Air New Zealand's top leaders know all about the pressure to cut carbon emissions.
They will soon release an annual report that requires an outline of exactly what's being done to trim the airline's contribution to climate change.
Airline chairwoman Dame Therese Walsh says investors are more closely scrutinising words and actions. And although the airline is one of the country's biggest companies, with many staff, a long-standing international panel and for years has devoted technical resources to operating more sustainably, it's hard stuff.
"Air New Zealand does not try and hold itself out as perfect. We're on a journey. We're on a really long journey and a complex one," says Walsh, who is also Aotearoa's steering committee chair for Chapter Zero, a global organisation that aims to educate and equip directors and boards to make climate change a boardroom priority.
"We're still learning - and the organisation - as to how to deal with this, and this isn't about holding ourselves out as exemplars. We're learning some things - we're not getting everything right and some things are going well."
Air New Zealand has just released its aim to reduce absolute carbon emissions by 16.3 per cent by 2030, compared with a 2019 baseline.
The pandemic didn't help carbon intensity, though. While the number of flights in 2021 was well down on pre-Covid times, flying was less environmentally efficient per passenger.
The key measure of carbon intensity went up 31 per cent in 2021, compared to 2020. Carbon intensity is measured in grams emitted per tonne of payload carried. And the airline has copped criticism for its new cabins with a premium skew - bigger, heavier seats being more polluting per passenger - although these changes fit in with another expectation of its Government majority owner: sustained commercial success.
Chapter Zero is aimed at individual directors rather than companies. Directors from most of New Zealand's major companies have signed up, Walsh says, and the organisation wants to get more support from small and medium-sized firms.
Boards have to take a strong ownership and leadership position, and that means they are responsible for the commitment to sustainability, which Air NZ chief executive Greg Foran says is the number one issue at his company.
During the year, Foran and the executive propose ideas, strategies and options to the board.
"We challenge, we debate between us all and we bring insights into the room, and eventually we have to settle on a position that is Air New Zealand's," says Walsh.
Air New Zealand asks itself about the big risks and opportunities, how it's going to mitigate them and what targets it will set out to achieve that.
Walsh says it's important to keep asking questions. "We've all got our individual plans for individual companies, but are we really doing enough? Are we really reading the tea leaves and are we really facing into the elephant in our respective rooms?"
And under mandatory climate-related disclosures, big companies must outline these targets and what they're doing to reach them in their annual accounts, which for Air NZ will be released next week.
Walsh, who is also chair of ASB Bank, says it's not as easy as it sounds.
"It's not something that companies have been doing for a long time. So there are moments where you have to try and figure out the calibration between the board and the executive team. I think that's the same for all companies in New Zealand at the moment where you're just trying to get that kind of rhythm right."
How much of all this is rhetoric?
"I think in the past you will have had companies speaking quite broadly about climate change and broad, sweeping statements. People are pretty acutely aware now that that's not the case." Now, she says, statements must be backed up.
What if companies miss those targets?
Walsh says that around the margins this is not such a problem, but investors are now keeping a close eye on more material misses, as they do with financial performance forecasting.
"If you don't get the calibration right and [miss] the targets over the years, you're going to have a bit of an issue. Ultimately, if you miss them entirely, then the organisation's future becomes a bit of a risk."
Increasingly, big institutional investors - and activist small shareholders - are driven by a company's environmental credentials.
"People are going to be pretty clear about what they think about your response," says Walsh. "If you want to get financing - whatever size company you are - you need to be able to demonstrate those things.
"We'll be doing investor presentations over the next week with results and I'll be doing a governance roadshow later in the year with our investors and they'll want to know about that."
Should the All Blacks wear black?
Foran says the days of questioning how quickly humans are having an impact on global warming - and more volatile weather - are long gone. And for him, where New Zealand needs to position itself is a no-brainer.
"Over the years you come across themes or ideas that just [are] right and make sense."
Questioning whether New Zealand should be green is a bit like asking "should the All Blacks wear black", he says.
"To me, it is so inextricably linked with who we are, what we stand for, our values, our beliefs — I would think that New Zealand should continue for decades or centuries, to hold itself up as being a very green, safe country."
The airline, other businesses and the Government have a role to play in solving the "wicked" problem of global warming, and other issues such as wealth disparities and international health crises.
"These are hard things to fix but if we don't fix them and we don't have a go at them, then I think we're leaving a legacy that is not something we would be proud of."
The impact of bad weather was acutely felt at the airline, but it was a much bigger issue for the country.
The evidence now was irrefutable that as the world warms, up weather patterns were changing, there were more storms and more extreme events.
"I don't think this is a matter of just picking up on us having had a tough July. I think you've got to look at these things over decades, and the evidence is increasingly what we're seeing in the world is playing out in New Zealand, playing out in communities and is playing out in households," he says.
"You better pay this thing forward and start to do what's right for our children. So for us at Air New Zealand, for the leadership squad, the board, for the frontline staff, I think most people would say this is the biggest issue that we're going to face."
Headwinds for airlines
Airlines contribute around 2.5 per cent of direct global emissions but as part of the wider travel system, their indirect impact is higher.
Air New Zealand has been working on alternative fuels for close to 15 years, running a sustainable aviation fuel (Saf) flight in 2009. That was with oil processed from a tropical nut but since then Saf has been produced from a variety of feedstock, from other plant material to municipal waste. In New Zealand, biomass from wood waste is a strong contender for producing Saf as a "drop-in" fuel, suited to long-haul and ultralong-haul aircraft.
A study involving MBIE and consortium partners Z Energy, Scion, LanzaTech and LanzaJet into whether New Zealand could viably produce such fuel is getting to the "pointy end", says Foran.
"Saf is generally in short supply around the world. So even if you want to buy lots, you just can't get enough at the moment. But I think that will probably change quite quickly."
Foran, who has a background in global retail, says that ideally, progress would be quicker.
"There are various stakeholders - the solution is not going to be Air New Zealand to go and find hundreds of millions of dollars and build this. It needs to be a total ecosystem solution. Everyone's going to have to put their hand in the pocket initially," he says.
Once production is scaled up, the costs of making the fuel may end up being comparable to fossil fuel.
Before the spike in oil prices over the past year, producing Saf could cost up to five times the cost of fossil fuels. But despite the recent retreat in oil prices, Foran says the momentum for a global Saf industry is stronger than ever.
"Initially you've got to invest — you don't make a lot of money in your first couple of years building electric cars. But you do once you've worked it out ..."
Walsh says Saf is important not only to the airline industry, but also the entire economy.
"From an export perspective and a tourism perspective, it's really important that we get the Saf issue solved as an economy."
The airline also hopes to have batteries and hybrid hydrogen power fuelling planes early next decade.
What is Chapter Zero?
The World Economic Forum has developed a set of climate governance principles for boards of directors, with a view to enabling them to gain climate awareness and skills, embed climate considerations into board decision-making, and understand and act on "the risks and opportunities that the climate emergency poses" to the long-term resilience and business success.
The Institute of Directors NZ (IoD) is the host of Chapter Zero New Zealand - the national chapter of the Climate Governance Initiative.
Its signatories here account for almost 60 per cent of New Zealand's gross emissions, create around 38 per cent of GDP, employ more than 220,000 people and have a collective turnover of $122b. It is free to join.
Signatories now must adopt new short- and long-term science-aligned emissions targets, publicly disclose their climate-related risks and opportunities, plan for a just transition and incorporate te ao Māori perspectives into all climate action plans.
The Chapter Zero steering committee in New Zealand includes directors from organisations including the NZX, Westpac, Air New Zealand, Z Energy, Fisher & Paykel Healthcare, a2 Milk and the Arts Council.