“Every social revolution has elicited some form of counter-revolutionary response from the international system. The impulse to reverse revolutionary transformation has much to tell us about the dynamics of social revolution as well as the nature of international order” Nick Bisley, Review of International Studies (2004)

2023 was the year of the Environmental, social and governance (ESG) backlash. (For those that have been living in a cave, ESG is a framework used to assess business practices and performance against various sustainability issues and provide a way to measure business risks and opportunities in those areas).

“ESG scores” are used in the finance industry because they provide the illusion of an “easy button” for making ESG-based decision-making. However, the scores are so badly flawed that no investor can use them. In September, S&P Global announced they are no longer scoring companies on ESG risks when assessing credit quality.

Where is ESG heading in 2024?

The ESG term has become increasingly toxic, both politically and in the industry. However, it is not just ESG that’s a problem – it is the ‘E’ part that is becoming progressively challenging.

The aviation industry has set an environmental goal to become Net Zero by 2050 and IATA has developed a 4 pillar strategy of improvements needed to achieve this: technology, operations, infrastructure and socio-economic initiatives. A key building block in the strategy is the increased production and development of SAF (sustainable aviation fuel). However, there is a catch, it is estimated that to reach Net Zero, current SAF production needs to scaled a thousand fold from 500 million litres to 500 billion litres between now and 2050.

“Sometimes it is healthy to believe in what we want to believe in. We all appreciate the charts that so wonderfully depict the levers to decarbonize our aviation industry, SAF (sustainable aviation fuel) being one of most important levers. Yet, when we look at the facts, the scaling of SAF both in terms of volume and projected timeframe is uncertain. There are too many uncertainties that need to be tackled.”

This quote from Dr Ulrike Ziegler, President of IMPACT, the independent association to promote sustainable aircraft financing, encapsulates the challenges aviation as an industry (not just business aviation) face. IATA, ICAO, and other aviation bodies have committed to Net Zero as a goal. Regulators, the public, science and research, investors and supervisory bodies are calling for strategies, transparency and focused measures.

SAF is now getting a spotlight on it as the “Sustainable” in its name is now being seen as fuelling greenwashing.

SAF has the potential to greatly reduce aviation lifecycle emissions: most SAF will cut lifecycle emissions by 50%-80%, sometimes even more. However, sustainable fuel (whether it’s bio-based or power-to-liquid) will be blended with conventional fossil kerosene.

Commercial aviation is at the receiving end of claims they have made about reducing emissions through SAF. If an airline advertises “We use sustainable fuel” (meaning blended fuel) when the emissions reduction is so small, it is penalised by advertising regulators for greenwashing.

Activists such as The Netherlands Fossielvrij claim that “SAF is the biggest greenwash of all. It’s such an amazing brand name but it’s not sustainable. Indeed, the term “SAF” is likely to be litigated in the next couple of years to test whether it is tantamount to greenwashing. Without context, SAF will become a difficult term to use.

Another environmental campaigner, Peter Lockley, believes that reputational rather than legal risk will force change as “SAF is another case of the aviation industry promising jam tomorrow as a basis for it to carry on expanding today.”

Then there are the practicalities of cost. Stefan Gössling, Research Professor at Linnaeus University points out that “our most recent research suggests that indeed, net-zero is not achievable. In real world terms: there is no basis for air transport to finance new propulsion systems including new fuels, provided these could even be made available.”

Gössling points out that over the period 1978-2022 (45 years) air transport’s profitability has been 0.49%, or US$ 82 bn per year. In comparison (for the period 2024-2050), the production of SAF is expected to cost US$18-78 bn US$ per year – a colossal $4-$5 trillion cost of decarbonisation. In other words, commercial aviation does not have the money to fund SAF. Neither does business aviation which has a much smaller scale.

The business aviation industry continues to be the whipping boy for those who remain unconvinced by the industry’s commitment to decarbonize. The Guardian wrote around the COP26 meeting that flights since the start of 2022, by 200 prominent private jet travellers generated as much carbon dioxide as the total emissions from almost 40,000 British citizens.

However, the industry cannot avoid this challenge. Climate targets are rapidly finding their way into national legislation. Commercial aviation bodies like IATA and ICAO are committing to Net Zero as a goal. Two new EU directives could affect companies’ ability to cite offset and SAF purchases as progress towards carbon footprint reduction;  there is even potential for regulators or pressure groups to act against companies which misrepresent their business travel emission reduction strategies.

There is yet another reason for the industry to address the challenge: sustainability is going to play a growing part in business aviation’s ability to raise loans.  In terms of European Union regulations, the business aviation sector experienced the adoption of new green financing rules and legislation commanding a sustainable aviation fuel (SAF) blending obligation in the bloc’s 27 member states plus Iceland, Liechtenstein, and Norway.

Many banks have Net Zero mandates and operate as part of groups like the Net Zero Banking Alliance etc. which drives the decarbonisation agenda of these lenders. Industry leaders are concerned that the exclusion of business aviation in the taxonomy could result in higher interest rates or dry up green financing altogether as banks and other investors will look at other projects to support.

What can business aviation do?

The industry needs to come up with solutions so we can safeguard the future.  Business aviation needs to prove it can achieve sustainability objectives.

European Business Aviation Association (EBAA) COO Robert Baltus and the EBAA have summarised the challenge for all of us.

“We want to make sure that the business aviation commitment to climate change is also reflected in the legislation and meets or exceeds the standards of whatever Europe comes out with.”