Link between risk and sustainability has never been greater

The risk of not developing a sustainable approach to business has never been greater, according to a group of Swiss risk managers meeting recently in Zurich as part of our Risk Frontiers Europe survey. The group said risk management plays a fundamental role in supporting the sustainability agenda. Vito Fortunato, insurance manager at retail giant Migros, said: “We take sustainability extremely seriously and for us it runs deep through the company.” For example, he said Migros does not sell alcohol, tobacco or e-cigarettes and has a strict enforcement policy. “For us it is about credibility,” said Mr Fortunato. The company also stops short of investing in other businesses that might breach its internal ethics. This includes banks or pension funds it considers unsustainable. However, such a stance is not always easy. Carsten Schirmeisen, head of group insurance and risk financing at LafargeHolcim, said sustainability is a huge opportunity for his company. But working towards a more sustainable business model – and getting buy-in from customers for more environmentally-friendly solutions – remains a challenge, he added. Mr Schirmeisen explained that as a global leader in building materials, LafargeHolcim’s portfolio is heavily based on cement. Cement is a fairly CO2-intensive product, due to its inherent chemical reaction and heat required for the reaction. Although Mr Schirmeisen argues that cement is sustainable because it is made of local materials and must not be transported over long distances, perceptions are not always a true reflection of reality and the company is working hard to reduce its carbon footprint. In its tenth sustainability report, LafargeHolcim underlined that it has reduced CO2 emissions per tonne of cement by some 25% since 1990. “It is a massive undertaking,” he confirmed, and relies heavily on risk management. The company continues to run several projects aimed at being the most CO2-efficient global cement producer. These range from adjusting product mixes, to using alternative fuels and investing in solar and wind farms to reduce local CO2 emissions. And insurance plays an important part in this conversation. “We need a partner who can work with us that has a similar approach to sustainability and can provide solutions in this regard. It is not just about premium but about appetite for the risk, delivering good service,” said Mr Schirmeisen. “We are very ambitious in terms of our carbon footprint and sustainability, and we want our insurance partner to understand that,” he added. Pauline Davoust, risk manager at airline catering company Gategroup, said sustainability is on her agenda. “In addition to our overarching corporate responsibility approach, we are addressing the issue in response to requests from our airline customers. They have realised the challenge for their companies and are looking to all their suppliers to play their part,” she said. The risk managers agreed that there are two sustainability conversations running in parallel. The first is at a high level, while the second is very practical and about changing day-to-day operations. Both require risk management input, they said. On the practical side, one of the challenges Switzerland faces is supplying sufficient volume of goods to its people. As a landlocked and mountainous country, it has some unique challenges in keeping pace with demand. Ines Surholt, corporate non-marine risk and insurance programme manager at Nacora International Insurance Brokers, said: “Supply chain risk management is a vast topic. Next to logistics performance capabilities, it is equally important to consider the suppliers’ sustainability footprint.” Adding: “Supply chain risks may put reputational pressures on companies. Customer relationships may be negatively impacted by news of unsustainable partners or practices within the supply chain. However, there will always be competing interests between the fastest and most cost-efficient logistics solution and the most sustainable way in managing logistics.” The group questioned whether sustainability will become a competitive issue. On the one hand, being more sustainable might encourage customers to support a firm. But on the other hand, it can skew the cost base. As one of the risk managers said: “Supplying the UN with products, for example, has meant we have had to comply with all sorts of targets that we would not necessarily do for other customers. But it does mean that we are increasingly sustainable.” The group also discussed if sustainability is really a new topic. They concluded that, in reality, it has been on the radar of certain companies, notably those in the oil and gas sector, for decades but has gained the public’s attention relatively recently. Daniele Zucchi, captive manager at Saipem/Sigurd Rück, suggested that many companies have been making huge efforts to improve their sustainability for years. This has involved going above and beyond simply looking after company profits to actually benefitting local communities. However, he acknowledged that the past year has seen a major shift in how this is communicated and how it needs to be communicated. Sustainability has come on the radar of risk departments like never before as companies must be seen to be doing the right thing, he added. Sabrina Hartusch, global head of insurance at Triumph Holding, highlighted how the textile sector had suffered from bad press in past years because of working practices in Asia. “How people are treated is also about sustainability,” she said. “I think the mindset has shifted in the textile industry and we understand that, but that shift is still to come in other sectors,” she added. Ms Hartusch’s company now employs a specific environmental, social and governance specialist. “We have always considered it as an issue but now there is a real person for people to engage with,” said Ms Hartusch. And giving visibility to the way her company handles sustainability is, crucially, reducing reputational risks, she added.

Link between risk and sustainability has never been greater

Want to read this article?

Read Next

Alternative solutions and specialty drive Scor’s Q1 growth

AXA XL names new client and distribution officer in APAC and Europe

Costs rapidly rising for employee health insurance in Portugal

UK market must innovate rather than exclude emerging risks: BIBA

EC probes Meta for alleged breaches of Digital Services Act

Alternative solutions and specialty drive Scor’s Q1 growth

AXA XL names new client and distribution officer in APAC and Europe

Costs rapidly rising for employee health insurance in Portugal

UK market must innovate rather than exclude emerging risks: BIBA

EC probes Meta for alleged breaches of Digital Services Act

Want to read this article?

Read Next

Alternative solutions and specialty drive Scor’s Q1 growth

AXA XL names new client and distribution officer in APAC and Europe

Costs rapidly rising for employee health insurance in Portugal

UK market must innovate rather than exclude emerging risks: BIBA

EC probes Meta for alleged breaches of Digital Services Act

Related Articles