The overhaul of policies and procedures enables transport companies to rapidly strengthen their support for environmental and social sustainability.
Insurers can expect their commitments to sustainability to come under increasing scrutiny in 2021. They can make great strides by carefully managing their purchases of goods and services, such as the major transportation companies. Zurich Insurance, Alliance, en Swiss Re who use their procurement spending to promote sustainability within their own organizations and among their suppliers.
It is essential that insurers embrace sustainability as an integral part of their corporate strategies to meet the demand for sustainable solutions from all spheres of society, to manage increasingly complex risks and to develop new business solutions. They need to transform themselves into what I described earlier in this blog series as ‘sustainable insurers’. Such far-sighted insurers put sustainability at the heart of all their key decisions. They consider the possible impact of their decisions on the environment and on all spheres of society.
Corporate strategies that successfully embrace sustainability must address a wide range of business functions and resources. I have already discussed the importance of sustainability ecosystems that insurers can offer a network of partners to help them achieve their sustainability goals. I also talked about how insurance providers can use digital technologies, especially cloud services, to increase their support for sustainability.
How can they also use acquisition as leverage?
Acquisition offers insurers ample opportunities to quickly increase their commitment to sustainability. By refining their procurement policies and procedures, carriers can quickly improve their sustainability evidence. For example, they can choose service providers who are committed to sustainability initiatives such as environmentally friendly manufacturing, employment diversity or job creation in low-income communities. Energy procurement is especially ripe for sustainability improvements. If insurers offer the opportunity to encourage green energy and reduce the demand for fossil fuels.
Well-managed supply chains reduce the risk of reputational damage.
Several major insurers in Europe have already identified purchases as an important feature of their quest to improve sustainability. Zurich Insurance, Allianz and Swiss Re, as well as other transport companies such as Munich Re and AXA aligned their codes of conduct for suppliers with the principles of the United Nations Global Compact (UNGC). These principles prohibit slavery and discrimination, and promote human rights, environmental protection and sustainability within the supply chains.
Insurers can manage with sustainability-oriented supply chain to advance their own sustainability goals, while also encouraging other businesses to progress with it. It can also reduce costs, increase profitability and increase shareholder value. Furthermore, improved supply chain control can reduce the risk of reputational damage that an insurer may suffer as a result of the actions of one of its suppliers.
- Zurich Insurance, the best judge in 2020 Dow Jones Sustainability Index, has developed a global vision for sustainable procurement to strengthen its commitment to sustainability. The vision, which supports the UNGC principles, provides a framework and a set of values to ensure that sustainability is a key factor in all of the company’s decisions and acquisitions. It considers the suppliers’ social, environmental and ethical behavior. Zurich also works with its suppliers to promote social and environmental initiatives. It worked with Ninety Consultingfor example, to fund a clinic in Kenya. It also, together with the Wildhearts Group, funded programs that address gender inequality and promote social mobility.
- Allianz has been particularly effective in using its procurement activities to enhance its contribution to sustainability. By the end of 2019, approximately 97 per cent of its suppliers, responsible for joint € 1.8 billion invoices, had committed to the Allianz seller code. The code is in line with the standards of the UNGC and the International Labor Organization (ILO). Allianz has also reconfigured some of its ordering systems to prioritize sustainable solutions and is reviewing its motor fleet policy to limit the use of fossil fuels.
- Swiss Re uses the EcoVadis sustainability assessment platform to see if its suppliers meet its UNGC-aligned group procurement standard. The platform enables the insurer to systematically measure the performance of its suppliers and, where necessary, help them improve. Swiss Re planned to assess all its major suppliers by 2020, which together receive about 80 percent of the insurer’s expenses.
- Munich Re expects its suppliers to adhere to UNGC principles. By the end of 2019, compliance with the UNGC principles had been implemented in almost 80 per cent of its framework agreements with suppliers.
- AXA requires its suppliers to adhere to the principles of the ILO, which prohibit child labor, forced employment and discrimination, and promote the well-being and freedom of expression of employees. It also implemented a risk assessment of corporate responsibility of its suppliers to measure their contribution to environmental and social upliftment, the impact of their services and products on end users, the quality of their supply chains and the integrity of their businesses.
As we move further into 2021, insurers will increasingly have to show their commitment to sustainability. By improving their management of procurement practices, insurance providers can strengthen their support for sustainability, while also encouraging their business partners to follow suit.
In my next blog post, I will look at another powerful lever that can enable insurers to become ‘sustainable insurers’. I will discuss how insurers can use their roles as financial investors, and real estate financiers and managers to advance their commitment to sustainability. See the links below for more information on how insurers can increase their support for sustainability. Or send me a message. I would like to hear from you.