Sustainability in Business Wind Power Engines - Case Study Example

Sustainability in Business “Wind Power engines” Abstract The purpose of the project is to propose the British Airways Airline Company implement a sustainable innovation to its business. The strategy to implement a wind power engine for Aircraft Company is set forth by 2030. Even though the project covers all sustainable perspectives, the key benefits refer to environmental and economic factors. By 2030, the proposed sustainable innovation and its further adoption by other airline companies will provide people an opportunity to get to any corner of the globe at lower prices; to increase social satisfaction from air tourism; create more employment opportunities; and improve quality of life. From an economic perspective, this innovation would lead to increase the monetary and trade benefits; stimulated and increased competition; and decreased dependency and uncertainty of oil prices. From environmental perspective, our sustainable approach to engine operating might lead to significant decreases in aviation fuel consumption; and decrease of emissions and in result % of air pollution. Introduction All the information presented below is based on the future predictions and forecasts of authoritative sources. Thus, the analysis is based on a fictional scenario which might not coincide with the real environment situation and global trends. However, the analysis and recommendations are outlined according to the sustainable approach in business development. Forecasted scenario is given by 2030, and aims to explore the potential benefits of implementing wind power engines for British Airline aircrafts. Future forecasts for Aviation industry: Years 2028-2030 Socio-economic perspective Focusing mainly on the aviation industry there were identified two major factors that play a significant role in identifying a social perspective in this business sector. While society and economics are highly correlated issues, these factors are more referred to the socio-economic category. Thus, the socio-economic factors that are significant in the aviation business include: demographics and air tourism. Demographics: The future population forecasts are crucial for business planning and strategic development. According to the information provided by the International Monetary Fund (IMF), most future growth of population will occur in the less developed countries (Rosenberg and Bloom, 2006). Population in developing countries is predicted to continue increase more than five times faster than in developed countries (Rosenberg and Bloom, 2006). The world’s population is expected to reach more than 8 billion by 2030: Demographics as a socio-economic factor should not be neglected while developing business strategies in any industry, including airline because resulting growth and demand will drive the need for more aircraft, both passenger and freighter fleets (Airbus, 2009). Air tourism: Air tourism depends highly on the economic growth, as it has been brightly demonstrated during the financial crisis 2006-2009. Also it depends on the world oil prices, because the prices for passenger tickets highly depend on the oil fuel prices. Air passenger numbers are predicted to tremble by 2030 (Parliament Office of Science and Technology, 2003, p.2). In case the predicted demand will be met entirely, this would lead to both positive and negative outcomes. On one hand, the positive aspects will include customer’s satisfaction, business profitability, infrastructure development and other economic benefits. On the other hand there will be crucial negative outcomes, such as environment pollution and political wars for oil resources (in case no alternative will be invented). Predictions for the future airline service demand by 2028 are segmented by regions and presented below in “map scheme”. The scheme highlights significant demand on world airline deliveries in three regions: North America, Europe, and Asia-Pacific (Airbus, 2009, p.11). Passenger aircraft demand is predicted to be the highest in such countries as the United States, China, United Kingdom, Germany, India, Ireland, Australia, Japan and Brazil (Airbus, 2009, p.11). Domestic and international migrations caused in result of global liberalizations are also forecasted to increase by 2028. This factor will also influence demand on airline passenger volumes. Fuel prices: the world primary energy prices are estimated to increase steadily to the horizon 2030. Airline industry immensely depends on crude oil resources (fuel and lubricants). Considering this fact it is important to highlight that the prices for crude oil will remain high and might increase further towards 70-80 €/bbl in 2030 (Schade, 2008, pp.5-6). Environment perspective Scarcity of oil resources: It is predicted that by 2030 there will be a crucial global scarcity of oil resources. Thus, the global economics and community will be highly dependent on other alternative substitutes for this strategic and highly-valuable resource. Energy-related emissions and environment pollution: Air travel pollution imposes significant threats on both local and global environment. Locally, the growth in air travel affects the environment through noise, pollution of air, damage to landscapes, wildlife and heritage (Parliament Office of Science and Technology, 2003). Global growth in air travel leads to the increase of emissions from aircraft engines that contribute to global warming (Parliament Office of Science and Technology, 2003). According to the International Energy Association, energy-related emissions will be at 41 billion metric tons by 2030, up from 28 billion tons in 2006 (World Energy Outlook 2008, cited by Environmental leader, 2009). Along with the noise and air pollution, there are some other local environmental impacts, including: land take, water pollution, and waste management (Parliament Office of Science and Technology, 2003). By 2030, all these local environmental aspects are predicted to be worsened in result of growing aircraft demand and capacity of airline industry. Analysis of current trends in the aviation industry Socio-economic trends Global financial crisis: in result of global economic recession, the aviation industry has experienced one of the most difficult times in the history of its existence; airports and airline companies have felt significant impacts in a short time period. Limited passenger’s revenues and decreased savings were reflected through the decreased profits of the global airline industries. The main impacts of global recession slashed demand for passenger air travel (Murray, 2009, p.6). Additionally, economic activity slowed down in cargo sector as well. The impacts were crucial because cargo sector is a large contributor to airport/airline revenue and is a critical issue for economic development (Murray, 2009, p.6). Such underlying factors as the oil price and economic recession are closely correlated factors that should be taken into account while analyzing the current trends in the aviation industry. Below is provided a graphic which clearly illustrates the statement that “world air traffic growth is closely correlated to economic growth” (Airbus, 2009, p.32). Environmental trends CO2 emissions: according to the Center for Climate Change and Environment Forecasting, CO2 constitutes roughly 70% of aircraft engine emissions (Cited by Online Guide to Airline pollution, 2008). Currently, the aircraft industry accounts for about 5% of the total carbon dioxide emissions (Online Guide to Airline pollution, 2008). To decrease air pollution and amount of CO2 emissions there were adopted special regulations by reducing the number of planes circling airports as they wait to land, introducing traffic control changes to enhance aviation fuel efficiency and some others (Online Guide to Airline pollution, 2008). Fuel consumption: levels of fuel consumption continue to be significantly high despite the development of various substitutes (biofuels, solar and wind energy). Recent ecological tragedy in the Gulf of Mexico has raised the problem more sustainable development. Sustainability in business Sustainability is the management of environmental, social and economic impacts, and the encouragement of good governance practices, throughout the lifecycles of goods and services (Hultmann 2010, 5). Jacobs and Chase provide their own concept of a sustainable strategy known to be as “a triple bottom line”, that considers evaluating the firm against environmental, social and economic criteria (2011, 22). The Institute for Supply Management Committee on Sustainability and Social Responsibility also observes the concepts of integrating sustainability and social responsibility as integral parts of a company’s sustainable success (Novak 2008, 7). Paul Novak explains the term of sustainability as the ability of businesses to meet current needs without hampering this ability in future perspective in terms of economic, social and environmental challenges (Novak 2008, 7). To derive the greatest benefit from the interactions between a company, its customers and suppliers, it is necessary to extend “the focus as far as possible upstream towards the raw materials, downstream towards the consumer and then back again as the product and wastes are recycled” (NZBCS 2003, 6). Scope and methodological approach of the project While predicting the future of aviation industry from the social, economic, and environmental perspectives, we decided to propose sustainable solution for airline industry that should be created by 2030, when fuel consumption and air emission will pose significant threats on global economies and human lives. The objectives identified for sustainability include creation, protection and growth of long-term economic, environmental and social value for all stakeholders that participate in the process of bringing products and services to market (The United Nations Global Impact 2010, 5). The purpose of our innovation is to make British Airlines the leading global premium airline by becoming the world’s most responsible airline. Thus, we will encourage other airlines to become more sustainable by developing alternative and innovative solutions. The timeframe for the project development is 20 years. Plant geographic location is Great Britain. Our strategic objective is to work out a wind power engine which will reduce the amount of produced carbon dioxide over the next 30 years by half. In result, by 2030 we expect such positive sustainable outcomes: global society will be enabled to enjoy less contaminated air and travel by saving money for air travelling; economic growth will be accelerated due to the significant inputs to GDP and infrastructure development due to the airline sector; the threat of climate change and other negative environmental threats will be decreased. Oil as a strategic resource will be substituted by other alternative resources (wind energy). Sustainable solution: Wind power engines While fuel burn and emissions are the key factors in developing scenario for the future of the airline industry, it is also a very considerable challenge today (Airbus, 2009). To solve this problem our team has developed an innovative approach – wind power engines. The idea of the sustainable innovation is to implement wind power engine to the plane, which will be located on the top of the plane between the wings. It will be connected to the actual fuel engine as well as to the batteries where energy will be stored, produced by the wind engines. Take a look at two schemes presented below to understand the technical process of this innovation: Scheme 1. Wind power engine Scheme 2. Wind power distribution to electricity storage and plane engine Benefits of sustainable approach to business - triple bottom line of the wind power engines innovation The benefits of implementing the proposed innovation by 2030 cover a broad range of different aspects. According to the triple bottom line, the main benefits are distributed over social, environmental, and economic perspectives. Benefits: Social perspective Aviation plays a significant role in today’s world, and will do it for the next 20 years. This industry supported, support and will continue support social and economic development in both developed and emerging markets. One of the main social benefits of the sustainable airline industry is the opportunity for people from all over the world to continue travelling to any corner of globe. So at the fuel engines will work for electricity and wind power by 2030, global fuel consumption will be significantly lowered. Thus, people will be enabled to get to any place by air at lower prices; they will gain new knowledge about other cultures and will enjoy new quality of life (Airbus, 2009). Another significant social benefit will be caused in result of decreased air pollution, which partially causes approximately two million premature deaths worldwide annually through respiratory infections, heart disease, and lung cancer (World Health Organization, cited by British Petroleum, 2010). Benefits: Economic perspective According to the data, provided by the Airbus Company, in monetary terms alone, aviation contributed more than some G20 countries to the world Gross Domestic Product (2009, p.7). Considering the forecasts that by 2030 global oil resources will be scarce, the outcomes of this shortage will be reflected on the aviation industry, in case no substitutes by that time will be developed. By 2030, wind power engines will enable aviation industry to operate more efficiently and cost-effectively, consuming less fuel than before, thus decreasing dramatically oil consumption. From economic perspective this factor will decrease costs for air passengers and cargo transportation. Additionally, it will reduce high dependency on and uncertainty of oil prices; political constraints among countries caused in result of oil resources will be reduced (for instance USA vs. Iran, Iraq). Our innovation will accelerate the paces of trade, by offering access to more lucrative and geographically disparate markets (Airbus, 2009, p.7). Such sustainable development of the global economics will stimulate not only productivity, but competition as well. It is estimated that by 2030 the air transport industry will directly contribute to 8, 5 million jobs and US$1 trillion to the world economy (Airbus 2009, p. 14). Thus, our innovative and sustainable approach to the aircraft development will lead to positive economic knock-on effect. Benefits: Environmental perspective Today there are many organizations, institutions, and government regulations that promulgate environmentally responsible business activities and operations. Thus, they increase customers’ awareness of certain operations in particular companies contributing to the climate change. Aircraft business is also a subject to environmental debates and government regulations concerning the issues of environment pollution and fuel consumption. By 2030 we predict that the legal reforms limiting affordable amount of CO2 emissions will be more tightened toward the airline industry. Our innovation of sustainable wind power engines for aircrafts will enable BP and other airline companies not only to avoid the risk of limited productivity but also will increase customer’s loyalty due to the positive environmental impacts. Fuel burn engines, partially substituted by wind power engines will decrease the amount of fuel burn allowing natural replenishment of oil resources. The main benefits of wind power engines are distributed over social, environmental, and economic perspectives summarized in the table below: Social benefits Economic benefits Environmental benefits Opportunity to get to any corner of the globe at lower prices; monetary benefits: significant contribution to GDP; Significant decrease in aviation fuel consumption; thus less threat to ecological catastrophes (during oil drilling; for instance recent tragedy in the Gulf of Mexico, BP); Increased social satisfaction of air tourism; trade benefits: access to more lucrative and geographically disparate markets (Airbus 2009, p.14); Decrease of emissions and in result % of air pollution; CO2 emission reduced from 17 tones to approximately 5 tones (100km) increased employment stimulating and encouraging both competition, innovation and greater efficiency (Airbus, 2009, p.14) Stimulus for the further sustainable innovations; improved quality of life sustainable economic growth; decreased dependency and uncertainty of oil prices Risk reduction based on additional engine Competitive advantage of using wind power engines Competitiveness of the firm is a very significant factor defining its success and sustainability on the market. Competitive strategy is a clue that helps companies to mark them out favorably among its competitors and thus helps to attract and interest more potential customers/consumers. So as all customers are different in their tastes and preferences, and all they are attracted by different attributes, a company with a sustainable perspective has to choose appropriate competitive dimension for its promotion (Jacobs and Chase 2010). However, such traditional competitive differentiators as quality and costs have become so similarly widespread among many companies that there appears a necessity to develop new strategies (NZBCS 2003, 7). Many companies and organizations focus their efforts on sustainable business development because the tendency of increasing consumers’ and social awareness will continue up until the environmental problems will not be resolved. By 2030 there might be some sustainable innovations; however, it will be still far from absolutely eco-friendly business environments. By considering the environmental, economic and social factors relating to the whole business process, due to our sustainable innovation, airline company (British Airways) will be capable to differentiate itself among its competitors and also to improve its service and reduce costs (NZBCS 2003, 7). Trough sustainability of business, British Airways will be enabled not only to protect the long-term viability of its business but also to secure a social license for the further operating (The United Nations Global Impact 2010, 5). In addition to internal drivers for sustainable development (gaining of competitive advantage), there are identified external key drivers, including: growing awareness of climate change; rapid increase in global demand for energy and material resources, and transition from product life cycle to sustainable supply chain management (Park 2008, p.2). All these drivers’ combination reinforces the competition among both international and local organizations. Thus our alternative resolution of adopting wind power energy fuels will help BA to build the sustainable business strategies in a global perspective and to implement set of procedures and policies concerning both market and nature’s economies. To achieve these goals, BA needs to reduce pollution burdens and to develop clean technology and products; to lower energy and resource consumption and replenish depleted resources; to build the skills of the poor and the dispossessed and foster village-based business relationships; and to ensure sustainable use of nature’s economy (Park 2008). By 2030, we hope to achieve these goals, mainly through implementing our sustainable innovation and developing other substitutes for fuel, sparing air resources. Potential pressures, impacts and responses Undoubtedly, development of sustainable business can be both supported and pressured from different interested parties. To foresee the main responses and reactions, we have identified these main parties: customers, shareholders, fuel suppliers and government. Considering that our project is going to be firstly implemented by the British Airways, we consider that a sustainable innovation of wind power engines will be positively perceived by both company’s customers and shareholders. The benefits for both have been already precisely analyzed and summarized (see the Benefits section). British government also might support this sustainable initiative mainly because of the global opposition toward the climate change and negative environment impacts incurred (Kyoto Protocol, and many other restrictive regulations). However, by 2030 the companies supplying fuel to the global market might feel significant decrease on oil demand if there will remain enough fuel resources; decreased demand on oil resources might cause fall in prices for fuel, thus increase pressure on the sustainable companies (such as BA). Critics Wind power engine is a new peace of technology that is expected to offer a dramatic reduction in fuel burn. However, it could negatively impact on such parameters as weight, noise or drag (Airbus, 2009). For changing aircraft design, BA needs to find the optimum combination of all these elements (Airbus, 2009). Thus, critics of our innovative idea might be reasonable regarding engineering and mechanics design. Conclusion After having analyzed the current trends in aviation industry and forecasted the future aircraft scenario by 2030, our team has drawn a conclusion that the development of sustainable innovation is the only way which can lead to positive social, economic and environmental outcomes. For this purpose we have invented wind power engines for aircrafts which might reduce significantly fuel consumption and CO2 emission from 17 tones to approximately 5 tones (100km). To understand the core benefits based on three main pillars: social, economic and environmental perspective there was provided a brief analysis of aircraft industry, its impact on society, global economies and finally on climate change. From a social perspective, the proposed sustainable innovation and its further adoption by other airline companies would provide people an opportunity to get to any corner of the globe at lower prices; to increase social satisfaction from air tourism; more employment opportunities; and improved quality of life. In case of massive adoption of wind power engine innovation, people could improve their health in result of decreased air pollution. From an economic perspective, this innovation would lead to increased monetary and trade benefits; stimulated and increased competition; and decreased dependency and uncertainty of oil prices. From environmental perspective, our sustainable approach to engine operating might lead to significant decreases in aviation fuel consumption; and decrease of emissions and in result % of air pollution. By considering the environmental, economic and social factors relating to the whole business process, due to our sustainable innovation, airline company (British Airways) will be capable to differentiate itself among its competitors and also to improve its service and reduce costs (NZBCS 2003, 7). Trough sustainability of business, British Airways will be enabled not only to protect the long-term viability of its business but also to secure a social license for the further operating (The United Nations Global Impact 2010, 5). While sustainable characteristics and benefits are clear and logical, there should be done more thorough analysis of engineering and mechanics issues while considering implementation of the proposed innovation. 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