Reason and Benefits for Wealth Wise Insurance Adoption of Sustainability Reporting - Example

Sustainability reporting Name: Lecturer: Course name: Course code: Date: Introduction The concept of sustainability reporting began to be adopted by corporations worldwide in the mid to late 1990s. It has thus become apparent in modern day corporations to take a broader perspective on publishing financial reports but also incorporate aspects of sustainability reporting[Amr11]. A pragmatic definition of sustainability reporting entails achieving sustainable development through the performance of an organization with an aim of practicing on elements of measurement, disclosure and accountability to the internal and external stakeholders. Sustainability reporting also in the narrowest sense refers to the publication of environmental, social and governance (ESG) information in a detailed and tactical manner to offer insights on activities and outcomes on the firm performance across the three dimensions. Sustainable development is defined as any development help in accomplishment of present organization needs without having an effect on the ability of future generations to accomplish their own needs. The guidelines of the Global Reporting Initiative (GRI) provide key drivers for the quality of a sustainability report. The guidelines of GRI sustainability reporting enable firms worldwide evaluate their sustainability performance and in a similar way to financial reporting disclose their results[ODw11]. The guidelines of sustainability reporting encompasses three major areas of focus. The areas include economic, environmental and social performance. Economic performance is articulated through the traditional business profits and also issues which include the long term sustainability of a firms costs, demand for its products, pricing and profit margins and innovative programs. Issues that relate to the sustainability of an organization use of natural resources are defined by environmental performance. Social performance articulates by a broad concept of social capital that considers human capital in the context of public health, skills and education, health of the society and the potential of wealth creation. Reason for Wealth Wise Insurance adoption of sustainability reporting Traditionally, corporations are responsible for their financial performance and the principal stakeholders are the owners of the company i.e. the shareholders. The perception however is changing and it is becoming acceptable that corporations have responsibilities to a wider set of stakeholders which extend beyond the shareholders[Mil131]. The wider set of stakeholders include the local communities, suppliers customers, creditors, the government and to some extent the future generations. A corporation responsibilities will incorporate aspects of financial performance as well as environmental, social and governance performance. Sustainability reporting is not a mandatory requirement for publicly listed corporations like Wealth Wise Insurance. It is a voluntary exercise. However there is a rising interest in issues that involve sustainability globally and consequently, calls have emerged for entities to report on sustainability in their policies and practices and also report on what and how well they are operating. The benefits of adoption of sustainability reporting. The benefit of adopting sustainability reporting for a publicly listed company include; i. Risk management. The benefit entails reporting firms may be better equipped to predict and manage risks which emanates from sustainability related dimensions of the entity[Ioa11]. Sustainability reporting engagement allows firms anticipate and prepare for issues that affect communities in areas of operation and future scarcity of materials. ii. Increased reputation and customer trust. The point is accentuated by customers who are increasingly wary on placing their trust on corporations[Uph11]. The approach assist the firm create, improve or repair its corporate brand, reach social choice consumers and maintain license to operate. iii. The approach have a profound effect on the employees’ productivity and happiness. A survey conducted also concluded sustainability reporting help to improve retention and recruitment of competent staff. iv. Sustainability reporting open the door to new and less costly sources of capital. Corporations that report on the sustainability initiatives undertaken are able to convince potential source of finances on their competitiveness and have a low risk investment[Amr11]. A research paper has suggested investors increasingly prefer to invest in firms that are transparent as a consequence of high stakeholder-manager trust. v. Data gathered in sustainability reports may result to a high chance of innovation, reduction of waste and an increase in efficiency in production or service delivery[ODw11]. vi. Sustainability reporting has a positive impact on a corporation financial performance. Analysis from different empirical studies suggest transparent firms which implement a control on environmental performance tend to have a higher cash flow. vii. Doing well and doing good do not offer mutually exclusive prepositions on firms that publish sustainability reports[Uph11]. A corporation that issue the report engages with external stakeholders, integrate with communities and partake inclusive activities that leads to investments for the company benefit and its operating environment Key performance indicators in sustainability reports of Wealth Wise Insurance help achieve its mission. Financial Indicator The financial performance indicator is of immense importance in understanding an organization and its own sustainability[ODw11]. The performance indicator however is normally reported in the organization financial accounts. The financial performance in Wealth Wise Insurance has been categorized into three performance measures. i. Net profit performance indicate how the organization has been able to utilize its asset to generate income. The net profit implies that the company revenues have exceeded the operating cost. It represents a return to stakeholders of the company on the aspect of profit maximization. ii. Gross insurance premium collected by the firm provide an assurance to stakeholders the company is operating as required, that is offer insurance services as a mission to its customers through collection of insurance premiums. iii. Return on investment is a measure of performance which analyze how investments from stakeholders can guarantee a return. The performance indicator accomplishes the organization mission on shareholder wealth maximization Economic Indicator Economic indicator as a performance measurement technique main intention is to measure the economic results of the firm’s activities and effects of the results on a broad range of stakeholders[Mil131]. The sections under economic indicator includes; i. Policy, practices and spending on local suppliers. The support given to local businesses in the supply chain can indirectly attract additional investment to a local economy. A strategy on local sourcing can help ensure adequate supply and support stability of local economy. Local spending also help to maintain community relations. ii. Procedure of hiring local staff. The measure benefits the local community and ensure the organization is better placed to understand the local community needs. iii. Development projects primarily for public benefit. The impacts of the performance measure extend beyond the business operations of the organization[Ioa11]. The indicator is a measure of the organization contribution of capital to the economy. Social Indicator Social indicator on sustainability reporting represents impacts that WealthWise Insurance has on the social systems within the areas it operates in. Aspects on performance measures in the case study context include; i. Employee satisfaction ratings. The aspect indicates the organization policies that go hand in hand with employee expectation. Discontented employees as reported in the case study impacts negatively on employee satisfaction ratings[Amr11]. The factors impacts negatively on the organization mission to support employees in achieving their personal and career goals. ii. Percentage of women in the top three tier of management. The measure represent the organization overall mission on equality based on gender. A proportionate representation by women in the top three tier of management helps the organization implement its overall strategy. iii. Number of indigenous employees. The aspect represent the measure adopted by the organization in creation of employment opportunities to communities in the different location it operates in. The organization has offices in all capital cities and regional cities with over 50000 people. The human resource from indigenous employees help the organization implement its overall strategy. iv. Customers’ ethical ranking of sales staff. The measure outlines the level of sales staff interaction with insurance policy customers. The performance is accentuated by level of sales made by the sales staff[Loz111]. A positive ranking helps the organization achieve the mission on acting responsibly in dealing with clients. v. Number of staff hired who were previously unemployed teenagers. The measure represent the organization ability to optimally use the available labor which is a long term strategy. Young people provide a long term employment service to the organization and also form a higher proportion of the population in the communities. The aspect is in line with the organization mission statement to promote a better social environment to the world. Environment indicator are designed to reflect the impact in terms of input and output an organization has on the environment[Ioa11]. The standard types of input include energy, water and materials. Input results to outputs which are covered in form of emissions, effluents and waste. Aspects in the context of Wealth Wise Insurance include; i. Tons of paper recycled. The performance indicator describes an organization contribution in conservation of resources based on an effort to reduce paperwork in order to increase efficiency of the economy. ii. Percentage reduction in electricity usage. Electricity represents an intermediate energy produced by converting a primary energy. Electricity consumption by the organization has a direct effect on cost of operations. A reduction in electricity usage reflects the organization effort to minimize environmental impacts on electricity usage. iii. Litres of fuel per dollar of sales. The indicator measures consumption of a litre of fuel to dollars made from sales. Fuel generates carbon dioxide to the environment. Using fuel to make sales in an efficient manner gives the organization a competitive advantage and reputation. Alternative performance measures that could help Wealth Wise Insurance achieve its mission Wealth Wise Insurance may incorporate a wide array of alternative performance measures while adopting sustainability approach[Amr11]. Examples of the performance measure will include: i. Trade union membership. The concept forms an important in the form of employees’ engagement in assisting in creation of institutional frameworks that contributes to a stable society. Employees’ engagement to trade unions allied to the organization area of operation demonstrates its commitment in adherence of freedom of association. ii. Continuous employee training. Improvement of human capital achieved through training expand employees’ knowledge base on matters pertaining to insurance services provided by the organization. The aspect provides an insight to degree of investment in training. Training opportunities assist in motivating improvement at organization and personal level. Training also support growth in social performance. iii. Investment contracts with human rights clauses. The measure indicates the organization extent of integration of human rights concept in its economic decisions[Mil131]. Problems associated with the organization human rights record will result to damage of reputation which affect stability of investment from the stakeholders. iv. Mechanisms on discrimination. The measure encompasses all stakeholders involved with the organization. Particular concern is placed on the company from the fact that it operates in different parts of the world. A monitoring system that is effective is necessary in the organization to guarantee compliance throughout its operation. The aspect accomplishes the organization mission mainly because stakeholders seek assurances policies and monitoring are effective. v. Compliance with laws and regulations. The level of compliance within the organization assist to show the management ability in ensuring its operation are in conformity with certain parameters[Uph11]. From an economic sense, it assists the organization in reduction of financial risks incurred directly from fines or indirectly through reputation. Compliance also affect the organization ability to expand or gain permits to operate in different areas in the world. vi. Privacy on customer information. The aspect as a performance measure in sustainability approach indicates a customer right to privacy on matter that include data protection, confidentiality and use of data for intended purpose. Customer privacy protection is considered a vital goal in the organization policy. The measure provides an evaluation of how successful the management systems and procedures in customer privacy protection. It poses risks in terms of finances in penalties and fines and reputation risks in terms of customer loyalty and satisfaction. Steps taken to encourage sustainability reporting For WealthWise Insurance to attain sustainability, the management function of the organization should incorporate its staff for attainment of the long term strategy and day to day operations[Ioa11]. The steps under discussion include; i. The organization needs its employees to distinguish and market the organization identity. Vision, mission and values make up an organization identity. Employees should be in a position to highlight the organization concepts and reason for existence. Employees should be able to identify concepts advanced by the corporation founder which is based on contributing to the society rather than maximizing profits[Loz111]. ii. Employees in the organization should be involved in the strategic plan that conceptualizes on its mission, vision, goals and niche. A strategic plan gives a roadmap of the company for a number of years. Employee support on the strategic plan will ensure the organization attains the requirements of the strategic plan. iii. An annual plan of operation and finance forms a pragmatic identification of activities that staff should be involved in. The staff need to identify activities that should be undertaken in annual plan which ensure sustainability[Uph11]. iv. The organization staff should ensure the organization has a long range fund-raising plan. The step include identifying funding needs and potential sources of income. The employees will seek for funds through sale of insurance premiums and other revenues from investments and report their accomplishments on a regular basis. v. The employees need support assessment of the strategic needs and organization objectives. The assessment by employees help create a plan that is beneficial to all the stakeholders in the organization vi. The staff are the main function of the organization. A competent and well respected staff are more likely to make the organization be sustainable. As such, a sustainable organization will invest in its employees, reward initiatives and competence and offer transparency and flexibility. The employees should thus support their evaluation and be involved in training and team building. Performance measurement system and attaining organization goals Performance measurement is described as process where information in reference to performance of an organization is collected, analyzed and reported[Mil131]. A performance measurement system will focus employees in achieving goals and results by concentrating on mission and objectives of the organization. Activities of the organization are aligned with organization goals through the help of a performance measurement system. References Amr11: , (Amran, 2011), ODw11: , (O’Dwyer, 2011), Mil131: , (Milne, 2013), Ioa11: , (Serafeim, 2011), Uph11: , (Upham, 2011), Loz111: , (Lozano, 2011), Read More