The airline sector will be one of the most difficult to decarbonize. The industry contributes 2.5% of total global emissions – a number that is fast on the rise as passenger transport is projected to grow by about 4% each year. There are many measures required for aviation to decarbonize and sustainable aviation fuel (SAF) is one part of the solution, however, current infrastructure and supply do not meet the demand.
But major airlines are partnering with stakeholders to find ways to accelerate decarbonizing their industry.
Air Canada is highly engaged in the efforts to decarbonize, including collaborating with industry and strategic partnerships toward mid- and long-term net-zero climate targets. An important step in finding those solutions is transparency around current impacts, risks, opportunities and other vital environmental data. CDP’s TCFD-aligned climate disclosure has formed a basis for the ambitious action Air Canada has taken on climate. We spoke with Teresa Ehman, Senior Director, Environmental Affairs, Air Canada about how the company is utilizing disclosure to identify key areas for change and seize opportunities related to the low-carbon transition.
Teresa Ehman, Senior Director, Environmental Affairs, Air Canada
Taking off: the origins of Air Canada’s sustainability journey
Air Canada has a long history of engaging with the airline industry to address greenhouse gas (GHG) emissions from aviation. Around 2005, Air Canada shareholders started to express interest in Air Canada's carbon footprint and the actions being taken to mitigate climate change impacts. In response, the company began disclosing through CDP in 2007, which allowed it to demonstrate progress through regular annual corporate and sustainability reporting.
When the Task Force on Climate-Related Financial Disclosures (TCFD) was formed, Air Canada reviewed trends, consulted with stakeholders and benchmarked against other companies – all of which led the company’s leadership to decide to progress its reporting in the model of the TCFD. They felt this was an important component to its first five-year plan in a series of implementation plans on the path to reach net-zero by 2050 (Air Canada will issue its first TCFD report in 2022).
CDP was on the same page. In 2018, CDP aligned its climate questionnaire to the TCFD’s guidelines, making TCFD-aligned reporting a simple process for companies like Air Canada. And the results were impactful.
“CDP climate disclosure has allowed Air Canada to generate impactful data along key areas of focus for the TCFD: risks and opportunities, business strategy and emissions targets,” said Ehman.
Identifying climate-related risks
The process of CDP disclosure has helped the company identify and categorize its climate-related risks, including regulatory risks related to the shifting carbon markets as well as physical risks. As Air Canada writes in its 2021 CDP climate disclosure: “Climate change could increase both the severity and intensity of weather events such as turbulence, jet stream, floods and forest fires. This could influence Air Canada’s flight operations, including flight cancellations and delays, which would have a financial impact to the Company.”
In identifying the impact of climate change on its business, the company indicates that chronic physical changes in the climate could lead to reduced demand for flights as holiday destinations change or become less viable. For example, an increase in temperature could impact snow fall in regions where travelers typically take ski holidays.
“Disclosing through CDP allowed us to better visualize the impact that climate change may have on our operations and finances,” said Ehman. “The best way to mitigate those risks is through our continued efforts to reduce fuel consumption and emissions.”
Illuminating sustainable opportunities on offer
Air Canada has long recognized that modernizing its fleet offers a substantive emissions reduction opportunity, and this information is captured in its CDP disclosure. “Optimizing airline routes to make more fuel-efficient journeys and investing in building a young, more fuel-efficient fleet are significantly important in helping mitigate the company’s carbon footprint,” said Ehman.
Air Canada disclosed another interesting opportunity: providing corporate customers with the ability to understand the impact of their travel. Upon request, Air Canada provides client-specific carbon footprint reports for corporate accounts, which helps those businesses aiming to lower their travel-related carbon footprints.
“From early on, the CDP questionnaire helped us to complete a deep dive into our climate considerations and further enhanced our knowledge and thought process around climate change and its associated risks and opportunities,” said Ehman. “It allowed us to bring more awareness on climate risks to our organization and move toward financial quantification, as well as longer term adaptation elements.”
Shaping business strategy and ambition through disclosure
The process of disclosing was part of the groundwork that Air Canada accessed to develop its climate change strategy, another key component of TCFD-aligned reporting. In March of 2021, Air Canada released its Climate Action Targets and Plan, a comprehensive strategy that includes decarbonization, innovative use of technology and carbon removals.
A major element of the Climate Action Plan is setting climate targets. Air Canada aims to achieve a long-term goal of net-zero GHG emissions by 2050. In defining this pathway, and to ensure meaningful progress, Air Canada also set 2030 absolute midterm targets of 20% GHG reductions from its air operations by 2030 and 30% GHG reductions from ground operations by 2030, both compared to a 2019 baseline.
Electric ground support equipment (GSE) in use at an Air Canada operations center.
Air Canada’s Climate Action Plan also notably includes an investment of CA$50 million in SAF, as well as in carbon reductions and removals. “Through our Climate Action Plan, we have engaged with various stakeholders in the aviation industry to not only advance the research and development of technologies to decarbonize the industry, but also on other sustainability topics that matter, such as the reduction of single use plastics and waste diversion,” said Ehman.
Flying into the future
Air Canada looks to disclosure to further increase transparency with its stakeholders. “CDP’s alignment with the TCFD had benefited us directly, as it has put more rigor into the reporting process and framed the information to evolve with the TCFD guidance,” said Ehman. “Air Canada’s CDP disclosure, in turn, provides information to support decision-making and provides structured material that can be used for other purposes such as annual reporting. CDP has set the stage for reporting data fully in line with the TCFD, which we have committed to do, for the first time, in 2022.”
Investors are pleased to see Air Canada taking tangible action, including developing its Climate Action Plan. They’re glad to see that, through increased transparency and further consideration and demonstration of climate action, Air Canada improved its CDP climate score from a C to a B- in 2021. This enhanced data helps investors make informed financial decisions that account for climate-related impacts.
Air Canada’s future includes many sustainability goals, in addition to its short- and long-term climate targets. For one, the company will continue to roll out its Leave Less Travel Program for corporate customers. Launched in 2021, the program gives corporate customers the opportunity to offset their air travel through SAF, carbon offsets or a combination of both.
It will also continue work around single use plastics and waste reduction. This includes developing solutions for new waste streams created by the pandemic and working with departmental partners to re-evaluate the way waste is generated, disposed and tracked across all lines of business in line with circular economy principles.
Air Canada completed its first water security disclosure through CDP in 2021 and intends to continue to develop and improve its water program and subsequent disclosures. The company says that CDP disclosure is providing a helpful framework as it expands its sustainability efforts and looks to the future.
“Our environmental focus is two-fold: ‘Leave Less and Do More,'” said Ehman. “That means less energy use through operations, less carbon in the atmosphere, less waste on land and in water, and less noise in communities; and do more to address environmental issues: more collaboration and participation with industry partners, and more involvement in communities and with employees and customers.
“We are committed to managing the environmental impacts of our operations while integrating environmental considerations into our business decisions. CDP’s TCFD-aligned disclosure is helping us advance this crucial sustainability work and stay focused on making a positive impact on the planet.”