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Applying sustainability reporting to decision making: product focus and life cycle assessmentJanice A. Loftus and John A. Purcell

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1

Introduction 2

About the authors 2

Background 3

Some important definitions 3

Sustainability and competitive advantage: an evolving approach to decision making

3

Review of frameworks 5

The utility of a product or entity focus 5

What is meant by life cycle assessment? 5

A more detailed examination of the LCA components 6

Overlap between LCA and boundary concepts applied by the GRI 6

Issues in applying LCA 8

Case study of an airline 9

The product 9

Direct and indirect effects of producing a flight service 9

Direct activities 10

Flying the aircraft – 10

In-flight services – 11

Ground services – 12

Engineering and maintenance – 15

Indirect activities 16

Building the aircraft – 16

Treatment of waste – 18

Concluding comments 20

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Introduction

The motivation for this paper is to describe evident trends in sustainability reporting towards a greater level of integration of stakeholder disclosure and underlying decision making. The paper initially sets the scene by presenting some basic definitions of sustainability, indicating its underpinning in a widening recognition of corporate social responsibility (CSR). A significant parallel development in understanding is the extent to which a sustainability orientation in strategic decision making can present the basis of achieving competitive advantage.

With the above as background, the paper then focuses attention on emergent methodologies which have been developed to assist organisations to identify a broader scope of non-financial dimensions associated with their commercial or operating activities. It suggested that a range of firm-based and wider public policy decision making processes can be enhanced by these insights. As such, these product-oriented and organisational boundary approaches reflect an understanding of the embedding of products and business entities respectively, in a chain of relationships extending both backward and forward. The case study, which forms the major part of this paper, illustrates how these techniques might be applied in practice and, equally significantly, identifies the types of difficulties that might be encountered in identifying and treating relationships.

About the authorsJanice Loftus is a senior lecturer in accounting in the School of Business, The University of Sydney.

John Purcell is a policy adviser, Professional Standards, CPA Australia.

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Background

Some important definitionsTo establish a context and scope of discussion, it is appropriate to commence with some definitions.1

‘Triple bottom line’ (Elkington 1998) refers to the notion that organisations need to think, and in turn report, in terms of social and environmental dimensions alongside the traditional financial ‘bottom line’.2 Other dimensions recently considered include cultural sustainability and corporate governance—the latter giving rise to the notion of a ‘quadruple bottom line’.

According to Brundtland (World Commission on Environment and Development, 1987), ‘sustainability’ is defined as ‘meeting the needs of the present generation without compromising the ability of future generations to meet their needs’.

Increasingly ‘triple bottom line’ (TBL) and ‘sustainability’ are embraced within a wider debate around ‘corporate social responsibility’ (CSR) which, more critically, calls into question the role of the corporation in effecting positive environmental and social change—many of the problems of which are perceived to have been manifested in the presumed commercial imperatives at the heart of the corporation’s objectives and ongoing conduct. With this perspective in mind, one of the more useful definitions of ‘corporate social responsibility’ is that provided by Parkinson:

… behaviour that involves voluntarily sacrificing profits, either by incurring additional costs in the course of the company’s production processes or by making transfers to non-shareholder groups out of the surplus thereby generated, in the belief that such behaviour will have consequences superior to those flowing from a policy of pure profit maximisation.3

Underlying the notion of CSR is the emergence of performance-assessing criteria that are tempered increasingly by the consideration of trade-offs between long-term and short-term objectives. Moreover, promoted therein are behavioural considerations of preserving future capacity for meeting the needs of a widening base of stakeholder interests at an ‘inter-generational’ level.

What then, does this all mean for the topic at the centre of this paper; that of business decision making? And particularly, what are the implications for market-based competitive behaviour which remains, not withstanding these emerging understandings and pressures, the premise upon which business is conducted with a view to risk-based wealth generation?

Consideration of such issues should not be taken to infer that the challenges here are unique to the private sector. Quite clearly, many Australian government business enterprises and other public-sector entities have been at the forefront in responding to changing performance expectations, particularly in terms of their environmental impacts both vertically within a supply-chain and ‘longitudinally’ over expanding time-horizons of performance.

The answer to the above questions, we suggest, can be found in an understanding of the interrelationship between innovation and competitive advantage. Thus, before embarking upon a description of key features of some of the frameworks that have emerged to identify and describe these widening dimensions of business performance, it is worthwhile identifying how sustainability-based innovative business practices might be a source of enduring competitive advantage.

‘Sustainability’ and competitive advantage: an evolving approach to decision makingWithin the pivotal sustainability dimension of CSR, many of the decisions that are being made by managers are no longer one dimensional issues; such as assessing the trade-off between short-term profit sacrifice and future returns, or the capacity to shift the burden of incremental costs to customers. Rather, sustainability itself is increasingly identified as a source of business success beyond merely enhancing reputation. While this trend is not universal amongst business, it provides a substantial base upon which future leadership and direction might be developed.

Research conducted by Goldsmith and Samson4 shows that highly successful companies identified as leaders in sustainable development business practices—whose source of competitive advantage contrasted between the innovative and quality / service / reliability—demonstrated a limited number of key generic strategic orientations:

Efficiency referring to the range of sustainable development practices that make a direct or indirect contribution to the company’s financial performance; and

1 Note the discussion here is derived from our related Congress paper (K1) Sustainability Reporting: Driving a Universal Standard and Global Recognition through the Global Reporting Initiative.

2 J. Elkington, Cannibals with Forks: The Triple Bottom Line of 21st Century Business New Society Publishers, Canada (1998).3 J.E. Parkinson, Corporate Power and Responsibility Clarendon Press, Oxford (1993) pp. 260-261.4 “Sustainable Development and Business Success: Reaching beyond the rhetoric to superior performance”, Foundation for Sustainable Economic Development

University of Melbourne, March 2005.

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Market edge describing those practices that contribute to the company’s market opportunities in terms of new markets, market share and profit opportunity. Research and development, innovation, and supply chain improvements are all examples.5

The research conducted by Goldsmith and Samson further dispels the myth that sustainability practices and conducting a profitable commercial enterprise are mutually exclusive. They confirm that as the sustainability orientation becomes deeper aligned and congruent with other facets of strategy, improved adaptability, efficiency and market edge ensue. This orientation thus forms the basis of both continuous improvement and the identification of novel opportunities. Nonetheless, capacity for economy and society-wide movement in this direction is embedded in wider issues of appropriate policy mix and a consideration of the role and capacity of business amongst ‘other players’ to effect positive social change. As such, the improved conduct of business provides a vital, though incremental, component to a more sustainable future.

In these terms, a key feature of doing business successfully into the future will be the attainment of approval, cooperation and satisfaction (though not necessarily formal) of a widening body of stakeholders6 – the dilemma, of course, being how to identify and then assess and fairly satisfy the demands of this non-shareholder constituency. Attitudes, within decision making, that are conducive to identifying and embedding sustainable business practices cannot be developed through simple formulaic or prescriptive solutions. Such decisions require a thorough understanding of many facets of a business’ operations:

… sustainability development practices are a sub-set of business practice engaged in to achieve sound strategy and performance outcomes. There is no single set of sustainable development practices because every firm has a unique business strategy.7 (emphasis added)

Underlying this perspective is the notion of linkages between stakeholder engagement and the role of information, by which the interests of third parties are balanced with those of the company as part of decision making processes within the context of corporate responsibility.

5 Ibid. at 8.6 “Sustainable Development and Business Success: Reaching beyond the rhetoric to superior performance”, Foundation for Sustainable Economic Development

University of Melbourne, March 2005 at 6.7 Ibid. at 7.

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It is now appropriate to turn attention to a review of evolving frameworks that have sought to provide a basis for identifying the reach in business activity, fundamental to both describing and managing the full gamut of business activity in a more sustainable manner. The first, ‘life cycle assessment’, applies a more product-based orientation; whilst the second, the Global Reporting Initiative’s 2005 Boundary Protocol, adopts a corporate or organisational perspective—though, as will be demonstrated, there are overlaps in approach.

The utility of a product or entity focus At the outset it is reasonable to acknowledge the appeal of adopting a product focus, as it is potentially the appropriate level of disaggregation in which to assess, measure and manage sustainability impacts. Moreover, it is quite reasonable to suggest that a product perspective is the most valid means by which there can be captured the type of sustainability-oriented competitive advantage described by Goldsmith and Samson.

Nonetheless, reporting that focuses on the economic, environmental and social impacts of each product is not considered as an alternative to sustainability reporting at the entity level but, rather, as a supplement to it; or as reporting relevant to different users and decision contexts, such as product-related decisions by management and also for stakeholders who are users of end products.

The focus of most sustainability reporting is thus entity-focused. This approach is also implicit in frameworks such as the Global Reporting Initiative (GRI) G3 Guidelines. Arguments supporting a product focus in external reporting tend to assume the end user is the stakeholder, but consumers are not necessarily the most representative stakeholder reflected in the GRI framework or the sustainability reports of other entities.

Further support for this preference towards an entity focus can perhaps again be found in Goldsmith and Samson’s observations. Critical to their view that, increasingly, the capacity to do business will be dictated by ‘the attainment of approval, cooperation and satisfaction of a range of stakeholders’8, is the manner in which legitimate stakeholder empowerment is achieved. Stakeholder empowerment amongst leading companies, as Goldsmith and Samson see it, has shifted substantially away from transactional relationships towards a recognition that ‘power and influence becomes shared between the two parties: business and each stakeholder’9 —leading, by inference, to a declining product orientation.

Product-based assessment nonetheless presents a worthwhile adjunct to a more widely accepted corporate perspective on describing the non-financial dimensions of business and, moreover, provides a potentially useful starting point of disaggregation. As such, perhaps one of the approaches of greater utility is ‘life cycle assessment’10 which is described in the next section.

What is meant by life cycle assessment?Product life cycle refers to all activities undertaken from:

Thus, all upstream and downstream activities and impacts are included. Pflieger et al. (2005) refer to all operations occurring at the production site (therefore, under the control of the entity) and operations occurring beyond the site. While this implies both upstream and downstream activities, examples and discussion of indirect activities referred to by Pflieger et al. are generally confined to upstream activities.

The meaning of product life cycle should be clearly distinguished from the use of that term to refer to the stages of a product’s life—from its introduction to the market, its growth, maturity and eventual decline, after which it is replaced by alternative products—a tool commonly applied to the examination of marketing and pricing strategies. It is nonetheless suggested here that a sustainability perspective might be adapted to this type of LCA. Manufacturing process and related set-up decisions are made at a time even prior to the introduction of a product to a market, thus having far reaching environmental and related consequences potentially embedding into a succession of ‘product life cycles’.

Similarly, as products enter a stage of decline, which depending upon their nature may span many years, the opportunity is presented to critically evaluate the most appropriate basis of renewal. These considerations have perhaps their most obvious application to infra-structure renewal and other significant capital investment decisions. The key conclusion to be drawn is that sustainability-based strategic decision making applies to a multiplicity of dimensions of business activity.

Review of frameworks

8 “Sustainable Development and Business Success: Reaching beyond the rhetoric to superior performance”, Foundation for Sustainable Economic Development University of Melbourne, March 2005 at 6.

9 Ibid. at 7.10 J. Plieger, M. Fischer, T. Kupfer and P. Eyerer, “The contribution of life cycle assessment to global sustainability reporting of organisation” (2005) 16(2) Management of

Environmental Quality: An International Journal pp. 167-179.

Raw materialsEnd product, including recycling and waste disposal

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The more vertically-based perspective on product LCA can be conceptualised as encompassing direct and indirect effects. Again some clarification is warranted because the use of direct and indirect differs from their application in management accounting (see Pflieger et al. p. 170). Thus, some activities are considered direct because they are controlled (e.g. power consumed to provide lighting in the factory, and administrative functions supporting the production and sale of the product) but their costs would be treated as an indirect product cost or an indirect cost allocated under activity-based costing. In essence, Pflieger et al. argue that both direct and indirect economic, environmental and social effects are relevant (at least to some users and decision contexts).

A more detailed examination of the LCA components In their LCA-based approach to sustainability reporting, Pflieger et al. suggest the need for a ‘paradigm-shift’ in which there is a recognised and adjusted-for dichotomy between inventory data (which can be directly measured and thus accumulated) and impact data (which are the consequences of that which is included within the inventory parameter). They present an example of carbon dioxide emission as a product-derived outcome which can be accumulated under an inventory parameter and thus, in turn, global warming as an example of a consequential impact.

A trend amongst both policy regulators and consumers to demand product-related sustainability information is identified by Pflieger et al., who suggest that developments in data accumulation techniques around products, in the terms described, may drive both internal and external communications of corporate performance. Notwithstanding our views that entity-level sustainability reporting would be more useful for assessment of corporate performance, the technique suggested by Pflieger et al. serves as a potentially useful adjunct or framework of analysis, complementary to more standard methods of strategic decision assessment (such as net-present-value) used by management.

This paper thus presents an example of this approach applied hypothetically to the airline industry. Firstly, however, the key premises of the LCA approach are identified and, in turn, contrasted with the more ‘entity-based’ Boundary Protocol described by the GRI.

The common central problem addressed by these emergent techniques is that of ‘boundaries’, which acknowledges that the reach and consequences of commercial activity extend beyond the immediate physical, ownership and control

structures. Thus, by ‘regarding the life cycle of a product from raw material extraction through production processes and use to end-of-life recycling’11 , a wider range of effects can be identified and thus coordinated towards a continuous improvement process, in terms similarly described by Goldsmith and Samson. Moreover, by introducing the notion of measurable indirect economic, social and environmental impacts throughout the supply chain identified by way of the product-derived LCA, the externalities of economic activity can be better recognised. This, in turn, would enable better assessment around public-policy responses and the transparency of product pricing.

In these terms, because of potential uncertainty around interrelationship and causality, external communications12 should contain two streams of reporting; that derived from inventory parameters and that identified at the impact level. Moreover, this more holistic approach to describing and communicating performance negates against the potentially distorting effect of altering the inventory parameters.

Overlap between LCA and boundary concepts applied by the GRI13 The GRI Boundary Protocol recommends the determination of report boundaries based on control, significant influence and significant impact. A three-tiered reporting approach is recommended, reflecting the practical difficulties of accessing information from entities over which the reporting entity does not exercise control (page 19, GRI G3 Sustainability Reporting Guidelines):

At minimum, the reporting organization should include the following entities in using these approaches:

Entities over which the organization exercises control •should be covered by indicators of Operational Performance; and

Entities over which the organization exercises •significant influence should be covered by Disclosures on Management Approach.

The boundaries for narrative disclosures should include entities over which the organization does not exercise control / significant influence, but which are associated with key challenges for the organization because their impacts are significant.

This acknowledged divergence in reporting from ownership and investment structure—along with the alluded mixed

11 J. Pflieger et al. ibid. at 170.12 Ibid. at 171.13 The evolving basis and widening application of the GRI are described in our related Congress paper (K1) Sustainability Reporting: Driving a Universal Standard and

Global Recognition through the Global Reporting Initiative.

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form of quantitative non-financial and narrative techniques—suggests why, at least for the foreseeable future, development of sustainability reporting should evolve via non-government organisations and professional guidance, rather than through government or regulator-mandated practice. The problem of ‘dovetailing’ sustainability disclosures with the traditional corporate context of reporting is similarly described by Pflieger et al. (2005) in the context of accumulating contrasting inventory and impact data: ‘aggregation of the sustainability parameters is … not possible in a uniform way’14 .

To determine those entities to be included within the reporting boundary, the GRI suggests the use of a mapping process which combines, on respective vertical and horizontal axes: thresholds of high / low significance of related entity sustainability impact; and in turn, influence / control (the influence measure further disaggregated to a threshold of significant versus non-significant). This entity analysis, or categorisation, is then applied to a ‘scale’ of reporting ranging from the inclusion of operating data for high-impact / high-control entities, down to narrative (by exception) information for low-impact / low-influence entities.

Similarity between product LCA and boundaries in GRI: GRI principle of completeness is consistent with the •comprehensiveness of the approach of the product life cycle assessment.

Differences between product LCA and boundaries in GRI:

Different assumptions about the stakeholder for whom the •sustainability report or sustainability information is intended and their decision needs.

Consideration (by the GRI) of practical issues regarding •access to information and assurability; the LCA is presented very much at a conceptual level.

The GRI is based upon a structure of quantitative and qualitative indicators. It is therefore possible to construct a table of indicators that, in general terms, would be the applied outcome of a boundary setting analysis. In addition to the report boundary protocols, the GRI captures upstream and downstream environmental considerations in some of its core and additional indicators (see Table 1). The GRI distinguishes between core and additional indicators—a core indicator is one which is considered by the GRI, based on extensive consultative processes, to be relevant to most entities and useful to most stakeholders.

Table 1: GRI and upstream-downstream (product life cycle) considerations

GRI G3 Guidelines

Environmental

Energy Core

EN4. Indirect energy use.

As per GRI Guidelines 2002

Additional

EN7. Initiatives to reduce indirect energy consumption and reductions achieved.

Emissions, effluents and waste

Core

EN17. Other relevant indirect greenhouse gas emissions by weight.

Social

Human rights Core

HR2. Percentage of major suppliers and contractors that have undergone screening on human rights and actions taken.

14 J. Plieger et al. ibid. at 168.

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Table 2 identifies environmental indicators that provide information at the product level, rather than aggregated at the entity level as typified in the GRI frameworks.

Table 2: GRI and product life cycle or other social or environmental considerations at the product level

GRI G3 Guidelines

Environmental

Energy Additional

EN6. Initiatives to provide energy-efficient or renewable energy-based products and services and reductions in energy requirements as a result of these initiatives.

Products and services

Core

EN26. Initiatives to mitigate environmental impacts of products and services, and extent of impact mitigation.

EN27. Percentage of products sold and their packaging materials that are reclaimed by category.

Product responsibility

Customer health and safety

Core

PR1. Life cycle stages in which health and safety impacts of products and services are assessed for improvement and percentage of significant products and services categories subject to such procedures.

Additional

PR2. Total number of incidents of non-compliance with regulations and voluntary codes concerning health and safety impacts of products and services, by type of outcomes.

Product and service labelling

Core

PR3. Type of product and service information required by procedures and percentage of significant products and services subject to such information requirements.

Additional

PR4. Total number of incidents of non-compliance with regulations and voluntary codes concerning product and service information and labelling, by type of outcome.

Issues in applying LCAThe following conceptual and practical issues may arise in both the application of LCA and the identification of boundaries in sustainability reporting:

Corporate group structure has implications for what •is direct and what is indirect (also affects which tier of reporting would be applied in GRI Boundary Protocol).

Outsourcing has implications for what is direct and what •is indirect. While economic impacts are captured through price paid for outsourced activity, social and environmental impacts may effectively go ‘off-balance sheet’.

The effect of whether an activity is within the boundary (e.g. •an outsourced activity would only be in the report boundary if it has significant impacts, and then, only at the third tier of reporting).

Selected outsourced upstream activities are captured in •GRI indicators, such as those reporting on procurement policies.

Outsourcing decisions may influence or distort the •identification of the report boundary.

Consideration of product-related decisions, such as •outsourcing, based exclusively on financial / economic factors (on which information is available), may have considerable environmental and social consequences that are inconsistent with the entity’s sustainability objectives.

Outsourcing decisions that do not fully consider social and •environmental implications may result in significant risks to the entity if activities move outside of their control (e.g. if an entity outsources production and, further upstream, the line activity is sub-contracted to a source that employs child labour, the entity may be challenged in the implementation of its own human rights policies).

Choice of location of operations and location of outsourced •activity may have sustainability implications.

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The following case study illustrates the potential application of LCA to the airline industry. It is not intended to represent any particular airline, nor is it intended to be comprehensive with respect to the operations and significant environmental and social impacts of airlines. The case draws on selected operating arrangements and focuses on a sample of environmental and social effects to illustrate the issues pertaining to the application of LCA identified in the preceding discussion.

The case study will examine the identification of environmental and social effects of direct activities and upstream and downstream indirect activities. It will consider the implications of outsourcing, as well as intra- and inter-period allocation of effects pertaining to activities that are not feasibly traceable to specific products. For purposes of the illustration, the identification of impacts is confined to inventory parameters, such as carbon dioxide emissions. The analysis of performance on inventory parameters and translation to ‘core indicators’ of sustainable development, such as contribution to global warming, is beyond the scope of this study.

The productThe airline’s major products are flight services; each scheduled flight may be considered as a separate product. Management may require information for decisions about specific flights, such as whether to operate the flight or whether to use a Boeing 747 or a Boeing 767. Some decisions may be made in relation to groups of products, such as whether to continue air services to a particular destination. External stakeholders, such as passengers, may also need information for product-related decisions, such as whether to travel by plane or use other forms of transport.

Direct and indirect effects of producing a flight serviceNumerous activities contribute to the airline’s provision of flight services for passengers, such as flying the plane, in-flight services, and ground services (including baggage handling, passenger handling, waste disposal, engineering and maintenance, finance, marketing and human resource management). The classification of the effects of each activity as direct or indirect, in the context of LCA, is based on the presence of control over the activity by the airline.

For example, the operation of the flight is usually controlled by the airline and the economic, social and environmental effects of the flight are classified as direct. Some aspects of waste disposal, however, are often performed beyond the site and outside the control of the airline. The economic, social and environmental effects of waste disposal undertaken by other entities are therefore classified as indirect effects of the airline’s activities.

Some activities are more readily traced to individual flight services than others. For example, while most of the output of catering activities can be traced to particular flights, some processes within catering (such as refrigeration) are not easily traced to specific flights. Engineering and maintenance activities are generally not readily traceable to specific flight services, although they would ordinarily be easily traced to a particular aircraft.

Furthermore, while some activities may be readily traceable to a particular flight service, not all of the consequential environmental and social effects of the activity may be readily identified with a particular flight service. For example, waste produced from in-flight services (such as provisions of meals) may be readily traceable to a flight; but the environmental effects of disposal of the waste, such as energy consumed in a recycling process, are not readily traceable because the waste output from multiple flights is removed and treated in a bulk handling process.

A selection of direct and indirect activities involved in the delivery of flights is illustrated in Figure 1.

Figure 1: Selected activities in LCA of flight services

Build aircraft

Fly aircraft In-flight services

Ground services eg:

•Baggagehandling

•Loadpassengers

•Catering

Ground services eg:

•Baggagehandling

•Unloadpassengers

•Cleaning

•Engineering

Waste

•Reusableitems

•Recyclable – paper, plastic

•Disposable – bio waste

Case study of an airline

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Direct activitiesThis case study commences by analysing selected environmental and social effects of three major direct activities that contribute to the provision of flight services: flying the plane, in-flight services, and ground services.

When numerous tasks and operations combine to form a service, the distinction between activities (such as flying the plane and ground services) can be arbitrary, to some extent. For instance, the use of the push-back tractor to push the aircraft away from the terminal could be considered as part of flying the aircraft or as part of ground services—in this case it is included within ground services, reflecting the typical operational structure adopted in the airline industry. In terms of LCA, the classification of an activity as part of the operations of one department or another is of no consequence as the focus is on the accumulated social and environmental effects and impacts of the product throughout its life cycle, rather than on the contributions of various departments.15

Flying the aircraftThe specific operations classified as flying the aircraft include: generation of thrust to enable the aircraft to take off; travel to the flight destination and landing; and all operations formed by flight staff including the pilot, co-pilot and, on some aircraft, the flight engineer.16

Selected environmental effects of flying the aircraft to the flight destination are listed in Table 3.17 The environmental performance data are expressed at the inventory level, consistent with the information generated by an environmental management information system tailored to the provision of product.

Table 3: Environmental effects of flying the plane to the flight destination

Environmental effect (inventory)

Description

Materials

Consumption of jet fuel Aviation-grade kerosene consumed in the preparation for and execution of the flight.


Greenhouse gas emissions CO2 emissions by aircraft engines.

Nitrous oxides (NOx) and sulphur oxides (SOx) emissions

Emissions generated by aircraft engines.

Other direct effects of flying the aircraft are the wear and tear and eventual consumption of the aircraft, giving rise to maintenance costs, replacement of parts and eventual retirement of the aircraft. For purposes of LCA, these effects are classified as direct to the extent that they are controlled by the airline. Wear and tear is considered in the context of engineering and maintenance, a component of ground services, while the eventual retirement of the aircraft is grouped with other downstream waste disposal activities.

Each scheduled flight contributes to the social effects of flying the aircraft and can, to varying degrees, be measured at the product level. For instance, data for labour practices can be collected and reported for flight crew assigned to the flight. Table 4 lists a selection of social effects of flying the aircraft18 drawing from social performance indicators used in the GRI G3 Guidelines.

15 However, measuring the total environmental and social impacts of certain activities may provide useful input to monitoring performance and discharging accountability, such that the classification of the operation should be aligned with areas of responsibility.

16 In-flight services, which refer to services provided to passengers during the flight, are considered separately.17 T he list of environmental effects of flying the aircraft to the flight destination is not intended to be exhaustive.18 The list of social effects of flying the aircraft to the flight destination is not intended to be exhaustive.

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Table 4: Social effects of flying the plane to the flight destination

Social effect (inventory) Description

Labour practices and decent work

Breakdown of workforce (casual / permanent; full-time / part-time etc.)

Data collated for flight crew assigned to the flight.

Percentage of workforce represented by trade union organisations or collective bargaining agreements

Data collated for flight crew assigned to the flight.

Policies for reporting accidents

Policies applicable to accidents involving flight crew.

Injuries (days lost) Injuries and days lost for flight crew resulting from incidents occurring on the flight service.

Staff training (in hours) Training of flight crew, pro-rata if staff are engaged on multiple flight services.

Society

Noise problems Noise generated by the flight, particularly if using airlines located near residential areas.

In-flight servicesIn-flight services refer to all of the functions performed by the cabin crew during the flight. Some of the inputs to in-flight services are outputs of other activities that form part of the product life cycle of the flight service. For example, the outputs of catering activities are inputs to in-flight services. Inputs that represent outputs of another direct activity are not considered, so as to avoid double counting.19 Selected environmental and social effects of in-flight services20 are identified in Table 5 and Table 6, respectively.

Table 5: Environmental effects of in-flight services


Description

Materials

Newspapers and magazines, headsets, antimacassar, rugs and pillows, eating utensils, trays, toiletries

Provision of meals, entertainment, lavatory supplies and other comforts for passengers during the flight.

Water

Water consumed Water used for drinking, washing and flushing.


Insecticide spray Sprays required before entry to terminals at certain destinations (e.g. New Zealand).

Waste: paper, aluminium, recyclable plastics, glass, etc.

Waste from newspapers and magazines, linen / paper antimacassar, meals (food and beverage) and packaging (aluminium cans and covers; recyclable plastics from cutlery, cups, eating utensils and trays; glass).

Bacteria and viruses Potentially transferring bacteria and viruses to areas with little or no immunity.

19 While all inputs can ultimately be traced further upstream to some basic elements in the measurement of an ecological footprint, in the interests of brevity this will not be pursued in this case study.

20 The lists of environmental and social effects of in-flight services are not intended to be exhaustive.

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Table 6: Social effects of in-flight services




Data collated for cabin crew assigned to the flight.


Data collated for cabin crew assigned to the flight.

Policies for reporting accidents, illnesses and diseases

Policies applicable to accidents, illnesses, etc. involving cabin crew and passengers.

Injuries (days lost) Injuries and days lost for cabin crew from incidents during the flight service.

Staff training (in hours) Training of cabin crew, pro-rata if staff are engaged on multiple flight services.

Human rights

Human rights policies applied in procurement of supplies and outsourcing

Applied in choice of suppliers, e.g. caterers at point of flight destination.

Policies against discrimination

Policies to cater for disabled access to the aircraft cabin as well as medical and religious dietary requirements on each flight.

Society

Policies addressing bribery and corruption

Applicable to cabin crew interacting with passengers during the flight.


Policy for preserving customer health and safety

Safety talks, safety cards, anti-terrorist precautions, security measures, prohibition on smoking, disclosures about deep vein thrombosis.

Policies and procedures for product labelling

Policy on labelling on food packaging.

Policy for consumer privacy Passenger list privacy policy.

Ground servicesGround services occur before and after the flight.

Pre-flight ground services include: facilities for passengers and guests awaiting departure at the airport, loading passengers and baggage onto the flight, safety checks by maintenance and engineering, and the preparation of food and beverages.

Post-flight ground services include: unloading passengers and baggage, facilities for guests awaiting arrivals, and cleaning and maintenance of the aircraft.

Activities before and after the flight are analysed in the following tables, consistent with the manner in which environmental and social information systems would typically record and collate the information as part of one responsibility centre. Selected environmental effects of ground services21, excluding engineering and maintenance, are listed in Table 7.

While engineering and maintenance activities form part of ground services, they are considered separately as an illustration of the issues involved in the intra- and inter-period allocation of environmental and social effects to products. Issues of outsourcing are also considered in the context of ground services with reference to catering.

21 The list of environmental effects of ground services other than engineering and maintenance is not intended to be exhaustive.

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Table 7: Environmental effects of ground services excluding maintenance and engineering


Description

Materials

Inputs of food and beverage Preparation of meals by catering.

Use of recycled paper Boarding passes, luggage tags etc.

Energy

Electricity consumed Ground power unit used while aircraft is on the ground (for lighting, cleaning, door operations, avionic systems); at the terminal (for baggage handling, air conditioning, cleaning, heating, automatic doors, lighting, conveyer belts, escalators, elevators); and in catering for food preparation, cooking, refrigeration and freezing.

Water

Water consumed Water used for washing the aircraft and other vehicles; consumed by ground power units and other vehicles; used as drinking water and to flush toilets at the terminals; used to remove ice and snow from the plane, if applicable; and used in food preparation.


Greenhouse gas emissions CO2 emissions from ground power unit, pneumatic ground cart, baggage handling, push-back tractor and other vehicles.

NOx and SOx emissions Ground power unit, pneumatic ground cart, baggage handling, push-back tractor, other vehicles, incineration of quarantined items (international).

Discharge to water Washing aircraft and other vehicles.

Biodiversity

Impermeable surface as % of entity’s land

Concrete area at airports and related sites.

Some of the operations, such as the consumption of water at the terminal, are not feasibly traceable to a particular flight. Drinking fountains, bathrooms and lavatories at the terminal are used by passengers and visitors associated with the many flights scheduled to arrive at, or depart from, the airport. Nevertheless, the water consumption at the terminal is part of the process of operating each flight.

In the application of LCA, environmental effects should be allocated to each product using an appropriate driver, in a similar manner as economic overhead costs are allocated to products using an appropriate cost driver. For instance, the consumption of water at the terminal may be allocated to flights on the basis of the number of passenger hours22 spent at the terminal.

In this case study, catering is treated as a direct activity; however, the airline may choose to outsource some or all of its catering, in which case the activity would be classified as indirect. The environmental effects of catering may be included in the entity-focused sustainability report of an airline to the extent that the activity is controlled by the reporting entity, as recommended in the GRI Boundary Protocol. The GRI G3 Guidelines suggests that if the activity is neither controlled nor significantly influenced, but the environmental impact is significant, narrative disclosure should be included. Thus, in applying the GRI G3 Guidelines to reporting on the environmental effects of an airline’s catering services, environmental performance indicators would be provided to the extent that the catering services are controlled while reporting would be confined to narrative disclosure for outsourced catering services.

In contrast, product LCA makes no distinction between controlled and outsourced activities, other than to classify them as direct or indirect components of the product’s life. In practical terms there may be some limitations on access to information about the environmental and social effects of activities beyond the control of the reporting entity.

22 Passenger hours at the terminal may be a more appropriate allocation base than the number of passengers if there are significant differences in check in requirements prior to departure for flights operated by the airline. This occurs, for instance, if the airline operates both domestic and international flights from the same airports.

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Table 8: Social effects of ground services excluding maintenance and engineering




Data collated for ground crew.


Data collated for ground crew.

Policies for consultation regarding changes such as restructuring

Policies applicable to ground crew.


Policies applicable to ground crew activities.

Occupational health and safety committees

Committees for ground crew.

Injuries (days lost) Injuries and days lost for ground crew from incidents traced or allocated to the flight service.

Staff training (in hours) Training of ground crew.

Human rights

Human rights policies applied in procurement of supplies and outsourcing

Applied in choice of suppliers, (e.g. source of ingredients for in-house catering).


Policies to cater for disabled access around the terminal, religious beliefs (such as prayer rooms) and dietary requirements.

Policies for freedom of association

Policies applicable to ground crew.

Society

Procedures for engaging with stakeholders

Passengers and visitors using the terminal.


Applicable to ground crew interacting with passengers and handling baggage.



Safety procedures for passenger handling.

Policy for consumer privacy Privacy in relation to security checks and passenger identification.

Social effects, such as labour practices, may vary between flights due to differences in labour laws and regulations in the various jurisdictions in which the airline’s ground crew are employed. Table 8 lists selected social effects of ground services, excluding engineering and maintenance.23

Some social effects, such as certain labour practices, may be more readily traceable to specific flight services than others. For example, hours lost due to injuries resulting from a baggage handling accident may be easily associated with a flight service, while hours lost due to repetitive strain injury are unlikely to be specific to an individual flight service. The social effects of activities with a high labour component can be allocated to flight services based on a measure of labour hours used in the production of each product or service.

In measuring the social effects of human rights policies on the freedom of association, it is necessary to determine weighting applicable to different labour input, to the extent that labour resources used in the production of the flight service are not covered by the same policies. For example, due to differences in labour laws between countries, ground crew employed offshore (either directly by the airline or as part of an indirect activity performed at the destination airport) might not have the freedom of association enjoyed by domestic ground crew. In measuring the effect on freedom of association for the flight service it is necessary to identify the portion of labour contributed by workers who have freedom of association. This could be achieved by measuring the actual or expected labour hours of the relevant categories of workers per flight service.

Quantitative social indicators, such as the amount of staff training, present additional complexities when measuring effects at the product level. In allocating the staff training of ground crew to a flight service it is necessary to consider the amount of training undertaken by ground crew within a specified period of time. This will vary between staff and employment category, with more training time experienced by employees engaged in apprenticeships. The accumulated training time may then be allocated to flight services, based on a measure of actual or expected labour hours (or minutes). For example, if baggage handlers undertook 8,000 hours of training during the year and performed 320,000 hours of service, then 0.025 hours of staff training would be allocated to a flight service for every man-hour of baggage handling;24 this process could then be repeated for other categories of employment.

23 The list of social effects of ground services other than engineering and maintenance is not intended to be exhaustive.24 8,000 hours of training / 320,000 hours of service

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Engineering and maintenanceThe operations of the engineering and maintenance departments of an airline include: maintaining, inspecting, repairing and testing avionics (such as navigation systems and electrical power systems); overhauling, repairing, modifying and testing components of hydraulic systems, engines, pneumatic systems and landing gear; and the manufacture and repair of aircraft components, such as flight control surfaces and the structural framework of the aircraft. Selected environmental effects25 of engineering and maintenance activities are listed in Table 9.

The inspection, maintenance, repair, overhaul, modification and testing of the components of the aircraft are ongoing activities over the life of the aircraft; these activities are not readily traceable to flight services. The environmental and social effects of these activities, however, can be allocated to flight services in a manner similar to the allocation of economic effects, such as the allocation of maintenance costs and other ground costs using techniques applied in activity-based costing.

The allocation of environmental and social effects of engineering and maintenance activities in the application of LCA poses additional complexities where operations performed in one period, such as the overhaul of an engine, pertain to the production of flight services over multiple periods. When accumulating environmental effects of engineering and maintenance activities it is often necessary to consider a longer horizon than one year.26

We illustrate this process for the overhaul of aircraft engines. The schedule for overhauling aircraft engines is based on hours of operation. For example, the overhaul of an aircraft engine is scheduled after each cycle of a specified number of engine hours,27 irrespective of whether the engine hours are spent on the ground or in flight. The environmental and social effects of the labour, materials, energy and waste associated with the overhaul can then be allocated to flight services based on the actual or expected number of engine hours consumed by each flight service.

Table 9: Environmental effects of engineering and maintenance activities


Description

Materials

Inputs of spare parts, grease, oil, fuels, aluminium (in sheet, bar and rod forms), composite materials, various plastics, wires, bolts, etc.

Materials used in the maintenance, repair and overhaul of components of the aircraft.

Overalls and safety wear

Materials consumed by engineering and maintenance ground crew.

Recycled components Rags used for cleaning.

Energy

Electricity consumed Operation of lighting and equipment.

Gas consumed Operation of equipment and heating.

Water

Water consumed Cleaning and cooling processes.


Greenhouse gas emissions

Jet engine testing, CO2 emissions from push-back tractor, emergency diesel generators, various engineering vehicles.

Ozone depleting emissions

Emissions from specialised cleaning agents used to clean aircraft parts; recharging and servicing air-conditioning systems.

NOx and SOx emissions

Jet engine testing, push-back tractor, emergency diesel generators, various engineering vehicles.

Waste: rags, used oil and cleaning fluids, material off-cuts, used tyres, scrap parts

Recyclable and non-recyclable waste from replaced parts; and materials used in processes of repairs, maintenance and testing of aircraft.

Discharge to water Washing parts, hand washing, laundry (uniforms / overalls).

Significant spills Potential chemical and oil spills.

Impermeable surface as % of entity’s land

Concreted surfaces used in and around engineering workshops.

Selected social effects of engineering and maintenance activities28 are listed in Table 10.

25 The list of environmental effects of engineering and maintenance activities is not intended to be exhaustive.26 This is not to suggest that inter-period allocation of environmental and social effects of activities in the application of product life cycle analysis is confined to

engineering and maintenance activities.27 Additional engine overhauls may be scheduled on inspection after incidents such as bird strikes or the use of power in excess of the normal maximum under

emergency conditions, causing potential reduction in the expected life of the engine.28 The list of social effects of engineering and maintenance activities is not intended to be exhaustive.

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Table 10: Social effects of engineering and maintenance activities




Data collated for engineering and maintenance staff.


Data collated for engineering and maintenance staff.


Policies applicable to engineering and maintenance staff.


Policies applicable to engineering and maintenance staff.


Committees for engineering and maintenance staff.

Injuries (days lost) Injuries and days lost by engineering and maintenance staff from incidents traced or allocated to the flight service.

Staff training (in hours) Apprenticeship programmes in engineering and maintenance; staff training programmes.

Human rights

Human rights policies applied in procurement of supplies

Applied in choice of suppliers of spare parts* and other materials.

Consideration of human rights policies in the supply chain

Consideration of human rights policies of suppliers of spare parts and other materials.


EEO for engineering and maintenance staff.


Policies applicable to engineering and maintenance crew.

Society

Noise problems Noise generated in testing jet engines.



Procedures and regulations for safety and monitoring systems (e.g. certified staff on certain tasks; formal and regulated training), aircraft engineers’ log books.

* Extensive regulation in the airline industry imposes significant restrictions on the choice of suppliers for spare parts, thus limiting the potential influence of the airline’s procurement policies.

Indirect activities Two indirect activities are considered in this study: building the aircraft, and off-site waste disposal. Focus on building the aircraft amplifies the issues involved in application of the LCA approach to sustainability reporting with respect to upstream activities. Issues surrounding the identification and reporting of environmental and social effects of downstream activities are considered in the context of waste disposal.

Operations that are neither controlled nor significantly influenced by the entity are typically outside the boundary of sustainability reports at the entity level.29 Nevertheless, the relevance of the effects of an upstream activity to the sustainability assessment of a product is not diminished by the level of vertical integration of the entity.

The following discussion illustrates the identification of environmental and social effects of indirect upstream and downstream activities that form part of the life cycle of the production of a flight service. The activities, from Figure 1, that have been selected for this analysis are building the aircraft and the treatment of waste.

Building the aircraftBuilding the aircraft used in the provision of flight services is an upstream indirect activity. Ultimately, there are further upstream activities beyond the construction of the aircraft, such as mining for bauxite used in the manufacture of aluminium which, in turn, is used to build the aircraft. For purposes of this illustration, however, the analysis of upstream activities are limited to on-site operations undertaken by the entity building the aircraft.

The ability of the airline to incorporate environmental and social effects of operations undertaken by the entity building the aircraft is dependent upon the level of disclosure in the supply chain. For instance, consider the measurement of the proportion of labour resources employed in the production of a flight service that are represented by a trade union organisation—while the entity building the aircraft may report that 70% of its employees are represented by trade union organisations, this proportion may vary between product lines (that is, alternative aircraft types), reflecting differences in labour practices and regulations in the various locations in which aircraft are built or in which component parts are made by subsidiaries and subcontractors. If disclosures are not made at the product level, the purchaser of an aircraft would not be able to determine this indicator of social effect for the aircraft that forms an input into its product, the flight service.

The environmental and social effects of building the aircraft30 are identified in Tables 11 and 12, respectively.31

29 The GRI Boundary Protocol recommends narrative disclosure in relation to entities that contribute to operations but over which the reporting entity does not have control or significant influence, where the impacts of their operations are significant.

30 The lists of environmental and social effects of building the aircraft are not intended to be exhaustive.

31 The reclaimable and reclaimed portion of the aircraft is considered further in the context of waste treatment.

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Table 11: Environmental effects of building the aircraft


Description

Materials

Aluminium, composite fibres, steel, electronic components, fabric, titanium, plastics, paint, sealants, rubber, oils, etc.

Materials used to build and test the aircraft (e.g. fibreglass used in wing panels).

Use of recycled materials: aluminium, plastics

Used in the manufacture of aluminium and plastics, varies with supply chain and stress requirements of parts.

Energy

Electricity consumed Electricity for lighting and machinery.

Gas consumed Gas used for heating furnaces.

Water

Water consumed Water used for cleaning, heat treating, cooling and testing.


Greenhouse gas emissions CO2 from combustion engines in fork lift trucks and testing aircraft engines.

Ozone depleting emissions Emissions from specialised gases and liquids used in cleaning and testing aircraft parts; filling of refrigeration systems used on aircraft; and in the production facilities, due to the need to control temperature and humidity in the manufacture and testing of aviation instrumentation.

NOx and SOx emissions Emissions from combustion engines in fork lift trucks and testing engines.

Waste: recycling metal off-cuts, rags, paper, and contaminated chemicals

E.g. metal off-cuts sent to scrap merchants.

Discharge to water Detergent in run-off from wash bays.

Significant spills Potential spills of chemicals and oils used in cleaning and testing parts.


% of product reclaimable / reclaimed

Aluminium used in the aircraft.

Table 12: Social effects of building the aircraft




Data, if reported, for employees of the entity building the aircraft.


Data, if reported, for employees of the entity building the aircraft.


Policies of the entity building the aircraft.




Committees in place for the entity building the aircraft.

Injuries (days lost) Injuries and days lost by employees of the entity building the aircraft.

Staff training (in hours) Apprenticeship programmes, staff training programmes of the entity building the aircraft.

Human rights

Human rights policies in operations

Policies applied by aircraft builder within its operations.


Policies applied by aircraft builder (e.g. in purchasing curtain fabric).


Policies of suppliers of spare parts and other materials to entity building the aircraft.


EEO policies of entity building aircraft.


Policies applicable to employees of the entity building the aircraft.

Society

Noise problems Effects of noise from engine testing on local community.

Odour problems Effects of chemical odours from operations on local community.



Policies addressing lobbying and political contributions



Policies regarding public health and safety of the aircraft

Policies and compliance with regulations for safety and quality assurance policies and procedures.

Policies and procedures for product labelling

Labelling on aircraft (e.g. instructions on opening doors).

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Treatment of wasteWaste is an output of the product cycle that does not form part of product to the consumer. In the case of a flight service, most materials will become waste. Examples of waste generated in the production of a flight service include: cans, bottles, plastics and paper from in-flight meal services; food scraps; human bio-waste; chemicals and oils used in engineering and maintenance and building the aircraft; and non-recyclable plastic used in landfill. Waste can be classified by destination—that is, the method by which it is treated,32 including composting, reuse, recycling, recovery, incineration and use for landfill.33 The treatment of waste may include further processing (such as disassembly), cleaning and heating in the course of recycling, or decontamination and crushing for use in landfill.

The extent to which treatment of waste is a downstream operation of the airline will vary between different items and destinations of waste. For instance, if the airline incinerates quarantined food brought into the terminal by passengers, the activity is direct. Conversely, if the incineration were undertaken by an airport authority that is not controlled by the airline, the activity would be classified as indirect.

While the decision of whether to recycle or discard waste may be made by the airline, control over the recycling activities may be limited to the collection of items for recycling and the choice of transport provider and recycler. For some operations, such as the treatment of paper and glass waste at destination airports, the choice of transport provider and recycler may be made by the airport or by local authorities; however, the decision to operate flights to a destination is within the control of the entity. The LCA approach captures the sustainability impacts of the provision of the product, providing input to multi-dimensional decisions at the product level.

Difficulties in management of the environmental and social effects of the treatment of waste may arise where the activity is predominantly beyond the control of the entity. For example, when an aircraft reaches the end of its useful life to one airline, it may be sold to another airline. In the event that a purchaser is not available, the aircraft is mothballed34 and may be sent to a storage facility, such as the aircraft parking lot in the Mojave Desert in the Unites States,35 where long-term storage requires daily labour-intensive maintenance.36

Eventually, the aircraft will be retired and scrapped. Various reusable items, such as engines, may be removed and sold. Sometimes, entire planes are purchased for specialised purposes such as film production. Many aircraft, however, may remain in the desert—reflecting the high economic costs of disassembling the aircraft, separating component parts and mitigating risk of contamination in preparation for purchase by scrap metal merchants.

While the airline may, in applying its own sustainability principles, prefer a high level of recycling, the decisions made by downstream operators may reflect a greater weighting on economic considerations. Similarly, the measurement of the environmental and social effects of downstream recycling may be complicated by the potential deferral of decisions and actions—for instance, recycling may occur many years after the airline has ceased to operate the aircraft.

The emission of methane gases from decomposing food scraps provides another illustration of environmental effects in the product life cycle that are dependent on decisions made by other service providers. Methane gas is a greenhouse gas and, as such, its emission is considered an environmental cost. On the other hand, if the methane gas is used as a source of power, it can be seen as contributing to the environment as an energy source.

The environmental and social effects of the treatment of waste generated throughout the life cycle of a flight service are identified in Tables 13 and 14, respectively.

32 Global Reporting Initiative, (2002), GRI Guidelines, Environmental Performance Indicator EN11, http://www.globalreporting.org/guidelines/2002/c48.asp33 Some categories are not mutually exclusive over the long term. For instance, a reused item may eventually reach the end of its useful life and a different treatment

will be applied, such as landfill or recycling.34 Mothballing the aircraft refers to its preparation for long-term storage, including procedures such as covering windows, sealing engines and other openings, and

replacement of regular fuels and oils with alternatives with special preservatives.35 This location is chosen for its low humidity resulting in minimal corrosion.36 Discovery Channel - http://www.exn.ca/flight/video/ - “Plane Graveyard”

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Table 13: Environmental effects of the treatment of waste


Description

Materials

Cans, bottles, plastics, paper, aircraft, etc.

Material used in waste; outputs of other processes forming the inputs of waste treatment.

Energy

Electricity consumed Electricity used by recycling and processing activities, particularly heating processes.

Gas consumed Gas heating used for recycling glass.

Water

Water consumed Water used in recycling paper.


Greenhouse gas emissions CO2 emission from transportation of waste, gas heating used for recycling glass, and vehicles used at landfill dumps. CH4 methane emissions from decomposing food scraps in landfill dumps and processing bio-waste.

NOx and SOx emissions Emissions from gas heating used for recycling glass, from vehicles used in transportation of waste to recycling sites and at landfill dumps.

Discharge to water Processed bio-waste (treated effluent) discharged to water after processing by Water Authority.


Aluminium used in the aircraft Proportion of product that is reclaimable and reclaimed.

Table 14: Social effects of the treatment of waste




Data, if reported, for employees of the entities undertaking waste treatment.


Data, if reported, for employees of the entities undertaking waste treatment.


Policies of the entities undertaking waste treatment.


Policies of the entities undertaking waste treatment.


Committees in place for the entities undertaking waste treatment.

Injuries (days lost) Injuries and days lost by employees of the entities undertaking waste treatment.

Staff training (in hours) Staff training programmes.

Human rights


Policies applied by waste treatment entities (e.g. in purchasing chemicals used in recycling).


Policies of suppliers of materials to entities treating waste.


Policies applicable to employees of the entities treating waste (could vary between countries in which waste is treated).

Policies for excluding child labour

Extent of policies in place, particularly if downstream waste disposal is in countries where child labour is a social issue.

Society

Noise problems Effects of noise on local communities near landfill dumps and bio-waste treatment facilities.

Odour problems Effects of odour on local communities near landfill dumps and bio-waste treatment facilities.

Dust problems Effects of dust on local communities near landfill dumps.

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Sustainability reporting at an entity level provides useful information for the evaluation of performance on broader environmental and social dimensions, together with the economic dimension reflected in traditional financial reporting. Parallel to the development of economic measures at the product level—such as alternative approaches to product costing including full costs, or activity-based costing—is the burgeoning product-focused approach to ‘triple bottom line’ reporting. This approach, combined with life cycle assessment, incorporates the economic, environmental and social impacts of the direct and indirect activities that collectively contribute to the products delivered to end consumers.

Information incorporating the indirect environmental and social effects over the product life cycle enables product-related decision making by management and stakeholders to reflect sustainability considerations. Ultimately, sustainability information at the product level provides capacity for sustainable operations to be driven by market transactions. Information about the environmental and social impacts at the product level is also useful for management decisions about the continuation of existing product lines, new product developments, or investments by facilitating assessment of the potential impact of product-related decisions on the entity’s objectives of satisfying stakeholders’ expectations of environmental and social performance.

The application of LCA was illustrated using a case study of an airline. Conceptual and practical issue were identified in that context, but are not unique to the airline industry. Outsourcing and group structures have implications for boundary definition, and the type of reporting applied in entity-focused sustainability reporting in accordance with the Global Reporting Initiative Boundary Protocol. By adopting a life cycle approach, however, the environmental and social effects are included in sustainability measures, irrespective of the level of control over the activity by the reporting entity.

A difficulty that may be encountered in the practical application of LCA, with respect to indirect activities, is access to the information comprising the inventory parameters of environmental and social effects. The ability of the entity and other stakeholders, such as consumers, to analyse the sustainability dimension at the product level is subject to the level of transparency of environmental and social effects throughout the supply chain.

Other complexities arise when the resources used in the production process, such as waste disposal, are not readily traceable to the end product. This can be addressed through intra- and inter-period allocation, analogous to the allocation of manufacturing overheads in product costing and administrative and marketing expenditure in activity-based costing.

Clearly, management accounting can play a significant role in the adaptation of established techniques to the development of sustainability reporting for decision making by management and other stakeholders.

Concluding comments

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