20th September 2019
“Q: I’ve always tried to teach you two things. First, never let them see you bleed.
James Bond: And the second?
Q: Always have an escape plan”
The World is Not Enough (1999)
This week the Dutch airline KLM announced that next year they are going to replace one of their five daily flights between Amsterdam Schiphol and Brussels with reserved seating for KLM customers on the high speed intercity train service between the two capitals [1]. Their long term plan is to further reduce these flights, whilst still preserving the level of service that customers expect, and this is a good example of how firms other than energy companies may diversify their operations away from carbon intensive activities towards more energy efficient ones.
This venture is marketed as one aspect of KLM’s “Fly Responsibility” program, trying to create a sustainable model of air transport. Unfortunately, simply running fewer flights will not necessarily result in lower CO2 emissions, as the freed up landing slots will likely be transferred to a long haul flights; however, it could serve as a future model for CO2 emissions reduction. Furthermore KLM are pitching this as a learning experience and it will certainly be interesting to see where they go next.
“Reducing our frequency from five to four flights a day is a good way of gaining more experience with Air & Rail services.” [1]
One thing KLM are keen to stress is that the customer experience will not be drastically different. KLM will be working with the Belgian and Dutch rail operators, Thalys and NS, to ensure that their intercity train service matches the “speed, reliability and comfort that air travel offers passengers” [1]. This is an important aspect to KLM’s diversification, as the company are not trying to reinvent the wheel, but rather they accept that customers are technology agnostic and will potentially not mind how they make their journey, so long as it is commensurate with the current option.
We are familiar with energy companies making a lot of noise about their diversification away from fossil fuels, but there are many other industries out there which will have to rely on a bit of lateral thinking to ensure they still provide the same service to customers but in a sustainable manner.
Keeping track of all these changes
As companies diversify away from carbon intensive business models, it will be difficult for investors to analyse these companies using traditional methods. Financial modelling and forecasting will no longer involve siloed industries disconnected from one another, but rather the whole business landscape will form an interrelated, interdependent, complex network.
From a green finance and green bond perspective, this could make it increasingly difficult to keep track of what and where green investment is going. The muddying of the waters presents an opportunity for greenwashing, and potentially damaging the credibility of the wider green and sustainable finance community. As corporate giants’ business models change, their effect on the planet will change with it. Keeping a tab on these changes will allow appropriate sustainable investment and green finance decisions to be made going forward.
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