Why ESG Reporting is Particularly Important for the Airlines during the Covid-19 Pandemic

Abstract

The concept of environment, society, and governance (ESG) performance is gaining momentum in all business sectors as the global economic system recognises the importance of sustainability. The airline industry has several incentives to apply ESG initiatives and report the related results. The literature has established positive links between noble ESG scores and priority access to funding, better compliance with regulatory requirements, increased customer loyalty, and employee productivity, and improved firm value and financial performance. Although adherence to ESG goals may seem contradictive to tremendous cost reduction pressures posed to airlines due to the covid-19 pandemic, literature also argues that ESG can play a vital role in the post-covid-19 world as ESG can alleviate airlines’ financial risks. The aim of this short paper is to raise awareness among aviation practitioners and policymakers on the importance of ESG application and reporting as a means to strengthen business resilience and mitigate the adverse impact of the covid-19 pandemic and future crises that challenge the airline industry.