NAB: Carbon Neutral – Staff Engagement Positive

By Jane Farago, Climate Alliance Limited

"I’m so proud to be working for this bank." Late in September 2007, emails like this started pouring into the inbox of then NAB Group CEO John Stewart. What could generate this kind of organisational patriotism in a bank? It wasn’t their new home lending rate, a merger deal, or even a pay rise. Stewart had just announced that the bank was to become carbon neutral by September 2010.

While Australia continues to debate the merits of reducing its carbon footprint, one of the nation’s largest firms has quietly been taking decisive action. It’s a process that has fed neatly into company strategy, unlocked new relationships with both customers and suppliers and, above all, unleashed an amazing boon in staff engagement.

Four years ago, An Inconvenient Truth and The Stern Review were stirring up the maelstrom of debate about climate change that continues today, and NAB Australia’s then CEO, Ahmed Fahour, was concerned that the organisation didn’t have a position on the topic, or an understanding of its impacts on their business. He drafted Darren Clarke in his strategy team to look into it. Clarke, who says he had ‘no green credentials’, turned to a number of individuals within the bank whom he knew to have an interest in the subject. He soon found others were approaching him, eager to get involved. He was astonished to find that before long, 50 people from all areas and levels of the bank were offering their advice or support.

With this input, Clarke’s team identified a number of opportunities and risks hinging on climate change. The risks included credit risks to key sectors serviced by the bank, and the opportunities included the ability to advise clients, to develop new lines of business and to improve the performance of the business by becoming more efficient. To address the risks and take advantage of the opportunities, Clarke realised that the organisation needed to learn more, and the best way to do that was by ‘putting their own house in order’. He put forward a recommendation that the bank embark on a journey to become carbon neutral.

“People took it seriously because it was couched as an adaptive business problem, not just an environmental issue,” says Clarke. The strategy was customer-oriented, looking to capture commercial opportunities and provide leadership. Staff engagement didn’t feature strongly in the proposal, but it was the enthusiasm of those 50 people, as much as the strategic alignment that persuaded the bank’s Executive Committee to endorse the proposal, with a tight three-year timetable. The 50 were not unrepresentative. Staff surveys, forums and feedback all reflected a desire among staff to work for a company with a commitment to social and environmental benefit.

“There wasn’t a detailed business case,” recalls Company Secretary Michaela Healey. “It resonated with us, and we thought, we don’t know how we’re going to get there, but if we don’t have the goal we’re not going to figure it out.” When it reached the Board, the issue that is dividing the nation caused barely a ripple. Even though Board members may not have been personally committed to the goal, they saw the alignment with the bank’s strategy and reasoned that ‘if our employees and our businesses are behind it, we see no objection to it.’ They also recognised the need for top-tier companies to show leadership in the area.

One thing they were clear about was that this was not to be an exercise in ‘greenwashing’, says Healey. “The Board was quite clear that it would not be undertaken if it were just about marketing.” For NAB, corporate responsibility and staff engagement are core parts of strategy. They are seen as a part of business sustainability, which rests on their licence to operate in the community.

Once the announcement was made, the hidden bonus of staff engagement exploded like a piñata spraying sweets – starting with that overflowing inbox. Staff from all over the organisation wanted to play a part. Trevor Moore, Head of Environment and Sustainability, had hands-on responsibility for meeting the reduction targets, and acted early to harness this enthusiasm. “We could have treated this as a discrete project with a small team, but we realised very early that there were huge benefits in involving the whole staff. People want to know what they can do to contribute,” says Moore, and his team ensured that they shared that knowledge.

The bank used both top-down and bottom-up approaches to drive engagement. Despite the spontaneous grassroots enthusiasm, it was recognised that the visible support of senior staff is a key factor in driving culture change. Members of the Executive Committee starred in a series of short, humorous videos promoting sustainable behaviours, which were distributed virally through the organisation. This strong leadership helps to create a culture in which environmentally responsible behaviour is the norm.

And they ‘walk the talk’. A commitment to social and environmental values is part of the ‘unique DNA’ of NAB’s senior leadership, says Michaela Healey. She proudly shakes her key for Melbourne Bike Hire, which she uses to zip between meetings at NAB’s various offices around Melbourne’s CBD. Meanwhile CFO Mark Joiner recently cycled across the deserts of America raising money for biodiversity. One executive after another list posts on non-profit Boards alongside their business credentials. “This group doesn’t come from typical conservative backgrounds”, says Healey.

Leadership of implementing the initiative was given to Gavin Slater, Group Executive, Group Business Services. It’s no coincidence that Slater’s portfolio includes not only Trevor Moore’s sustainability team, but – more significantly – property and IT, NAB’s two biggest sources of emissions. This meant that the program was structurally as well as strategically aligned. The experience has altered Slater’s perspective on these areas of operation. “Energy is a relatively small part of our cost base,” concedes Gavin Slater, “but every part of the cost base requires focus and attention. We need to support a business with increasing expectations but keep costs down and maximise productivity. The initiative is well aligned with those goals.” For example, the bank now organises its IT around energy efficiency, which simultaneously drives operational efficiency.

Both Slater and Moore were careful not to be too prescriptive, but to allow solutions to come from the people closest to the source. So when Moore recognised the rapidly growing energy use of the bank’s centres, he went directly to the IT engineers and laid out the problem. They came back with a range of possible solutions. Similarly, by rolling out a series of staff-wide campaigns – in paper reduction, for example – he enabled staff at all levels to engage with the problem and feel that they were personally contributing to the reduction target. In some cases, merely stopping to think can be powerful. Group CEO Cameron Clyne recently decided to start signing off on all international travel; it has dropped by 60%.

The bottom-up approach came from providing a structure of ‘green teams’ to empower keen staff. Three years into the program, there were over 800 staff involved. Green teams come up with their own local initiatives to reduce waste and save energy, and compete across the country to see which business units can deliver the best results. Exercises like this not only produce efficiencies, they also inspire innovation – something all organisations are hungry for.

The Green teams also act as intermediaries able to ‘translate’ the messages from the executives into the idiom of frontline staff. “It enables customer-facing staff to talk confidently – and voluntarily – about what we’re doing” says Slater. “That kind of staff engagement also makes our staff into ambassadors in the community – they’re happy to talk about the bank and even encourage people to bank with us.” The comment is borne out by chance encounters with various NAB staff over the course of preparing this article – all were noticeably enthusiastic about their employer.

The behaviour of individual employees plays only a small role in achieving the reduction targets – but it plays a large role in engagement. And it is a point of difference between this and the bank’s other corporate social responsibility initiatives. Staff may be proud of the Schools First program, but only a few have a direct hand in it, whereas everyone can ‘do their bit’ to reduce carbon by using less paper, flicking off a switch, or opting for a teleconference instead of travel.

If we take NAB’s 27,000 Australian staff as a reasonably representative slice of society, their experience makes an important comment on attitudes to climate change. It seems that most people are eager to get involved in action if they are given just a little encouragement, some direction from the people they look up to – and the feeling that their personal contribution is valuable.

The results have been impressive, and show just how much ‘low-hanging fruit’ there is in carbon emissions. With the support of its employees, NAB has shot past its emissions reduction target of 20% to achieve 25%. Admittedly, some upfront investment was required to achieve this – including $6m for a tri-generation power plant in the Melbourne data centre. And these investments also feed into staff engagement by validating executive commitment, giving staff the confidence that their own actions are part of something bigger.

Remarkably, all investments met the bank’s standard hurdle rates of ROI and payback period. Because all residual emissions would be offset – at a cost – that cost of carbon was built into calculations. This provided a consistent method of approaching choices – solar panels or offsets, for example. Some might feel that using a carbon price distorts the true value of the investments. But that is to look only at the direct cost savings from energy efficiency; the collateral gains in staff engagement and productivity don’t appear on the spreadsheet.

Even the process of buying offsets has provided unexpected benefits. The bank expected it to increase its capability in the growing field of carbon trading – which it has achieved. But the choice of offsets with a ‘feelgood’ factor has also fed into staff engagement. For example, a Thai power plant fed on discarded rice husks is also helping fund a local school. NAB staff feel proud to have a direct link to projects such as this.

In spite of all the positives, Michaela Healey is still cautious of declaring the program a success in pure business terms – especially whilst investors remain focused on the short term and are largely uninterested in green credentials. Slater is more confident. “I’ve worked here 11 years,” says Slater, “and I’ve never seen the staff as engaged as they are now.” This is reflected in the wealth of data that the company gathers on staff engagement – even the 85% participation rate in the voluntary survey speaks volumes. They also know from feedback that the bank’s environmental and corporate responsibility agendas are a key attraction for new job applicants.

“If you get good alignment between what we say we stand for and what we actually do, that absolutely drives engagement and authenticity as an organisation, which ultimately translates into bottom line benefits. That’s not just about a reduced energy bill, it works more broadly for business performance.”

That philosophy reflects an emerging consensus in the business literature around ‘doing well by doing good’. Corporate social responsibility is most powerful when it is aligned with, and integrated with, strategy - rather than treated as a philanthropic bolt-on.
All the ‘big four’ banks have come under criticism from environmental groups for their financing of polluting industries, especially coal. When you run a values-based campaign, this exposes you to accusations of hypocrisy. CFO Mark Joiner argues that it’s ‘not the bank’s moral right to withhold credit from a robust business model because they’re not ideologically aligned with them.’ Rather, he sees their role in closing the gap between regulation and values as influence through demonstrating leadership.

The other way they have influence is through the cost of credit. “Climate change as a risk filters through to decision making on financing,” says Healey. “Risk is natural to a financial institution. It affects how products are priced – how prepared businesses are for risks or what investments might be required.”

This influence is not restricted to financing coal projects; it filters down to local branches. And here again, the involvement of staff in the process pays off. “Because of this experience, our staff feel confident to talk to customers about reducing their emissions,” says Slater. “For us as a business, and for the businesses we finance, it makes sense to reduce waste.”

Trevor Moore talks about the bank’s ‘circles of influence’ – staff, customers, competitors, and suppliers. Sustainability questions now form part of their procurement process. Moore, who manages the bank’s large property portfolio, notes another surprise bonus. The process of retrofitting its offices and branches for energy efficiency has changed the quality of NAB’s relationships with its landlords, becoming a partner and advisor, rather than simply a customer.

The executives we spoke to readily concede that this initiative is far less onerous for a service organisation than it would be for one in an industry like mining or manufacturing. But whether or not they choose to take it as far as NAB, all organisations could do worse than to give staff the opportunity to contribute to an initiative that benefits both the business and society.