In recent corporate history, financial statements have always represented a key pillar of information disclosure. A company’s financial statements provide information that a wide range of stakeholders, but primarily investors, creditors, and regulators use to evaluate a company’s financial performance. Financial statements serve as an important tool to manage business from an economic standpoint—that is, to manage limited resources to meet all business needs and goals.
A significant portion of information presented in a financial report is required by law and is prescribed by accounting standards. The three key items of any financial report—income statement, cash flow statement, and balance sheet–are indispensable for measuring the impact of specific decisions, determining budgets, and minimizing or eliminating unnecessary costs. They are also important for looking at the big picture—aligning functions and departments, setting goals, and driving motivation of an entire organization. Additionally, it is one of the best benchmarking tools in terms of measuring past successes and expected performance.
While in some jurisdictions airports’ public financial disclosure is mandatory by legislation (e.g., the Airport Financial Reporting Program in the United States which requires commercial service airports to annually file financial reports with the Federal Aviation Administration) or is an integral part of a specific arrangement an airport operates in (e.g., an airport operator company is listed on stock exchange and hence obliged to follow financial disclosure standards of a security exchange commission), some airports are not prescribed to disclose their financials.
Nevertheless, a growing number of airports are still opting to disclose their financial statements. Such transparency testifies to the ongoing globalization and hence harmonization of business standards and practices, increased national requirements, and better technical capabilities of airports in all parts of the world.
Financial accounting, reporting, and disclosure are essential tools for quantifying and communicating airport performance from an economic standpoint, facilitating transparency and accountability against a wide range of stakeholders including airports’ users, employees, suppliers, investors, and business partners to the wider communities they serve. However, most industries and sectors, and airports specifically, have undergone a profound rethinking of what performance is both today and in the foreseeable future.
We are currently witnessing a fundamental corporate transformation wherein sustainability is becoming indispensable to the survival and prosperity of the world and global economy. The search for sustainability has become no less than the search for a resilient future. Even the most skeptical individuals notice that our civilization pushed the biosphere into an unprecedented perilous state, evidenced by rising sea levels, volatile weather, spreading disease, and compromised water and agriculture systems to name but a few calamities of environmental nature.
However, there are additional issues of social and corporate governance nature to be tackled. The United Nations Sustainable Development Goals (UN SDGs) provide good insight into what these issues are. These include, but are not limited to, poverty, hunger, compromised health and well-being, availability and quality of education, gender inequality, and lack of diversity and inclusion.
Airports are committed to contributing to their fair share of responsibility in tackling the issues of environmental, social, and corporate governance. They are mature businesses and important economic engines, fostering socioeconomic development in all parts of the world. In 2019—immediately before the pandemic—the aviation sector generated US$3.5 trillion in economic activity, representing 4.5% of global GDP. The transport of 9.1 billion air passengers and US$6.5 trillion in goods also supported 87.7 million jobs around the world. A significant proportion of these jobs, estimated at around 60%, concentrate on the airport site, making the airport sector an indispensable node of aviation employment.
The typical airport hub has as many as 40,000 employees working on site. These include airport operator employees and contracted staff, people from airlines, ground handling companies, providers of commercial services such as retail, car parking, food and beverage, government employees, and many others. As such, airports are meaningful nexuses of people and businesses and are often unique ecosystems, as exemplified by the concept of aerotropolis—fostering speedy connectivity to private individuals and the corporate sector, and creating value through economies of scale, scope, density, and speed.
As any other mature industry, airports put sustainability at the very core of their business and future developments, as testified in their Environmental, Social, and Corporate Governance (ESG) reports, Task Force on Climate-Related Financial Disclosures (TCFD), the Global Reporting Initiative (GRI), Sustainability Accounting Standards Board (SASB), International Integrated Reporting Council (IIRC) and other information disclosure vehicles. While some reporting standards focus almost exclusively on the environmental aspects of sustainability, others encompass the three pillars.
Many airports are actively pursuing multiple sustainability indexes, including the Dow Jones Sustainability Index (DJSI), FTSE4Good Global Index (FTSE4Good), Carbon Disclosure Project (CDP), Sustainability Yearbook, STOXX Global ESG, MSCI Global Sustainability Index, Vigeo, ISS ESG, GRESB, to name a few. Some leading airport operators have developed their own sustainability index, such as Ferrovial, for instance, which decided to build their own sustainability index—the Ferrovial Airports Sustainability Index (FASI). FASI covers the full range environmental, social and governance topics, but has been customised to capture the factors most relevant to the sustainable operation of its airports.
As for the environmental aspect, significant attention is given to the issue of carbon dioxide emissions and airports’ efforts to reducing these emissions, something often referred to as decarbonization (carbon dioxide emissions representing about 95% of greenhouse gas emissions (GHG)). ACI has recently released a much-anticipated Long Term Carbon Goal Study—the result of a year long research and consultation period, underpinned by an extensive analytical and evidence-based research. The study led to the creation of an ambitious, long-term carbon goal for the global airport sector, formulated as follows: “ACI member airports at a global level commit to reach Net Zero Carbon emissions by 2050 and urge governments to provide the necessary support in this endeavour.”
Due to the urgency of reducing GHG and carbon dioxide emissions, both often represent either a sole metric for high-level ESG airport disclosures, or the key metric. In a simplistic ESG disclosure framework, two of three environmental indicators are usually defined as GHG emissions intensity and CO2 reduction policy, the third metric often being energy intensity. However, environmental performance indicators encompass a much wider number of dimensions, including water consumption and recycling, biodiversity protection, and effluents and waste management among others.
Aena, S.A. (formerly Aena Aeropuertos, S.A.)—one of the leading airport management companies—in its annual Environmental Sustainability Report highlights, for instance, the following aspects of its environmental management:
This specific example highlights the broad range of challenges falling under the environmental sustainability umbrella. Some of these issues either directly or indirectly relate to the next pillar of sustainability, namely society.
As highlighted above, airports are meaningful employers in their own right, but also enablers for other industries and sectors, contributing further in terms of indirect, induced, and catalytic economic impact. A highly professional labor force is indispensable to the provision of airport infrastructure and services in a safe, secure, efficient, and sustainable manner. Airports evolved from simple facilities to sophisticated businesses, which also had an impact on its workforce profile. Today, airports employ people specialized in a wide array of domains—civil, mechanical, electrical and computer engineering, data science, finance, economics, environmental planning, and so on.
Therefore, increasing attention is being given to social concerns, especially with regard to an airport’s own employees and the communities in its immediate surroundings. These often include employment practices (hire, turnover, benefits), occupational health and safety, training, education and development, and diversity and equal opportunity.
Ferrovial, S.A., previously Grupo Ferrovial—a multinational company involved in the design, construction, financing, operation and maintenance of transport infrastructure and urban services, including airports, is committed to society through social programs and conceives investment in the community as a strategic instrument for the development of people and the environment where they exercise their business activity. These social programs are highlighted as follows:
The social programs highlighted above testifies to the interrelatedness of airport business practices, interests of its internal stakeholders, as well as the impact on surrounding communities. Social sustainability aims at reconciling these interests with a win-win outcome for all parties in question. That is largely related to good corporate governance—the third pillar of sustainability.
Corporate governance covers the area of investigation into the rights and responsibilities of the management of a company—its board, shareholders, and the various stakeholders in that company. Looking at high-level governance indicators used by investment banks and rating agencies, one would notice such measures as average board tenure in years, share of female board members, and board member independence.
However, the question of corporate governance is much wider in scope. Based on Moody’s methodologies outlining general principles for assessing environmental, social, and governance concerns, corporate governance considerations in the airport sector can be structured as follows:
These considerations demonstrate the multi-faceted nature of sustainable corporate governance and shed light on the interrelated nature of management structure, employee relations, compensation on the internal stakeholder side, and the regulatory and government relations on the other side.
This article highlights a simple yet important transformation of information disclosure in the airport sector—from one that is finance-based towards a multi-dimensional framework that combines airport financials with the ESG aspects of its business. However, this transformation is also a testament to the constantly evolving nature of the airport industry and the new set of challenges the industry is facing—from an objective need to tackle environmental issues to a creative pursuit of new ways to engage with local communities.
The airport industry is undergoing a significant transformation; airports are becoming more digital, innovative, technologically advanced, contactless, and people oriented. All these transformations are superimposed on airports’ commitment to sustainability. Airports are set to face an ambitious agenda for the years to come, and these ambitions are fully aligned with the UN SDGs: airports are here to support economic and social development and provide opportunities and connectivity, and ESG disclosures are the right tool to facilitate this transformation and growth.
Towards further guiding our members during this transformation, ACI will soon release the Sustainability Strategy for Airports Worldwide, with selected case studies, which will provide the very first overview of airports’ most relevant and commonly reported material sustainability topics at the global level. This comprehensive report will help airports executives with their holistic sustainability strategy as they work towards aligning their local initiatives with common international topics and objectives. The report was made possible with the financial support of Hamad International Airport and developed in collaboration with Taylor Airey and Vancouver International Airport.