International Business

United Airlines’ Disgrace: It’s Sustainability, Stupid

I hope CEO Oscar Munoz reads this before United Airlines shoots itself out of the sky.  Just two weeks after his company earned bad PR for banning two women because they wore leggings, United is again the poster child for bad behavior thanks to the April 9th debacle on Flight 3411.   After his initial legalistic and tone-deaf response to the video of a bloodied customer being forcibly dragged off Flight 3411, what Munoz needs is not just a new PR strategy.  He needs a comprehensive sustainability strategy integrated throughout the company.   If United already practiced sound sustainability management, this week’s scandal probably would not have happened.   Why?  Because sustainability is a management discipline that proactively helps a company manage its environmental, social, and governance (ESG) risks.  The point of integrating sustainability into core strategy is to prevent unmanaged ES or G issues from damaging corporate value.   The United scandal falls into both the “S” and the “G” categories – it’s both a social disaster and a sign of poor corporate governance.  And it’s a sustainability issue because it strikes at the heart of United’s ability to build and sustain value for shareholders.  Today, at the market’s close, United stock had dropped 1.2% in value with a loss of $300 million from its market capitalization.  Can United restore the lost value?  Maybe.   Until the next unmanaged ESG crisis sends shareholders on another rollercoaster.   It’s sustainability, stupid.   Or more accurately, it’s a lack of sustainability strategy.   Even more interesting, at this point it appears that United’s actions complied with law.  Airlines have discretion to remove customers they deem to be “disruptive” so from the standpoint of regulatory compliance, United may be doing just fine.  No red flags from the compliance department.   But, in fact, United is now the newest poster child for a company that likely complied with laws and regulations but damaged its social license to operate.  Companies with robust, integrated, comprehensive sustainability strategies go beyond compliance with law.  They proactively review policies and procedures, seeking those practices that might be legal but would nonetheless cause reputational damage and harm corporate value.   Every company should have a sustainability strategy and every investor should be asking about it.  It’s just good business.

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