Risk managers have role to play in sustainability, but be clear what it means

Corporate sustainability is a very broad term that is defined in about as many ways as risk management itself. Just as with the discipline of risk management, there is no single and clear definition of what sustainability actually means, except for the fact that most people agree it’s a good thing. If pressed, most people would say sustainability is all about saving the planet, adapting processes, inputs and outputs to ensure a corporation’s activities do not have a negative impact on the environment. Investopedia has a decent, if rather broad, definition. It defines sustainability, in a corporate sense, as the “avoidance of the depletion of natural resources in order to maintain an ecological balance”. But while most people think environmental when asked about sustainability, it is generally accepted that there are four main types of sustainability: human, social, economic and environmental. There is certainly a degree of overlap between the four categories. So, when discussing corporate sustainability, it is important to clarify exactly which form is under discussion or, just as with risk management, the conversation can become overly broad, woolly and theoretical, with little practical value. The group of Dutch risk managers gathered for this year’s Risk Frontiers Europe discussion were asked how risk and insurance managers can and should be involved in sustainability. The response was understandably varied and underlined the simple fact that, while most people and companies are waking up to the importance of sustainability, it remains a rather ill-defined subject area that is very much a work in progress. But there were two salient points to emerge from this part of the discussion. First, sustain-ability is important but, at the same time, people must recognise that it can come at a cost and therefore has to be justified. Second, the insurance market needs to step up to the plate and offer innovative solutions to help firms embrace sustainable technologies and ways of working. Adri van der Waart, Narim president and corporate insurance manager at Arcadis, a global design, engineering and management consulting company based in Amsterdam, said the Narim board has discussed how risk and insurance managers can help support the drive towards sustainable development, particularly in terms of the environment. He said the answer is as much individual as corporate. “At my company, sustainability and sustainable solutions are a core value now. From an individual perspective, you have to ask yourself: will I travel by car or train? From a risk and insurance perspective, the question is quite different. We would all like to choose our insurers based upon their sustainability and environmental policies. But if the sustainable insurer is more expensive it is going to be tough trying to convince the CFO!” he said. Hans Berkers, director of risk management EMEA at Johnson Controls International, a global diversified technology and multi-industrial leader, said sustainability is an extremely broad term that can mean many different things depending upon what a company does. The role of the risk and insurance manager in the process will very much depend upon the type of company and its structure, he said. “At a basic level, sustainability for us is to make sure a building does not burn down, so it is sustainable – it is about safety and ensuring that people are not killed as a result of corporate activity. Sustainability means different things to different people. Should we as risk and insurance managers own the subject? No. It is up to the company as a whole and all individuals,” he said. Ronald de Vos, corporate insurance manager and legal counsel at Nutreco, an Amersfoort-based global leader in animal nutrition and aqua feed, echoed his colleagues’ comments. He added that from his perspective, the insurance market has a potentially important support role to play in this increasingly crucial area. “Our role as risk and insurance manager is to support the company’s effort to work in a sustainable way. Our mission, for example, is to help feed nine billion people by 2050 and this has to be done in a sustainable way. If the world continues on its current route, we will need two planets by then! So, there is a lot of effort being made to develop sustainable products and ways of producing. This can be risky because you are naturally breaking barriers and this is sometimes something new for insurers. We have to find risk transfer solutions that are more enabling. We can help with that by pointing out the risk involved in new activity. I like the idea of picking insurers that work in a more sustainable way, but there are not so many of them nowadays. The merger and acquisition activity of recent times presents a problem of choice,” he said. Titus Tiel Groenestege, director of safety, risk and insurance at Pon Holdings, a Dutch transportation conglomerate, agreed that risk managers and insurers have an important role to play in the push for a more sustainable path. He stressed that it is critical for risk experts to look for unintended consequences of new products and technologies developed in the name of sustainability. “We have to look for the role that risk and insurance can play in this. Sustainable development has implications and knock-on effects that need to be taken into consideration. If we sell 800,000 bikes annually and 40% of those are e-bikes, then that means a lot of new batteries that have to be stored and transported,” he said.

Risk managers have role to play in sustainability, but be clear what it means

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