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Picking the fit for sustainability

AUTHOR: Editor   DATE: 01.09.05   ISSUE 2, 2005

Companies that are serious about long-term profitably must worry about all their stakeholders. “If they don’t, their profitability will not be sustainable it will come back to haunt them,” he warns.

Clearly, the headline benefits from a well-aligned CSR approach community investment strategy are in better community reputation and response.

Sustained profitability comes from creating very happy customers and employees, Hawker insists, and one of the great tasks of management today is finding ways to create passionate people.

Michael Hawker outlined his views on corporate sustainability in a speech in the Lifelong Learning series at AGSM in July. In three and a half years running the insurance group, Hawker’s focus has been on corporate social responsibility developing an internal culture that , generates mutually beneficial outcomes for the organisation and the community by addressing the needs of both.

No supporter of corporate philanthropy for its own sake – or generosity motivated purely to make the company look good or to create the right spin, – Hawker believes an well-defined and effective sustainable CSR community investment effort defines and addresses issues of importance to both the community and the companyidentifies and addresses issues that impact on both the company and the wider community.

Picking the right focus for sustainable efforts not only allows the company to enjoy success into the future, but also means it will be able to continue making its contribution to the community for the long term haul because, in a properly aligned sustainable project, company support and funding doesn’t dip out when corporate executives change, Hawker points out.This happens by understanding the care purpose of a company (ie. the underlying benefit a the company provides to its customers) and then helps the company align supporting its community activities within that purpose. This alignment facilitates the sustainability of these community activities means the support of the community activities becomes truly sustainable. – which is necessary to the community recipient.

For example in IAG’s case, one of our core purposes of IAG, is to help reduce risk for the community, and the company’s. Therefore ongoing our work with St John Ambulance and the CareFlight helicopter are totally aligned with this purpose.

Clearly, the headline benefits from a well-aligned CSR approach community investment strategy are in better community reputation and response.

Within IAG, some of the real benefits seen so far have been reduced costs through better practices, more of “the right people” joining the company and greater employee engagement, a vital factor as “passionate employees deliver better customer outcomes and happier customers,” says Hawker.

While IAG is the leading general insurance group in Australia and New Zealand, best known for its retail brands NRMA Insurance, CGU, SGIO, SGIC State Insurance and NZI, the challenge of making employees passionate about coming to work and what they do is always pressing in an insurance company, Hawkerhe says. “How do you get people to come into your organiszation and differentiate it from competitors? How do you get people in a call centre to give a different level of response when you are just another insurance company?”

Upfront corporate values play an important role in setting the standard for who comes and goes in an organiszation, but the framework for keeping employees engaged – a sustainable approach – is found in what the organisation actually does and the way it connects with the broader community.

Explained in simple terms: the role of an insurance company is to pay claims. As Hawker put it neatly, “people give us money, so we can give it back to them when they need it.” IAG insures over $800 billion worth of property assets and pays out $4 billion in claims every year. Backing this is a complex process of risk evaluation, pricing and product management to deliver an outcome that meets the customers’ expectations – to have those claims paid – and to provide ongoing profitability to the company. Profitability is in particularly sharp focus in the insurance industry in the wake of the HIH corporate collapse.

Sustainability in practice

IAG has identified four clear areas that have a big impact on profitability – the four top drivers of claims cost – and continues to explore ways the company can contribute to reducing risk in these, thereby making a significant difference to both the company’s bottom line and to the community at large.

Reducing the environmental footprint
When first in the Chief Executive’s role, Hawker recalls sitting in a company service centre and seeing a summer storm passed across Sydney. Longer serving executives shook their heads, he says, exclaiming “there goes $5 million.” A series of major environmental events, including huges storms in New Zealand and Melbourne and the Canberra bushfires, subsequently followed.

There’s a direct correlation between global warming and the changing weather patterns that have increased the ferocity of storms, and increased the risk of flooding and bushfires. This realisation has prompted IAG to commit to reduce its environmental footprint with a company-wide policy that includes:

• Green awareness campaigns among suppliers and customers;
• Recycling and paper saving;
• Energy efficiency through a commitment to purchase 11.5% of electricity as Greenpower - electricity purchased from accredited clean renewable sources;
• The introduction of a fleet of fuel-efficient hybrid company vehicles;
• A 5-star green fitout in new corporate offices in Adelaide;
• Reducing landfill by encouraging the remodelling of bumper bars.

The company is also committed to encouraging its supply chain to adopt ‘green’ practices.

Improving workplace safety
Hawker himself took on the role of Chief Safety Officer for IAG, a company that provides workplace safety expertise along with nd provides workers’ compensation insurance. Initially, hHis attentions initially turned to internal safety issues within the company after learning the insurance company’s safety record compared less than favourably with organisationscompanies in the high risk mining sector.

He determined to turn that around by creating a working environment that is not only safer, but with a spin-off positive effect of people overtly caring for others.

IAG became the first corporate sponsor for St.John’s Ambulance Australia and to date hasve had almost 15% had 9,500 of employees accept the company’stake the company up on its offer to put them through a first aid course. with some instances of lifesaving results.

The insurance group has reduced the premiums it pays on workers compensation policies and made a $2.5 million improvement to the bottom line.

Crime reduction
The frightening impact of crime on individuals is matched by the impact it has on insurance claims, suggests Hawker.

IAG is working with police and local government in a range of theft reduction initiatives; from the simple act of putting a boom-gate on a car park in Shellharbour to assisting with unemployment in Dubbo, and tackling car re-birthing crime rackets involving the shipping of thousands of stolen cars annually.

The company also supports a youth/police mentoring program.

Road safety
One of the major causes of trauma for IAG customers is being involved in a car crash. As a company that repairs 600,000 motor cars a year, one of IAG’s services is in identifying black spots where large numbers of motor accidents occur.

Among other sustainable initiatives, IAG as an injury insurer is funding a study aimed at finding ways to reduce the response time to deliver medical care to the head injured. Severe head injury is the most common cause of death from accidents for people aged under 40 and a leading cause of disability in the Australian community.
A matter of minutes in delay in receiving medical treatment can worsen the prognosis by 80 percent, Hawker reports.

Fostering understanding

The success of a sustainable strategy may be in a company’s ability to tap into activities that are relevant to the nature of its business, Hawker believes, although an important part of the success is also in making sure the right people are employed for the right reason, “ensuring people understand what you are on about and in finding ways to involve the people who work for you”. At IAG, he landed “on fertile ground” as a number of the companies within the group, now with more than 12,000 employees, were already were tuned into helping others.

There is no right or wrong answer to what percentage of after-tax profit companies should allocate to sustainability, and return on investment is not easy to analyse, admits Hawker who has helped to launch a voluntary Corporate Sustainability Code in Australia.

A range of measurement tools is are used by IAG to track its performance including employee and stakeholder surveys, along with customer satisfaction and external rating systems such as the Corporate Responsibility Index and the Dow Jones Global Sustainability Index.

The task of spreading the word about a company’s sustainability strategy also needs to be handled with care.

Beyond establishing good feedback mechanisms into the organiszation, attention needs to be paid to the alignment of middle management in culture change, Hawker emphasises. Driving the change agenda of IAG has been the establishment of a Sustainability Change Team made up of ‘sustainability champions.’

While companies may want to communicate sustainable initiatives to their own people and customers, advertising them to the public is inadvisable, in Hawker’s opinion. “It’s better if others say ‘these people are doing a good job’. And that happens, he says. “You don’t need to seek it.”