Air New Zealand’s corporate governance flight plan

There is heavy environmental bias in Air New Zealand’s approach to responsible governance which is understandable given the nature of its business. The Air New Zealand Environmental Trust is an innovative example of carbon credit certification programme. Instead of issuing certificates which are, at best, just piece of paper, the scheme encourages travellers to donate to the Trust’s specified environmental programmes. The airline in turn tops up the fund by calculating the carbon-offset value of its employees’ travel and injecting “several hundreds of thousands of dollars year” into the Trust.

The Trust is one several environmental initiatives driven originally by the airline’s chief executive Rob Fyfe and embraced by its board. Fyfe’s environmental epiphany is reportedly attributable to an encounter with potential customer in the United Kingdom who told him she would ‘love to travel to New Zealand’ but flying there in 747 was, she felt, like ‘turning up at Greenpeace conference in Hummer’.

And given Air New Zealand’s positioning as business based on promoting New Zealand as an environmentally attractive destination, Fyfe realised the company’s strategic marketing and operational approach had to align to be credible.

“We could hardly operate within New Zealand’s global ‘100% Pure’ environmental branding and not be seen to be doing something to substantiate the claim,” says Air New Zealand’s general counsel John Blair. “There are limitations to what an airline can do, but when we really started thinking about it we found many things to help us improve our environmental footprint generally. It is one of those classic situations where good social responsibility governance aligns well with the commercial aspects of the business.”

Other initiatives now include Green Team of roughly 3000 employees. They get involved in range of clean-up, planting and other environmental protection projects.

Refinements that reduce moisture and consequently the weight of an aircraft in flight have significantly cut fuel consumption, as has the decision to spend roughly $30 million attaching winglets to its 767s. “These environmentally-linked decisions have both cut costs and enhanced revenue,” says Blair. “They are also the right things to do.”

Air New Zealand’s general approach to responsible governance is, according to Blair, led by the company’s chairman John Palmer. “His view on governance, and it is one the executive team buys in to, is simply that we do the right thing,” Blair says. “You can have the picket fence approach to governance, with all the rules and structures, but if you don’t have people with the right mindset willing to act with integrity you are wasting your time.”

Air New Zealand’s legal team runs an online compliance training programme called “Integrite”. And almost all the company’s 11,000 staff take it. The company has written code of ethics and publishes handbook on business ethics and other issues, such as workplace safety, bullying, confidentiality, privacy of information, competition, how to deal with suppliers and treat customers fairly. “It gets refreshed every year and our employees go through it annually,” says Blair. “The board does the online training too.”

Blair is now thinking about improving Air New Zealand’s stakeholder communication options. He does not, however, want to emulate what he calls wasteful European practices of turning out massive corporate social responsibility reports. “I am bit cynical about reporting at length on how well behaved you are. Besides, we are very visible in the New Zealand marketplace and to that extent there is pretty constant communication with our stakeholders.”

• Extracts from an article in the June issue of NZ Management by Reg Bi

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