Vision and strategy

IAG has a vision to be the world’s leading airline group on sustainability. That means using its scale, influence and track record to not only transform the business, but drive the system-wide change required to create a truly sustainable aviation industry.

IAG is committed to delivering best practices in sustainability programmes, processes and impacts, while executing on Group strategy. Creating a truly sustainable business is fundamental to our long-term growth.

IAG has three overall strategic priorities for its business. The environmental strategy is aligned to these:

  • Strengthening a portfolio of world-class brands and operations
    • Ensuring customers have visibility of, and are engaged in, our sustainability programmes
  • Growing global leadership positions
    • Demonstrating industry leadership
    • Maturing our transition pathway towards a net zero business
    • Leadership in carbon disclosures
  • Enhancing IAG’s common integrated platform
    • Investing in an efficient aircraft fleet and delivering best practice in operational efficience
    • Innovating and investing to accelerate progress in sustainable aviation fuels, future aircraft and other low-carbon technologies

Highlights

First European airline group to commit to 10% fuel as Sustainable Aviation Fuel by 2030

From 2022, British Airways will be the first airline in the world to use UK-produced sustainable aviation fuel saving over 40,000 tonnes of CO2 per annum

Leadership grades in key global rankings of corporate climate action, CDP (rating A-) and TPI (top rating - level 4)

33% women in senior executive positions in 2021 (up from 23% in 2016) and a target of 40% by 2025

Our Approach

How we manage our sustainability programmes is explained in more detail in the following sections:

Governance, Strategy and Targets

Governance

IAG has multiple levels of governance in place to ensure robust, aligned and progressive sustainability decision-making.

In 2021, IAG appointed a Chief People, Corporate Affairs and Sustainability Officer (CPCASO) to further drive forward environmental and social initiatives. The CPCASO is a member of the Management Committee and reports into the IAG CEO. The IAG Group Head of Sustainability and Group Head of People report into the CPCASO.

The Group sustainability strategy covers Group policies and objectives, governance structures, risk management, strategy and targets on material issues, sustainability performance indicators, and communications and stakeholder engagement plans. Each individual operating company within the Group has a distinct sustainability programme which is regularly reviewed to ensure alignment with the Group strategy.

The IAG Board provides oversight and direction for sustainability programmes, and the IAG Management Committee provides the key forum for reviewing and challenging these programmes and setting strategy.

During 2021, a new Safety, Environment and Corporate Responsibility Committee of the Board met quarterly to help us maintain and build on our sustainability efforts.

IAG Sustainability Strategy

Since 2015 IAG has maintained a vision to be the world’s leading airline group on sustainability.

That means using its scale, influence and track record to not only transform the business, but drive the system-wide change required to create a truly sustainable aviation industry.

IAG is committed to delivering best practices in sustainability programmes, processes and impacts, while executing on Group strategy. Creating a truly sustainable business is fundamental to our long-term growth.

Our vision

Progress against the vision is measured against these strategic aims:

  1. Clear and ambitious targets relating to IAG’s most material issues
  2. Low carbon transition pathway embedded in business strategy
  3. Management incentives aligned to delivering a low carbon transition plan
  4. Leadership in carbon disclosures
  5. Accelerating progress in low-carbon technologies including aircraft technology, SAF, carbon offsets and carbon removals
  6. Accelerating innovation in low-carbon technology as above
  7. Industry leadership in the innovation and deployment of SAF including power-to-liquids
  8. Stepping up our social commitments including on diversity, employee engagement and sustainability as a core value
  9. Industry leadership in stakeholder engagement and advocacy

Our targets

Group sustainability targets focus on the material aspects of climate change, diversity, Noise and waste. Our airlines have additional targets associated with other non-financial measures including energy efficiency, punctuality and customer net promoter score.

IAG climate targets

IAG will work with key stakeholders to deliver net zero emissions across its global operations by 2050. This aligns with worldwide efforts to keep average global average temperatures below a 1.5°C rise. IAG was the first airline group to commit to this goal and the first airline group to sign the UN Business Ambition for 1.5°C pledge.

The key climate targets in our Flightpath Net Zero programme are:

  • Net zero CO2 emissions for British Airways UK domestic flights from January 1, 2020
  • 11 per cent improvement in Group fuel efficiency between 2019 and 2025, from 89.8g CO2/pkm to 80g CO2/pkm in 2025
  • 10 per cent SAF in 2030, equivalent to approximately to 1 million tonnes of fuel
  • 20 per cent reduction in net Scope 1 and 2 CO2 emissions between 2019 and 2030, from 27.6 MT to 22 MT in 2030
  • 20 per cent reduction in net Scope 3 CO2 emissions between 2019 and 2030, from 8.1 MT to 6.5MT
  • Net zero Scope 1 Scope 2, and Scope 3 CO2 emissions by 2050

In addition, we are engaging with external stakeholders to build support for a global aviation target of net zero CO2 emissions by 2050, to be agreed at ICAO in 2022.

IAG noise target

  • 10% reduction in average noise per landing and takeoff cycle by 2025 versus 2020.

IAG’s average noise per journey – per landing and take-off cycle – has reduced by 19 per cent in the past five years.

IAG diversity target

As part of our commitment to ensure we are a diverse and inclusive organisation last year we set a new target of having at least 40 per cent of senior roles held by women by 2025. In 2021, 33 per cent of senior roles were held by women. We also created a new Diversity Panel to share best practice and to lead the co-design of new diversity and inclusion initiatives.

Materiality

IAG’s sustainability strategy, initiatives and reporting are based on a rigorous assessment of which business activities have a material impact on the environment and people and what is most important to key stakeholders.

In 2021, IAG repeated a comprehensive materiality assessment to assess these issues. This was facilitated by leading sustainability consultancy Simply Sustainable as an independent third party.

The internal stakeholders included IAG Management Committee members, Board members, and operating company sustainability representatives. External stakeholders included investors, corporate customers, policymakers, trade associations, fuel suppliers, airports, and NGOs.

The findings led to the production of two materiality matrices, over three-year and ten-year timescales respectively, with issues grouped into four different areas: People, Planet, Prosperity, and Governance. By aligning these with our strategic priorities and measuring our performance, we are best able to put all our stakeholders at the heart of our decision-making to ensure IAG can have a positive impact on society over the long term.

Principles of Governance Planet People Prosperity
  • Investing in the future
  • Planning for climate-resilient operations
  • Working with suppliers
  • Reducing our climate impact
  • Influencing policy
  • Running a profitable business
  • Pleasing our customers
  • Engaging with employees
  • Building a diverse, inclusive and
  • equal workplace

 

UN SDGs 

In 2015, the United Nations adopted a plan to “end poverty, fight inequality and injustice, and tackle climate change by 2030.” At the heart of this Agenda 2030 are 17 Sustainable Development Goals (SDGs). Fulfilling these goals will take significant effort by all sectors in society and it is widely recognised business has an important role to play.

Aligning with IATA and Sustainable Aviation, we draw links to 9 relevant SDGs, as shown in the table below and reflected in our annual report performance updates. Within these we regard SDGs number 5, 7, 8 and 13 as priority measures for IAG to support.

Disclosure standards

IAG aligns sustainability reporting with current and emerging disclosure standards to ensure the Group discloses relevant and meaningful data on sustainability performance.

This includes compliance with obligations under EU Directive 2014/95/EU on non-financial reporting and its transposition in the UK and Spain, the 2018 UK Streamlined Energy and Carbon Reporting (SECR) regulation, the Task Force on Climate-related Financial Disclosures (TCFD) guidance. and the EU Taxonomy Regulation (2020/852).

IAG also goes beyond compliance requirements and voluntarily aligns sustainability reporting with the Sustainability Accounting Standards Board (SASB), the IATA Airlines Reporting Handbook, and relevant criteria from external ESG rating agencies. IAG supported IATA and the Global Reporting Initiative (GRI) to develop the IATA handbook.

Carbon disclosures

For the second year in a row, IAG was the only European airline to gain a Leadership (A-) grade in the CDP climate change questionnaire. The business was in the top 6% of over 11,000 responding companies. We achieved an A grade in the 2021 CDP Supplier Engagement Rating. IAG achieved a 4 out of 4 overall rating in the Transition Pathways Initiative (IAG - Transition Pathway Initiative) Management Quality Index, successfully meeting 17 out of 18 climate indicators. We continue to actively improve our external disclosures, and engage with external ratings organisations to better understand their assessment methods and share expertise on the aviation sector.

TCFD

IAG has adopted the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD), and a summary table of this alignment is included in the 2021 Annual Report.

IAG was an early adopter of TCFD guidance, including on climate-related scenario analysis and climate-specific risk assessments. In 2018 and 2021, IAG followed the TCFD six-step process and analysed the implications of climate change on business activity in 2030.

Audit and verification

The full contents of our annual report and accounts is included in the IAG non-financial information statement, which is subject to external verification in line with ISAE3000 (Revised) standards and available on our website here.

EU ETS verification is required for emissions data for all flights within the European Economic Area. From 2019 we are monitoring, reporting and verifying emissions data associated with all our international flights as part of our compliance with CORSIA, the Carbon Offsetting and Reduction Scheme for International Aviation.

 

Sustainability risks and opportunities

IAG takes a proactive approach to managing climate-related risks and is committed to managing the regulatory, reputational, market and technology aspects of these.

Since 2019, sustainable aviation risks have been identified as a principal risk to IAG. Climate-related risks are considered and assessed under the Group Enterprise Risk Management (ERM) framework which is presented to the Board. More details on the framework and process for how risks are assessed, and how Group risks inter-relate, can be found in the ‘Risk Management, Principal risks and uncertainties’ section.

Sustainability risks and opportunities, including climate-related risks and opportunities, are also identified and assessed by the Group Sustainability team, in conjunction with the Group ERM team. This assessment includes risks over medium-term (two to five years) and long-term (greater than five year) timescales. These risks are bi-annually reported to and reviewed by the IAG Management Committee and the IAG Audit and Compliance Committee. sustainability risks regularly reported to the IAG Chief People, Corporate Affairs and Sustainability Officer who reports to the IAG CEO. Plans to mitigate risks are developed by relevant risk owners in specific areas of the business.

IAG allocates significant resources to environmental risk management. This includes a strategic commitment to invest US$400 million over 20 years in SAF development, production and supply, along with a dedicated sustainable fuels team. This also includes a significant and continued investment over five years in fuel efficiency software, to manage risks related to operational efficiency, with dedicated representatives within operating companies to manage operational efficiency programmes. In addition, each of the Group’s four main airlines are working towards IEnvAStage 2 accreditation and have invested in people and IT resources to enable this.

Climate related scenario analysis

In line with our commitment to TCFD we have undertaken climate-related scenario analysis to review the resilience of our business strategies in the context of climate change. We regard this as an iterative process and will be continuing to consider further climate scenarios and develop more quantitative conclusions.

Companies choose emissions scenarios for this analysis. In 2018 IAG chose a 4°C and 2°C scenario. In 2021, a 3°C, 1.5°C orderly, and 1.5°C disorderly scenario were used. This change was based on the impacts of the latest global emission pledges versus the goal of the 2015 Paris Agreement.

”Orderly” and ”disorderly” are defined in the TCFD report ”Guidance on Scenario Analysis for Non-Financial Companies”. These scenarios compare smooth and idealised climate-related changes with variable, abrupt and disjointed changes.

In 2021 we considered the implications of these three climate scenarios on our business in 2030, assuming we have the same business activities as we do today. 2030 was selected as a nearer term consideration en-route to 2050, which is the target year for our net zero target.

Four categories of TCFD-aligned climate impacts were explored – physical, market, technology, and policy. This exercise identified that key potential impacts were industry-wide policy and market shifts. Significant uncertainty also exists around the global policy, technology and market pathways for aligning with 1.5°C by 2030.

The business is broadly resilient to the identified impacts, based on Flightpath Net Zero plans. However, there are further opportunities to maximise resilience to wider societal changes. These results informed our climate-related risk assessment and disclosures.

In December 2021, we also agreed that TCFD-aligned scenario analysis would become a rolling exercise from 2022 onwards. Ten year time horizons would be further embedded into sustainability-related planning wherever relevant.

Business Ethics and Integrity

Our vision to be the world’s leading airline group can only be achieved if we conduct our business with integrity. IAG and our airlines have policies and procedures in place, including a Group Code of Conduct, setting out the general guidelines that govern the conduct of directors, executives and employees of the Group when carrying out their duties in their business and professional relationships. We also expect our suppliers to carry out their business in a manner that is consistent with the principles set out in our Supplier Code of Conduct.

Training and communications activities are carried out for Directors, employees and third parties on a regular basis to maintain awareness and understanding of the principles that govern the conduct of the Group.

We promote a work environment that encourages staff to speak up and raise concerns freely. Several resources are available across the Group for employees to do so. These include external and independently managed reporting lines provided by Safecall and Ethicspoint where concerns can be raised on a confidential basis.

Anti-Bribery Programme

As outlined in our Code, IAG does not condone any form of bribery or corruption in its business. IAG and our airlines all have anti-bribery policies and procedures which are made available to all employees. Training courses on these policies and related procedures are delivered throughout the year. Training requirements vary by operating company and are determined by factors such as the level and responsibilities of an employee.

Modern Slavery

Our Group Modern Slavery Statement is available here and sets out IAG’s zero tolerance approach to Modern Slavery. This Instruction applies to all persons working for us or on our behalf in any capacity.

Supply Chain

In 2021, IAG led the industry by becoming the first airline group worldwide to extend its net zero commitment to its supply chain. Working with key partners, the business will target net zero Scope 3 (supply chain) emissions by 2050, and a 20 per cent reduction by 2030 relative to 2019. The Group will liaise with, support and monitor suppliers to ensure net zero emissions by 2050 for products and services provided to IAG. IAG Global Business Services (IAG GBS) manages the relationships and interactions with suppliers on behalf of the Group.

In 2021 the Group appointed EcoVadis, a market-leading provider of business sustainability ratings, to support us in understanding every aspect of sustainability in our supply chain, including environment, labour and human rights, and ethics.

IAG GBS has a dedicated Procurement Sustainability Programme which also consists of four key aspects relating to the supply chain:

  • Code of Conduct
  • Risk screening
  • Corporate Social Responsibility (CSR) Audits
  • Joint programmes to promote sustainability initiatives

A Group-wide Supplier Code of Conduct has been issued to existing suppliers and integrated into the supplier onboarding process. This Code clarifies the standards of behaviour expected from suppliers working with any part of the business and emphasises the importance of sustainability. IAG will only work with businesses which share our standards and ways of working.

As a minimum, all suppliers undergo annual screening for any legal, social, environmental and financial risks.

 

Stakeholder engagement and innovation

We actively engage with industry partners and associations, policy makers, shareholders, investors and governments to influence policy and drive action to meet our sustainability objectives.

IAG is a member of multiple trade associations. These include Sustainable Aviation, Airlines 4 Europe, IATA, ATAG, oneworld and the Coalition for Negative Emissions. We are proactively driving trade association positions towards consistency with global 1.5°C climate ambitions. Internal governance processes ensure that stakeholder engagement is consistent with IAG’s material issues and environmental goals. Where positions with trade associations are inconsistent, IAG representatives take roles on task forces and working groups and respond to consultations to communicate our stance and constructively move to alignment.

We lobby governments at the domestic, European and global scale and actively participate in ICAO programmes, to support net zero commitments and develop global policy for aviation and environment including on aviation carbon targets, carbon pricing and sustainable aviation fuels.

We partner with suppliers; for example we are collaborating with fuel suppliers and waste companies to develop technology and production facilities for sustainable aviation fuels and with Air Traffic Control authorities and Airport Operators to achieve more fuel efficient flight operations. We are also working with our aircraft suppliers to enable changes in standard operating procedures to improve fuel efficiency.

We engage with our corporate customers who contract with British Airways and Iberia on large business travel accounts, in the development of low carbon products, and respond to customer sustainability surveys and requests for disclosure such as via CDP supply chain questions. Our engagement with individual customers includes raising awareness of our sustainability programmes through our websites, in-flight magazines, social media, annual report and through actively engaging passengers in climate impact mitigation such as through British Airways Carbon Fund.

IAG also leads the aviation industry in engaging with global sustainability innovators. Since 2019, sustainability has been one of the eight core challenge areas within the Hangar 51 structured ten-week accelerator programme. In 2021, the focus of this broadened with the inclusion of a new Future Energy category. From hundreds of applications the Group chose to work with 12 pioneering start-ups covering topics such as new hydrogen fuel cell solutions, electrification infrastructure, customer engagement tools and carbon removal technologies.

In 2022, the Group will continue to expand its focus on sustainability innovation to accelerate decarbonisation.