Wild fires, flooding, distracted driving and emotional wellness concerns cost Canadians billions of dollars in 2016.
For insurance group The Co-operators, those numbers represent a threat to the financial security of Canadians and their communities. Last fall the company launched a national brand campaign focused on jumpstarting conversations about resilience to risk and encouraging people and organizations to better protect their property and their loved ones. The Co-operators is advocating for more open and transparent dialogue about mental health, distracted driving and disasters related to climate change – all complex societal issues that demand action from individual homeowners through to the federal government.
This is not the first time The Co-operators has taken the lead in raising awareness about the importance of building resilience against the risks and resulting costs that Canadians face. No stranger to leadership, in 2016 The Co-operators won the first-ever Excellence in Governance: Best Practices in Sustainability and Environmental, Social and Governance Award from Governance Professionals of Canada. This honour recognizes the expertise of its Board of Directors in providing oversight of the organization’s sustainability performance and its role in society.
What follows are some highlights of the journey The Co-operators Board of Directors took to become a nationally recognized sustainability governance leader.
Sustainability governance gets underway
Ten years ago, The Co-operators Board of Directors adopted an enterprise-wide sustainability policy and changed the organization’s vision to include a commitment to be a catalyst for a sustainable society. It established an ad hoc committee of the Board to provide oversight as the organization developed its sustainability approach. In 2010, the Board approved the organization’s first sustainability strategy, including a goal that the Board become “a recognized leader in sustainability governance.” With these steps the Board signalled its commitment, setting the tone at the top.
Over the past decade The Co-operators Board of Directors has had an unwavering formal commitment to best practices in sustainability governance. To symbolize its ongoing dedication to sustainability, the Board has since elevated its Sustainability and Citizenship Committee from an ad hoc to a standing committee with an enduring governance role. Today, sustainability is embedded in all key board governance mandates such as strategy, risk, investments, nominations, education and compensation.
Pay for sustainability performance
The Board’s compensation philosophy includes a requirement that senior management are incentivized for sustainability performance along with financial performance. The CEO and all EVPs, SVPs and VPs have at least one bonus-able goal related to sustainability and co-operative principles, tied to the corporate scorecard and corporate strategy deliverables.
Embedding sustainability into corporate strategy
Rather than being siloed, sustainability is now integrated into the corporate strategy. At The Co-operators, sustainability is one of three pillars in the 2015-2018 Corporate Strategy (called “Co-operative Identity”). Each sustainability objective has a set of deliverables and an accountable executive member. As well, all the sustainability objectives have corresponding KPIs, targets and metrics to enable the Board’s assessment of management’s performance. At each Board meeting the Chair of the Board Sustainability & Citizenship Committee reports on management’s progress on the sustainability objectives. The CEO’s routine performance reports include updates on the sustainability goals, targets and initiatives. Annually, the VP of Sustainability & Citizenship delivers a report to the full Board on the status of these initiatives.
Walking the sustainability talk
The Chair plays a visible, active role advancing sustainability by, among other things, voluntarily attending meetings of the Board Sustainability & Citizenship Committee. The Board’s own goal requires it demonstrates - and periodically educates itself on - best practices in its approach to sustainability governance. Additionally, each year at its Annual General Meeting, a sustainability topic is identified by the Board Sustainability & Citizenship Committee and a presentation is made to the meeting participants by senior management. Board members further walk the talk having reduced greenhouse gas emissions associated with their meeting travel by 30 percent since 2010.
Measuring the impact of sustainability strategy and governance
This sustainability governance model generates tangible results, contributing to value protection and creation through improved risk management, product innovation, cost-savings, employee engagement and client loyalty.
The Board’s leadership in sustainability governance has resulted in significant impacts and results that reveal the extent to which sustainability has been embedded in the corporate culture. As a result of the Board’s ongoing stewardship, oversight and advice, check out these metrics below (For more results see the 2015 Sustainability Report).
Ten sustainability products have been launched since 2008, including insurance discounts for fuel-efficient vehicles, wind insurance and car-share insurance coverage, green building incentives and socially responsible investment options. This represents well over 200,000 policies and contracts in force by the end of 2016. Of particular note was the launch of Canada’s first comprehensive flood product two years ago. The Co-operators Board championed this move that provides homeowners in Alberta and Ontario with insurance for the costliest natural disasters in Canada (the product will be extended to other provinces this year). Flooding is expected to worsen as extreme weather events become more frequent.
Engaged clients and employees
Clients are noticing, and taking advantage of The Co-operators’ sustainability commitments. According to the organization’s market research, 31 percent say that the company provides them valuable information about sustainability issues and risks and how to manage them. Close to half of clients’ auto repairs were completed at “green” shops and 94 percent of dollars paid to preferred property vendors went to “green” contractors recommended by The Co-operators.
An overwhelming number (93 percent) of employees agree that The Co-operators is a socially and environmentally responsible organization. The voluntary turnover rate in 2016 was 3.3 percent - well below the industry benchmark of 7.0 percent.
Topping the list
The Board has taken a bold lead and enduring oversight of the company’s sustainability efforts – protecting and creating shareholder value. In fact, as a direct result of their strong stewardship and monitoring of sustainability practices, The Co-operators has ranked among the top ten “Best 50 Corporate Citizens” in Canada since 2010.
If you want to know more how The Co-operators is changing the corporate governance landscape, are keen to learn about the drivers and trends of sustainability governance and the role of the board, and/or are curious to find out what options and practices governance professionals can pursue to enhance board sustainability oversight and create value for the organization, click here.