Sustainable business growth requires the Company to address its environmental impact, both globally and locally. As part of this effort, Icelandair Group participates in the work of various environmental working groups, such as with the International Air Transport Association (IATA) and Airlines for Europe (A4E). Furthermore, Icelandair Group participates in the incentive project of Responsible Tourism in Iceland along with over 300 companies, with the purpose of maintaining Iceland’s status as an optimal future destination for tourists by supporting sustainability for future generations.

Icelandair adheres to the goals IATA has set to address the global challenge of climate change and monitors accordingly fuel efficiency and CO2 emissions from flight and ground operations. To achieve the goals Icelandair has set targets for reducing emissions to 2025.

Icelandair Group grew tremendously over the past decade. The increase in the number of passengers and amount of cargo, the constant growth of the route network, as well as the expansion of the Company’s fleet are all factors that affect and increase the total emissions. However, in 2020 the Company was heavily impacted by the global pandemic, like the airline and tourism industries as a whole. As travel restrictions were put in place around the world, travel demand almost dropped completely and Icelandair Group's route network was consequently drastically reduced. A large part of Icelandair Group's fleet was put in storage as a result. Evidently, the total emissions for the year 2020 dropped significantly compared to previous years. The Company, however, focused on meeting demand for cargo transport, protecting important export from Iceland and importing necessities to the country. All available cargo space in the passenger aircraft was utilised and additional flights set up with special cargo aircraft. In addition, the interior was removed from six passenger aircraft to participate in transporting medical equipment from China to Europe and North America. The Company also took on special projects in assisting stranded passengers all around the world through its leasing operations, Loftleidir Icelandic. The total emissions from aviation in 2020 were 346,397 tCO2e, a reduction of 74% compared to the previous year.

The key metric that is used to monitor environmental impact is CO2 per Operational ton kilometer (OTK). The OTK metric displays how much CO2 is emitted by moving one payload ton one kilometer.

Lower average payload during the year is the reason why the OTK metric is higher than the years before even though total CO2 emissions are significantly lower. In addition, the continued suspension of the Boeing 737-MAX aircraft, which are more fuel-efficient than Icelandair's current fleet, also have an impact throughout the year.

Ground operations generate some carbon emissions and the emissions from Ground vehicles in 2020 are 813 tCO2e, a reduction of 51% from 2019 which is fully explained by the effects of Covid-19. This number includes data from around 130 cars, vehicles and equipment directly linked to the airport. It does not include company cars. Icelandair Group aims to renew the equipment fleets with electrified equipment when current equipment completes its service life so not to waste fully functional equipment and by those measures aim to reduce CO2 emissions by 40% before 2025.

The Company’s goal is to maximise the use of renewable energy in all aspects of its operations where it is possible to use alternatives, and actively observe progress in the development of alternative aviation fuels.

Icelandair participates in programs that explore development of alternative fuels and electric airplanes, NISA and NEA. There are significant reasons why Icelandair Group should be an early adopter of electrification in aviation as the expected range for these aircraft will fit Iceland's domestic flights perfectly and will provide a cost-effective, environmentally friendly and convenient transport between parts of the country. It fits well with Iceland’s well-established green energy narrative.

NISA is an active Nordic association working to promote and develop a more sustainable aviation industry, with a specific focus on alternative sustainable fuels for the aviation sector.

NEA (The Nordic Network for Electric Aviation) is a platform where Nordic actors come together to accelerate the introduction of electric aviation in the Nordic countries.

Since the beginning of 2012 all airlines offering European destinations have been required to comply with the EU Emissions Trading Scheme (ETS), which commits them to raise their carbon permits in proportion to their emissions of carbon. To address the increase in emission as of 2020 the International Civil Aviation Organization (ICAO) has decided to implement the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA). Icelandair is participating in CORSIA by monitoring emissions, starting in 2020 (might be reconsidered due to effects of Covid-19).

Icelandair Group's goal is to minimise waste and increase recycling in all operations where restrictions by laws and regulations do not restrict waste separation.

Total amount of waste generated by Icelandair Group was around 2,450 tonnes 2019, very similar to previous years. The geographical location of operations and the legal environment must be considered as in some cases these factors may restrict waste separation, as cabin waste is subject to national waste management controls that are strict to protect agricultural sectors. That means that all cabin waste that has come in contact with or is made from animal products must be incinerated. Approximately 9% of all waste was incinerated in 2019.

The events of the year and the decrease in travel demand have had the side effects that the amount of waste generated from the Company is considerably less than in previous years, just about 20% of the amount in a normal operating year, the biggest impact there is the decrease in operations in the Catering Kitchen at Keflavik Airport and the services on board were minimised to limit contact between passengers and crew members. To respond to the situation, the Company has, in co-operation with its waste service provider, changed the frequency of the waste collection to eliminate unneccesary trips with empty waste containers.

Icelandair Group has initiated various projects to improve waste recycling within the Company with good success. As can be seen 76% of waste from GSE is recycled, that is mostly used oils and metal parts. Waste from the hangar in Keflavík includes very much timber and metals and 52% of waste goes into recycling streams.

Aircraft noise is a significant part of the environmental issues associated with aviation, impacting communities and habitats in the vicinity of airports. This noise is mainly caused by engines but also aerodynamic noise. Requirements have been set by the International Civil Aviation Organization (ICAO) and the European Union Safety Association (EASA) to minimize the effect caused to the surrounding. Icelandair complies with these limitation and guidelines and Icelandair's fleet is in the progress of being modernized with newer airplanes that create less noise than older models. Procedures have been adapted to reduce environmental effect and close cooperation with local communities has had a positive impact in reducing noise pollution. With almost no air traffic in 2020 noise pollution was not a significant environmental issue to monitor during the year.

Icelandair and Air Iceland Connect have offered passengers the option to offset the carbon footprint of their air travel since September 2019 and contributions from passengers in 2019 funded planting for approximately 5500 trees. Even though the year 2020 has been extraordinary, passengers are still participating in the compensation of their carbon footprint and have contributed to the planting of around 5000 trees during the year. The carbon offset program was devised in co-operation with Klappir Green Solutions and Kolvidur – the Iceland Carbon Fund to cultivate forests in Iceland.

From 2020 Icelandair will offset all employee business travel.