Q + A: Sir Jonathon Porritt and Christopher Luxon Interviewed by Corin Dann

CORIN Sir Jonathon and Christopher Luxon join me now. Good morning to you both.

CHRISTOPHER Morning, Corin.

CORIN Great to have you here. Christopher, first, this sustainability framework – sustainability is not a word we have heard for a while post global financial crisis. What is this all about?

CHRISTOPHER I think in New Zealand, sustainability is exclusively understood as environmentalism, and what we think as sustainable development and growth is actually a concept that’s much bigger and broader than that. It’s about economic, social and environmental progress.

CORIN Is it something you have to have the luxury of being a successful business to do?

CHRISTOPHER Absolutely not. I mean, the reality as a global business leader is I look at the world and I see there’s unprecedented challenges, there’s a lot of volatility, a lot of uncertainty. As a good business leader, you want to be thinking about sustainability and how you actually make sure your business stays enduring, compelling and is there for the future.

CORIN So how does an airline company be sustainable when you are burning carbon?

CHRISTOPHER Well, there’s a lot that we can do. I mean, we think we can do a lot around advancing New Zealand economically through tourism trade and enterprise. We can do a lot socially with our own people and modelling out what a great corporate can do, and certainly with the communities. And then environmentally, which is one aspect of those three, there’s a lot that we can do around carbon. And so, yeah, we’re in a world where we are actually… You know, people are choosing jet travel. It’s been very good for the world economically and socially. Three billion of the world’s seven billion people will be on an airplane this year, 36 million flights in the year. So there’s really good things about aviation, but you’re right – we consume about 2% to 4% of the world’s greenhouse gas emissions, and there’s quite a lot that we can do around more efficient aircraft, biofuels, carbon offsetting, good waste management and electrification.

CORIN Sir Jonathon, why have you got involved with Air New Zealand? You know, they do burn carbon. They can’t not burn it. Everything they can do to offset it is not going to be enough, is it?

JONATHON No. And the truth of it is is that aviation is a sector that is right in the spotlight now in terms of concerns about climate change. And it’s a critical sector because people really do appreciate the benefits of flying, both recreationally, personally and from a business point of view. And it’s very difficult to imagine a world in which people aren’t continuing to take advantage of the privilege of flying.

CORIN Do we need to imagine a world where we perhaps don’t fly as much?

JONATHON No. Not necessarily, and that’s why it comes right back to the responsibility of individual companies and to the sector as a whole. And the sector has committed to what they are calling ‘carbon-neutral’ growth after 2020. So all the new demand for aviation after 2020 is going to have to be delivered on a carbon-neutral basis. This is a big ambition level, and the reason why I am here working with Air New Zealand is because this is one of the few airlines in the world that is getting serious about working out what that growth curve looks like if you have to peg your carbon emissions.

CORIN And you are fairly discerning who you work with, aren’t you? Because you famously have walked away from some of the oil companies which you had been giving some advice to. So is that a sign that you do have some faith that Air New Zealand is genuine when it says it wants to do this?

JONATHON Yeah. I mean, we’re a not-for-profit. We’re not a consultancy. We have to feel comfortable that the companies we’re working with are committed to sustainability, as Christopher said, on social and economic grounds as well as on environmental and resource grounds. And we do a lot of due diligence, as Christopher knows. We knew each other a bit from Unilever days – Christopher used to work for Unilever. We’ve spent the last 20 years working with Unilever on its sustainable living plan, and the truth of it is now progressive companies like Unilever and others are making a big contribution to the total sustainability story around the world. So it’s a really important challenge to be able to take this forward with companies, even ones in a hot place like all the aviation companies are.

CORIN Christopher, is this ultimately-? You can do all sorts of things – you can have more sustainable products, all sorts of things, but you’re going to have to ask consumers to pay more, aren’t you? You’re going to have to offset your carbon use.

CHRISTOPHER Yeah, no, I think the bottom line for us is that we have been part of this fabric of New Zealand life for 75 years. As a result, we actually want to be here for another 75 years, and I think our success is completely dependent upon the success of New Zealand. So as a company, what we are doing is taking a step back and saying, ‘There’s things that we can do to supercharge tourism, trade and enterprise, certainly communities, certainly very much what we can do in the environment space. No, the reality is our customers are actually demanding this, our partners are demanding this, and our investors are demanding this. This is the reality.

CORIN But you are facing a lot of competition. You’ve got Jetstar coming in on the regions. If you’re going to meet these carbon demands, surely you’re going to have to ask people to pay a bit extra, perhaps, you know, offset with a… planting a tree somewhere. You’re going to have to pay more.

CHRISTOPHER We’ve got a lot of programmes, and if I just stick on the carbon piece, you know, as I said, it’s only one-third of, kind of, the big focus around sustainable development. But in the carbon piece, there’s a lot that we can do. We’re investing more in new aircraft than we’ve ever invested -- $2.6 billion in the next four years. Those aircraft- you know, consumers love travelling in them – they’re a much better experience; great for Air New Zealand – more efficient. And 20% to 24% more fuel efficient than the ones that have gone before them. Biofuels – we’ve looked at biofuel projects all around the world. We did the first biofuel flight back in 2008. But the reality is none of those projects have actually scaled up or commercialised since 2008.

CORIN So you must have done some price modelling here. You must have looked at what people might be willing to pay extra.

CHRISTOPHER No, I don’t think that’s the case. That’s a job for us to think about – how we manage that cost within our own business in the same way we do that as a business person each and every day, where big cost increases are on our books.

CORIN So would you offset some of the cost of your carbon emissions, take it out of your profit?

CHRISTOPHER Well, what we do is we actually find a way to recover that cost somewhere else in our system. And the thing I’ve learnt is that when you actually go after challenges or real problems like this around how we actually fund carbon investment, the reality for us is there’s actually some really good benefits of doing that.

CORIN And have you had to stand up and tell your shareholders and are they supportive of that idea?

CHRISTOPHER Yeah, well, investors – I can tell you right now if I look at the FTSE for good funds that exist around the world, these are investors who are consciously choosing to invest in sustainable companies. Why are they doing that? They’re doing that because companies who have sustainable practices at the heart of what they do are actually better businesses because you’re actually de-risking the future. You’ve got much more certainty around a supply chain. You’re removing waste, which is lowering cost, which is improving your margins so you’ve got more cash to invest. You’re doing innovation, and often a lot of that innovation is real breakthrough that makes you get through that problem and actually has a real advantage for customers.

CORIN Sir Jonathon, this all sounds good and inspiring, but do you see this as an extended from the New Zealand… as a whole, from the government? Because I’m not sure that many would argue that the New Zealand Government is taking the same sort of leadership approach, perhaps, that Air New Zealand is.

JONATHON: (LAUGHS) Not for me to comment on New Zealand politics today, not least because of what’s going on in the UK at the moment. But the truth is, governments now look to their business communities to play a bigger part in creating a sustainable economy. And all governments now are working much more closely with business. It’s easy to do a ‘divide and rule’ story here, but actually you can’t deliver a sustainable economy if business isn’t working with government and with civil society, with consumers and citizens. So this is something that is emerging, and if you look at the success stories around sustainable economies in Europe, you can see how that three-cornered bit really does work well. That’s why I think more companies in New Zealand are going to have to step up to the plate here. We’re hoping that when the sustainability framework from Air New Zealand gets launched, that it will persuade a lot of other companies, ‘Well, maybe we can look at this again and start thinking about a more integrated approach, about these community issues, social issues, as well as about carbon resources, biodiversity and so on. So it’s definitely part of the transformation that’s going on around sustainability.

CORIN So it will be business-led, not government-led?

JONATHON I wouldn’t put it quite like that, but I have to say that governments are not as clear in the direction of travel as they need to be. You were pressing very hard on prices, for instance. Now, the reality is at some point in the quite near future, governments are going to have to put a price on carbon. There’s no way you can deal with a huge externality in our economy like that without a proper price on it, without actually asking people and businesses to pay the real price for something which is causing huge problems, today and in the future. They’re very nervous about this; they’re very uncomfortable about what that would mean, so a company that’s saying, ‘We know this is coming. We don’t know when it’s going to come, but we know that carbon pricing is coming.’ Any company that gets ahead of that curve, works out how its business can be less impacted than some of its competitors, you can see why that plays to a business success story.

CORIN But surely you can also see that for New Zealand – you know, we’ve branded ourselves as 100% Pure, yet we are dependent on air travel. We’re an exporting nation. We’ve had the debate about air miles, and, I mean, is that still something that, for example, UK consumers are concerned about?

JONATHON Yeah, occasionally. We still get comments about Braeburn apples from New Zealand having more carbon embedded in them than apples from Kent, for instance.

CORIN Should we worry about that in New Zealand?

JONATHON You shouldn’t worry about people being more informed about impacts on the environment. But you should worry if the debate goes completely off line, completely into the wrong place. And there’s been a good debate in the UK about balancing this question of carbon emissions on New Zealand products. It’s a much better informed debate now than it used to be. But we all have to work to understand individual responsibility about this, because otherwise governments and even progressive businesses won’t be able to get consumers with them, won’t get them feeling comfortable about their own personal responsibilities.

CORIN Christopher, do you see any risks to New Zealand in terms—and your company, given where you’re positioning yourself in the branding of New Zealand, given we have only come up with a proposed cut at the Paris climate change conference of 11% below 1990 levels, back to 1990 levels? Doesn’t that put us nowhere near the front of the pack when it comes to these sorts of issues? That doesn’t quite gel with your imaging, does it?

CHRISTOPHER Yeah, well, the first thing I’d say is I don’t think I’ve actually earned the right to actually throw stones at a government target around emissions, because the reality in the next five years is Air New Zealand will grow about 35%, our emissions will grow around 19%, and my job as a business leader is to take—to control the things I can control and actually do something about Air New Zealand’s increasing emissions, irrespective of New Zealand’s reductions in emissions. And so that’s where it comes back to us around more efficient aircraft, you know, much more fuel efficient practices, certainly a lot more investment in good-quality carbon-offsetting programmes that can actually do social enterprise within New Zealand and improve the stock of land within New Zealand.

CORIN And clearly you see the value in New Zealand promoting itself continually as that clean, green brand. Is that what you see? The value?

CHRISTOPHER Yeah, it is. I mean, all around the world, I mean, the tourism—the environment here in New Zealand is a big part of the tourism proposition and a big reason for why people come. You’ve only got to live in cities around the pacific rim regions to see the huge attraction of New Zealand in terms of environmental—the environmental experience here. As a company, as a tourism business, largely, bringing leisure travellers into New Zealand, we have a responsibility not just to help economically by bringing in 40% of the tourists to this country; we’ve got to make sure they are high-value tourists, not just a volume of tourists. We’ve got to make sure that socially we can do everything we can to support those tourists while they’re here. We’ve got good driver practices in place across our in-flight entertainment. But we’ve got very involved with the Department of Conservation, for example, and a lot of people say to me, ‘Why are you involved with those guys?’ Well, we did the first public-private partnership. We spent a million dollars a year promoting biodiversity, doing a lot of endangered species relocation, obviously promoting the great walks of New Zealand. We do that because we want to upgrade the quality of the environment asset that’s actually here in New Zealand.

CORIN Sir Jonathon, while I’ve got you here, I just wonder… I don’t want to make it about the government, but they do argue, for New Zealand’s sake, that essentially New Zealand is a food-producing nation. We export food to the world. Our emissions as a country are dominated by agriculture. Therefore we can’t do much about it. We don’t have the science. Should New Zealand get a dispensation in the eyes of the world when it comes to our contribution for carbon emissions because we are a food producer?

JONATHON No. Absolutely not. No country can get a dispensation for its own particular economy. And it’s absolutely clear that economies that are land-based, agriculture-based, have got to work really hard to find ways of reducing emissions from those exported products. New Zealand has done some work on that. The research-base is reasonably good, but if you look at the whole question about the dairy industry here, about the protein base to the economy, there’s a huge amount of additional work to be done. And there are no ‘get out of jail free’ cards here. Every single industry in every single country is going to have to step up to this one. So I get nervous when politicians say, ‘Oh, let’s take the foot off the gas here. We’ve got special circumstances. We don’t need to do as much as other countries are doing.’ That won’t last very long. Everybody will expect a country like New Zealand – 100% pure in terms of marketing, not 100% pure in terms of actual delivery on the ground – everybody will expect New Zealand to play its part here. And Air New Zealand can’t deliver a completely sustainable tourism sector for New Zealand. That will only happen when the industry as a whole says, ‘You know what? This is so precious to us, not just to have that as a massively successful marketing campaign, but to deliver it on the ground throughout the entire tourism proposition for New Zealand. That’s the story. And if we can use more leadership here from Air New Zealand others, that will help the politicians enormously, because then you join it all up in the minds of the consumers.

CORIN As I mentioned earlier, you’re quite discerning about who you work for. Tell us, why did you walk away from those big oil companies that you were presumably trying to change?

JONATHON Indeed. And you can tell we don’t walk away from all companies that are dependent on the use of fossil fuels, otherwise I wouldn’t be sitting here this morning. But we walked away with working with Shell and with BP because we felt that those companies were not changing their core business model. Shell, for instance, was intent on continuing to drill in the arctic, despite all the knowledge we have now of incredibly high risks associated with that and the fact the world won’t need arctic oil because we’re going to see a gradual move away from these hydrocarbons, these fossil fuels. BP was still stuck in denial about the role it could be playing on renewables – repositioning itself in the energy economy. It’s all about leadership, and the leadership of those two companies, and I’m sorry to spell this out explicitly, the leadership of those two companies has not responded to the challenge the world now faces from the emissions of greenhouse gases from their products. They are not in the right place. And we spent years – honestly, years – trying to get them to move even towards a more intelligent position on that. And we failed. We didn’t succeed. No one succeeded. Those companies have not moved enough, and until they do, environmentalists have to think twice before working with them.

CORIN Sir Jonathon Porritt, Christopher Luxon, thank you very much for your time and coming on Q+A. We really appreciate it.

CHRISTOPHER Thank you.

JONATHON Thank you.

ENDS

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