Sustainability Directive big opportunity for risk managers but will require more resource, says rapporteur
Big question is who is willing to pay for sustainable practices
The Corporate Sustainability Due Diligence Directive (CSDDD) will enable risk managers to get the attention of boards but will cost companies a lot of time and money to implement, said Dorien Rookmaker – member of the European Parliament, co-rapporteur of the CSDDD and a former risk manager – at Commercial Risk’s Risk Frontiers Benelux Conference 2023.
Giving her keynote speech at the event in Antwerp, Rookmaker said risk management can be seen as a “nuisance” by executives. “Most boards don’t like risk management reports and don’t like risk management at all,” she said candidly.
But Rookmaker said the CSDDD will give risk managers the chance to turn this around, not least because the CEO’s bonus may depend on compliance with the regulation.
“If the company is not compliant, you could be in a situation where the CEO has to hand over their bonus,” she told the ESG: The New Frontier of Risk and Insurance Management conference, held in association with Belgian and Dutch risk management association Belrim and Narim.
Beyond the CEO, boards will be directly responsible for the CSDDD and wider ESG regulations coming through the EU. They will need the support of risk managers to deliver on this requirement.
“If the risk manager can translate and communicate the risks that are involved with ESG, and can incorporate it into the enterprise risk management system, then they will have no problem anymore getting their message across to the board. Because the CEO and other board members will be directly responsible for the risk management of the ESG risk, so they will take it seriously. It is no longer the case that your risk management report goes off the agenda because there is something more important. They will discuss it,” said Rookmaker.
Rookmaker said that the CSDDD will require companies to better assess, measure and mitigate their risks. But this will come at a cost, she added at the conference partnered by Allianz Commercial, Aon, Chubb, HDI, Howden and CMS.
“I am experienced with Basel II, and I know it will take you a year or five to implement it, with a lot of extra people. It will cost you big time… it will be far more difficult than it used to be, and it will cost far more,” he said.
In the panel debate that followed the speech, Carl Leeman, chief risk officer at Katoen Natie, agreed that the CSDDD and wider ESG rules are a big opportunity for risk managers. He said that companies will need a lot of people working full time on ESG reporting, certainly in the beginning. “So there is a lot of uncertainty, a lot of extra costs, and you are still in a grey area,” he added.
Leeman also noted that everyone wants to become green and sustainable as long as they don’t have to pay for it.
He said his company has proposed logistics solutions to clients that involve shifting from trucks to barges. However, while barges are much greener and have far less CO2 emissions, they are more expensive, and so only a fraction of clients agreed, he explained.
Leeman also said that Katoen Natie has acquired its first electric trucks but they are three times the cost of a normal truck.
“And that will be the big debate in the whole issue of sustainability – who is willing to pay for it?” he said.
He predicts that everybody will try to get as green as they can without the costs, and that will be a difficult balance.
