A market-based approach that makes good business sense

As introduced in our premier edition in December of last year, the Trailblazer Report showcases the work of leading organizations and experts with proven track records of success in business, sustainability and innovation. This report also provides a few updates of ctr’s work with leading clients who are setting and achieving impressive goals in order to walk the talk.

This issue features two leading financial services organizations that set a new bar in environmental sustainability performance in business.  An initial reaction might be, what does an industry focused on money have to do with the environment? From those we talked to—everything. For financial service organizations, improving the bottom line goes hand-in-hand with reducing energy consumption and carbon emissions. It just makes sense.

Jim Johnston (right), Director, Environmental Sustainability, BMO Financial Group and
BMO the Bear welcome Tom Heintzman, President, Bullfrog Power to BMO’s flagship branch in Toronto

Global insurer, Zurich Financial Services Group, is also fully committed to integrating its corporate responsibility and sustainability principles into all aspects of its operational processes and product offerings. With over 60,000 employees and customers in more than 170 countries, Zurich is highly motivated to reduce its wide carbon footprint. Accordingly, Zurich’s Climate Initiative includes the capture of carbon emissions collected from its own worldwide operations. Through a combination of cleaner energy sources, energy efficiency measures, reduced air travel, and the gradual transition of its car fleet to more fuel-efficient cars, Zurich is already well on its way toward reaching the target of a 10 per cent reduction in carbon emissions by 2013, using 2007 as its base year.

As well, a key differentiating value is Zurich’s “market approach” to addressing customer needs in the area of climate-related risk and facilitating economic and policy related research – i.e. sustainability. The question, as posed in Zurich’s recent white paper “The Climate Risk Challenge”, is not whether insurance can play a meaningful role in confronting the risks posed by climate change, but how can it set the rules for maximum engagement?

This issue of the Trailblazer report provides robust insights and generates ideas for those interested in best practices for leveraging sustainability for improving business and the environment.

BMO: Sustainability Leadership in Financial Services

There's a lot of chatter these days about corporate responsibility and sustainable management practices—what is most effective, who should pay and who should be held responsible. North American financial services leader, BMO Financial Group, just stepped up to the plate and took action.

BMO believes that the sustainability of its shared environment is inextricably tied to the long-term sustainability of its business and our planet. Thus, in 2008 BMO established a multi-stakeholder, enterprise-wide Clear Blue SkiesTM Initiative (CBSI) for the purpose of protecting and improving the quality of the air we breathe, and integrating environmental best practices in BMO’s daily operation.

A key component of CBSI is the BMO ECO5 Strategy, headed by Jim Johnston, Director of Environmental Sustainability.  ECO5 establishes specific goals and action plans to minimize the bank’s impact of its operations on the environment; made up of more than 1200 branches plus corporate offices and critical facilities. To track and improve, ECO5’s progress is documented, managed and periodically reviewed in accordance with the BMO Environmental Management System or EMS.

BMO’s ECO5 Strategy

How it was done

BMO uses its Environmental Management System and leverages ECO5 to examine operational activities, understand their impact the environment and how these risks can be mitigated.  Starting with the low hanging fruit, BMO first focused on energy reduction and efficiency, sustainable transportation, measuring associated carbon emissions and zeroing in on high performing improvement approaches.

As Johnston explains, putting the strategy into practice wasn’t rocket science. It simply meant being committed to setting goals, moving toward them, and then continuing to manage impact.” The initial goal, set in August 2007, was to be carbon neutral by the end of 2010. The second goal targeted the reduction of absolute emissions by 5 per cent by the end of 2010 as compared to the 2007 baseline.

To achieve carbon neutrality, BMO focused on 3 areas: 1) Consumption Reduction Measures, 2) Purchases of Renewable Energy, and 3) Carbon Offsets.
 

Measurable Results

This past August, BMO President and CEO, Bill Downe, announced the organization had achieved its goal of carbon neutrality relative to its energy and transportation footprint for operations worldwide [emissions were verified by an independent 3rd party, not the achievement of carbon neutrality]. Its targeted reduction of 5 per cent of absolute emissions by end of 2010 as compared to the 2007 baseline is currently being measured. Johnston says that he’s “reasonably optimistic” for a successful outcome.

Other BMO ECO5 Strategy successes:

• BMO is one of two Canadian banks committed to an initial $13 million investment in the Greening Canada   Fund, which sources high quality voluntary Canadian carbon offset credits from green projects in the private, public and not-for-profit sectors.  
• BMO is the only Canadian bank to have achieved ISO 14001 Environmental Management System certification for two of its facilities (both in Toronto, Ontario)
• To date, BMO has purchased 23,800 mwh of renewable electricity to power 160 branch locations in Canada and in April, 2010, 91,400 mwh of renewable electricity to power 100% of its facilities in the USA.
• Four BMO branches in Canada and three in the USA have been built to LEED certification standards

Employee Ownership

Part of the mandate of Johnston’s unit is to also raise environmental awareness among BMO employees as well as customers and other stakeholders. Employees have stepped up to the challenge and many have volunteered as  “Environmental Ambassadors”, ready to learn, pass on information (such as how to set printers to 2-sided copying), and provide feedback and ideas relative to sustainability challenges and opportunities in their locations.

It’s all part of how BMO demonstrates leadership by integrating environmental considerations into its wider business practices. “Environmental sustainability and costs are not mutually exclusive,” says Johnston, “What BMO is doing is good for the bottom line and it’s good for the environment.”

Translating CR to product and service offerings at Zurich

Similar to BMO, global insurer, Zurich Financial Services Group is fully committed to positively impacting the environment and has put strategies and actions in place to ensure that its industry—in this case, insurance—plays a central role in dealing with climate change. Zurich is successfully finding ways to address climate change through management of its carbon footprint, and has integrated environmental considerations into its overall suite of products.

As noted earlier, with a list of achievements under its belt, Zurich is already well on its way toward reaching the target of a 10 per cent reduction in carbon emissions by 2013. These include:

• Total per employee emissions in 2008 were reduced by 3.7 per cent, as compared to 2007 (from 4.17 to 4.02 tonnes of CO2 per employee per year).
• Significant facilities emission reductions were observed, mainly as a result of:

1. Switching to 100 per cent green electricity in company owned facilities in selective countries
2. Implementing efficiency measures (low energy lighting, replacement of air conditioning systems, etc.), including better energy management system

• In 2008 the air travel emissions were reduced by 5 per cent, compared to 2007 mainly due to less air miles in the US.

Measuring Zurich’s Group-wide carbon footprint was the first step in reducing and monitoring that footprint.
 

On the product side

Zurich also is one of the leading providers of environmental insurance solutions, having insured environmental risks to major industries for over 17 years. Its policies insure environmental services of contractors and design professionals, and the site specific exposures of lenders, owners and tenant/leases.  This includes the largest solar power station in Granada, Spain.

“The environment affects our industry —it has a direct impact on our business,” explains Bob Fellows, Zurich Canada’s  Senior Vice President, Distribution, Marketing & Communication, “ So it is in our best interest to know, understand and enable our people to be aware of what is going on.”

Today, Zurich’s customers continue to face risks related to environmental exposure, and Zurich is committed to creating value for its customers. With over 100 environmental underwriters across North America with deep scientific and technical experience, Zurich has developed specific experience in knowing what environmental solutions will help meet the changing needs of customers.

Bob Fellows, Zurich Canada.

Zurich collaborated with customers, academic experts and government officials to create two innovative climate-related products in the market: Carbon Capture and Sequestration (CCS) Liability Insurance and Geological Sequestration Financial Assurance.

A key enabler

Well trained and experienced claims specialists with access to a developed network of resources and programs enhances Zurich’s ability to handle most types of environmental claim – from a small exposure to catastrophic claims losses – and mitigate associated risks.   Zurich Canada, for example, offers emergency assistance to customers for both the physical and financial aspects of environmental clean-ups. Policy holders have complimentary access to the Spill Reporting Online system. This online service offers immediate consultation as well as emergency clean up, before hazmat, diesel fuel and other regulated materials are released further into the environment. To date, Spill Reporting has saved 50 Zurich customers (in Canada) over $1.5 million in cleanup and associated costs.

This kind of “market-based” approach by Zurich led to its global Climate Initiative launched in 2008. Highlights include:

• New products and services for Zurich customers who face risks as a result of climate change (e.g. Carbon Capture and Sequestration (CCS) Liability Insurance)
• A group-wide CO2-emission reduction target of 10 per cent by 2013
• Thought leadership on global climate change through ongoing research, outreach and advocacy efforts (white papers, research studies, and dialogues between governments and regulators)

Broader initiatives around corporate responsibility at Zurich are guided by the Zurich Basics, core values— integrity, sustainability, customer centricity, excellence and teamwork. These values direct Zurich’s core business practices, and set the framework for how the company delivers on its business goals.

“Everything we do is shaped around these basic values,” explains Fellows.  “And every employee working at Zurich, whether it is at head office in Switzerland or Canada, is expected to live up to them.”

Best Practices

• BMO First Principles
  
  All BMO directors, officers and employees are required to abide by the Bank's Key Business Conduct and Ethical Code of Conduct, First Principles. 

• Zurich Basics
  
  Zurich Basics states the company’s core values and rules to ensure that Zurich and its employees stay in accordance with the highest ethical, legal and professional standards.
  • Integrity
  • Customer centricity
  • Sustainable value creation
  • Excellence
  • Teamwork

For national and global corporations, the importance of clear, well-positioned communication cannot be overstated. Every day, such companies share their corporate responsibility priorities with stakeholder groups and the public— whether they intend to, or not—simply through their actions on the global stage. Every activity—whether it involves employees in the workplace or public addresses by senior leaders at public forums on climate-change —is watched, judged and evaluated by others. The evaluation is not only about results; it’s about what is communicated and perceived by others about the company’s brand, leadership, ethical appropriateness and follow-through on commitments to make a difference – i.e. walk the talk.

New environmental products must be developed and launched with sensitivity to the broader context (e.g. facing the reality that today we require more climate-related risk insurance; and, an increase in clean energy technology and community engagement).

Announcements from “head office” that the company’s operations will be audited for energy efficiency require both an internal and an external communication strategy and execution blueprint designed to engage and recognize active participation by key stakeholders, support and manage expectations, and continuously update the progress and impact of these efforts.

A market-based approach to environmental sustainability makes good business sense and is good for the planet. Does this mean a company should discard strategies that don’t make financial sense but still are good for the planet? When does the “ends justify the means?” or should all environmental strategies lead to a tangible bottom line ROI.

What do you think?

What are the top environmental, economic and social responsibility challenges and innovations that are critical for building sustainable value that has meaning to your organization, employees and customers?