Enviro Insurance Ltd is a company headquartered in Byron Bay, NSW. It has offices in all capital cities of Australia and every regional city with a population of more than 100,000 people. The firm was founded on the principles of social and environmental responsibility. This principle has been in place since its founding by Bella Roze, who wanted to contribute to society, rather than simply maximising profits. The company is a major contributor to charities, particularly those that focus on the homeless and the poor. It actively promotes environmental management in all of the company’s operations. It sponsors a program that provides scholarships to disadvantaged students to allow them to attend university, and it is proud to offer employment in the company to long-term unemployed and the poor. Each year it publishes a sustainability report that summarises its achievements across each area of performance.
Over time, these activities have become a marketing strength of Enviro. The social and environmental stance taken by the company has attracted many customers to the company. Listed on the Australian Stock Exchange in 2005, the company has also become a preferred investment of ethical and green investment funds.
The mission statement of Enviro states that it will aim to:
• Support employees in achieving their personal and career goals.
• Act in a socially responsible way when dealing with insurance clients and the general community.
• Promote a better social and physical environment for the world.
However, the current Chief Executive Officer, Pereira Kane, thinks that the firm has become complacent and is resting on its past achievements. She is concerned that the firm has built up a reputation for good social and environmental practices in theory but is not practising what they preach. There is some level of discontent among employees about the way that management treats staff, and this is impacting on employee satisfaction. There have also been negative reports in the media of its treatment of businesses and people after the Brisbane floods in 2010-2011. The reports claim that the company has tried to minimise amounts paid to these businesses by strictly applying clauses in the insurance contracts.
In 2016, the company’s net profit rose by 15 per cent to $173 million on an asset base of $1235 million. This is the third consecutive year of increased profits. Earnings per share were 62 cents, and the market value was $5.40 per share. The board is concerned that Enviro makes a loss on its insurance business, while its investments yield a strong return and are the main reason for the increase in profitability. Its investment portfolio includes shares in BHP Billiton, Qantas, Telstra and James Hardie Industries.
The board adopts a sustainability approach to viewing its performance and uses the following key performance indicators to assess company performance:
Financial:
• Net profit
• Gross insurance premiums
• Return on investment
Economic indicators:
• Policy, practices and spending on local suppliers
• Procedures for hiring local staff
• Development projects primarily for public benefit
Social indicators:
• Employee satisfaction ratings
• Percentage of women in the top three tiers of management
• Number of indigenous employees
• Customers’ ethical ranking of sales staff
• Number of staff hired who were previously unemployed teenagers
Environmental indicators:
• Tonnes of paper recycled per annum
• Percentage reduction in electricity usage
• Litres of fuel per dollar of sales
Enviro has recently set up an internal information system to improve social and environmental practices within the company.
QUESTION:
A. How can the company encourage its staff to behave in a way that supports sustainability?
B. Recommendations for Enviro.