To address shortcomings in the existing rules, the European Council has reached a provisional political agreement to sharpen ESG legislation. The legislation aims to improve the existing rules on disclosure of non-financial information. Regulatory imperfections hinder the desired transition to a sustainable economy. The new rules are expected to come into effect next year and will have a significant impact on transport companies. They refer to the environment and human rights, but also relate to human trafficking, along with border control issues.
Given that a significant number of their suppliers are in the European Union and third-world countries, but also the overall complexity of value chains, EU companies, including the large ones, may have difficulty identifying and mitigating risks in their value chains linked to human rights or environmental impacts. This also applies to the air cargo industry. But what is ESG? What does it mean for sustainability in the air cargo industry? And why is it important for the air cargo industry to meet the ESG reporting requirements? This first blog post about ESG will answer all of these questions.
What is ESG?
ESG means that investors use environmental, social, and governance factors to evaluate the sustainability level of industries, companies, and countries. Environmental factors include the contribution that a company or government makes to climate change through greenhouse gas emissions. Other important environmental factors to consider are waste management, energy efficiency, and the impact on biodiversity loss.
Social factors include human rights, labor standards in the supply chain, and any exposure to illegal child labor, but also more routine issues, such as adherence to workplace health and safety. The EU-ESG framework also covers (violations of) human rights and prohibitions included in international human rights agreements. Governance focuses on establishing and adhering to a given set of rules, rights, responsibilities and duties that aligns the interests of different stakeholders.
Sustainability and the air cargo industry
Growing (inter)national and regional sustainability regulations and pressures from investors have placed the ESG metrics higher on the business agenda of most air cargo carriers. According to TIACA’s 2022 insight report, 73% of air cargo carriers have a sustainability strategy in place. 52% of all respondents say their company has a sustainability team or at least one fully dedicated person driving and managing the sustainability agenda.
For example, several airlines, airports, freight forwarders and ground handlers have:
- Significantly reduced energy consumption in their own operations;
- Made the transition to greener buildings;
- Optimized vehicle utilization;
- Upgraded to cleaner fleets and ground vehicles;
- Invested in more sustainable aviation fuels (SAVs) or other fossil-free energy sources.
Why is it important to meet ESG air cargo reporting requirements?
There are several reasons why it is important for air cargo carriers to meet current and future ESG reporting requirements. First of all, a carbon-intensive industry like air traffic is under increased scrutiny in a day and age that champions sustainability. This leads to increased compliance obligations and, logically, also to more frequent and higher penalties for air cargo carriers that fail to meet ESG reporting requirements.
Meeting the necessary ESG air cargo requirements also makes it easier to adapt to challenging markets, fierce competition and rapidly changing social trends. Interest from the general public and investors in ESG is at an all-time high due to the combined factors of COVID and the climate crisis. Although momentum is building and progress has been made, now is the time to realize the importance of companies reporting standardized, granular, and validated data. In doing so, companies can firstly identify any internal risks and also provide the material information needed by investors to incorporate sustainability-related issues into their investment decisions.
Intelligent automation of ESG air cargo reporting
Be Informed’s intelligent automation platform (which uses model-based intelligent automation to capture and automate processes rapidly) and ITTS (International Trade and Transport Compliance Solution) help air cargo carriers to consolidate and orchestrate systems, data and reporting, making it easier to improve the quality and consistency of ESG air cargo reporting. ITTS allows you to process data from different sources in an automated manner, create electronic dossiers for all your shipments, screen cargo loads, investigate risks, check licenses, and build comprehensive electronic dossiers.
Would you like to know more about ESG or get acquainted with the Be Informed automation platform and ITTS? Then don’t hesitate to contact us.
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