Air New Zealand has pulled the plug on its climate targets on 30 July saying the resources needed to meet them are unaffordable and unavailable. Photo: Supplied/ Air NZ
Air New Zealand is unlikely to be the only major company that will renege on its near-term climate targets, experts say.
The airline made global headlines last week with an announcement that it was pulling the plug on its 2030 emissions reduction target.
It had committed in 2022 to reduce its carbon intensity by nearly 29 percent before 2030, compared to a 2019 baseline.
Companies likely to follow Air NZ in abandoning emission reduction targets
Carbon intensity is a measure of greenhouse gas emissions relative to a certain activity.
In Air New Zealand's case, that's emissions per revenue tonne kilometres - the total weight of revenue-generating passengers and freight multiplied by the distance flown.
On 30 July it announced the target was unachievable.
"Many of the levers needed to meet the target, including the availability of new aircraft, the affordability and availability of alternative jet fuels, and global and domestic regulatory and policy support, are outside the airline's direct control and remain challenging," it said in a statement. The company had begun to consider a new near-term climate target, it said.
The move garnered some criticism, but according to DLA Piper partner Daniel Street, it's a normal part of target-setting.
"These targets aren't set and forget. If you are doing your emissions reduction targets well, then you have a reasonable basis for achieving them and you are constantly monitoring them," he said, adding that he didn't think Air New Zealand should be criticised for its move.
"We want companies that set these targets to be transparent about progress. They need the ability to come to the market and say, 'look, things are harder than we anticipated, we are not on track to meet our target'."
Street said Air New Zealand's announcement would have triggered conversations around board tables across the motu.
Reality check for investors
Sam Stubbs, founder of KiwiSaver provider Simplicity which invests in Air New Zealand, was not surprised by the news. He said many companies had committed to overly ambitious emissions reduction targets because they weren't required to prove they were achievable when they set them.
Now, a mandatory disclosure law passed by the previous government meant shareholders and investors were asking for more information.
The law requires listed companies, fund managers and other major entities to publish climate-related financial information every year.
The disclosures include all the greenhouse gas emissions in their value chain, the most significant risks facing their operations and any transition plans to reduce emissions and adapt to climate change.
The initiative is still in its infancy. The disclosures became mandatory for financial years starting from January 2023, but transition provisions mean some aspects of reporting are not yet required.
Sam Stubbs. Photo: Supplied / Simplicity
While it's early days, Sam Stubbs says Air New Zealand's announcement is a sign of progress.
Major local investors, like KiwiSaver providers, fall under these new rules. That means they need companies they invest in, like Air New Zealand, to tell them what emissions they produce each year, and how they plan to reduce them.
"We're being asked by our regulators to add up all of the carbon impact of our investments, so we want real numbers," Stubbs said.
"And that's good. It means we will be dealing much more in the world of fact going forward, rather than the world of aspiration and fantasy."
'Important piece of climate policy'
Matt Raeburn, climate disclosures lead at consultancy firm WSP, expects the new reporting requirements will be the most effective driver of climate action in the private sector.
"The mandatory climate-related financial disclosure legislation is the most important piece of climate policy that the last government passed. It is more important than the Zero Carbon Act and the ETS reforms," he said.
"It has a solid theory of change behind it. It forces actual disclosures, and it incentivises investors to start re-evaluating the companies they're investing in."
And with companies like Air New Zealand disclosing this information each year, they will be forced to face the reality of whether targets are achievable.
"The thing that will be most-compared, once the market starts to understand how to use these better, is what is your transition plan? What is this company actually planning on doing to decarbonise? If that's not realistic, it won't reflect well on the company."