April 21st, 2022 | News & Insights

Is ESG just Corporate Social Responsibility (CSR) by another name?

Shân Millie – who chairs Day 2’s Sustainability/ESG Seminar in discussion with Simon Colvin (Weightman’s), Simon McGinn (Allianz) and Vasilka Bangeova (Guy Carpenter) – says it would be a mistake for Insurance professionals and leaders to think that.

Not so long ago it, it was possible to separate completely what made a business successful financially, from both the societal context in which it operated, and the societal impacts of what it did, sold, made or invested in. In essence, the firm and its Board could demonstrate strong financial results, publish an annual Corporate Social Responsibility (CSR) report, and consider ‘job done’. That is no longer the case.

In 2022, civic society, investors, your current and future Talent and increasingly regulators are setting new and different expectations of how the firm articulates ‘where you stand’ on the (growing) range of Environmental, Social and Governance issues encapsulated in ‘ESG’. Whether its Class Actions on Climate (inaction and/or ‘greenwashing’), reputational (and bottom-line) damage arising from perceived inaction on Human Rights violations in the supply chain, or civic society activism in response to the corporate response to the Russian aggression in Ukraine – expect to be called out.

Where the 2006 Companies Act (the foundation of CSR reporting applied only to quoted companies, ESG knows no such limits. Every firm, from micro- to global, is part of someone else’s (Environmental, Social and Governance) supply chain: many SME brokers will already be aware that their insurer partner cannot meet their Net Zero commitments unless they too are with that programme i.e. setting their own Net Zero policy and credible plans to achieve it. Who decides what is a ‘credible’ plan for an SME broker? That question, and many others, is yet to be answered in anywhere like sufficient detail. I think it’s inevitable that ‘blueprints’ will emerge in 2022, but  I also think this is a test of Leadership: just as insurer partners support their broker partners and networks with compliance, business development and other expert capabilities, so specific and focused support on ESG should be part of the commitment to ‘grow together’.

Do those insurers and large brokers have ESG completely ‘sussed’ yet? In my experience, no, but getting to that point is considered by many to be an Operational and Strategic Resilience goal of the highest importance in 2022. For them, ESG isn’t just CSR with a few bells and whistles: it is a data-driven probe into how the firm defines and generates Value way beyond the Profit & Loss; the rules (metrics, standards) are being developed and set by others (from investors and regulators to Civic Society players like Insure Our Future); and how the firm ‘scored’ has the power to move EDITDA valuations, all-important Buy-Sell-Hold verdicts, credit ratings, Talent retention and acquisition and more, decisively, at breakneck speed.

All this takes us a world away from the annual commentary, that told the story the firm wanted to tell in the way it chose to, on optional activity like charitable giving and community engagement, right?

It also makes for a fascinating and important conversation on Thursday 12 May with a panel of leaders who are in the thick of it for their firms, clients and partners. I look forward to seeing you there.

 

by Shân M. Millie, co-founder GreenKite Associates