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Overview of 2010

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Stakeholder Issues and Cathay Pacific (CX) Response Map 2010

Our Sustainable Development Strategy and Becoming a Sustainable Airline

Issues raised by Stakeholders Stakeholders’ view on Cathay Pacific performance Our response
Where we are Where we are going
  • Commitment
  • Communications on sustainable development
  • Being a leader
  • Target setting
  • A leading company in HK, but what about beyond that?
  • Use new ways to communicate
  • Be more forthcoming about issues e.g. local noise pollution
  • Use SMART targets and have measureable commitments

We subscribe to the IATA global emissions targets. CX’s top management has called on the industry to unite behind IATA and has put firm emphasis on environmental issues in CX.

We are committed to emissions reduction targets across the business. On the ground, targets for waste, energy, water, paper and plastics are being developed across the Group. Airborne GHG targets are also being looked into to drive emissions reductions.

  • Develop a technology roadmap
  • Zero carbon and waste
  • Sector leadership
  • Best-in-class on safety
  • Employee retention and career development
  • Sustainable tourism
  • Collaboration with other industries
  • Be a leading company on sustainability issues. Influence and support the community on relevant issues, e.g. transport and electric vehicles
  • To be “best in class”, benchmark to know where CX sits compared with other airlines
  • Offset fuel burn through a good carbon trading programme
  • Disclose whether CX has or will utilise biofuels
  • Make CX Holidays packages more eco-friendly
  • Continue to get involved in international aviation associations

Our aspirations are set out in the Sustainable Development (SD) Strategy.

We are constantly reviewing technologies to improve the sustainability performance of our business.

We provide a carbon offset programme, FLY greener, to customers. CX offset all our staff’s (and that of Swire’s) business travel. We are also investing in new and more diverse offset schemes.

We have been working closely with industry partners, monitoring the feasibility of biofuels, through membership with the Sustainable Aviation Fuel Users Group (SAFUG).

We are an active member of international aviation groups such as International Air Transport Association (IATA), Aviation Global Deal (AGD) Group and Association of Asia Pacific Airlines (AAPA).

More intensive promotion and diversification of our carbon offset programme offering to customers and promote awareness amongst staff.

We are working towards the adoption of sustainable biofuels and are undertaking extensive research and dialogue with key players in this area. We acknowledge that CX will need to be more proactive in communications.

Inject biodiversity elements into our SD Strategy that incorporates principles of sustainable tourism for CX Holidays.

Continued focus on and engagement with industry groups.

Our Stakeholder Mapping and Engagement

Issues raised by Stakeholders Stakeholders’ view on Cathay Pacific performance Our response
Where we are Where we are going
  • Ongoing, engaging process
  • Building capacity
  • Engaging customers, especially on FLY greener
  • Communicating with and be responsive to stakeholders
  • Stakeholder process needs to be structured and consistent
  • Engage stakeholders on specific issues on a regular basis
  • Enhance engagement with local NGOs
  • Recognize that different stakeholders have different focuses
  • Room for improvement in responding to stakeholders

CX has had a five-year Stakeholder Engagement Plan in place since 2009. We invest significant resources in this process and have undertaken extensive engagement with our stakeholders – this is an ongoing commitment.

We have ongoing strategic engagement with local NGOs such as WWF (HK), international NGOs, customers, staff, investors, the media, and the HK SAR Government.

Develop a more structured and consistent process for the longer term, to include issue-specific engagement.

We are piloting the use of the AA1000 Engagement Standard this year to identify areas of improvement to strengthen our approach.

Corporate Governance

Issues raised by Stakeholders Stakeholders’ view on Cathay Pacific performance Our response
Where we are Where we are going
  • Leadership from the top on sustainability
  • Management on key sustainability issues from the top
  • Seen to be taking an industry lead, e.g. by financial analysts and investors, Climate Change Business Forum (CCBF), IATA, AGD, on EU Emissions Trading Scheme (ETS) issues, at climate change conferences

There is endorsement by top management on active participation in industry groups to facilitate progress in technology, operational and infrastructural improvements and global financial mechanisms.

CX was identified by CLSA Asia Pacific in 2010 as one of the top three sustainable aviation companies.

Continued emphasis on global initiatives to ensure Asia’s voice is heard internationally; greater embedding of SD into the mainstream business within CX.

The CX SD Steering Group, which consists of members from senior management, has been reconstituted to ensure appropriate coverage of key departments and representation of leaders in respective areas of our business.

Emissions and Efficiency

Issues raised by Stakeholders Stakeholders’ view on Cathay Pacific performance Our response
Where we are Where we are going
  • FLY greener and engaging passengers to offset
  • Being a leader in the industry and in Hong Kong in emission reduction, offsetting and reporting
  • Pursuing a responsible biofuel strategy and influencing manufacturers and in research and development (R&D)
  • CX is good at adoption but not a pioneer when it comes to technology and biofuels. Need to be engaged in biofuels, exerting pressure on manufacturers and working with an alliance of airlines to stimulate the R&D process
  • FLY greener initiatives - CX should force the issue when people buy a ticket
  • Share information on the success of FLY greener and where the money goes. Projects must be credible.
  • Have targets on climate change as well as standards, statistics, comparisons or benchmarks to assess performance, and communicate this performance
  • Important to achieve IATA and CX’s own targets
  • Should push the Government to make offsetting mandatory for flights out of Hong Kong
  • Offset all of CX’s carbon footprint, not just business travel

Technology decisions are carefully considered. It is in our business interest to ensure that we deploy the most environmentally-efficient technologies, e.g. committing to investing in 32 Airbus A350 XWB aircraft in 2010 – our largest aircraft order to date.

On FLY greener –We are increasing communication through articles published in CX World and the inflight Club magazine, which illustrate clearly the benefits of offset investments. Currently we do not force the issue with our customers, but are looking to include an ‘opt-in’ choice in the internet booking engine.

In order to offset all CX’s carbon footprint, first we need to better understand our GHG footprint, and how we can reduce it without offsetting.

On biofuels, we are part of SAFUG, where we are partners with manufacturers, research institutes, fuel suppliers and airlines to accelerate R&D in sustainable biofuels. Much progress has been made but there are some key questions (e.g. sustainability, scalability, availability, commercial considerations) that must be answered before we can make a long term investment. CX is, however, fully committed to investing in sustainable biofuels over the long term if we are to achieve our emissions targets.

More emphasis on the importance of offsetting and efforts to increase awareness.

We aim to encourage passengers to offset emissions, but we also believe that they must be given a choice, especially in light of the increased number of environmental taxes and charges applied by governments and paid by passengers. FLY greener will therefore remain a voluntary, ‘opt-in’ scheme.

We will be communicating more on FLY greener via inflight entertainment (IFE) videos and the inflight Discovery magazine in 2011.

On targets – these are under development, and will be reported year on year once they are set.

We are working on quantifying our carbon footprint and are committed to reducing it. This requires us to invest in measures such as offsetting, technology, sustainable biofuels, operational improvements – and it must be a long term agenda.

Environmental Performance

Issues raised by Stakeholders Stakeholders’ view on Cathay Pacific performance Our response
Where we are Where we are going
  • Impact reduction (noise, air, etc)
  • Inflight waste
  • Resource efficiency
  • Responsible aircraft disposal
  • CX is a pioneer in responding to environmental issues
  • Need targets for all environmental issues
  • Take action on environmental issues that ‘the person on the street’ can relate to that are linked to CX’s impacts, e.g. air and noise pollution
  • Need information on inflight air quality

We have been working on setting targets for a number of environmental aspects. Refer to section on ‘Our Sustainable Development Strategy and Becoming a Sustainable Airline’ for further details.

We run workshops, visits and activities on waste, energy and nature conservation to help raise awareness amongst staff.

On inflight air quality - Aircraft that transit areas with higher ozone levels are being fitted out with ozone converters. All aircraft are fitted with High Efficiency Particulate Air (HEPA) filters in the cabin air recirculation systems, which provide the best level of filtration currently available for re-circulated cabin air.

We have purchased new aircraft that feature high rates of material recovery and recycling at the end of their service lives.

We will develop a structured strategy for staff engagement as part of the sustainability process.

We are committed to helping our customers understand the challenges we face in terms of the environment and climate change. We will endeavour to communicate these and be open about how we can make a difference (e.g. via inflight videos). We will look for opportunities to engage in dialogue with our passengers and those who may be affected by our activities.

Safety

Issues raised by Stakeholders Stakeholders’ view on Cathay Pacific performance Our response
Where we are Where we are going
  • aircraft safety for passengers and staff
  • staff occupational health and safety and working conditions
  • emergency response
  • health-pandemic response
  • Better than average to excellent, but cannot be complacent
  • Safety is the number 1 priority
  • Room for improvement in staff rostering system to reduce fatigue
  • CX has demonstrated a high degree of professionalism in ensuring passenger safety. Sophisticated systems are run by well-trained, professional CX staff. Passengers have confidence in the crew.
  • Safety performance should be benchmarked against other airlines – it gives an incentive for people to perform better.

We have launched a Fatigue Risk Management System (FRMS) which is an integral part of our Safety Management System. It helps us and our pilots better manage any fatigue-related risks through education and training of crew and staff, and the more effective management of pilot rostering.

Continue to promote a safety culture that maintains Cathay Pacific Airways amongst the safest airlines in the world

Our Customers

Issues raised by Stakeholders Stakeholders’ view on Cathay Pacific performance Our response
Where we are Where we are going
  • Customer service and comfort
  • Investing in people to enhance service delivery
  • Punctuality of flights
  • Crisis handling
  • Ability to contact CX businesses directly and quickly
  • Rated by customers as a leader with high performance
  • Perception that the level of service in outports could be improved
  • Enhance opportunities for direct, two-way interfaces with customers
  • Set targets to personalize the flying experience and to inject new elements to the flying experience
  • Could better accommodate the need of families

On Outports – New lounges have been opened in 2010 e.g. at London Heathrow Airport. We try to provide online sales services and self-print boarding passes to ensure service quality and reduce reliance on non-CX ground handling agents.

On two-way interface – We are utilizing social media e.g. Facebook, Twitter and blogs

On the flying experience – We recently announced that internet access will be made available to inflight passengers by 2012.

On the need of families – We have adopted a family approach to point earners on the Frequent Flyers programme by extending redemption options in the last two years to include educational toys, concert tickets, health/eye checks and pet grooming/hotel experiences.

New lounges to be opened in various outports in the coming years.

We are looking to enhance the passenger’s flying experience by allowing them to be able to keep in touch with people on the ground by providing means of two-way communication inflight.

We will continue to improve and extend redemption options available to Frequent Flyers to suit as wide a range of needs as possible.

Supply Chain

Issues raised by Stakeholders Stakeholders’ view on Cathay Pacific performance Our response
Where we are Where we are going
  • Support for and promotion of sustainable sourcing
  • Influence passengers
  • Report on monitoring and compliance results
  • CX does a reasonable job where this is not widespread in Asia
  • Should report concrete information on performance, monitoring and specific targets (e.g. percentage of organic food, carbon and water footprint)
  • Report on what is purchased and CX’s process of procurement
  • Use supplier survey results to drive improvement and screen out suppliers
  • Actively choose suppliers in Hong Kong who are proactive change-drivers
  • Foster sustainable sources, local organic farms and organize bulk purchases
  • Promote sustainable sourcing and influence passengers

We have engaged our suppliers and established systems to check and achieve compliance with our Supplier Code of Conduct, particularly for suppliers that pose potential high risk and to embed sustainability issues in purchasing decisions.

Non-compliances with the Code are addressed on a case-by-case basis.

Information on our subsidiaries’ environmental footprints (i.e. carbon, water etc) are reported in our SD Report.

Suppliers will be selected based on the company’s selection criteria which include sustainability risks and compliance with the Code.

We will ask suppliers to share environmental performance information in 2011.

Identify and focus efforts on CX’s procurement of key items that either pose potential sustainability risks or opportunities to enhance sustainability performance. Our SD commitments include plans to enhance the sustainability nature of sourcing and to communicate that to relevant stakeholders, including raising awareness amongst passengers.

Our Staff

Issues raised by Stakeholders Stakeholders’ view on Cathay Pacific performance Our response
Where we are Where we are going
  • Treatment, welfare and working conditions/hours of staff
  • Professional development
  • Work-life balance and flexibility
  • Communication channels
  • Dealing with historic perceptions
  • Seen as a very good company that generally invests in their staff, and CX does quite well in providing professional development
  • CX’s role in ensuring locals have employment and working with other businesses is good for economic development
  • Compensation for no-pay leave and staff amenities (e.g. recreational facilities) is seen as good
  • Seen as putting in more systems, training and improving retention and morale
  • Room to improve labour relations and working conditions
  • Room to improve two-way communication and consultation to allay labour disputes
  • Perception is that people are proud of working for CX but it could be better

Comprehensive benefits are available for staff, and include paid annual leave and sick leave, compassionate leave, travel benefits for staff and family members, profit sharing and bonus to staff and a flexible benefits scheme which includes medical and dental cover, accident and life insurance, and retirement benefits. Non-operational staff can agree with managers on staggered working hours to meet their personal needs.

CX organize staff outings, volunteering activities and trips, sporting activities and competitions. Provide a leisure centre for staff and family members.

Employee Assistance Programme (EAP) provides free-of-charge and confidential counselling services for staff and dependents at all our ports to support with personal and work-related issues.

Labour relations, working conditions and communication – We have well-established communication mechanisms in place for employees from different staff groups, to hear and implement suggestions. There are over 14 consultative groups/ forums for cabin crew, cockpit crew and ground staff, carrying out meetings and briefings. Other channels include newsletters, blogs and advisory teams.

Provision of crew personal protection equipment (PPE), safety risk assessments (including fatigue), talent management/ improvement courses.

Our aim is to foster unity in the company.

Be a ‘reasonable company’ – reflected in being a good employer, pay, lifestyle and management style.

Community Involvement

Issues raised by Stakeholders Stakeholders’ view on Cathay Pacific performance Our response
Where we are Where we are going
  • Support for social enterprises
  • Local engagement
  • Flexibility and support for voluntary work
  • Reporting performance data and assessing results
  • CX’s initiatives are above average compared to other Hong Kong companies but CX should compare itself to international best practice
  • Use CX’s influence and communicate with and educate the Hong Kong community
  • Allocate seats to sponsor community action, to send people on collaborative projects or educational programmes
  • Measure and disclose programme impacts, outcomes, staff involvement and effectiveness
  • Make community engagement and volunteering more strategic
  • More flexibility should be allowed in terms of performing voluntary work (during “office hours”)

This year, we joined the London Benchmarking Group’s Community Investment Round Table in Asia to help us build capacity on impact measurement and evaluation of CX’s community investment programmes.

CX continue to invest in the Hong Kong and outport communities where we operate, through activities related to aviation, education, health and the environment.

We provide air tickets to awardees of our Advanced Aviation Education Programme to enable them to attend flying courses overseas. We also provide free and discounted air travel for ORBIS personnel, enabling eye care professionals to join the Flying Eye Hospital before it departs to remote places in developing countries.

Formulate future direction of our community investment programmes.

Greater collaboration with Swire to ensure a group-wide approach to corporate community investment and sharing of best practice.