Qantas Airways and Virgin Australia Airlines

Voluntary Disclosures in Australian Corporate Sector

Introduction

The main aim of this report is to analyze the sustainability standards adopted by Qantas Airways and Virgin Australia Airlines in a bid to determine their level of compliance with the Global Reporting Initiative (GRI) Sustainability Reporting Guidelines. To this end, the report highlights the operating activities of these companies in order to determine the environmental, economic and social impacts of these activities on its stakeholders. Moreover, it elaborates the environmental, social and economic disclosures made by the companies in reference to the respective GRI disclosure guidelines. Finally, it identifies the key strengths and weaknesses of the sustainability reports and provides recommendations on how Qantas Airways and Virgin Australia Airlines can improve their reports in future.

Company Backgrounds

Qantas Airways Ltd is the largest airline in Australia by fleet size, international destinations and international flights. Having been established in 1920, it is the third oldest airline in the world. The company is based in Mascot, Sydney and controls 65% of the Australian domestic market (Qantas Airways, 2015). Moreover, it carries at least 18% of all inbound and outbound passengers in Australia. The company’s subsidiaries, which include Jetconnet and QantasLink provide airline services within New Zealand and Australia respectively, operating under the Qantas brand. The company also owns Jeststar, a low cost airline that offers both domestic and international airline services and owns shares in a number of other airlines.

Formerly known as Virgin Blue Airlines, Virgin Australia Airlines is the second largest airline in Australia. The company was established in 2000 and is based`in Bowen Hills, Brisbane. It serves 29 cities in Australia from hubs in Melbourne, Brisbane and Sydney. After operating as a low cost carrier for several years, the company has upgraded its services to become a “New World Carrier” to compete favorably with Qantas in the business travel segment. Both companies are listed on the Australian Stock Exchange and belong to the service sector of the airline industry.

Sustainability Reporting

“Sustainability reporting is the practice of measuring, disclosing, and being accountable to internal and external stakeholders for organizational performance towards the goal of sustainable development.” (GRI, 2011). It is a broad term synonymous with other terms such as corporate responsibility reporting and triple bottom line that generally refer to reporting on social, economic and environmental impacts of an organization. Reporting organizations should make deliberate efforts to ensure that they provide a balanced and reasonable representation of the sustainability performance of their organizations.

Basing on the GRI reporting framework, sustainability report should disclose results and outcomes that took place within a given reporting period in relation to the organization’s strategy, commitments and management approach (GRI, 2013). These reports serve a myriad of purposes including, benchmarking and assessing the sustainability performance of the organization, demonstrating how the organization affects and is affected by expectations about sustainable development and facilitating a comparison of the performance of different sections within an organization and the organization as a whole in relation to other organizations.

GRI Sustainability Reporting Guidelines offer Standard Disclosures, Reporting Principles and an Implementation Manual to assist organizations in preparing sustainability reports irrespective of their size, sector or geographical location. The guidelines also provide an international reference for organizations that intend to disclose their governance approach and the social, economic and environmental impacts of their operations. These guidelines are prepared after rigorous consultations with several stakeholders including business representatives, labor and financial markets, the civil society, auditors and experts from different fields. Regulators and government agencies from different countries are also consulted to ensure that the guidelines are consistent with internationally recognized reporting standards.

Similarities in Disclosure

Both companies made deliberate attempts to disclose the economic, environmental and social impacts of their operations and other issues that might significantly influence the assessment decisions of their stakeholders. Virgin Australia disclosed all the entities that were included in the scope and acknowledged the use of the GRI G3.1 framework as the basis for their sustainability assessment approach. It particularly addressed the direct financial impacts, peer based norms, and policy related performance of the organization while at the same time taking into consideration the stakeholder behavior and concerns and societal norms affecting the company. Each of these issues was prioritized using a materiality matrix that facilitated the plotting of issues based on their relative significance on both the company and the stakeholders.

Qantas Airlines clearly outlined its governance approach, by addressing issues relating to corporate governance, business resilience, the groups security and the risks it faces (Qantas Airways, 2013). Moreover, the report highlighted the stakeholder engagement by outlining its company policies regarding stakeholder engagement and identifying the various stakeholders that are affected by its operations. Other than that, it provided an elaborate discussion of the company’s financial strategies, which include disciplined capital management and prudent investment, underpinned by financial risk management with an aim of enhancing the company’s long term profitability. This section highlighted the company’s sustainable value proposition, strategic priorities and optimized capital structure.

The report also demonstrated the company’s appreciation of the various needs of its different customers, which is an indication that it takes into account the social impacts of its operations on its latter. In this regard, the company has adopted a holistic approach to diversity and has demonstrated its commitment to having a diverse and inclusive workplace. The management believes that a diverse workforce supports the company’s objectives and affords it a sustainable competitive advantage over other key players in the industry. As such it strives to promote diversity through talent, leadership and development programs, human resource planning and flexible working hours. Finally, the sustainability report highlights the impacts of the company’s operations on the environment with special attention to greenhouse gas emissions and fuel consumption.

Differences

Given the different histories and scale of operations for the two companies, the huge discrepancy between their sustainability reports was expected. First, the sustainability report for Qantas Airlines is a separate document while the sustainability report for Virgin Australia is included in the Annual Report. For this reason, the former is more comprehensive and elaborate than the latter. Qantas Airlines’ sustainability report is a 63 page document that clearly elaborates both the company’s governance and it the social economic and environmental impacts of its operations.

On the other end of the spectrum, Virgin Australia’s sustainability report is merely an 8 page report summarizing the company’s sustainability progress and performance for the relevant financial period. Furthermore, the report focuses on the environmental, economic and social impacts of the company at the expense of governance issues. This can be attributed to the fact that the company’s operations are mainly localized in Australia, which implies that it is not bound to adhere to international reporting standards. As aforementioned, only multinational organizations are required to report about their governance approach.

Conclusion and Recommendations

Despite their efforts to produce an elaborate summary of the company’s sustainability progress and performance, Virgin Australia’s sustainability report is not user friendly. The report is too technical for a lay users because it mainly contains statistical data, which will be interpreted differently by different users. While such data might be very useful for professional users, lay users might either find it useless or worse still, interpret it wrongly. Qantas Airway’s repot is more descriptive, which implies that it will make more sense to both lay and professional users. In future, Virgin Australia should produce a more detailed sustainability report with adequate descriptions in order to enhance its understandability by a wider audience.

Nonetheless, while Virgin Australia’s report is not very detailed, it offers more statistical data than that of its counterpart. Even though this data might not be very useful for lay users, it can prove to be very critical for professional users. Moreover, the data facilitates comparability between current and past sustainability performance of the organization. As such, Qantas Airlines should strive to include more statistics in its sustainability reports to enhance their credibility and comparability.

Even though the nature of its operations does not require Virgin Australia to report about its governance issues, the company should be cognizant of the fact that the Australian Stock Exchange is open to foreign investors, who have a wide range of opportunities to choose from the global financial market. As such, it should adopt the sustainability reporting standards used by multinationals in order to compete favorably with other key players in the global airline industry. Moreover, because the company’s vision is “To become a sustainability leader within the aviation industry”, it should go an extra mile in providing relevant disclosures to its stakeholders (Virgin Australia Holdings Limited, 2014). Providing information about its governance approach would be a positive step toward this end. Voluntary Disclosures – Voluntary Disclosures

References

GRI. (2011, September 26). Sustainability Reporting Guidelines. Retrieved from Global Reporting Initiative: https://www.globalreporting.org/resourcelibrary/G3.1-Guidelines-Incl-Technical-Protocol.pdf Voluntary Disclosures – Voluntary Disclosures

GRI. (2013, May 14). Sustainability Reporting Guidelines. Retrieved from Global Reporting Initiative: https://www.globalreporting.org/resourcelibrary/GRIG4-Part1-Reporting-Principles-and-Standard-Disclosures.pdf Voluntary Disclosures

Qantas Airways. (2013, September 18). Sustainability Review 2013. Retrieved from 2013: https://www.qantas.com.au/infodetail/about/investors/qantas-sustainability-review-2013.pdf Voluntary Disclosures

Qantas Airways. (2015, May 5). Our Company. Retrieved from Qantas.com: http://www.qantas.com.au/travel/airlines/company/global/en Voluntary Disclosures

Virgin Australia Holdings Limited. (2014, June 30). Annual Financial Report 2014. Retrieved from http://static.globalreporting.org/report-pdfs/2014/ba8d596c0f42955ebace11edc608b2e3.pdf Voluntary Disclosures