ACCT20074: Qantas Sustainability Reporting and Financial Analysis

This report provides a comprehensive analysis of Qantas Airways Limited's sustainability reporting practices, focusing on its financial performance and adherence to corporate social responsibility (CSR) principles. The report begins with an executive summary outlining the key aspects of sustainability reporting, emphasizing its importance in addressing corporate social responsibility and stakeholder interests. It then delves into the theoretical foundations of sustainability reporting, exploring the importance of CSR for financially-oriented firms, the holistic view of sustainability reporting, and the theoretical underpinnings of stakeholder and legitimacy theories. The report applies this theoretical knowledge to Qantas's financial performance, analyzing its net debt, return on invested capital (ROIC), net free cash flow, and shareholder returns. It also examines Qantas's application of the GRI guidelines. The report concludes by discussing the strategies Qantas has implemented to meet the expectations of its stakeholders, providing insights into the airline's approach to balancing financial success with social and environmental responsibility.

Running head: QANTAS SUSTAINABILITY REPORTING
Qantas sustainability reporting
Name
Institution

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Executive Summary
Sustainability reporting provides a holistic approach to addressing corporate social
responsibility. Sustainability reporting focuses on the interests of all the stakeholders how are
directly or indirectly affected by business operations. Sustainability reporting is based on four
main principles namely stakeholder inclusiveness, Sustainability context, materiality, and
completeness of report. To study examines the application of sustainability reporting by the
Qantas, one of the largest airline companies based in Brisbane Australia. The company has
taken the four principles of sustainability reporting to explain its performance in 2018 and
2019 reports. The company’s sustainability reports address how the economic,
environmental, and social impact of Qantas operations affect its stakeholders. Lastly, the
report discusses the strategies that Qantas has put in place to meet the expectations of each of
its stakeholders.
Introduction
Sustainability accounting refers to a branch of financial accounting that disclosure
information on the non-financial performance of an entity to the stakeholders. Sustainability
accounting was invented approximately twenty years ago to help companies become more
sustainable in their operations. According to the Global Reporting Initiative (GRI)
organization, sustainability reports disclosure the environmental, social and economic impact
of an organization’s activities (Glavas A., 2016). The report also demonstrates an entity's
commitment to sustainable global economy through its strategy. Sustainability reporting is
essential in several ways. First, the report to understand and measure its performance
effectively. Secondly, sustainability reporting enhances the effectiveness in communicating
environmental, social, governance and economic performance to external stakeholders.
Thirdly, sustainability reporting allows entities to address the impact of their performance on

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global sustainability. This report seeks to elaborate on the importance of sustainability
reporting also known as the corporate social responsibility reporting, by focussing on the
financial reports of Qantas Airways Limited (QAN).
Part A: Theoretical Knowledge
i. Importance of corporate social responsibility (CSR) to financial-oriented firms
Corporate social responsibility (CSR) is considered a standard practice for businesses.
CSR is crucial in creating a sustainable competitive advantage, increase performance,
promote company’s reputation and enhance both financial and social performance. CSR
procedures and policies help businesses to integrate economic, social, environmental, ethics,
and consumer concerns into business strategy. In other words, CSR enables businesses to
incorporate the needs of different stakeholders into organizational vision, goals, and
objectives (Yamahaki, 2016).
CSR encourages organizations to take responsibility for the impact of their activities on
society. Organizations should aim at promoting positive effect on society by creating a shared
value for all the stakeholders involved. Studies have shown that companies that are
committed to CSR outperform those that are not committed. For example a study conducted
by the Kenexa Institute in London in 2015 showed that companies committed to CSR posted
return on assets, which was nineteen times higher than noncommitted companies. Likewise,
CSR committed companies had a higher level of employee engagement and provided better
quality to their customers. It can be concluded from the study that CSR contributes to both
financial and nonfinancial success for truly committed companies. In reality, the success of
CSR goes beyond financial gains (Mridula & Ramanathanb, 2014).
Despite the advantages associated with CSR, only a few companies are committed to
implementing it. Most companies do not fully accept the responsibility that comes with CSR.

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Some companies only take CSR as a marketing strategy with others and are coerced into
accepting CSR. Companies adopt CSR based on different reasons. Irrespective of the reasons
for choosing CSR, the results might take time before being realised. The adoption of CSR
comes with financial and non-financial responsibility, which should be met in the short run.
Businesses should know that it takes approximately five years before the benefits of CSR can
be realised (Antonaras, 2019).
ii. Sustainability reporting as a holistic view of CSR
There are several points that support the notion that sustainability reporting represents a
holistic view of corporate social responsibility. First, sustainability focuses on a more
significant objective about what the business intends to achieve in the long term instead of
improving the current position. For instance, sustainable development is defined as using
resources to meet the needs of the current generation without compromising the ability of
future generations to meet theirs (paiaconsulting, 2019). On the other hand, CSR concept
focuses on balancing the needs of the current stakeholders. With CSR cares about the current
operations, sustainability focuses on both the present and future practices. Therefore,
sustainability reporting is a long term system that seeks to create an inclusive strategy to
tackle climatic, economic, and social issues arising from business operations. A
sustainability reporting address issues arising business operations hence provide a better
approach to meeting CSR objectives (Archie & Kareem, 2010).
Sustainability creates a common goal for different sectors of society. Unlike CSR,
which is a corporate approach, sustainability is a multistakeholder approach where
businesses, civil society, employees, suppliers, and government play critical roles in its
success. Sustainability reporting includes social, economic and environmental issues caused
by business activities and have impact on society. Although CSR also addresses these issues,

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but it follows a narrow approach. Sustainability reporting follows an integrated approach
making it a holistic concept of addressing social issues. Lastly, the comprehensive nature of
sustainability reporting allows the concept to easily integrated into business vision, mission,
goals, and objectives. Compared to responsibility aspect of CSR, sustainability reporting
offers and inspiring and attractive framework of addressing the social, economic and
environmental issues (paiaconsulting, 2019).
Generally, sustainability reporting focuses on the interests of all the stakeholders how
are directly or indirectly affected by business operations. Sustainability reporting is driven by
the needs of stakeholders. Stakeholders demand accoutable and transparent reporting which
can only be provided by sustainability reporting. Sustainability reporting allows businesses to
set their goals, measure their performances and make necessary changes to be more
sustainable in the competitive business world. Sustainability reporting will enable businesses
to separately and exhaustively communicate their non-financial performance to their
stakeholders. Lastly, the preparation of sustainability reports is guided by the GRI guidelines
leading to high transparency level (Delloite, 2018).
iii. Theoretical explanation of the essence of sustainability reporting
Two theories, stakeholders, and legitimacy, can be used to explain the essence of
sustainability reporting. According to the stakeholder's theory, company has the
responsibility of disclosing information to the stakeholders. Sustainability reporting increases
the availability of information to stakeholders. Sharing financial information helps to
convince stakeholders that the company has the potential of using the resources competitively
while keeping risk at the lowest level. Sustainability reporting also communicates the
percentage of company resources that have been committed to improving societal wellbeing.
Sustainability reporting provides a positive avenue for companies to maintain good relations

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and trust with stakeholders especially creditors, suppliers and investors. The company’s
image and reputation are enhanced when stakeholders have a confidence feeling. Good
reputation, in return, leads to a sustainable market performance. (Deegan, 2013)
On the other hand, legitimacy theory is based on social contract. Legitimacy theory
states that the activities and practices of a company should be considered as legitimate by
external stakeholders as well internal stakeholders. Legitimacy theory can be explained using
the environmental aspect of sustainability reporting. GRI G4 of 2013 addresses
organizational inputs (water and energy) and outputs (waste, effluent, and emissions). The
non-sustainable balance between inputs and outputs leads to environmental problems. As a
result public pressure might compel a company to minimize, prevent or repair the damages
caused by its practices (Lanis & Richardson, 2012). Transparency in organization’s
contribution towards protecting the environment makes it easy for stakeholders to understand
what has been done as well as what needs to be done. Transparent disclosure increase the
level of support from stakeholders hence a smooth running of business operations (Wolk,
Dodd, & Rozycki, 2017).
Part B: Application of theoretical knowledge to explain reporting practices
iv. Qantas Airways Limited financial performance
Qantas Airways Limited operates is based in Australia and works in both the local and
international airline markets. Qantas trades in the Australian stock exchange market as
QAN:ASX. The company operates in six market segments namely Qantas domestic, Jetstar
Group, Qantas International, Qantas Loyalty, Corporate, and Qantas Freight. Qantas is
second oldest airline in the world after the Netherlands ' KLM. The company is also among
the most significant airlines globally in terms market capitalization. Qantas was founded in
1919 by Paul McGuiness and William Hudson. The company was later registered in 1920 in

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Brisbane and started its operations with a capital of $12,074. The first chairman of Qantas
was Fergusson McMaster. Today Qantas is still under operation under the leadership of
Chairman Richard Barr Goyder and CEO Alan Joseph Joyce. Currently Qantas has 5,249,569
outstanding shares, with each share trading at approximately $6.3 in the stock exchange
(Qantas, 2019).
According to 2017, 2018 and 2019 annual report, Qantas reported positive financial
performance. Qantas posted a net income of $891 million in 2019 which was lower compared
to a net income of $980 million in 2018. Moreover, the company recorded $1.3 billion profit
before tax, which was a 17% reduction compared to 2018. The comparative financial
performance for Qantas can be broken as follows.
a) Net debt
Qantas' net debt had decreased since 2014 financial year when it stood at $7.3 billion.
The company recorded net debts of $6.4 billion in 2015, $5.6 billion in 2016, $5.2 billion in
2017, $4.9 billion in 2018, and $4.7 billion in 2019. The company has been relying more on
shareholders’ capital to finance its operations and investment. A decrease in net debt shows a
strong balance sheet and enhanced financial flexibility (Qantas, 2019).
b) Return on Invested Capital
Return on Invested Capital evaluates a company’s financial return. Qantas considers
ROIC of 10 percent to be greater than its pre-tax WACC. Qantas recorded ROIC of 20.1%,
21.4%, and 18.4% in 2017, 2018, and 2019 respectively. Qantas has recorded a consistent
ROIC performance, which is above the recommended 10 percent.
c) Net Free Cashflow

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Net Free Cash Flow is defined as cash realised from operating activities less cash
invested in such activities. Qantas recorded $1,309 million, $1,442 million and $1,244
million in 2017, 2018, and 2019 respectively.
d) Shareholder returns
With the strength of the balance sheet and reduction of net debt, Qantas paid $3.6
billion to the stakeholders. However, shareholder returns reduced by 28% compared to 2017.
The dividend per share was higher in 2019 compared to the last two financial years. Dividend
per share was 14 cents, 17 cents, and 25 cents in 2017, 2018, and 2019 respectively. Lastly,
earning per share also improved over the three years. Earning per share was 46 cents, 54
cents, and 55 cents per share in 2017, 2018, and 2019, respectively (Qantas, 2019).
Lastly, Qantas was profitable in its five segments. Qantas International segment has
been consistent in its profitability level from the time Alan Joyce took over as the CEO.
However, the company’s profitability level was hindered by high prices of fuel.
v. Principles of sustainability reporting according to the GRI) guidelines
GRI guidelines provide four principles for sustainability reporting. The laws are
stakeholder inclusiveness, sustainability context, materiality, and completeness (Cohen,
2017). The four principles are elaborated as shown in the table below.
Principles Explanation
Stakeholder
inclusiveness
A sustainability report should identify company stakeholders
and explain how their interests and expectation has been
addressed. The GRI guidelines give examples of stakeholders
like employees, shareholders, local community, suppliers,
creditors, NGOs, government and civil societies among others.
Sustainability context Sustainability reporting must follow a broader context of
disclosing organizational performance. The report should be

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elaborative in addressing how the company contributed and
plan to contribute to the future wellbeing og the society. The
report should address how the company addresses the
economic, social, and environmental issues caused by its
activities at all levels (Delloite, 2018).
Materiality GRI guideline states that sustainability reports should only
cover information that significantly important in reflecting a
company’s economic, social and environmental effects. The
information covered in the report is considered essential when it
can influence stakeholders’ decisions. Several factors are
considered when determining the materiality of topics to be
included in the sustainability report. Some of the factors include
shareholders’ expectations and interests, reasonable estimations,
current and future challenges facing the company/ sector, laws,
agreements and regulations, and organizational strategies,
values, and policies (paiaconsulting, 2019).
Completeness A sustainability report is considered to be complete if it covers
the material topics; the topics have boundary and are time-
bound as well. Boundaries of a topic describe where the impact
occurs and how the company is involved in the occurrence of
the material topic. On the other hand, time refers to when the
effect on the material topic occurred.
vi. Application of principles of sustainability reporting in Qantas sustainability report 2019
a) Stakeholder inclusiveness/ engagement
Qantas is committed to maintaining continuous communication with the stakeholders.
Stakeholders are people who feel the economic, social and environmental impact of
company’s practices. Qantas’ stakeholders comprise of employees, shareholders,
government, suppliers, community, trade unions, customers and investors. Firstly, the
company has employed over 33,000 people. 93% of the employees come from Australia.

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Active engagement of the employees is key to Qantas' success. Secondly, Qantas ensures
compliance with the disclosure obligation to its shareholders during Annual General
Meetings (Qantas Airline Ltd., 2018). The company also makes communication with its
shareholders through its website and registered emails. Thirdly, Qantas maintains good
relationship with the government by maintaining high level of ethics and complying with the
laws. Fourthly, Qantas maintains effective communication with its suppliers using supplier
relationship management program. Fifthly, the company engages in interactive
communication with its investors through results briefings, conferences, and roadshows.
Sixthly, Qantas engage trade unions through negotiations and consultations. Seventhly, the
company engages its customers through social media platforms such as Twitter, YouTube,
online forums and Facebook. Qantas also responds to customers' queries as well as producing
frequent flyers for customers to read. Eighthly, Qantas is committed to improving welfare of
the community through partnerships and engaging in philanthropic activities. The company
participates in frequent meetings with the community to find ways of reducing noise
pollution (Qantas Airline Ltd., 2018).
b) Economic/ Financial issues
Qantas' vision is to build a viable, healthy and sustainable financial performance and
returns to shareholders. The company’s financial strategy is based on long term profitability,
disciplined capital management, prudent investment, and financial risk management. The
four aspects form the material areas for addressing the economic factor of sustainability
reporting. Qantas has also put in place governance practices that promote healthy financial
operations. First, audit committee helps to maintain integrity of financial reporting. The
committee also ensures compliance with regulatory and legal obligations. Secondly, the
company’s CFO is committed to addressing corporate and economic issues associated with

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CSR. Thirdly, Qantas’ finance policy outlines the responsibilities and requirements for
financial control, governance, and reporting. The company is committed to adhering to ASX
Laws and regulations as well as showing its true and fair financial position. Lastly, the
company is committed to product excellence and cost efficiency as a way to keep the cost of
low service, even with the rise in fuel prices (Qantas Airline Ltd., 2018).
c) Safety and health
Qantas has put in place several strategies to promote safety and health and its facilities.
First, safety management system has ensured efficiency and simplified safety management
oversight and process. Secondly, the implementation of the risk management framework has
enhanced the reduction of risks across Qantas. Thirdly, Qantas enjoys improved behaviour
and culture towards safety issues. Lastly, the company engaged in constructive and robust
relationships with different stakeholders to enhance workplace safety. Qantas has also
established several committees entitled to promoting safety and health across its premises.
The Safety, Health, Environment and Security Committee helps the company’s board to
monitor the operational safety system. The audit committee monitors the effectiveness of
Qantas’ internal control framework. The Airline safety committee is responsible for safe
operations. Lastly, the Safety and Health Committee provides independent advice on the
company’s safety and health operations (Qantas Airline Ltd., 2018).
d) Environmental factors
Qantas' ecological strategy is based on four elements. First, engaging in continuous
improvement of its environmental efficiency. Second, the company has adopted innovative
ways of managing fuel and carbon emissions. Third, promoting environmental values as a wa
of strengthening the belief in company’s brand. And fourth, Qantas encourages global

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environmental regulators to achieve a sustainable carbon compliance level. The critical
material focus areas that are addressed in Qantas’ environmental factors include management
of its greenhouse emissions, control of water and electricity resources, reducing noise impact
and environmental engagement. Qantas has improved in its fuel efficiency. Fuel consumption
decreased by 1.5% in 2019 compared to 2018. On the other hand, emmision of greenhouse
gases reduced by 50% in 2019 compared to 2018. Electricity usage reduced by 9.8 % in 2019
compared to the targeted 10%. Water usage reduced 5.3% in 2019 compared to the aimed
10%. Lastly, the amount of waste emitted by the comp[any reduced by 19.7% in 2019 against
the targetted 20% (Qantas Airline Ltd., 2018).
e) Social factor/ community
Qantas is committed to promoting the wellbeing of the community where it operates.
The company seeks to form a partnership with communities through improving lives,
building social amenities, and recreational centres to promote quality living. Qantas' social
strategy is based on material focus areas such as becoming the spirit of arts, sports, award,
reconciliation, and people in the community (Qantas Airline Ltd., 2018).
Conclusion
The report was intended to create an understanding of sustainability reporting as a
strategy for promoting CSR. The study has shown that company engages in CSR because of
economic benefits or social pressure. Sustainability reporting refers to a branch of financial
accounting that disclosure information on non-financial performance of an entity to the
stakeholders. Sustainability reporting provides a holistic concept of disclosing the
environmental, economic and social impact of business activities to its stakeholders. Qantas
Airlines Limited has adopted sustainability reporting to reveal the aspect of environmental,

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social, and economics which significantly influence its performance. Qantas sustainability
report shows its contribution to economic, social and environmental improvement at the
community, country, and international levels. The three aspects of contributions have
enhanced Qantas brand image and financial performance in the market. The success of
Qantas CSR can be proved based on its financial performance over the last five years.
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