Setting the right priorities

We have relatively minimal direct impact on the environment, so it is important that we look at the areas in which we can make a difference. After consulting with external stakeholders and peers, we agreed to the following key environmental indicators:

• paper use;
• fuel use;
• air kilometres travelled;
• electricity use;
• recycled co-mingled waste; and
• CO₂ emissions.

CO₂ emissions are the most significant performance indicator, as they provide a snapshot of our overall environmental performance. Combining all other environmental indicators (excluding recycled co-mingled waste) determines our overall CO₂ emissions.

Our performance on CO₂ emissions is also important because of our strong public position on climate change, and the detrimental impacts that increased CO₂ emissions will have on the global economy and society.

We would like to be able to report on our water usage, as this is an area of considerable environmental concern. However, we are not currently in a position to include our water consumption due to the leasing arrangements of most of our property assets.

Managing our impacts

In 2005/06, our managers were provided with monthly reports that illustrated their teams’ environmental performance. The reports allow our managers to monitor their teams’ environmental performance against targets, and to take specific steps to improve it.

Given IAG comprises a series of very different operations with different growth imperatives, it was determined that divisional environmental targets were more appropriate than previous Group-wide targets. These allow for divisional differences to be accommodated and for areas of greatest impact and influence to be identified accordingly.

For example, our Chief Financial Office division uses relatively little electricity; however, electricity usage remains as one of their targets as they control building management- a key influence factor for reducing electricity usage.

Results of our environmental performance are generally positive for the 2005/06 year. As can be seen in the table below, we have reduced fuel use and paper use (both print and office), and have increased the amount of recycling to which our employees contribute. Importantly, we’ve decreased our CO₂ emissions by six percent in Australia and New Zealand. Initiatives to reduce electricity consumption at our major sites will further impact these results in 2006/07.

We understand the reasons why our air travel has increased, as we expected that our ongoing plans to expand internationally would affect our performance in this area. Encouragingly, domestic air travel has decreased, as can be seen in the graph below.

Offering green products and services

Manufacturing and distributing insurance products results in limited direct environmental impact. However, we can and do have an influence over our customers’ behaviour. In 2006, we were pleased to release a product called Climate Help.

Climate Help is an online tool that allows customers to offset the greenhouse emissions associated with using their car. It is an easy and inexpensive way for customers to mitigate the environmental damage caused by car emissions. For more information see this case study.

The way we interact with our customers also has an impact on our environmental footprint. This year we looked at ways to reduce the paper consumption associated with the printing of policies and brochures. As a result, we reduced the amount of paper used by our Australian operations by 34% and in New Zealand by 6.7%.

Advocating for the future

The risk of climate change is a significant and growing issue for IAG, and is one of the biggest issues facing our industry.

If we help reduce the risk of climate change we can reduce the number of claims. If we keep claims costs down we can also keep premiums affordable, and that means we stay in business.

We have a number of initiatives in place to help reduce the risk of climate change, with a focus on public advocacy. We are active members of the Australian Climate Group. In 2005/06 we also took part in the Australian Business Roundtable on Climate Change and its report, “The Business Case for Early Action.” The report shows that, if action on climate change is delayed, it becomes more expensive for business and the wider Australian economy to reduce greenhouse gas emissions.

Key findings of the economic modelling contained in the report include:

• a 60% reduction in greenhouse gas emissions from year 2000 levels by 2050 is possible while maintaining strong economic growth;
• delaying action for just nine years would result in an average of 0.2% lower GDP growth pa between 2022 through to 2050, and concentrate any economic costs over a shorter period; and
• an additional 3.5 million jobs will still be created between 2013 and 2050 under an early action scenario, equating to 250,000 more jobs than under a delayed action scenario.

We have also contributed to industry research such as the Emerging Risk Initiative, which is a think-tank of Chief Risk Officers working to improve risk management. The recent report “Climate Change and Tropical Cyclones in the North Atlantic, Caribbean and Gulf of Mexico” draws on the research and knowledge of many large insurance companies, including IAG.

In New Zealand, we sponsor WWF New Zealand’s climate change campaign and have brought climate change and natural disaster seminars to our broker business partners.

We will continue to work with our customers, employees and other stakeholders to raise awareness about climate change and how we can all reduce the risk of its impacts.