Profile

BAA is the world's largest commercial operator of airports, owning and operating seven in the UK - Heathrow, Gatwick, Stansted, Glasgow, Edinburgh, Aberdeen and Southampton - and part owning and/or managing eight in the USA, Australia and Europe. More than 178 million passengers use these airports every year, including 112 million in the UK. Until 1987, the company was the British Airports Authority, a publicly-owned corporation.

The business

The business is growing rapidly, with revenue up nearly 20% in the year to March 31, 1999, to over £2 billion. Pre-tax profits were £516 million. Of the 12,700 employees, 9,700 are in the UK. Income from airport and other traffic charges now generates only a quarter of BAA's total, with retail accounting for half. This commercial reality underpins BAA's understanding of who its customers are: clearly they are the airline companies paying landing fees, but BAA also looks beyond these to the ultimate customers, the individual passengers who fly and shop.

Demand for air travel in the UK is growing at 4-5% a year, with projections of a doubling in demand in the south east over next 20 years. So BAA is investing heavily in physical infrastructure, with construction at Stansted to double capacity, expansion at Gatwick to handle growth from 29 million to 40 million passengers a year and a huge and expensive effort to secure planning permission for a fifth terminal at Heathrow.

BAA is increasingly looking beyond the boundary of the airport and getting involved in transport schemes such as Heathrow Express, the new rail link from central London funded by BAA at a cost of £450 million If growth is to be sustainable, BAA cannot rely on existing infrastructure nor on public authorities alone to finance improvements. The company has established Transport Forums at each of its London airports to focus on public transport provision which bring together all the key players from providers to community to public authorities.

Licence to operate

Securing consent for this increase in capacity in the south east is critical to BAA's prospects as a growing commercial enterprise. Yet the days when central government owned the infrastructure and effectively controlled the whole planning process are long gone. It is not just that BAA is in the private sector - the nature of society has changed, deferential attitudes have gone and government is very vulnerable to pressure from well organised and articulate citizens' groups.

Previously, consent - the licence to operate - was largely a legal process, both for planning permission and for regulatory approval (the core business at Heathrow, Gatwick and Stansted is subject to regulation by the Civil Aviation Authority because of the monopoly nature of supply).

Now 'consent' must encompass broader community approval and this thinking has transformed the company's whole management approach. The marathon Terminal 5 public inquiry was a catalyst for this change in thinking. It closed in March 1999 after four years, and even now the final decision will not come until the inspector reports to the secretary of state in 18 months to two years time.

The change was formalised earlier this year, when a new key element was added to the company mission statement. In setting out to be "the most successful airport group in the world", the new added element "growing with the support and trust of our neighbours" is regarded as an essential internal driver in achieving the mission.

This is reflected in reporting: previously BAA accounted for financial performance through a traditional set of annual accounts, with a separate community relations report and environment report. In 1999, a combined Towards Sustainability report on BAA's environmental, social and economic performance, was published on the same day as the Annual Report as part of a single reporting concept.

Sustainability

Outgoing chief executive, Sir John Egan, has defined his vision for BAA as "a company whose actions do not leave to future generations a poorer world; a progressive company whose business goals are met in partnership with all its stakeholders, not at the expense of some;.... in other words, a company.... balancing environmental, social and economic factors in its decision-making and reflecting these priorities in its objectives, targets, key performance indicators and service level agreements".

Quite a commitment for any company to make, still less one in such a public position and subject to such competing forces from stakeholders: for ease of travel, for economic growth, for safety - and for peace and quiet. Yet that is precisely why the stakeholder approach is needed. As Sir John said recently "to deny that our neighbours have a genuine stake in the company is to deny not only the reality of their lives but also their ability to obstruct, delay and even stop the growth of our airports".

The new commitments centre around a ten point 'contract with the community' (see box 1) and a five point management action plan on sustainable development (see box 2). Management already uses performance indicators and benchmarking to drive continuous improvement and this approach is being extended to the commitment to sustainability and to reporting. On the environment, targets and performance are already well developed, with details published and an external verification statement. But on the social side, the process is still in its infancy, with appropriate standards, performance targets and benchmarks being investigated and consulted upon.

Mike Hodgkinson, BAA's new chief executive with effect from October, was part of the top management team which committed to the new thrust, so the continuation of the approach is assured.

Community programme

The shift towards a sustainability / stakeholder approach was driven by operational realities and a realisation of the limitations of a traditional community relations programme, however well managed. For example, despite the good work in community relations over many years, all the local authorities in the Heathrow area opposed Terminal 5 during the enquiry. A more fundamental approach was needed to demonstrate the full range of ways in which the impact of the business on communities around the airports is subject to a process of continuous improvement and where the community benefits are maximised.

For the future, the social sustainability agenda will focus on these aspects:

communities, not just in terms of contributions but including dialogue and consultation;

the workforce, covering health and safety, equal opportunity, training and local recruitment;

local economy, optimising the contribution which the airport can make.

The community support programme has three priority areas:

helping groups nurture the physical environment beyond the airports themselves;

assisting projects which help in the educational and personal development of young people, including the disadvantaged;

helping develop employment opportunities for local people.

The total community contribution in 1998/99 was valued at almost œ1.65 million, around half coming from the company, which is the majority funder of the separately constituted BAA 21st Century Communities Trust, and the balance made up of smaller contributions at local level by individual airports, some long standing corporate covenants and matching of employees' Give As You Earn contributions. In addition, noise fines, which are levied by BAA when aircraft operators breach agreed noise and track keeping procedures, are contributed directly back to community causes, effectively acknowledging who has suffered the nuisance.

Staff involvement is an important facet of the programme, making a real contribution while benefiting the business. In addition to skills' development, it is seen explicitly as a way to expose employees to the way the communities outside the airports see the company.

Major projects

Projects for education and young people include a broad range of activities to help school leadership and management - making places available for headteachers on the internal leadership programme Sharing the Vision, training seminars for heads and governors, encouraging staff to become mentors, linking managers with schools through twinning, offering work experience and providing volunteers to help with reading skills. Among community partners are Common Purpose, Young Enterprise, Young Engineers, The London Leadership Centre and the IoD HUB business awareness initiative.

In another flagship youth project, the company has created the BAA Millennium Youth Games, a three year programme climaxing in 2000. Some 300,000 young people are involved in local games and the national grand final. BAA's investment is œ1.8 million over three years. The BAA Millennium Youth Games is a joint venture with Sport England and the local authorities across the UK. They are aimed at encouraging participation by young people, especially those who have felt sport was not for them, rather than the elite performers.

Environmental sustainability

In the community programme, environmental projects include major support for a project to green the corridor into West London with Groundwork Foundation. Another is a training programme on energy management for SMEs in East London and the Stansted area, again with Groundwork, plus local TECs and European money.

In order to achieve the aim of sustainability BAA has recognised the need to combine the community programme with mainstream business action and wider factors such as enhancing transport connections. As an illustration of the issues, only one in three passengers arrive at the south east airports by public transport and over three quarters of staff currently travel to work by car. Whilst these ratios are better than most other airports, BAA is targeting measures to improve them significantly, with Heathrow looking at passenger use of public transport rising to 50 % and Gatwick moving to 40% in the next stage of development.

BAA's overall aim is to minimise the impact of its business activities on the environment. Five priority areas have been established on the basis of feedback from stakeholders through consultative committees, opinion surveys and an analysis of Government strategy and objectives. These are:

noise

climate change

local air quality

surface transport

waste

Performance has shown improvement recently. In 1998/99, passenger numbers grew by 15%, but water consumed was cut by 4%, energy by 5% and waste sent to landfill by 4%. Total carbon dioxide emissions were down 9%. However, the company recognises that it must achieve a step change in environmental performance in order to deliver its business mission and is in the process of establishing a set of five year challenging corporate environmental objectives which align to the government's agenda for sustainable development.

Managing relations

At local level, each airport has a team charged with the local community relations programme. They are part of the management team, reporting to the airport director of public affairs. At corporate centre, Chris Hoare is the community relations director, responsible for strategy and corporate projects. He reports to Des Wilson, director of corporate and public affairs for the company.

Chris has been community relations director for three and a half years, having spent more than 30 years with the company, in functions as diverse as planning, retailing and airport management overseas. He has personal responsibility for developing the Contract with the Community concept throughout the company. His approach has been to introduce a change of culture in the company so that everyone has a clear idea of the issues and of their crucial importance. Obtaining general buy-in to the change to the mission statement was a key part of the process. Now realigning the strategic and business planning processes will ensure that community impact and community development activity are central to the way BAA does business on a permanent basis.

Environmental objectives are at the core of Contract with the Community and these are overseen by Richard Everitt, director of strategy and compliance , with responsibility at BAA board level for environment and related issues. In addition, each of the priority environmental issues, as with the social issues, has an executive level champion, with functional support strategies to fulfil the new sustainability mission in their own areas. The environmental management structure is similar to that within community relations, with each airport having an environmental manager and at the corporate centre a head of group environment. The process of reporting, communicating and developing the strategy is shared between Chris Hoare and Kathryn Barker, head of group environment.

They work with two committees of senior executives from the different business units and from corporate functions. One is specifically for HSE and the other for the 'Contract with the Community'. In addition, the BAA 21st Century Communities Trust is governed by a board subcommittee, comprising two non-executive directors, one executive director and two senior managers.

Way forward

Despite the boldness of the aspiration to be a stakeholder company, BAA acknowledges that accounting and reporting is very much work-in-process, especially on social impact. Having set objectives, the priorities now are to assess the baseline position and to improve performance, staying in dialogue with stakeholders.

On the community relations programme itself, the aim is increasingly to focus the effort where it can have most impact - and that implies evaluating the results achieved, not just the contribution made. One aspiration is to achieve an impact greater than the specific projects, by offering BAA's experience to others for replication.

This particularly applies to head teacher training in the education programme. Likewise on the environmental the aim is to align individual activities and projects into local strategies such as local Agenda 21.

On employment and training, many jobs will become available in construction on new facilities and then in the airlines, retailers and other businesses within the airports. The challenge is to maximise the numbers of people from the local communities taking up the jobs, and increasing the success rate of local companies winning airport business. Once suitable performance measures are devised, the results should become clear - demonstrating the full range of impacts BAA has, positive and negative. For BAA, the stakeholder approach is essential to achieving the business goals. But none of this absolves senior managers from sometimes making hard choices between stakeholders, balancing short term pain and long term gain. At least with systematic measuring and reporting, they will now have the information on which to base their judgements.

Box 1

Contract with the Community

We will:

1. Work towards making best use of existing airport infrastructure by realising the capacity of the four runways serving our London airports. To this end, we are bringing forward terminal development proposals at all our airports.

As part of our 'Contract with the Community', we have asked the government to rule out another runway at Heathrow.

2. Produce growth strategies for each airport integrating business objectives with environmental management, planning and community relations.

3. Listen to and understand the concerns of local communities and other stakeholders, and develop practical programmes of action to address them.

4. Improve our environmental performance through our management systems, corporate objectives, targets, KPIs and service level agreements.

5. Support and encourage environmental improvements by business partners through contracts, price signals and incentives.

6. Where we do not have direct influence, we will lobby for wider environmental improvements through bodies such as Airports Council International and the UN International Civil Aviation Organisation

7. Proactively engage in European Union and national government consultations on the sustainable development of the aviation industry.

8. Act as a responsible corporate citizen and employer.

9. Develop a stakeholder partnership approach to the decision-making process on major capacity and other issues affecting the wider community.

10. Think long-term.

Box 2

Framework for action on sustainable development

The BAA executive committee is collectively tasked with five actions in accordance with government policy on sustainable development.

- Use fewer resources in meeting people's needs for goods and services.

- Promote sustainable communities for people to live and work in by contributing to their needs.

- Manage and protect the environment avoiding harmful impacts through best practice and innovation.

- Send the right signals through prices, regulations and information to support environment and social objectives.

- Develop effective environmental and social standards worldwide.

Corporate Citizenship Briefing, issue no: 47 - August, 1999