How Hobart Airport leads on climate and sustainability

Garreth Hanley:
This is INTHEBLACK, a leadership, strategy, and business podcast, brought to you by CPA Australia.

Patrick Viljoen:
Welcome to CPA Australia's INTHEBLACK podcast. I'm Patrick Viljoen, sustainability lead at CPA Australia. Now, usually, we have conceptual conversations around sustainability, but today, we have a case study for you on how Hobart Airport integrates sustainability into their strategic plans. We're speaking with Kate Gillies CPA.

Kate is the chief financial and commercial officer at Hobart Airport. She has a range of experience including finance and treasury management, commercial analysis, business strategy, accounting, risk management, and stakeholder engagement. She has worked in the utilities industry for over 15 years in both infrastructure and retail businesses. Most recently, as the CFO of Aurora Energy, and prior to that, as the Deputy CFO of Hydro Tasmania. Kate has been with Hobart Airport since 2021.

Welcome to INTHEBLACK, Kate.

Kate Gillies:
Lovely to be here. Thank you.

Patrick Viljoen:
Now, Kate, just reflecting on a recent INTHEBLACK article that featured Hobart Airport, you made the point about embedding sustainability into everything you do. So [inaudible 00:01:31], I have a first question. If you can give us some background as to how you go about identifying sustainability risks and incorporating that as part of your business response at the airport.

Kate Gillies:
Yeah, sure. We've worked really hard on making sure that sustainability isn't just an afterthought, that it's actually the core of what we do and how we make decisions as well. And when we consider sustainability, we think about it from a couple of perspectives, I suppose. We think about in terms of inspiring people and community, about being a trusted business partner, and being a sound environmental steward as well. And then, we think about some specific criteria that go around that, but we embed those criteria into all of the decisions that we make, so we put that lens over everything we do.

I suppose once we do that, we sort of have a couple of immediate or a lot of immediate climate-related risks. For example, the weather events that cause flight delays, more severe weather events that impact our operations such as lightning and electrical storms, increases in rainfall and flooding that impact our assets and changes in wildlife patterns. But then, we also have risks from changing expectations and behaviours of our partners and passengers in response to climate change and climate change mitigations.

Changing expectations around availability of infrastructure for electrification of vehicles is a big one. Access to sustainable aviation fuel and being able to meet that, how car rental partners, the types of vehicles they have at the airport. And then, the risk as well in terms of the consideration of passengers around wanting to minimise climate change impacts of flying too. So, it's sort of coming in a lot of different directions to us, which I think is why it's important that we're integrating sustainability into everything.

Patrick Viljoen:
I like that point you made about the global, more broad impacts of sustainability. So, just thinking about at Melbourne Airport, they were obviously contemplating building a third runway, and I think one of the key considerations for them as well was the impact on nature in as much as wildlife that would need to be moved away from that particular site. So, it's always good to hear that it's a well-rounded approach.

But maybe just reflecting on some of the physical risks from climate change. You mentioned storms and all these kinds of things that are happening in a more frequent fashion. But way of contingency planning, so when these things do happen, how do you actually maintain operational capability at the airport?

Kate Gillies:
Yeah. I think for us, I mean, obviously maintaining operations is a system-wide approach that requires airlines, ground handlers and the airports to all come to the party to manage those risks. For us, it's really making sure that we have the infrastructure available, that when we've built the right infrastructure to start with, that we've got the funding for that infrastructure, and then we have the risk mitigation around that as well. And then, it's everyone else bringing their own mitigation plans in there too.

Patrick Viljoen:
I can vividly remember I was flying into Canberra. When was it? Last year. We parked at the terminal building only to get told we can't get off the plane because of thunderstorms, so there was a bit of a risk in terms of you don't want people running across the tarmac and then getting hit by a lightning bolt. Yeah, it does impact sometimes.

But also in terms of the climate events that impact on the airport, and also I think from your response and as much as how you build resilience into your operations, thinking about concepts such as design, procurement, and then also the construction that goes into an airport terminal, how do you actually go about taking those functions along on this particular journey when you're contemplating your response to climate change?

Kate Gillies:
Yeah. I think the first thing is making sure it's core part of the decision-making process. In terms of the concept plans that we develop, in terms of the procurement plans, and in terms of the business cases, that sustainability is considered in all of those processes and there's an explicit mechanism to do that. It doesn't come as an afterthought. It's really integrated into the infrastructure that we build. I think we've thought about that a couple of different ways at Hobart airport.

I think one of the most obvious ones, the first order impact of climate change that you see across a lot of airports, because airports tend to be built in quite flat, low-lying areas, is the increase in flooding risk. What we're doing is making sure that when we build new infrastructure, that we take the latest flood modelling into consideration and build up some of our assets higher than we have in the past to mitigate that risk.

The other thing we're very conscious of is our impact on climate change too. We, at the moment, are at the very end of doing a major airfield upgrade. We describe it as a once-in-a-generation upgrade to our airfield. From that, we've had to mule off the top layer of the asphalt from our runway. It's about 27,000 tonnes of asphalt. We could have decided to send that straight to landfill, but what we actually did was we recycled it to use it in our car parks.

That's been a great environmental outcome, but it's also been a great financial outcome in that we haven't paid for the cost of disposal then the cost of new asphalt. We've actually had a saving from keeping all of that in the system as well.

Patrick Viljoen:
Yeah. I think that's actually quite an interesting point because that comes back to this whole concept of circularity, doesn't it? In as much as trying to reuse stuff that we would normally just chuck in the bin. That repurposing is actually quite a good point in as much as how do you creatively think about construction and make sure that you can reutilize quite a lot of what would normally just be discarded.

So, quite happy to hear that as well.

Just coming back in terms of your supply chain maybe. Obviously, the airport is only one part of a much bigger machine. Thinking about airlines for example, is there any insights that you can give us in terms of how you've partnered as an airport company perhaps with airlines to make sure that there's that end-to-end approach in terms of sustainability perhaps?

Kate Gillies:
Yeah. Look, I think we are working on it and we're always very keen to make sure we're working with our airline partners too. Probably, one of the best ways we're thinking about it comes back to the treatment of waste. I think it's just around making sure all the waste that's coming off the aircraft, and indeed the waste that's generated in our terminals isn't going straight to landfill.

We can appropriately segregate all of that material, and that requires everyone that's part of that value chain to do that, segregate the material, recycle it, reuse it, and compost it. So, composting is another one for us where we can too.

Patrick Viljoen:
Good. Now, I think we've spoken quite a lot about identification of risks and your proactive approaches to sustainability. And also, just alluding to what I said earlier on about circularity. But you are a CPA, so obviously, I just wanted to highlight the role of finance and commercial teams and how they need to add value back into sustainability. It's often set that accountants can save the planet. I don't particularly like that because it sort of negates the ecosystem that we operate in. So, we will play a very valued part, but we can't do this by ourselves.

But if you are reflecting in terms of the way that you've approached it from your finance team and your commercial teams and how you've harnessed that, could you perhaps explain to us why you think that finance and commercial teams are best placed to drive strategies and what kind of skills you can draw on from those teams to really drive success?

Kate Gillies:
Yeah, sure. Look, I think finance and commercial teams play a really important role in it, but everyone plays a really important role in it. And when you have everyone working together towards the same goals, I think is when you get kind of the best sustainability outcomes for an organisation. But specifically in terms of the finance team, I think one of the benefits that they have in driving this within a business is that they're often the first port of call that others within a business go to do things like get help with business cases, get help with procurement plans, get help with setting of KPIs.

Your finance teams, they are, traditionally, the home of the numbers. When they broaden that out to be the home of good business decisions, I think that's when they can play a really important role in integrating sustainability into the consideration of business outcomes, rather than just those traditional financial metrics in terms of profit and loss, balance sheet, funding, kind of impacts as well.

I think the other interesting thing about the role of the finance team in sustainability is with the introduction of the new Australian Sustainability Reporting Standards, in that finance is always the department where it has the processes and procedures designed to satisfy external reporting and audit. But now, we'll have a mandate to gather a much broader information around sustainability and climate change as well, and bring some of that rigour that we'd brought to financial reporting and financial analysis to sustainability. That has the potential to be a bit of a driver within the business as well.

Patrick Viljoen:
I think it's a very valid point to raise, because I usually talk about the classic disciplines within the profession. So, looking at things like financial reporting, which is where the standards would presumably sit because it's financial accountants that produce that information for users of information. And then, the second component to my mind is that audit and assurance function. Again, coming back to the requirements under the legislation, obviously you can't just produce information. That needs to go through that third party verification.

But one point you raised about the construction of business cases and the analysis of data, I'm a management accountant by trade. So when you spoke about how we partner with business, that really resonated with me because that's where management accountants actually play, is working quite close to the heartbeat of the organisation. It's about how do we get connectivity across all the three classical disciplines to make sure that information is done in a very robust fashion that can stand up to assurance in the end. Really interesting to hear how you are harnessing your team in that space.

But leading on to just another question perhaps. Obviously, we've got technical skills as accountants, we understand concepts such as judgement , scrutiny, how to engage with data, whether that's financial or non-financial data, and then also the creation of narratives. But within the sustainability space, obviously, we're talking about concepts that are based in science. And if we're thinking about things like transition plans, obviously, that needs to be backed by things like science-backed targets, but also the considerations in terms of how you craft your response might sit outside of our profession sometimes.

With that in mind, what advice would you have for our members in terms of partnering with other professions to make sure that we get a solution or a response that is really fit for purpose?

Kate Gillies:
Yeah. That's a really good question. I think from my perspective, like an airport, it's a really interesting environment to work with, and there's a lot of external people that you can partner with, a lot of external organisations that have an interaction with your asset. I think that's one of the first ports of call for our site people that are using our assets, what experiences have they had before, how can we leverage on things that have already been done before and worked well in other places.

We have a lot of access to expertise via our shareholders as well. It's very important for us that we meet sustainability standards, that our sources of funding require both our shareholders and our bank lenders. So often, there's the ability to draw an expertise in those particular areas too. And I think sometimes, there is the external perspective as well from consultants. As you said, sometimes these things are very specific, very technical and very scientific, and the skills just don't reside in smaller businesses as well. Working out when to go and get that external advice so you can have a robust response in the right data, like what you're talking about, is important too.

But I think the other observation around this is there is always this, and there always is with finance and accounting, and in particular, as you were saying, management accounting, the requirement to work with others to deliver good business outcomes. I think it's no different with sustainability. It's just broadened the range of people that we get the opportunity to work with to deliver great outcomes.

Patrick Viljoen:
Maybe just by way of a final question, and this is perhaps a two-pronged question. Over the next 10 years, if you cast your mind forward, what would you see as the biggest challenge for airports and for the airport industry that they would need to navigate? And maybe the second component to that question would be, in 10 years time, if you reflect on the progress that the Hobart Airport's made, what, for you, would be success and a good exemplar of what we should do?

Kate Gillies:
Yeah. They're two really good questions. I think the first one, the challenge for airports is playing our part in climate change mitigation. I think doing that is important, one, because we should do the right thing, and, two, because we need to do that so people still feel comfortable about flying and comfortable with their impact of flying as well. So, it's both a sort of a demand and a supply side approach that we need there.

I think for Hobart Airport, what is important for us is that we deliver on our sustainability objectives. We really do pride ourselves on doing the right thing, that we continue to do that, that we continue to be a really good gateway for Tasmania. Tasmania is known as a clean and green state, and two-thirds of all of the traffic that comes through airports into Tasmania comes through Hobart. So, it's important that we maintain that image for Tasmania, and we're a good gateway.

Patrick Viljoen:
I have to say, out of all of the states and territories, Tasmania is one of my favourites just in terms of how naturally stunningly beautiful it is down there, so really glad to hear that. Thank you, Kate, for sharing such compelling insights on Hobart Airport's proactive approach to sustainability and climate risks to ensure the operation of the airport now and also into the future.

Kate Gillies:
Thank you.

Patrick Viljoen:
For our listeners, eager to learn more, please check out the show notes for links to additional resources from Hobart Airport and CPA Australia, and don't forget to subscribe to INTHEBLACK and share this episode with your colleagues and friends in the business community. Until next time, thanks for listening.

Garreth Hanley:
To find out more about our other podcasts, check out the show notes for this episode. We hope you can join us again next time for another episode of INTHEBLACK.