Insurance Australia Group Limited (IAG)

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Our approach

The environmental risk that we find ourselves faced with is well documented. Weather risk and climate change is a significant risk for IAG as well as the broader community.

Our environmental sustainability strategy includes managing not only our impact on the environment, but also the impact of the environment and the changing climate on our business. Managing our own impact includes our ambition to become carbon neutral by 2012.

Increases in the severity and frequency of weather events represent significant risks to our business, our customers, and the communities we serve. So as an insurer, there is a very strong business case for IAG to take action on climate change.

All of these facts drive us to action, and there are three broad categories into which our action falls:

Managing our own carbon footprint

As well as being a responsible practice, reducing our impact on the environment contributes to our economic sustainability by reducing operating costs, for example though lower costs of electricity consumption.

We have committed to becoming carbon neutral by 2012 and are working towards this target through a range of measures, including:

Setting divisional CO₂e emission consumption reduction targets - our Australian, New Zealand and UK operations are measured for their progress against a target of 5% year on year reduction to 2012. For the first time this year our Thai businesses have established an environmental footprint and in subsequent years they will be part of the 5% year on year reduction target;
Educating our people on how they can help us achieve our target; and
Identifying initiatives to assist us to effectively manage and reduce consumption of carbon emitting resources. For example, we have focused on introducing five star, green star rated buildings to our property network when new buildings have been required and are encouraging a reduction in air travel through the promotion of leading edge video conferencing technology.

IAG must also meet regulatory requirements. The footprint of our scope 1 and 2 emissions in Australia means we may be captured by the National Greenhouse and Energy Reporting (NGER) Act in FY2011. Our ongoing reporting of our environmental footprint will ensure we are ready for this, with additional work also being undertaken to ensure we will meet the required standards of disclosure.

We remain committed to transparently monitoring and reporting CO2e emissions, and submit data annually to the Carbon Disclosure Project (CDP), which collects information on carbon use and distributes it to investors, corporations and governments.view IAG’s submission.

Working with our customers and communities

Insurers are part of the front-line response to natural catastrophes, so we are well placed to help the community after disaster strikes.

But it’s also important to help communities adapt, and become more resilient in a world in which severe weather events will become increasingly common. There is a clear benefit to both us as an insurer, through reduced claims costs, as well as to our customers and the community through less damage to their assets.

We do this in a variety of ways, including:

Understanding the risks (and opportunities) associated with weather risk and a changing climate;
Sharing information to assist in helping communities adapt to extreme weather and build adaptive capacity;
Forming partnerships to help us share information;
Assisting with emergency readiness and responses;
Engaging with government and policy makers on issues which affect community resilience, including under-insurance; and
Continually improving our internal process to ensure that we’re equipped to respond quickly to natural disasters.

We also encourage sustainable customer behaviours, for example by:

Offering products which promote sustainable behaviour, such as NRMA Insurance’s fuel efficient discount, and NZI products which offer discounts to customers who drive under 5,000 kilometres a year, provide an extra A$20,000 of building claims to install sustainable features when rebuilding after a total loss, and contents cover which enables customers to replace whitegoods with energy efficient equivalents;
Aligning products to increased severe weather risk, such as NRMA Insurance’s flood cover; and
Providing tools to help the community bring sustainability into their purchasing decisions, such as the Greensafe Car. Such tools provide useful tips and practical advice that allow a comparison between products based on sustainable features.

Working with and influencing Government IAG engages with different levels of Government and other key stakeholders on a broad range of climate related issues, including:

The need for a market based response to reduce Australia’s Greenhouse gasses in an economically efficient way;
Research into and action on building standards, to ensure new buildings in at risk areas are more resilient to extreme weather events;
Risk appropriate land use and zoning; and
Tax reform, to reduce the cost of insurance, thereby combating the issue of non-insurance and under-insurance and making the community more resilient after disaster strikes

IAG continues to be a signatory to the United Nations Environment Program Finance Initiative and a member of the World Business Council for Sustainable Development, as part of our commitment to environmental stewardship.

Our performance

Although this year we have not achieved our target of five percent year on year reductions in carbon emissions across the group, we are continuing along a journey. Since 2006, we have decreased our carbon emissions by over 30%. This included a big decrease of 12% from 2008 to 2009. What we have observed is that our reductions occur in step changes, rather than being equal from year to year.

Despite some significant consumption reductions, in Australia we have achieved only a small decrease of 2.3%* in emissions due to the adoption of different emissions factors for the conversion of our paper consumption into CO2 equivalent emissions. In our New Zealand business we have experienced a 4.3%* increase in emissions, in part due to the adoption of different emissions factors for both paper and electricity consumption, but also due to increases in underlying consumption. We strive to ensure that we are using the more appropriate and best practice emission conversion factors which means that from year to year we may need to change the factors that we source. On a more positive note, for the first time this year our reporting now includes our Thai and UK operations.

* Note: 2009 emissions have been restated to reflect a change in the paper emission conversion factor in Australia and a change in the paper and electricity emission conversion factors for New Zealand.

Australia

Our Australian business continues to be the largest contributor to our Group emissions, and in the past year delivered a decrease of 2.3%*.

* Note: 2009 emissions have been restated to reflect a change in the paper emission conversion factor.

With an Australian footprint of 53,175 tonnes of carbon, we are just on the threshold of potentially being included in the third year of the National Greenhouse Energy Reporting (NGER) Act in FY11. This means that we will potentially be required to report our Scope 1 and Scope 2 carbon emissions on an annual basis, if they exceed specified thresholds.

Electricity

While we want to reduce emissions further, Australia saw a 2.6% decrease in electricity consumption, which accounts for 74% of the footprint of our Australian operations.

This year’s consumption reduction has largely been driven by the implementation of some technology to help us manage our computer fleet, and by the consolidation of our property network. During the year we have implemented a Desk Top Power Down initiative, and have seen growing benefits from our green star rated buildings.

Going forward, we want to refine our approach to measuring and monitoring our consumption of electricity across our property network to help us identify those parts of our business that are not performing to expectation, and assist us in identifying opportunities for greater efficiency.

Paper

Our Australian operations delivered a significant 12% reduction in our office paper consumption during the year. This has been driven by an increasing commitment on the part of our people to print only when necessary, the consolidation of printers to Multi Function Devices, setting print defaults to double sided printing, and providing the functionality to scan directly to an email.

Print paper use has also decreased by 6.1%, thanks to increasing moves to online or web based solutions for items which would have been printed in the past (see our case studies for details on how we’re reducing print paper use in shareholder materials).

This year, we have updated the source of the factor that we use to convert our paper consumption into carbon dioxide equivalent emissions. As a result, while our consumption has dropped in real terms, the new factor records this as an increase when compared to last year. The impact of this change in emissions factors is a 20.7% increase for office paper and a 28.9% increase for print paper emissions. This is why we have restated our prior year emissions to enable a like for like comparison.

Fuel and travel

Our consumption of fuel by our tool of trade fleet has fallen by over 8% during the year, in part because of a reduction in the size of our fleet. There has been a small improvement in fuel consumption by vehicle compared to 2008/09. Driver education on efficient driving practices is an area of focus for the coming year.

Air travel for our Australian business has increased compared to prior year. This category in particular reflects the challenges that we face in balancing our desire to reduce our emissions, and doing business as a global company.

We continue to strive to limit air travel to essential trips only, encouraging the use of video conferencing. We have also installed leading edge telepresence facilities across our businesses in Australia, New Zealand and the UK in response to employee feedback about the quality of existing videoconferencing facilities.

Water

We continue to work towards a system to measure and monitor water consumption across our property network in Australia. In the meantime, individual sites have developed initiatives to manage their water consumption.

CGU is leading IAG’s work in this area, installing a purpose built water recycling plant in its building on Collins Street in Melbourne. The plant, which commenced operation in May 2010, will supply recycled Class A water for all toilet and urinal flushing water. A secondary process will also provide part of the water supply servicing both building's cooling towers. While the system is new and its performance will be closely monitored, it is capable of delivering up to 60,000 litres per day of recycled water. In one year, this would equate to over eight Olympic size swimming pools.

New Zealand

Our New Zealand business has recorded a 4.3%* increase in emissions. Here too, we have adopted more up to date emissions factors for paper and electricity, however there have also been increases in real terms in consumption of electricity, fuel and air travel.

* Note: 2009 emissions have been restated to reflect a change in the paper and electricity emission conversion factor.

As in Australia, electricity makes up the largest portion of our emissions in New Zealand, in which there has been a 10.4% increase in consumption. This is primarily due to short term factors, such as our double occupancy of old and new premises when transitioning between the two.

Air travel has also increased 16%, due to factors including new business initiatives launched during the year and increased participation in Group wide leadership programs.

More pleasingly, there have been 11% reductions in both office paper and print paper consumption.

The reduction in office paper use is due to a concerted effort from our people in reducing their paper consumption, and also by a reduction in storage space in new the premises. For example, the NZI Centre in Auckland has 70% less storage space than our four previous buildings, prompting a move towards more electronic storage.

In terms of print paper, a new electronic customer renewal process has resulted in less printed customer material.

Clearly, we will be very focused on reducing our emissions in New Zealand in the coming year. A number of initiatives to do this are underway including (but not limited to) the introduction of software that will put all IAG NZ computers into stand by after hours, reducing electricity consumption; launching the Energy Wise Challenge - a program that will run to educate and re-engage the business in simple actions to conserve power; continued implementation of an Electronic Renewal System developed to reduce print paper usage across NZI; increased scrutiny of travel requests and the encouragement of video conferring as an alternative.

UK and Asia

Our UK and Thai businesses are reporting for the first time this year on their emissions.

Reporting on UK emissions reflects slightly different methodology to that used in Australia and New Zealand, as there are differences in the way the business operates – for example the use of gas for heating, and the widespread use of rail rather than air travel for domestic travel. The business has this year reported CO2e emissions of 2,474 tonnes, which was higher than expected, due to factors including increased gas consumption resulting from a long, cold winter, and increased need for staff to travel between the UK and Australia.

This is the first time that our Thai businesses have captured data on the environmental indicators to establish their carbon footprint, reporting emissions of 1,955 tonnes. This reflects a growing trend for larger businesses in the Asian market to recognise the impact that their operations are having on the environment and to report externally on them, driven by an increasing customer and community sentiment.

Not surprisingly, this work confirmed the largest drivers of their footprint were electricity consumption (66%) and fuel for tool of trade vehicles (26%). Safety Insurance has been a largely paperless office since 2002 with the only printing of any note being the policy documentation which is required to be sent to customers and documents required by Thai authorities. NZI Thailand is not paperless as yet but does have a paper recycling arrangement in place with a service provider, Recycle Paper For Trees, who measures the waste on removal and provides a report on the quantity of waste that has been recycled. Office and print paper usage for Thailand is the third main driver at 7.5%.

The collation of this information has not come without challenges, and the businesses have been unable to source complete information on electricity consumption from suppliers. Consequently consumption has been estimated for a number of months this year. The businesses are working with electricity suppliers to ensure the provision of accurate consumption data and cost information going forward.

Working with customers and communities, and influencing government

While we aim to minimise our carbon footprint, climate change is already having an impact on communities in the form of severe weather events.

While climate change is a broad community issue, there are steps IAG is taking to boost adaptation to climate change, both internally and within the broader community.

These include:

Ensuring we have a good understanding of the risks associated with climate change, for example through our dedicated Natural Perils Research Team in our reinsurance division;
Sharing information on risk and how to reduce it.
Forming partnerships to help communities adapt.
Assisting in emergency readiness and response, helping our customers at claims time by ensuring we can make claims payments quicker and help people to get back on their feet.
Influencing and advocating – insurance companies acting alone, or even collectively, will only have a limited impact in achieving success. What is needed is a collaborative effort on many different levels from a range of stakeholders.
Adapting our own internal processes, so that we can respond to our customers in an efficient and timely manner.

As a large corporate, IAG recognises the role that we can play in influencing approach and policy so also engages with the government on a number of different issues. We engage at various levels including local, state and federal government, through many different channels including formal submissions through to face to face meetings.

For more information on how we are working to mitigate and adapt to the risks associated with climate change, see our Key Risks and Opportunities section.

Case studies

In the case studies below we share some of the initiatives that have driven our environmental performance, as well as the challenges we have experienced.

Towards carbon neutrality
Driving sustainably
Desktop Powerdown
A sustainable partnership
Communicating sustainably

Towards carbon neutrality
We view climate change and severe weather events as significant risks to the sustainability of our business and the communities in which we operate. So for several years, we have been working with communities to help them adapt to climate change, offering products and services to our customers to help encourage sustainable behaviour, and participating in the policy debate on climate change. We also recognise the need to lead by example, ensuring our own impact on the environment is as minimal as possible. So in 2006, as part of our approach to ensuring our ongoing sustainability, we made a commitment to be carbon neutral by 2012. We are using a simple framework to guide our journey to carbon neutrality. Having identified our material scope 1, 2 and 3 emissions, we are measuring them (you can’t manage what you don’t measure), and have set a 5% year on year reduction target to 2012 for our carbon emissions. We are focused on identifying and implementing ways to either reduce consumption and / or switch to alternate sources that are less carbon intensive. We recognise though that we will not be able to reduce our emissions to zero by 2012, therefore understand that we will need to purchase eligible offsets in 2012 to achieve our carbon neutral goal. Central to this approach is changing behaviours within our organisation to reduce the carbon emitted through electricity, air travel, paper production and fuel. We continually review our business practices to ensure we are not using resources unnecessarily, and change our activities to reduce emissions. This ties directly into our objective as an organisation of being as efficient and effective as possible with regard to our operations. You can read more about some of our specific initiatives in other case studies in this section. And in line with our devolved model, which gives each division responsibility and accountability for its own operations, each division is responsible for investigating how to avoid and reduce emissions in their own operations. However some emissions are best viewed from a Group or regional perspective, for example electricity consumption, since many of our divisions occupy common buildings. In this case, the cross divisional Energy and Water Action Group reviews electricity consumption and identifies opportunities to avoid or reduce consumption. This is particularly important as 74% of our carbon footprint is attributable to electricity consumption. Our carbon neutral commitment is a Group target, and this year for the first time our UK and Thai businesses have reported a carbon footprint. You can read more about how we are progressing against that target in the Our Performance section of this website. Read more [+]

Driving sustainably
Having a fuel efficient vehicle fleet is one way for organisations like IAG to reduce their carbon footprint, as well as costs. But fuel efficient cars are only half the battle – to be truly sustainable, organisations also need to look at the fuel efficiency of their driving practices. This is the rationale behind IAG New Zealand’s Ecodriver program. No matter how efficient a vehicle is at using fuel, research suggests the human element also has a significant impact - the driver has the ability to cause excessive fuel consumption, and that expert training, coaching and/or education has yielded improved fuel economy figures of typically between 10 - 20%. So to increase the efficiency of its fleet, IAG New Zealand looked at training its drivers to drive more efficiently. To do this, IAG New Zealand piloted Ecodriver training throughout April and May 2010 with all Auckland staff who drive a company vehicle. The course included a theory session covering best practice techniques and underlying theories for economy driving, and a practical session in the drivers’ normal fleet car, as well as an action plan. The outcomes of the training are being monitored throughout 2010, and the program will be rolled out across New Zealand if it demonstrates an improvement in efficiency of 10% or more. Throughout the assessment period, IAG New Zealand is running a Drive Wise Challenge for drivers across the country, to compare results from those who have received the training with those who haven’t. Drivers can also set their own personal targets and include these as a part of the performance management objectives through out the year. Read more [+]

Desktop Powerdown
In many companies, offices are buzzing even in the middle of the night. This is because often companies ask staff to log off but not shut down their computers at the end of the day, so information technology staff can install upgrades and patches overnight. The problem is, of course, that even when logged off, if they are not completely shut down then the computers are still consuming electricity. Electricity is by far the biggest contributing factor to IAG’s overall carbon emissions, as well as being a significant cost to our business. As such, reducing electricity consumption is an ongoing focus. To help address the issue of electricity waste, IAG has implemented a Desktop Powerdown solution in our Australian operations. The solution uses Green Planet software to enable work stations to be remotely ‘woken’ during the night for any upgrades. This means that employees can be asked to completely shut down their computers at the end of the day, but updates can still be installed. And if our employees forget to turn their computers off at night, the software will do this for us by remotely turning off all the desk top computers that have not been fully switched off. It then ‘wakes’ all these machines in the morning, so that the computers are ready to go when staff get into work. We have been tracking the resulting savings from this initiative and early results, for a sample of around 1,200 workstations, show significant savings. Based on those results, the initiative is contributing a 2.36% saving of energy consumption for all of IAG’s power use in Australia. Rolled out to IAG’s 9,500 workstations, it’s expected that the energy savings will exceed these, as some of the sample workstations have longer operating hours than average. An important aspect of reducing electricity consumption is driving behaviour change and unfortunately some of our efforts to reduce consumption through the Desktop Power down are being partially offset by employee behaviours. Changing this behaviour, and continuing to educate on all aspects of carbon emission reduction, remains a focus for the coming year as we move towards our target of carbon neutrality by 2012. Read more [+]

A sustainable partnership
While environmental sustainability is a key focus internally, IAG New Zealand company NZI is also using an external partnership to drive sustainability. NZI has been a foundation sponsor of the Sustainable Business Network (SBN) for the past five years, and is leveraging the partnership to develop practical sustainability tools for its business, as well as for brokers and other key business partners, including: GreenList – a sustainable products and services directory which effectively provides a one-stop-shop for consumers seeking products and services designed around social and environmental considerations. NZI introduced the get Sust Online, not Get Sust - a simple online assessment tool for businesses who are new to sustainability, allowing them to benchmark performance, compare themselves against their industry and other businesses and identify gaps and opportunities. Sustainability Advice Line – an 0800 number for businesses with sustainability questions. The SBN run this advice line and provide expert advice to help people resolve their sustainability query. As well as making use of these initiatives, NZI introduced the Get Susty Online to its brokers to help boost their own business sustainability capability. Twenty brokers took up the challenge, including ICIB Limited. The broker’s managing director Garry Mooney says using the tool has positioned the company to provide leading edge service to clients who are themselves developing sustainability credentials. Read more [+]

Communicating sustainably
Shareholder communication and education is an important priority for IAG. However as IAG has one of the largest share registers in Australia, this communication has used significant quantities of print paper. As a result, IAG’s Group Secretariat has undertaken a campaign to switch IAG's 865,000 shareholders to electronic communications rather than by mail. When launched 18 months ago, approximately 55,000 shareholders had provided an email address for communications, primarily to receive the Annual Report. The campaign has yielded another 50,000 email addresses for all communications via the email channel. This year, in an effort to gather more email addresses, four $5,000 prizes were offered to shareholders who made the switch to email for things such as Annual Reports, Dividend Statements and AGM documentation. By the time the incentive campaign wrapped up in May of this year, an additional 50,000 shareholders had provided their email address, increasing the total number to around 150,000, or 17.3 % of the shareholder base. With 17.3 % of hard-copy mail-outs now avoided, it is estimated six tonnes of paper will be saved each year. The campaign to capture email addresses will recommence in the next 12 months. Read more [+]

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