 21
3.1 The concept of Corporate Social Responsibility ............................................................................... 21
3.2 Corporate Social Responsibility definition ............................................................................................ 22
3.2.1 CSR impact areas.................................................................................................................................... 22
3.2.2 Sustainability .............................................................................................................................................. 23
3.3 CSR in the airline industry ............................................................................................................................ 23
3.3.1 Economic...................................................................................................................................................... 23
3.3.2 Social.............................................................................................................................................................. 24
3.3.3 Ecological ..................................................................................................................................................... 24
3.4 CSR indexes ....................................................................................................................................................... 24
3.5 CSR policies in Aviation ................................................................................................................................ 25
3.6 Virgin Blue‟s CSR approach ........................................................................................................................ 26
3.6.1 Investments ................................................................................................................................................. 26
3.6.2 Virgin Earth Challenge .......................................................................................................................... 26
3.6.3 Conclusion ................................................................................................................................................... 27
4. Carbon Offset Programs in aviation ................................................................................................................ 28
4.1 Carbon offset programs ................................................................................................................................. 28
4.1.1 Carbon offset program legal frameworks ..................................................................................... 29
4.2 Regulatory and Voluntary ............................................................................................................................. 29
4.3 Categories in carbon offsetting .................................................................................................................. 30
4.3.1 Renewable energy projects ................................................................................................................ 30
4.3.2 Energy-efficiency projects.................................................................................................................... 30
4.3.3 Forestry, sink-forestry, biological sequestration ....................................................................... 31
4.3.4 Doubling ........................................................................................................................................................ 31
4.4 Carbon offset programs in Australian aviation ................................................................................... 31
4.4.1 Greenhouse Friendly .............................................................................................................................. 32
4.4.2 Forestry, sink-forestry or bio-sequestration under Greenhouse Friendly .................... 32
4.4.3 Energy- Efficiency under Greenhouse Friendly ........................................................................ 33
4.4.4 Renewable Energy under Greenhouse Friendly ...................................................................... 33
4.4.5 Additionality and Doubling under the Greenhouse Friendly ............................................... 33
4.4.6 Overhead Costs ........................................................................................................................................ 34
4.4.7 Air Travel Emissions Calculator ........................................................................................................ 34
4.4.8 Distance ........................................................................................................................................................ 35
4.4.9 Occupancy Efficiency............................................................................................................................. 35
Analyzing Corporate Social Responsibility Policies in Aviation:
A focus on Carbon Offset Programs in Australia 6
4.4.10 Type of Plane .......................................................................................................................................... 35
4.4.11 Non CO² emissions .............................................................................................................................. 35
4.4.12 Example air travel calculator ........................................................................................................... 36
4.4.13 Kyoto Protocol and Greenhouse Friendly ................................................................................. 36
4.4.14 Solution for climate change? ........................................................................................................... 36
4.5 Voluntary or Compulsory .............................................................................................................................. 37
4.5.1 Conclusion ................................................................................................................................................... 37
5. Passenger perceptions in carbon offsetting programs..................................................................... 38
5.0.1 Introduction into the survey ................................................................................................................. 38
5.0.2 Survey sample ........................................................................................................................................... 38
5.0.3 Age groups .................................................................................................................................................. 39
5.0.4 Nationality .................................................................................................................................................... 39
5.0.5 Reliability ...................................................................................................................................................... 39
5.0.6 Practical information ............................................................................................................................... 39
5.0.7 Survey results ............................................................................................................................................ 39
5.0.8 Affecting your decision to travel by air? ........................................................................................ 40
5.0.9 Total travel ................................................................................................................................................... 40
5.0.10 The greenest airline? ........................................................................................................................... 40
5.0.11 A good way to tackle climate change? ....................................................................................... 40
5.0.12 Compulsory carbon offset programs? ......................................................................................... 41
5.0.13 Have you used a carbon offset program?................................................................................. 41
5.0.14 How much are you be willing to pay extra from Sydney to Melbourne? ................... 41
5.0.15 How about from Sydney to London? ........................................................................................... 41
5.0.16 Young and Old ........................................................................................................................................ 42
5.0.17 Results ........................................................................................................................................................ 42
6. Conclusion ............................................................................................................................................................... 43
6.0.1 Research Questions 1 and 2.............................................................................................................. 43
6.0.2 Research questions 3 and 4............................................................................................................... 43
6.0.3 Research question 5............................................................................................................................... 44
6.0.4 Research questions 6 and 7............................................................................................................... 44
7. Reference List ........................................................................................................................................................ 46
Appendices
Analyzing Corporate Social Responsibility Policies in Aviation:
A focus on Carbon Offset Programs in Australia 7
List of figures and tables FIGURES: Figure 1: Catastrophic consequences of global warming page 15 Figure 2: Transport CO2 emissions by mode in 2000 page 16 Figure 3: Carroll‟s four-part model of corporate social responsibility page 21 Figure 4: CSR impact areas page 22 Figure 5: Model for sustainable development page 22 Figure 6: The scale of aviation‟s CSR page 27 Figure 7: Does climate change effect air travel page 40 Figure 8: Is Carbon Offset a solution for global warming page 40 Figure 9: Will passengers pay extra to offset carbon emissions (national) page 41 Figure 10: Will passengers pay extra to offset carbon emissions (international) page 41 TABLES: Table 1: Passenger survey page 12 Table 2: Air travel calculator page 36 Table 3: Survey age groups page 39 Analyzing Corporate Social Responsibility Policies in Aviation: A focus on Carbon Offset Programs in Australia 8
1. Introduction Climate change is seen more and more in news headlines. The media catches stories about heavy rain fall, bushfires and melting ice caps. New documentaries are produced in relation to climate change, the most famous being Al Gore‟s “Inconvenient Truth” where the earth‟s destruction by humans is widely explained. Also positive documentaries are shown to the public. They illustrate how fortunate we are to be in a world with tremendous diversity and extraordinary beauty, e.g; “Planet Earth”. These documentaries do have a double meaning. “Show some respect to the earth and your children will be able to enjoy it too.” With the establishment of the Intergovernmental Panel on Climate Change (IPCC) in 1988 which consists of the world‟s leading academics and scientists, research towards the concept of climate change has commenced. The IPCC was established to provide decision makers and others interested in climate change with an objective source of information about just what it is and what we can expect it to. Its role is to assess on a comprehensive, objective, open and transparent basis the latest scientific, technical and socio-economic literature produced worldwide relevant to the understanding of the risks of human induced climate change, its observed and projected impacts and options for adaptation and mitigation. The IPCC has concluded that climate change is definitely occurring and there is significant evidence that human activities are the main cause of global warming and climate change in the recent decades. The IPCC has confirmed that global greenhouse gas emissions induced by humans have grown by an astonishing 70% from 1970 to 2004 (IPCC 2007a). The growing concern in the world about climate change has also been related to the contributions from aviation. Aviation has already been exempted from most fuel charges because they are taxed as public utilities (Gossling et al 2007). The transportation sector accounts for a large and increasing share of emissions in industrialized countries (Gossling et al 2007). Although aviation is an important contributor to climate change through the release of greenhouse gas emissions and its fossil fuel consumption (Becken 2007), it‟s contribution is at the moment estimated by the Stern review to have contributed only 1.6% of the total global greenhouse gas emissions in 2005 (Stern 2007a). Although this percentage seems small, the forecasts for growth in aviation are a rising concern for academics. Airlines have introduced various policies to ensure the public that the airline is doing everything possible to prevent any further climate change. These so-called corporate social responsible (CSR) policies are the topic of this dissertation. The main goal of this research study is to analyse the corporate social responsibility methods practiced by airlines in relation to climate change. I will particularly focus on one of the CSR methods, “carbon offset programs.” These programs offer services to individuals to reduce their impact on global warming by purchasing carbon offsets. The carbon offset programs will be analyzed through the involvement of passenger perceptions. Analyzing Corporate Social Responsibility Policies in Aviation: A focus on Carbon Offset Programs in Australia 9
1.1 Research study
Major schemes involving airlines are on the way, to tackle climate change and emission
reduction. For instance, emission trading schemes, tree planting projects, investments in
more sustainable materials and alternative fuels, improvements in air traffic management
and carbon offset programs are some of these schemes. It is therefore hard to look beyond
corporate social responsibility. Are all the measurements taken just public relation stunts or is
there more than this in the picture for the airlines? What do their customers say about these
programs? Are passengers willing to pay more for an airline ticket to safeguard the
environment? Do increasing ticket prices because of environmental measurements,
constraint their ways of travelling by air? All these questions need to be answered. Therefore
I choose this goal for my dissertation:
1.1.1 Goal:
To analyze the Corporate Social Responsibility policies of airlines regarding climate
change with the help of passenger perceptions.
Because this research dissertation needs to contribute to the above goal, there are certain
terms requiring clarification. First the term “corporate social responsibility” will be addressed.
This indicates that corporations have not only economic responsibility, but also social and
ecological responsibilities toward society. The next concept that will need some explaining is
policies. In this research study, policies are a plan of action intended to influence decisions or
actions. And the climate change concept must also be defined: “Any change in climate over
time, whether resulting from natural variability or from human activity” (IPCC 2007c). The
next term that might need some explanation are perceptions, which is perceived in this study
as “a view or interpretation of something.”
After the goal for this study was established, some research questions were formulated.
These questions will support the accomplishment of the goal of this research study.
1.1.2 Research Questions
1. What is climate change?
2. What are the trends in aviation to minimize aviation’s contribution to climate
change?
3. What is corporate social responsibility (CSR)?
4. What are the CSR trends in the aviation industry relating to climate change?
5. Which climate change projects or carbon offset programs are currently being
used by the Australian airlines?
6. What are the perceptions among Australian citizens on carbon offset
programs?
7. Are passengers willing to pay extra to offset carbon emissions?
Analyzing Corporate Social Responsibility Policies in Aviation:
A focus on Carbon Offset Programs in Australia 101.2 Outline of the study First the concept of climate change will be introduced and described. The discussion of climate change and aviation will be enhanced. The Kyoto Protocol and emission trading schemes will be analyzed and the concept of CSR will be discussed. For this, one of the Australian airline operators and their corporate social responsibility policies will be analyzed. In this study Virgin Blue will be utilized as the airline operator. The CSR policies will be analyzed with the help of A.B. Carroll‟s four- part model for corporate social responsibility pyramid (fig. 3 in chapter 3.1) . Chapter four will demonstrate the issue of carbon offset programs. Should carbon offset programs be made compulsory or should they remain voluntary? Chapter five will enhance the issue of money. Are passengers willing to pay extra for carbon offset programs? This chapter will mainly focus on Australian airline operators and their customers. The final chapter will put forward the main conclusions of this research study by answering the questions it raises. The conclusions to the research questions are a primary focus in fulfilling the goal of this thesis. 1.3 Research location It was relatively easy to determine the site of my research. Australia has been very upfront with climate change innovations e.g. the three largest Australian airlines have introduced carbon offset programs. Although Australia did not ratify the Kyoto Protocol, its new leader, Prime Minister Kevin Rudd, did ratify on December 3 2007, at the Climate Change Convention in Bali. The Kyoto Protocol is a legal framework where countries that have ratified it will need to reduce the emissions of greenhouse gases by at least 5%. This will be measured against the base year of 1990. 1.4 Constraints on field research Field research was carried out in Australia from 11 September to 4 November 2007. The first couple of weeks were mainly focused on getting more articles related to aviation in Australia and climate change and to gain a better understanding of the current situation there. A survey was prepared, because this would give a better perspective of passenger perceptions regarding climate change and aviation. Questions were formulated for interviews with principals from the three most significant airlines in Australia (Jetstar, Virgin Blue and Qantas). Subsequently contact was made with them, but a meeting was out of the question, because all the information the airlines could make public, was published on their Web sites. Extensive calling of the airlines made no difference. This was one of the constraints of this research study. A survey was then conducted at Brisbane domestic airport. It went well, and people were willing to participate. Regretfully many passengers had not heard about the carbon offset programs and some explaining was often needed. The passengers under whom the survey was conducted were randomly chosen to get a better perspective of all age groups. Moving around at the airport was necessary. Staying in one place could interfere with the results because of the arrival and departure gates of the three major airlines, which are all in a separate section of the airport. Twenty interviews were conducted with passengers at Brisbane and 20 interviews were also conducted at the Melbourne airport. Analyzing Corporate Social Responsibility Policies in Aviation: A focus on Carbon Offset Programs in Australia 11
Passengers in Melbourne were also willing to participate in the survey. After 19 surveys,
though, one of the managers from the Melbourne airport concluded that no authorization has
been given to me and it was illegal to conduct surveys there. That was possible only when
someone paid a AU$ 500 fee, and a screening process had taken place. I had no knowledge
of these circumstances, and the manager confiscated one of my surveys and telling me:
“This is a very sensitive issue, and the airlines do not want to be confronted with this”. This
resulted in my departure from the airport. I did manage to conduct one more survey however,
on the way to the bus I would board for the city.
Ten more surveys were conducted at Southern Cross Station, a major transport hub for
public transport to the airport and other places. It is in the middle of Melbourne city, but
people there were not so fond of participating in the study. To conduct these survey more
time was needed than at the airport.
1.5 Methodology
Interview with stakeholders
The fifth, sixth and the last research question will be answered through the period of 8 weeks
of field research in Australia, in which major actors in the aviation industry will be interviewed
along with airline passengers.
Survey of passengers
The reason to carry out this survey was to get more insight into the perception of passengers
in regard to carbon offset programs and climate change.
Passenger Surveys
Brisbane Domestic Airport Melbourne Airport Southern Cross Station
20 20 10
Table 1: Passenger survey
Analyzing Corporate Social Responsibility Policies in Aviation:
A focus on Carbon Offset Programs in Australia 121.5.1 Literature research Before analyzing the CRS policies from Australian airliners, I studied extensive literature and conducted a great deal of desk research. The literature research focused on answering the research questions 1- 4. The sixth and seventh research questions will be answered with the help of the survey mentioned. Also secondary data collected for answering the first five research questions will be used for this. The first 2 research questions regarding climate change and aviation will be discussed in chapter 2.The research questions involving Corporate Social Responsibility and its trends in the aviation industry will be discussed in chapter 3. The fifth research question discussing carbon offset programs will be analyzed in chapter 4. The final research questions which includes the passenger perceptions in relation to climate change and carbon offset programs will be discussed in chapter 5. Analyzing Corporate Social Responsibility Policies in Aviation: A focus on Carbon Offset Programs in Australia 13
2. Climate change In the following chapter, the concept of climate change and its relation to the Kyoto Protocol and recent developments in emission trading schemes will be analyzed. This analysis is needed to provide background for the research on carbon offset programs later on. It places the discussion on the role of the aviation industry in climate change and its methods to implement these schemes in a perspective. The Intergovernmental Panel on Climate Change provides an assessment of the risks of human induced climate change. These reports offer information on climate change, and therefore the reports will be discussed to provide a basic understanding of it. This chapter will seek to answer research question 1 and 2. 2.0.1 Intergovernmental Panel on Climate Change The IPCC was set up jointly by the World Meteorological Organization and the United Nations Environment Programme (UNEP) to provide authoritative international statements of scientific opinion on climate change; it delivered major reports in 1990, 1995, 2001 and 2007 (Lee & Raper 2003, Macintosh & Downie 2007). Here the basic concepts will be discussed and suitable references provided. Climate describes weather conditions typical of a region or site and climate change is a long term systematic change (Lee & Raper 2003). The United Nations Framework Convention on Climate Change (UNFCCC) describes climate change in this way: “Human activity – particularly the burning of fossil fuels – has made the blanket of greenhouse gases around the earth „thicker‟. The resulting increase in global temperatures is altering the complex web of systems that allow life to thrive on earth, such as cloud cover, rainfall, wind patterns, ocean currents and the distribution of plant and animal species” (UNFCCC 2007). The Intergovernmental Panel on Climate Change applies a different definition of climate change: “Climate change in IPCC usage refers to a change in the state of the climate that can be identified (e.g.using statistical tests) by changes in the mean and/or the variability of its properties, and that persists for an extended period, typically decades or longer. It refers to any change in climate over time, whether due to natural variability or as a result of human activity” (IPCC 2007). 2.0.2 IPCC assessment reports The developments in climate science are raising public concern. The first two assessment reports from the IPCC indicated that global average surface temperatures were increasing and this was partially due to the increasing concentration of greenhouse gases in the atmosphere resulting from human activities. The second assessment report concluded that global average surface temperature was projected to increase from 1° and 3.5ºC over 1990 levels by 2100 (Macintosh & Downie 2007). On the other hand, both reports stressed that the current level of understanding about the extent of human influence on global warming and changes in temperature over the coming century were limited (IPCC first and second assessment reports of working group 1). Analyzing Corporate Social Responsibility Policies in Aviation: A focus on Carbon Offset Programs in Australia 14
When the third assessment report from the IPCC was published, these uncertainties were
reduced considerably (Macintosh & Downie 2007). The report concluded that average
surface temperatures had increased by approximately 0.6ºC since the 1860s, when reliable
records of direct temperatures were first kept. There was a greater than 66% chance that
“most of the observed warming over the past 50 years” was due to the increasing
concentration of greenhouse gases in the atmosphere (IPCC 2001 cited in Macintosh &
Downie 2007 p. 3). This report also concluded that “globally averaged surface temperature is
projected to increase by 1.4 to 5.8ºC over the period 1990 to 2100” under business-as-usual
scenarios. The report mentioned that the projected temperature increase was quite likely to
have negative effects, including increases in extreme weather, such as droughts and tropical
cyclones and approximately a onemeter rise in sea levels by the end of the 21st century. If
global warming continues, catastrophic consequences are expected.
Deaths Heat waves and intensity, sea level
Disease Drought, bushfires and cyclones
Figure 1. Catastrophic consequences of global warming Source: Moss (2007)
Available at: www.moss.org.au/home/images/stories/supply_clusters.ppt
In 2007 the IPCC published a Fourth Assessment report named ‘Summary for Policymakers
- the physical science basis’ was published in February 2007 by the IPCC (IPCC 2007b). The
report concludes that the science has advanced further and uncertainties have been
removed since the third assessment report and states that there is no doubt that the climate
is warming. Global average surface temperatures increased considerably by approximately
0.75ºC from 1906 to 2005, which was significantly higher than the 0.6ºC that was recorded
in the third assessment report from the IPCC for the period 1901 – 2000 (Macintosh &
Downie 2007). The rate of warming was approximately 0.13ºC per decade over the last 50
years, which was nearly twice the rate recorded over the last 100 years. Other important
findings from this report were:
Most of the observed increase in global average temperatures since the
mid-20th century is very likely due to human-induced greenhouse gas
concentrations (IPCC 2007b, p.10)
Carbon dioxide is the most important human-induced greenhouse gas.
The human-induced concentration of carbon dioxide has increased from a
pre-industrial value of about 280 ppm to 379 ppm in 2005 (IPCC 2007b, p
2).
The annual carbon dioxide concentration growth rate was larger during
the past 10 years (IPCC 2007b, p. 2).
The increase in carbon dioxide concentrations is likely to affect the global
average surface warming by 2º and 4.5ºC with a best estimate of about 3
ºC and very unlikely to be less than 1.5ºC (IPCC 2007b, p.12).
Analyzing Corporate Social Responsibility Policies in Aviation:
A focus on Carbon Offset Programs in Australia 15 Long-term changes in climate have been observed, including; chances in
arctic temperatures and ice, widespread changes in rainfall amounts,
wind patterns and aspects of extreme weather including droughts heavy
rainfall, heat waves and the intensity of cyclones (IPCC 2007b, p. 7).
Even if the concentrations of all greenhouse gases and aerosols had
been kept constant at year 2000 levels, a further warming is expected of
about 0.1ºC per decade (IPCC 2007b, p. 12).
Based on the six scenarios suggested by the Working Group, global
average surface temperatures are very likely to increase from 1.1° to
6.4ºC from 1980 to 1999 and from 2090 to 2099 (IPCC 2007b p.13).
These reports from the IPCC have been vital for raising public awareness and reducing
scientific uncertainties in the complexity of global warming. The reports also improved the
amount of scientific research that has been conducted relating to the issue of climate
change.
2.0.3 The Stern Review
Other reports that conducted research concerning climate change are: the Stern Review on
the Economics of Climate Change. This report highlighted the profile of Climate Change and
also analyzed the economic costs that are involved in restraining the effects of climate
change The major outcome of this study was that if nothing is done to limit greenhouse
emissions, there could be a loss of from 5% to 20% of global GDP per year (Stern 2007b).
2.1 Aviation’s Contribution to Climate Change
The contributions of aviation to climate change has been widely discussed by academics e.g,
(Lee & Raper 2003, Lee 2004, Gossling et al 2007).
Transportation is estimated to account for
14% of global greenhouse gas (GHG)
emissions. After power, land use and equal to
the agriculture sector (Stern 2007). Aviation
comprises 12% of total transport greenhouse
gas emissions (figure 2). It is determined that
aircrafts release several types of gases and
particles that alter the composition of the
atmosphere and contribute to climate change.
Aviation contributes less than 2% of global
CO² emissions (IATA 2007a).
Figure 2. Transport CO² emissions by mode in 2000
Source: Stern review (2007).
available at: http://www.hm-
These gases include: Carbon dioxide (CO₂),
treasury.gov.uk/media/8/D/Transport_annex.pdf nitrogen oxides (NOx), water vapour and
sulphate and soot particles (Commission of the
European Communities 2006a).
Analyzing Corporate Social Responsibility Policies in Aviation:
A focus on Carbon Offset Programs in Australia 162.1.1 Non CO² emissions Other gases that are released into the air are non-CO². The gases emitted from aircraft at various altitudes have also a warming effect. This means that the overall contribution of aviation to climate change is much more than is recognized by including only CO² gases. Many uncertainties remain regarding the effects of non-CO² emissions from aircrafts (Stern review 2007b). Therefore these gases have been neglected in most academic, research reports. The rise in CO² emissions and IPCC reports played a major role in the negotiations leading up to the Kyoto Protocol. The importance and purpose of the Kyoto Protocol will be described later. This is important as it explains one of the methods used by governments to prevent any further climate change. Therefore this concept needs to be explained to proceed with this research study. 2.2 Kyoto Protocol The Kyoto Protocol to the United Nations Framework Convention on Climate Change strengthens the international response to the change. Adopted by a consensus at the third session of the Conference of the Parties (COP3) in December 1997, it contains legally binding emissions targets for developed countries for the post 2000 period. By arresting and reversing the upward trend in greenhouse gas emissions that started in these countries 150 years ago, the Protocol promises to move the international community one step closer to archieving the Convention‟s ultimate objective of preventing “dangerous anthropogenic (human – made) interference with the climate system” (European Commission 2007a). The developed countries commit themselves to reducing their collective emissions of six key greenhouse gases by at least 5%. The six gases are to be joined in a “basket”, with reductions in individual gases translated into “CO² equivalents” that are then added up to produce a single figure. The target that has been set for the countries should be achieved by the period from 2008 to 2012. It will be calculated as an average over the five years, and the countries need to show “demonstrable progress” towards meeting the target. Cuts in the three most important gases – carbon dioxide (CO²), methane (CH4), and nitrous oxide (N₂O) – will be measured against the base year of 1990 (with exceptions for some countries with economies in transition) (European Commission 2007b). Although most of the countries have ratified the Kyoto Protocol, a few major players in the emission of greenhouse gases have not yet ratified done so. The United States has the highest emission per capita and no intentions to ratify. Also China has not ratified. The newly installed Australian government ratified the Protocol on the 3rd of December 2007. One of the measures taken by the European Union is the instalment of an emissions trading scheme. The purpose of this is to assist countries in reducing greenhouse gas emissions. The reduction in emissions through the scheme will assist in reaching the Kyoto Protocol target set for the period of 2008 – 2012. The emissions trading scheme is in place to demonstrate progress. The next section will explain the concept of such schemes. Analyzing Corporate Social Responsibility Policies in Aviation: A focus on Carbon Offset Programs in Australia 17
2.3 Emissions trading schemes “An emission trading scheme involves the placement of a cap on the total quantity of emissions that are allowed to be emitted from specific industries or the entire economy“(Macintosh & Downie 2007 p. 48). Two types of emissions trading schemes (ETS) have been under discussion to account for the complexity of aviation emissions, both open and closed (Macintosh & Downie 2007). 2.3.1 Open and Closed Schemes An open scheme involves aviation emissions under the Kyoto Protocol. An emission cap is set for all countries, and separate caps are then set for each individual country. Therefore emission credits can be traded amongst various industries in the economy. For instance, airlines will be able to trade credits with the agricultural industry. In a closed scheme, airlines must trade their emission credits among other airline operators; a separate cap is established only for airline operators. 2.3.2 Cap and Trade System An emission trading scheme gives the airlines the opportunity to receive emission credits to emit a certain amount of CO² per year from flights. Each year airlines must submit the amount of emission credits for their actual emissions from that year. The total amount of available credits for the airlines is capped at the average level of emissions in the years 2004 – 2006. If airlines use less than the average level of emissions, airline operators can “top up,” or stall the excess and manage the airline more cost-effectively. On the other hand if the airline operators exceed the average level of emissions established, they will need to purchase additional allowances on the market or reduce emissions by investing in more efficient technologies and operational management. Airlines are also able to purchase credits from clean energy projects that are carried out in third countries established under the Kyoto Protocol. 2.3.3 Aviation in ETS From the start of 2011, emissions from all domestic and international flights between EU airports will be included in the scheme and in 2012 airline emissions will be covered by all international flights, from or to anywhere in the world, that arrive or depart from an EU airport (Commission of the European Communities 2006b). 2.3.4 Limitations ETS There is a growing controversy in relation to emission trading schemes. A limitation is that they do not include non-CO² aviation emissions. Because of the uncertainties related to non- CO² emissions, it is questioned whether an emission trading scheme should account for these emissions. The problem with this is that it is extremely difficult to calculate non-CO² emissions. At the moment the question is whether it is already possible to account for them or if further scientific research is needed to determine the effects of non-CO² emissions in relation to climate change (Macintosh & Downie 2007). The non-CO² emissions mostly have a short atmospheric lifetime, and their impact is often dependent on when and where they are released. Therefore the altitude at which the aircraft is flying could already provide a difference in the emissions that are generated. Also, the destination to which the aircraft is flying could provide a difference in the amount of emissions that are produced. The amount generated related to the size and nature of the aircraft and to how it is operated. Analyzing Corporate Social Responsibility Policies in Aviation: A focus on Carbon Offset Programs in Australia 18
At the moment these non-CO² emissions are mostly calculated with an uplift factor on the CO² emissions. As already mentioned, there are still many uncertainties associated with non CO² emissions; therefore finding the correct uplift factor is a challenge for the aviation industry. The overestimation of this factor could induce more costs for airline operators and underestimation would put a bigger constraint onto the environment; thus the scheme would not be reaching its ultimate goal (Macintosh & Downie 2007). 2.3.5 Splitting of Emissions As already mentioned, international aviation services are not yet included. The problem with including international aviation in the emission trading scheme is that the emissions of international flights need to be separated between the countries involved. The discussions at the moment present how the conflict between various countries in relation to the allocation of the amount of emissions from one international flight could be solved. Mentioned are the splitting of emissions between the country of departure and the country of arrival, splitting between countries depending on the country of departure and destination of the passengers or cargo, and splitting on the basis of where the applicable fuel is sold (Macintosh & Downie, IPPC 1999). There is also a problem with international flights flying from a country that is bound by the Kyoto Protocol emission reduction target to a other country that is not. 2.3.6 Legal Battle The future trend in aviation will mostly be stimulated by decreasing airfares and that the demand for aviation is generally income-elastic and price-inelastic. This could mean that there will be more dependency on aviation in the future, which could create political and economic obstacles to future cuts in emissions, which is already the case with the Kyoto Protocol (Macintosh & Downie 2007). 2.3.7 Efficiency The other option for an emission trading scheme is a closed scheme, already mentioned above. The problem with this is that when only airline operators are involved, the scheme would probably have a less-efficient outcome. The airline operators are able to trade only the emissions credits under airlines operators. Different industries are not involved in this scheme. Therefore the International Civil Aviation Organization strongly supports the implementation of an open scheme (Macintosh & Downie 2007). 2.4 Alternative solutions Other measures that have been, or that could be taken by the aviation industry to minimize aviation‟s contribution to climate change will be briefly explained in this section. With growing public awareness about climate change aviation operators around the world have been forced to consider their contributions to it. IATA (International Air Transport Association‟s) published a report in relation to aviation and climate change namely “the Environmental Review 2004, ” it is a report that focuses on the complexity of aviation in relation to climate change. It was intended for those concerned with finding the right solution to the challenge of sustainable growth” (IATA 2004). Analyzing Corporate Social Responsibility Policies in Aviation: A focus on Carbon Offset Programs in Australia 19
According to the IATA: “Voluntary agreement can be particularly attractive as a first step towards demonstrating to governments and the public that the aviation industry is acting responsibly to address, for example, the concerns about global warming” (IATA 2004, p.32). There are four technological areas in which the aviation industry could improve aviation‟s contribution to climate change: aircraft and engine, alternative fuels, engine and aircraft design, and operational procedures. Although these topics are now being discussed throughout the literature, it will only be briefly mentioned in this research study. Most of the research that has been carried out regarding these topics found that today‟s technology lacks the potential to reduce the projected growth of greenhouse gas emissions from aircraft (IPCC 1999, Macintosh & Downie, IATA 2004). Major costs will be involved for airlines operators to implement one or more of these technological solutions (except operational procedures), if a major breakthrough is to be accomplished in the aviation industry in terms of technological improvements 2.4.1 Conclusion The contribution of aviation to climate change is estimated, as many uncertainties relate to non - CO² emissions (IPCC 2007). Therefore it could have been useful for this research study to correspond with someone or have a meeting with someone that has extensive knowledge in the aviation industry and discuss new trends in relation to minimizing the effect on climate change. It is established by the IPCC (2007b) that more research is needed to determine the effects of non - CO² emissions. At the moment the share that aviation contributes to climate change is estimated at less than 2 % (IATA 2007a) in comparison with other modes of transportation. But through the expected growth in demand in the near future, this could change and might challenge the Kyoto Protocol target set by some countries. Emissions trading schemes do not include non - CO² emissions and therefore do not offset the total greenhouse gases in aviation. Section 2.1 was mainly focused on answering research question 1 . The method that was used to answer the first research question was desk research. This method was satisfactory for this research study as there is sufficient academic literature in relation to climate change, which is a complex concept; therefore for this study it was necessary to establish its basics. This was done with the help of the IPCC assessment reports. Scientifically much more can be said in regard to climate change. Sections 2.2, 2.3 and 2.4 were mainly focused on answering research question 2. The method to answer the second research question was desk research. This method was adequately to answer the second research question as extensive literature was found in relation to this topic. The contribution of aviation to climate change is estimated, as much uncertainties relate to non - CO² emissions. It could have been useful for this research study to correspond with or to have a meeting with someone that has extensive knowledge in the aviation industry to discuss new trends in relation to minimizing the effect on climate change. Analyzing Corporate Social Responsibility Policies in Aviation: A focus on Carbon Offset Programs in Australia 20
3. Corporate Social Responsibility policies in aviation
With this background taken into account, this research study will proceed with the corporate
social responsibility concept. The concept will be explained and analyzed and will project the
importance of corporate social responsibility in the aviation industry. An example will be
presented of an airline operator, utilizing the concept of corporate social responsibility in its
strategy. This example is necessary for this research study as aviation operators use
corporate social responsibility policies to communicate to the public, that the airline is doing
everything in its power to minimise impacts on climate change. This chapter will seek to
answer research questions 3 – 4.
3.1 The concept of Corporate Social Responsibility
The term corporate social responsibility was developed in the United States half a century
ago (Crane & Matten 2007). During the 1950s various concepts and principles were debated
in relation to CSR, and most of the debates focused on two key points:
Could it be argued that corporations have social and also financial responsibilities?
What is the nature of these social responsibilities?
Nowadays it is widely accepted that
corporations do actually have
social responsibilities beyond
making profits. This is based on
arguments presented in CSR
literature (e.g; Crane & Matten
2007 and Friedman & Miles 2006).
Most of these arguments are
related to enlightenment and self-
interest i.e. a corporation takes up
social responsibilities and hereby
enhances its own self-interest
(Crane & Matten 2007).
Figure 3: Carroll‟s four-part model of corporate social responsibility
To answer the second question,
Source: Adapted from Carroll, A.B. The pyramid of corporate social
responsibility: Business Ethics (2007).
Carroll‟s four-part model CSR has
been widely used (Crane & Matten 2007). It describes CSR as a multi-layered concept that
can be distinguished into four interconnected aspects – economic, legal, ethical, and
philanthropic responsibilities (Crane & Matten 2007) which are shown in Fig. 2.1. These
various responsibilities are portrayed in a pyramid, therefore the „real‟ social responsibility
requires meeting all of the four levels one after the other. The pyramid portrays the four
components of CSR. It starts with the basic building block that economic performance is the
base for everything else. At the same time the corporation is expected to obey the law, as
this is the society‟s code of acceptable and unacceptable behaviour.
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