Recast of procurement policies and procedures enables carriers to rapidly strengthen their support for environmental and social sustainability.
Insurers can expect their sustainability commitments to be scrutinized until 2021. They can take great strides forward by carefully managing their procurement of goods and services – such as major carriers Zurich Insurance, Allianz and Swiss Re uses its procurement costs to promote sustainability within its own organizations and among its suppliers.
It is important for insurers to adopt sustainability as an integral part of their business 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 turn into what I described earlier in this blog series as "sustainable insurance companies". Such far-sighted insurance companies put sustainability at the center of all their most important decisions. They consider the possible impact of their decisions on the environment and on all spheres of society.
Business strategies that successfully include sustainability must address a wide range of business functions and resources. I have already discussed the importance of sustainability ecosystems that can provide insurance companies with a network of partners to help them achieve their sustainability goals. I have also talked about how insurance providers can use digital technology, especially cloud services, to increase their support for sustainability.
So how can they also use procurement as a lever?
Procurement gives insurers many opportunities to quickly increase their commitment to sustainability. By modernizing their procurement policies and procedures, carriers can quickly improve their sustainability information. 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 particularly ripe for sustainability improvements. If offers insurance companies the opportunity to encourage green energy and reduce demand for fossil fuels.
Well-maintained supply chains reduce the risk of reputational damage.
Several large insurance companies in Europe have already identified procurement as an important element in their efforts. to improve durability. Zurich Insurance, Allianz and Swiss Re, as well as other airlines such as Munich Re and AXA, have adapted their suppliers' codes of conduct to the principles of the UN Global Compact (UNGC). These principles prohibit slavery and discrimination and promote human rights, environmental protection and sustainability in supply chains.
Sustainability-focused management of the supply chain enables insurers to move forward towards their own sustainability goals while encouraging other companies to move forward with them. It can also reduce costs, increase profitability and increase shareholder value. In addition, improved controls in the supply chain can reduce the risk of reputational damage that an insurer may suffer through the actions of one of its suppliers.
- Zurich Insurance, the highest ranked insurer in the Dow Jones Sustainability Index 2020, has developed a global sustainable sourcing vision to strengthen its commitment to sustainability. The vision, which supports the UNGC principles, provides a framework and set of values to ensure that sustainability is an important factor in all the company's purchasing and procurement decisions. It takes into account the suppliers' social, environmental and ethical behavior. Zurich also works with its suppliers to promote social and environmental initiatives. It partnered with Ninety Consulting, for example, to fund a clinic in Kenya. It has 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 improve its contribution to sustainability. By the end of 201
- Swiss Re uses EcoVadi's sustainability assessment platform to see if its suppliers meet its UNGC-compliant group purchasing standard. The platform enables the insurer to systematically measure the performance of its suppliers and, if necessary, help them improve. Swiss Re planned to have evaluated all its major suppliers, which together will receive about 80 percent of the insurer's expenses, by the end of 2020.
- Munich Re expects its suppliers to comply with UNGC principles. By the end of 2019, compliance with the UNGC principles had been introduced in almost 80 percent of its framework agreements with suppliers.
- AXA requires its suppliers to comply with ILO principles prohibiting child labor, forced labor and discrimination, and to promote employee well-being and freedom of expression. It has also carried out a risk assessment of corporate responsibility for its suppliers to measure their contribution to environmental and social enhancement, the impact of their services and products on end users, the quality of their supply chains and the integrity of their companies.  As we move further into 2021, insurers will increasingly need to demonstrate their commitment to sustainability. By improving their handling of procurement methods, insurance providers can strengthen their support for sustainability while encouraging their business partners to follow their example.
In my next blog post, I will look at another powerful leverage that insurers can activate to become "Sustainable Insurance Companies". I will discuss how insurers can use their roles as financial investors and real estate financiers and managers to promote their commitment to sustainability. For more information on how insurers can increase their support for sustainability, take a look at the links below. Or send me a message. I would like to hear from you.
Decade to Deliver: UNGC-Accenture Strategy CEO Study on Sustainability.
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