Easyjet And Ryanair's Compliance with Corporate Social Responsibility and Ethics - Case Study Example

A critical analysis of EasyJet and Ryanairs compliance with corporate social responsibility and ethics, based on academic literature of the student Course/module code 14 December 2014 A critical analysis of EasyJet and Ryanairs compliance with corporate social responsibility and ethics, based on academic literature Corporate social responsibility (CSR) and its pressures on low-cost airlines The emergence of low-cost airlines, their easy accessibility and the affordability saw a great increase in the number of airline passengers during the past three decades. In the European Union, the liberalization of aviation in the1980s and 1990s, witnessed the ‘low cost revolution’ of airlines and it has been estimated that low-fares airlines like Ryanair, easyJet, Air Berlin and Flybe accounted for almost 35% of all scheduled intra-European traffic (Coles, Dinan & Fenclova 2010, p. 1). However, the rapid growth of low cost airlines has also given rise to a number of questions on their adverse social and environmental impacts. The rise of various CSR theories enhanced public scrutiny and increased media coverage on unethical practices and violation of CSR policies within all businesses including the airline industry. Today, all the stakeholders including the local communities, the media, and the consumers have greater awareness as well as greater expectations regarding the CSR policies of all businesses. Business companies, on the other hand, needs to convince the stakeholders that they are operating in an ethical and socially responsible way. CSR, on the one hand, shows the social and environmental commitment of the company while on the other hand it acts as a bridge between the company and the society. This has prompted many airline companies to include their CSR policies in annual reports while many other businesses report the benefits of their CSR activities (Crowther & Aras 2008, p. 46). Today, over two-thirds of Low-Fares Airlines (LFAs) communicate about their CSR policies. This communication takes place through the company’s webpage (used by 11 LFAs, 50%), in their annual reports (10 LFAs, 45%), press releases (8 LFAs, 36%), or through policy statements (8 LFAs, 36%) on specific aspects of CSR (Coles, Dinan & Fenclova 2010, p. 25). However, it is worthwhile to note that both easyJet and Ryanair employ all these four modes of communication in varying degrees. Issues related to social responsibility, corporate ethics, safety, employee motivation, environmental protection, climate change, stakeholder interests, human rights, and sustainable models of development govern CSR policies in the airline industries. The emergence and growth of LFAs such as Ryanair and easyJet has given rise to public discourses on the relationship between low-fares aviation and sustainable development. Many of these discourses addressed questions related to sustainable development, the alleged environmental impacts of LFAs, and emphasized on the need for LFAs to ‘act in a socially-responsible manner’ (Coles, Dinan & Fenclova 2010, p. 3). The environmental impacts of the growth of low-cost aviation, especially its dangerous effects on climate change, have widely attracted public attention. CSR policies in the airline industry recognize the concern of the public and try to maintain sustainable but profitable operations. It is imperative for the low-cost airlines to address the concerns of all its external stakeholders varying from its customers to the local community members. While there have been many definitions of CSR the European Commission’s definition seems to be more applicable to the low-cost airline industry. According to the European Commission CSR is a ‘concept whereby companies integrate social and environmental concerns in their business operations and in their interactions with their stakeholders on a voluntary basis’ (Coles, Dinan & Fenclova 2010, p. 6). It is therefore imperative to analyze how Ryanair and easyJet have incorporated timely CSR policies to address the social and environmental concerns associated with the airline industry. Andersson & Jabkowski (2013, p. 39), in this respect, point out that even though Ryanair did not have a CSR section from 2000 until 2002 it had a specific session entitled ‘Social, Environmental and Ethical Report’ from 2003 until 2008. The growing significance of CSR was also reflected in the size of company’s CSR section. Even though Ryanair removed the session from 2009 onwards the content of the session is integrated into other parts. Similarly, from 2005 onwards, one can find reports on social and environmental concerns in easyJet. The session, initially titled as ‘Social, Environmental and Ethical Report’ was later modified as ‘Corporate and Social Responsibility’ and ‘Corporate Responsibility’ (Andersson & Jabkowski 2013, p. 41). The session deals elaborately with environmental impacts and safety, and explains elaborately the actions, technological innovations, and researches undertaken by the airline to address these issues. Very often, LFAs adopt CSR policies as a defense to protect their brand and reputation. Coles, Dinan & Fenclova (2010, p. iv) purport that “most LFAs do not have a formal policy, strategy or detailed implementation plan to guide their CSR practices.” CSR policies need to be continuously monitored and evaluated to bring out the best effects. CSR policies are to be adapted, changed or altered so as to suit to the community needs and address newly arising issues. However, it is true that companies do not make many noticeable changes in their CSR policies from the previous year. Coles, Dinan & Fenclova (2010, p. iv) argue that CSR policies of LFAs are unbalanced as they lay greater emphasis on either their environmental or societal impacts. Similarly, the authors claim that LFAs need to overcome a number of barriers to strengthen their CSR policies. These barriers consist of “knowledge gaps among senior managers and employees; the lack of a coordinated approach within LFAs; difficulties in making the case for greater CSR resources; and a lack of knowledge transfer inside the business and across the LFA sector” (Coles, Dinan & Fenclova 2010, p. iv). The airline industry is, in fact, pressurized by the green lobby and the environmentalists to adopt convincing CSR policies. The increased environmental awareness coupled with active media coverage prompt airline industries to stick on to clearly defined ethics and CSR. This has been sarcastically pointed out by Richard Tams, the head of corporate sales for British Airways, in 2007: “The aviation sector generates 2% of all CO2 emissions, yet receives 98% of press coverage” (Coulter, 2007 quoted in Andersson & Jabkowski 2013, p. 1). Airline industries, therefore, seek new technology and alternative fuels to reduce the CO2 emissions. While the airline industry, to a great extend, have succeeded in decreasing CO2 emissions the NOX emissions cause great headache to the industry due to their uncontrollable nature. CSR in easyJet easyJet has been one of the fast growing airline industry that carries more than 32 million passengers a year (Sadler 2012, p. 173). The airline made flying affordable for all Europeans and ever since its flight in 1995 the airline has grown enough to become a familiar household name in the U.K. However, the green lobby argues that aviation accounts for ‘7-11 per cent of Britain’s harmful carbon dioxide emissions’ and considers CO2 emissions on return flight from London to Florida equivalent to those produced by one year’s motoring in the nation (Sadler 2012, p. 173). However, easyJet holds that it is ‘environmentally friendly’ and introduces a new environmental code in its corporate social responsibility report as part of its mission to be ‘green’ (Sadler 2012, p. 173). It is worthwhile to analyze easyJet’s CSR policies on protecting the environment. The airline envisages a greener future for aviation by minimizing its environmental impacts. The 2012 annual report of the airline identifies three main environmental impacts of aviation: on climate change, on local air quality and on noise levels (easyJet plc: Annual report and accounts 2012, p. 37). Aviation contributes to climate change through the direct emission of CO2 and the emission of Nitrogen Oxides (NOx). While easyJet has succeeded in minimizing the direct emission of CO2 the science surrounding non-CO2 effects remains vague. Similarly, NOx emissions during aircraft take-offs and landings adversely affect the local air quality; however, easyJet has been able to reduce NOx emissions by 10% through upgraded engines (easyJet plc: Annual report and accounts 2012, p. 37). With regard to the noise levels the airline meets the tightest international noise standards and resorts to adequate changes in the flap settings to reduce noise impacts. The airline also realizes that environmental concerns have a great bearing on the formation of public policies towards aviation (easyJet plc: Annual report and accounts 2012, p. 37); thus, environmental protection has become a key CSR priority for the airline. As part of its CSR initiatives to minimize environmental impacts easyJet also monitors emissions per passenger kilometre. The airline claims that it has successfully reduced CO2 emissions per passenger kilometer by 18 per cent since 2000 (Sadler 2012, p. 173). In 2008, easyJet had an average CO2 emission of 90.3g per passenger kilometre and 98.6kg per passenger flight (easyJet plc: Annual report and accounts 2008, p. 17). It was 110g/km in 2003 and in 2010 it was brought down to 84.4 (easyJet plc: Annual report and accounts 2012, p. 37). By 2013, easyJet’s emissions per passenger km were only 83.76g/km and it is among the lowest in the airline industry (easyJet plc: Annual report and accounts 2013, p. 52). Emissions per passenger km are regarded as the standard industry measure of efficiency and it can be seen that easyJet fulfills its CSR in this regard. The 2013 annual report of easyJet addresses more CSR related issues related to safety, HR service deliveries (customer service), employees, equality and diversity, bribery and corruption. The safety management structure of the airline aims at protecting passengers, people, brand and assets through an industry leading Fatigue Risk Management System (FRMS) with assistance from independent partners such as the Imperial College London and the NASA Ames Research Institute in California (easyJet plc: Annual report and accounts 2013, p. 45-46). Similarly, the airline guarantees high quality HR service delivery to all its customers. Another major CSR initiative undertaken by the company is that over 90% of its employees are shareholders in the Company and holds around 90 million shares (worth over £240 million) on behalf of employees (easyJet plc: Annual report and accounts 2013, p. 50). Similarly, easyJet upholds equality and diversity to all its employees and customers and indulges in no discriminatory practices. The airline also maintains an Anti-Bribery and Corruption Policy and it is mandatory for all the management and administration employees to undergo a compulsory Anti-Bribery and Ethics training with an online examination (easyJet plc: Annual report and accounts 2013, p. 55). CSR in Ryanair Ryanair Ltd carried around 58 million passengers in 2008 and could add 201 routes throughout Europe the next year (Coles, Dinan & Fenclova 2010, p. 19). The airline claims to maintain strong CSR principles and seeks to follow ‘sustainable way by investing in the latest aircraft and engine technologies’ with a view to reduce fuel burn and CO2 emissions (Crowther & Aras 2008, p. 46). It is worthwhile to analyze the environmental policy of Ryanair. The airline offers environmentally friendly air transport and between 1998 and 2006, the airline has reportedly reduced ‘emissions and fuel consumption by almost 52%’ by implementing “the latest engine technology, for example winglets, efficient seat configuration, and high load factors” Hamling, Kololian, Lloyd & Yuill, 2006). Similarly, the airline applies modern technology and winglets to reduce the noise affected areas in the airport. All of Ryanair‘s aircraft comply with the EU and Irish regulations and Stage 3 noise requirements (2013 Annual Report – Ryanair, p. 79). The Air Travel Carbon and Energy Efficiency Report published by Brighter Planet describes Ryanair as the industry leader in terms of environmental efficiency, and the company is all set to go further with its CSR initiatives (2013 Annual Report – Ryanair, p. 80). The airline seeks to replace all its older aircrafts with the next generation aircraft -Boeing 737-800 which can considerably reduce the rate of fuel burns and noise levels. Similarly, in their attempt to reduce the number of take-offs and landings, the airline promotes direct services instead of connecting flights. Similarly, late night departures are avoided to reduce the impact of noise emissions. Unethical practices and violations of CSR in easyJet and Ryanair It can be seen that the CSR policies of both easyJet and Ryanair emphasize mainly on environmental impacts. The CSR policies of both airlines seek to address the three main environmental impacts of aviation (climate change, local air quality and noise levels) and how they minimize these environmental hazards of aviation. On the other hand, one can find a number of instances for unethical practices and violations of CSR in the case of both the airlines. For instance, easyJet stresses on equal opportunities and fair treatment for everyone irrespective of any sorts of discriminations and purports that even the applications of the disabled are accepted by the company (easyJet plc: Annual report and accounts 2013, p. 50). However, despite its proclaimed stance on anti-discriminatory practices, the airline has been at least twice penalized for showing discrimination towards its passengers. The French Court penalized the airline with a fine of 60,000 Euros in July 2014 for having refused a partially paralyzed woman to travel unaccompanied for her son’s funeral (AFP 2014a). In February 2014, the airline had already been fined with 50,000 Euros for forcing a disabled woman off the flight (AFP 2014a). Similarly, an explicit violation of CSR principles by budget airline Ryanair was reported by The Guradian on 21 April 2010 when the airline authorities refused to “pay the hotel and food bills of passengers stranded by the volcanic ash cloud” (Booth, Milmo & Brignall 2010). The EU consumer rules and Europe-wide regulations on aviation hold that passengers should be offered food, drinks and accommodation when they are stuck abroad. However, the airline was only ready to reimburse the original price of the air fare. Similarly, the low-cost airline is awaiting trial in the French Court for an alleged breach of French labour law for registering workers employed in France as Irish employees (AFP 2014b). Another huge fine is awaiting the airline if found guilty. Jureviciute et al (2013, p. 11) postulate that Ryanair has a bad reputation when it comes to CSR issues and point out that the company stands at the bottom 10 of 581 companies in terms of its ethical ranking. The ranking was based on the corporate social responsibility of the company in terms of its labour standards, waste management, social utility and human rights policies and it clearly demonstrates that the airline fails to comply fully with CSR principles. The authors also point out that the company’s staff turnover, especially among young pilots and cabin crew, is extremely high as employees feel undervalued and are made to work for hours without any break (Jureviciute et al, 2013, p. 8). This also raises concerns over the company’s working arrangements and employee motivation. One can thus see noticeable disparity between CSR principles and the actual practice of the company. It can thus been seen that among Carroll’s four layers of social responsibilities of business both easyJet and Ryanair fulfil their economic responsibilities to the fullest; their legal responsibilities to a great extent; philanthropic responsibilities to a certain extend; but fails in completely fulfilling their ethical responsibilities. As Lindgreen et al. (2009) suggests these airlines need to rectify their isolated violations of CSR policies and practices to enhance the public image of the firm and to ensure positive attitudes towards their services. Similarly, it is imperative for the companies to motivate their employees to improve their productivity, morale, and loyalty. References AFP. (2014a) “France: EasyJet & Europe Handling fined for refusing to let disabled woman fly unaccompanied”, Available at: http://business-humanrights.org/en/france-easyjet-europe-handling-fined-for-refusing-to-let-disabled-woman-fly-unaccompanied (Accessed 13 December 2014). AFP. (2014b) “Ryanair trial opens in France over alleged labour law breach”, Available at: http://business-humanrights.org/en/france-ryanair-on-trial-for-alleged-labour-law-breaches-including-preventing-workers-from-exercising-union-rights#c73070 (Accessed 13 December 2014). Andersson, C & Jabkowski, P. (2013) CSR Reporting in the Airline Industry – An Analysis of the Development of Airlines’ CSR Reporting. Master Thesis, 15 ECTS. Available at: http://lup.lub.lu.se/luur/download?func=downloadFile&recordOId=3775799&fileOId=3803450 (Accessed 13 December 2014). Annual Report 2013-Ryanair. Available at: http://www.ryanair.com/doc/investor/2013/final_annual_report_2013_130731.pdf (Accessed 13 December 2014). Booth, R., Milmo, D & Brignall, M. (2010) “Fury as Ryanair refuses to pay stranded passengers costs”, The Guardian, 21 April 2010. Coles, T., Dinan, C & Fenclova, E. (2010) Corporate Social Responsibility among Low-Fares Airlines: Current Practices and Future Trends. Centre for Sport, Leisure and Tourism Research, University of Exeter. Available at: http://www.exeter.ac.uk/media/universityofexeter/centreforsportleisureandtourism/pdf/CSR_and_LFAs_Current_Practices-Future_Trends_Dbl_Side.pdf (Accessed 13 December 2014). Crowther, D & Aras, G. (2008) Corporate Social Responsibility. Bookboon. easyJet plc: Annual report and accounts 2008. Available at: http://corporate.easyjet.com/~/media/Files/E/Easyjet-Plc-V2/pdf/investors/result-center-investor/easyJet_ar081.pdf (Accessed 13 December 2014). easyJet plc: Annual report and accounts 2012. Available at: http://2012annualreport.easyjet.com/downloads/PDFs/Full_Annual_Report_2012.pdf (Accessed 13 December 2014). easyJet plc: Annual report and accounts 2013. Available at: http://corporate.easyjet.com/~/media/Files/E/Easyjet-Plc-V2/pdf/investors/result-center-investor/annual-report-2013.pdf (Accessed 13 December 2014). Hamling, A., Kololian, C., Lloyd, Z & Yuill, Z. (2006). Silent Report & Shadow Report. Available at: https://www.st-andrews.ac.uk/media/csear/app2practice-docs/CSEAR_ryanair2007.pdf (Accessed 13 December 2014). Jureviciute et al. (2013) Best Practises in Corporate Social Responsibility. Available at: https://is.mendelu.cz/dok_server/slozka.pl?id=39939;download=120520 (Accessed 13 December 2014). Sadler, P. (2012) Sustainable Growth in a Post-Scarcity World: Consumption, Demand, and the Poverty Penalty. England: Gower Publishing, Ltd. Read More