Storebrand ASA: Second Place in Global 100 in 2017
Presentation written by:
Adam McCarthy, email@example.com
Brian Cronin, firstname.lastname@example.org
Presentation supervised by: Assoc. Prof. Dr. Elena M. BARBU, email@example.com
Storebrand is a leader in corporate social responsibility and sustainability. With its dedication to the environment and its wellbeing, passion to deliver high quality and sustainable products to customers, ethical and non-discriminatory labour practices and anti-corruption attitude, Storebrand has consolidated itself as a company to be looked up to and to strive to be similar to when aiming to reach impeccable sustainability and corporate social responsibility targets.
This was recognised by Corporate Knights when they awarded Storebrand with second place in the Global 100 2017. Annually, the Global 100 determines which companies are getting the most out of their capital, maximizing employee performance, and making smart, efficient use of their resources. The results are release each year at the World Economic Forum in Davos, Switzerland. It is very extensive and uses data on 4,353 global mid-, large-, and mega-cap companies with a market cap from 2 billion dollars. Companies are then analysed using 12 unique “key performance indicators” that measure the firm’s management of resources, labour and finances.
However, the Global 100 is very volatile and Storebrand will have to work very hard to keep their prized second place position. For example, in 2016, BMW earned first place in the Global 100 but slipped to sixteenth in 2017. Storebrand cannot afford to get complacent. They must not rest on their laurels if they wish to keep their coveted ranking (Dill, 2016).
The first part will present general information about the firm, the second part discusses various strategy of corporate social responsibility, and the third part realizes an analysis of the situation.
- General information about Storebrand ASA
The complicated roots of Storebrand can be traced all the way back to 1767 when “Den almindelige Brand-ForsikringsAnstalt” was founded in Copenhagen, Denmark. After Norway split from Denmark, the insurance scheme changed headquarters to the capital of Norway, Christiania (now Oslo). It became a public-sector company named Norges Brannkasse in 1913.
Meanwhile, in 1847, the P&C insurance company “Christiania Almindelige Brand-forsikrings-Selskab for Varer og Effecter” was ‘incorporated by private subscription’. The firm was renamed ‘Storebrand’.
14 years later, Storebrand’s owners founded Idun, a private life assurance firm and by 1923 Storebrand possesses nearly of Idun’s shares. In 1925, Storebrand rebranded itself as “Christiania Almindelige Forsikrings-Aksjeselskap Storebrand”. The subsequent years up to 1970 saw the company taking over and merging with several other companies in the field. In 1936 they acquired Europeiske, Norway’s biggest travel insurance company, while in later years they also acquired the financially unstable Norrøna and Norske Fortuna.
However, competitors Brage and Fram completed a merger consolidating themselves as the leading life assurance company in Norway. This prompted Storebrand and Idun to respond by relocating to their own new premises in Oslo.
In 1971, the company was re-named Storebrand and subsequently, in 1978, rebranded with a new logo and the current trademark of “the link” (See Figure 1). Another merger followed in 1983 with The Norden Group. In 1984 Norske Folk and the aforementioned Norges Brannkasse became a single entity ’UNI Forsikring’. Then in 1991, Storebrand succeeded in merging with UNI Forsikring making it a considerable force in the Norwegian life insurance market (Storebrand, 2017).
Storebrand Recent History
In 2005 the Norwegian parliament passed legislation making it obligatory for firms to commence an occupational pension scheme before 2007. This was obviously a potentially very profitable decision for Storebrand and they subsequently introduced ‘Storebrand Folkepensjon’ to capitalise on the new legislation and demand for pensions.
With headquarters now in Lysaker, Norway, Storebrand delved into P&C-insurance in 2006 after many years out of the market. 2007 witnessed Storebrand acquire the Swedish company SPP making them the Nordic region’s largest firm in life assurance and pensions.
However, the stock market crash in 2008 had far reaching implications for Storebrand. The frightening crisis within the US stock market triggered a 54 % fall in the Oslo Stock Exchange. For financial security, potential mergers were considered such as with Gjensidige but ultimately, no acquisitions came to fruition.
Having survived the crisis, Storebrand began focusing heavily on innovation from 2012 onwards. Firstly, management began to re-shape the business around its most important stakeholder – the customer. A new “recommended by our customers” vision was launched in January along with six new promises to consumers. Furthermore, an updated set of core values and principles were introduced to keep existing customers and attract new ones. Odd Arild Grefstad was also appointed as the new CEO. Politically, 2013 saw the Norway government introduce new regulations permitting better pension options and increased saving rates. By making a new and enhanced product range available to customers, Storebrand managed to adapt to these changes successfully (Storebrand, 2017).
The number of Storebrand employees dropped from 1,887 to 1,745 throughout 2016. On average, employees spend 10 years working for Storebrand leading to a low employee turnover. With an average age of 43 and an almost half and half split between male and female employees, Storebrand’s workforce is very diverse and varied. The company does not discriminate on factors such as age, gender, religion or culture (Storebrand, 2017).
In 2016, Storebrand had approximately 40,000 corporate customers along with a considerable 1.9 million individual customers (Storebrand, 2017).
Storebrand endeavours to be the best at helping its customers save money when it comes to their pension. Corporate customers such as employees of companies with pensions from Storebrand make up a huge section of their market. To serve their needs to the best possible standard, they “will supply sustainable solutions adapted to the customers’ individual situation through market and customer concepts, so that each person receives a better pension” (Storebrand 2017).
Financial Situation (2016)
Turnover: 21,249 million NOK
Operating Income: 1,989 million NOK
Profit After Tax: 2,143 million NOK
Earnings per ordinary share: 4.73 NOK
*at the time of writing 1 Norwegian Krone equals 0.10 Euro
The next part will present the corporate social responsibility in Storebrand ASA.
- Corporate Social Responsibility in Storebrand ASA
Since 2005, Canadian magazine and research firm Corporate Knights has conducted the Global 100 study, an annual list of the world’s most sustainable companies (Kaufman 2017). In 2017, Storebrand came second, up from 24th position in 2016, thus becoming the most sustainable company in the financial sector worldwide (Figure 2). Furthermore, the firm is one of just a handful of companies to have been classed on the Dow Jones Sustainability Index (DJSI) for the past 17 consecutive years. This ranking system functions as “an integrated assessment of economic, environmental and social criteria with a strong focus on long-term shareholder value” (DJSI 2018), with Storebrand placing 11th globally in 2016 (Storebrand 2017).While a relatively small company in global terms, Storebrand has risen to become a beacon, a shining example to all of the impact a can-do attitude to social responsibility can make.
This report will examine this impact, both internally and externally, under the following headings:
- Environmental Protection
- Relations with Stakeholders
- Ethical Labour Practices
- Environmental protection
Firstly, insurance companies, such as Storebrand, are uniquely positioned to address environmental challenges such as climate change in their duties as risk managers, risk carriers, and investors (Jaeggi 2015). Indeed, it could be argued that promoting environmental sustainability could be in an insurance company’s best financial interests also, thereby minimising the potentially astronomical pay-outs associated with an increase in global warming-induced severe weather events.
Storebrand has published environmental reports since 1995, while sustainability reporting has been an integrated part of its annual report and certified by an independent party since 2008 (Storebrand 2017). These two initiatives were extremely progressive for their time; although founded in 1999, If P&C Insurance (a larger Swedish competitor) only devised their environmental strategy in 2008 for instance (If 2015).
Storebrand has been climate neutral since 2008. Emissions from plane travel and energy consumption are compensated for by means of purchasing credits from the The United Nations Programme on Reducing Emissions from Deforestation and Forest Degradation Programme (REDD) and Varied Carbon Standard. Additionally, Storebrand co-operates with Wildlife Works on the purchase of emission allowances from the Kasigau Wildlife Corridor in Kenya, a forest area of high biological importance which is under the threat of extinction (Storebrand 2017).
Furthermore, Storebrand has signed up to the United Nations’ ‘Global Compact’, which provides companies with a series of ten fundamental principles that can be integrated into a firm’s sustainability guidelines. Indeed, these guidelines have become the very fabric of Storebrand’s corporate ethos, pervading through the company in many ways, from the manner in which it engages with the environment to the procedures it uses in employee relations (Storebrand 2017).
For instance, Storebrand supports the UN’s human rights conventions, the UN’s environmental conventions, the International Labour Organisation’s core conventions and the UN Convention against Corruption. In addition, within the financial industry itself, the firm ascribes to the UN ‘Principles for Responsible Investment’ (PRI) and the UN ‘Principles for Sustainable Insurance’ (PSI). And while these initiatives strive to underpin a sustainable strategy internally within Storebrand, the firm also has broader, more far-reaching objectives. Indeed, its ultimate goal, where sustainability is concerned, is to make concrete its vision of a sustainable world in 2050; a world where 9 billion people live comfortably and within the limits of the planet. To help achieve this, Storebrand collaborated with several other large enterprises to develop such a vision within the framework of the World Business Council for Sustainable Development (WBCSD) (See Figure 3).
‘Vision 2050’, a consensus report compiled by 29 leading global firms from 14 different industries, acts as a tool for thought leadership and a platform for instigating the discussion that must take place globally to navigate the forthcoming challenging years. Its recommendations include incorporating the associated costs of negative externalities into the cost of goods and services, thereby providing companies a meaningful incentive to achieve Vision 2050’s ultimate objectives of halving carbon emissions and ceasing deforestation (World Business Council for Sustainable Development 2016).
- Relations with stakeholders
While there is no one universally-accepted definition of corporate governance, Monks and Minnow (2001) have broadly described it as “the relationship among various participants in determining the direction and performance of corporations”. Storebrand, through its Corporate Governance committee established in 2006, believes good corporate governance allows them to build positive relationships with its stakeholders by crystallising the legal and operational framework by which it directs and controls its activities (Storebrand 2017).
Indeed, Storebrand places its customer at the very heart of the organisation, through its brand vision “recommended by our customers”. The firm views success through the prism of a customer recommending their products and services to another person. When interacting with its customers, Storebrand works with sustainability across two parameters, through beneficial pricing when customers display sustainable attitudes and behaviours and by developing products and concepts intended to minimise and prevent long-term injury, disability and health problems.
In 2016, Storebrand struck a co-operation agreement with Norwegian start-up ‘Eyr’ to offer customers the option to have a doctor’s appointment on a smart-phone. The initiative allows customers to get treatment, prescriptions and referrals without the hassle of calling out to a medical centre, thereby getting employees back to work quicker and reducing the likelihood of permanent disability (Storebrand 2017). This project aligns itself with Storebrand’s global sustainable business model whereby insurance is seen as a positive tool to create a meaningful difference for both the individual and society in general.
Sustainability is also an important parameter when it interacts with its corporate stakeholders. Storebrand monitors whether its corporate customers run their businesses on the basis of socially responsible principles. For example, a company that promotes sustainable policies in the areas of health, environment and safety will be rewarded in the form of a lower price on employee insurance (Storebrand 2017).
Furthermore, in its role as an investor, Storebrand seeks to build a sustainable global economy by investing in businesses that have a socially responsible corporate culture. As a firm with significant influence worldwide through its vast array of investments, Storebrand is well-positioned to seize the major opportunities inherent to a transition to a green economy. Indeed, the company has devised the ‘Storebrand Standard’ which lists the criteria required for a company to be deemed sufficiently sustainable to warrant investment. For instance, Storebrand does not invest in the tobacco industry or the worst performers in climate measures in high-risk industries, and as of quarter 4 in 2016, it has excluded 178 different companies from potential investment (Storebrand 2017). In fact, Storebrand investment managers are actually subordinates of the sustainability analysts and thus, they cannot change their indices or remunerations or lobby to maintain a company in the portfolio for market reasons (Brzezinski 2013).
Long-term, continued dialogue with stakeholders and external monitoring are essential for successful sustainability progress over the longer term. It is important to ensure that Storebrand continues to be a transparent organisation, with a strong corporate governance procedural structure ensuring that there are several checks and balances when it comes to making key operational decisions.
- Ethical labour practices
Across all the measures examined by the Global 100 study, Storebrand performed most effectively on executive pay. Storebrand’s CEO gets paid just 12 times more than the average Storebrand employee. Although, on face value, that may seem like a significant pay gap, the mean salary for CEOs of firms in the Morgan Stanley Capital international ‘All Country World Index’ (ACWI) (a collection of stocks designed to represent a wide range of companies globally) is 115 times more than their firms’ average employee (Kauflin 2017).
By minimising its hierarchical pay gap, Storebrand has reduced its intra-organisational social inequalities in a socially responsible way. The average employee, while accepting the seniority of the CEO, can feel that the CEO is closer to them, creating a more inclusive organisation that listens to each individual employee. Furthermore, in a purely financial context, no compelling academic evidence exists linking excessive CEO salaries and increased shareholder returns. Consequently, not only is Storebrand’s salary policy a socially responsible one, but it in no way limits the profitability of the firm (Kauflin 2017).
Storebrand believes that its employees and their skills and competences are the lifeblood of the organisation. Skills development takes place by assigning challenging tasks to employees in their positions, that allow them to develop themselves for new requirements and tasks. The professional competence of employees is thus enhanced, so that it can in turn contribute to greater adaptability and a greater restructuring capacity for the organisation as a whole. Indeed, Storebrand has its own custom management development programme for employees, called the ‘Storebrand Academy’. It is of a one-year duration and in 2016, twenty employees participated (Storebrand 2017).
Diversity facilitates increased innovation and learning within a company. By the end of 2016, 41 per cent of Storebrand managers were female, while 48 per cent of all employees were female (Storebrand 2017). Indeed, the insurance industry as a whole is becoming more gender-diverse, with 70% of women in insurance believing the industry is making progress toward gender equality (Tuttle 2015). Currently, there are no significant differences in Storebrand salaries based on gender differences, however one must never be complacent and consistent monitoring is essential (Storebrand 2017).
Sarah McPhee, an American national who is CEO of a Storebrand subsidiary in Sweden, Storebrand SPP, believes the company gave her the opportunity to embrace the fact that she was different. She never felt restricted by informal rules of “the way things have always been done”; in fact, her “un-Swedish” nature of being up-front and a quick decision-maker was actually welcomed by the company as she ascended the hierarchical levels within the firm (Brzezinski 2013). In reality, Storebrand strives to ensure equal treatment and opportunities across all the internal and external recruitment and development processes. The firm has its own diversity committee, which in addition to working on gender equality also systematically works to include people from groups that are under-represented in the labour market, including disabled people and groups from diverse ethnic backgrounds (Storebrand 2017).
Lastly, Storebrand has a common code of ethics that is available on its intranet in three different languages. Notification routines, brochures, anonymous postbox, dilemma bank, question and answer summaries and presentations are all at an employee’s disposal on the intranet, while managers must confirm in writing that they have had discussions with their team members around ethics and ethical dilemmas, information security and financial crime on an annual basis (Storebrand 2017).
Furthermore, employees undertake e-learning courses, with 136 employees taking the ethics course and 148 taking the anti-corruption course during 2016. Indeed, management also take mandatory ethics courses which include segments on money laundering and corruption. By placing ethics to the forefront of the business and by accentuating its importance within training programmes, Storebrand create a culture where transparency and openness flourishes. In the financial sector, and especially in areas such as capital investments and insurance, this transparency is especially important in reassuring the customer that the company is reliable and trustworthy (Storebrand 2017).
- Analysis of the situation
The prevalence of socially responsible companies in Norway
It is frequently wondered why the Nordic countries, and Norway in particular, place such an emphasis on sustainability and social responsibility and perhaps it is due to its people’s modesty throughout history. Being a hunter-gatherer population originally, it had a miniscule nobility in its early years. From the early 1800s, Norway was greatly influenced by the Haugean principles of diligence, economic enterprise and frugality, and it is clear that some of these traits are pervasive within Norwegian companies such as Storebrand today. Of additional importance was the 1935 election of the Labour Party which successfully lobbied for social renewal and consequently, social welfare measures were established. These labour policies were highly progressive for their time and still exist to some extent today, ensuring the spirit of social responsibility still permeates through Norwegian corporate society to this day (Ditlev-Simonsen, von Weltzien Hoivik, and Ihlen, 2015).
The future for socially responsible companies
There is often a misconception amongst business people that one cannot be both socially responsible and profitable simultaneously; that the two are incongruous with one impeding the progression of the other. However, as Storebrand’s continued growth shows, this is simply a myth. In fact, in the coming years, being a socially responsible firm may be essential for a company to attract top talent. In 2006, the Cone Millennial Cause Study found that 80% of 13-25 year olds surveyed wanted to work for a company that valued its authenticity and cared about its contributions to society (Robins 2017).
Furthermore, Deloitte’s 2015 Millennial Survey surveyed 7,800 future leaders from 29 different countries and the general feedback was that the business world as a whole was getting it wrong. Some 75% said they felt businesses prioritised their own agendas instead of improving society, while only 28% say they feel their current organization is making full use of their skills (Poswolsky 2015). Lastly, a global online survey conducted by Nielsen (2015) found that 66% of respondents were willing to pay more for products from companies committed to making a positive social and environmental impact.
Consequently, it can be argued that Storebrand has been ahead of the curve all along. With strong corporate governance structures in place, a gender diverse workforce and the ‘Storebrand Standard’ for guiding potential investments, Storebrand is well-placed to maximise the potential of the millennial generation – both as employees and as customers.
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Figure No. 1: The Storebrand trademark
Figure No. 2: The Top 10 World’s Most Sustainable Companies 2017
Figure No.3: Vision 2050