ESG is commonly associated with the environmental profile of a business, but the other aspects – social and governance should – not be overlooked. Ethical practices are a key consideration as ESG also covers the societal impact of a business and the way it is governed.
Demonstrating compliance with ESG is not always straightforward for an insurance business. It is one matter to announce a commitment to ESG and the related policies, but it is another matter entirely to be able to back that up with clear evidence that it is in place and delivering results.
Transparency over ESG commitments can serve as effective reputation management and improve how businesses are perceived by not only stakeholders but also the wider public. Conversely, any ESG claims proven to be false or exposed as greenwashing have the potential to seriously harm the reputation of a business.
“It’s not only whether a company is compliant or not, it’s also the perception within the society that the company is contributing to a better world” explains Javier Gil, product marketing chief expert of SAP.
Developing an ESG strategy in insurance
The most common reason businesses adopt ESG is pressure from investors, according to 32.8% of respondents in GlobalData’s Thematic Intelligence: ESG Sentiment Polls Q2 2024. Customer pressure was close behind at 31.1%, followed by a desire for an improvement in financial performance at 17.8%. In addition, other reports suggest that 85% of investment officers now view ESG as a key factor in investment decision-making.
“Because of ESG, chief investment officers are shifting portfolio financial assets towards low-carbon, sustainable and resilient investments,” adds Gil.
ESG should be incorporated as part of day-to-day processes and a growth strategy, as opposed to thinking of it as an optional add-on to existing processes. ESG principles should be embedded in all operations and processes. For companies, there are two main aspects. There are internal processes within their control. There are also external processes with partners, which are harder to control as they involve third parties.
Throughout all of this, data is vital. Operations data can be used to identify any areas that require improvement with sufficient information available to establish the root cause and the first steps towards developing a solution. Crucially, data makes it possible to clearly demonstrate compliance with ESG commitments to stakeholders.
“Customers are asking us: ‘How can I gather data from different sources, harmonize it and obtain data-driven insights towards sustainability and compliance?’,” adds Gil.
Why an intuitive data platform is vital for ESG in insurance
ESG for businesses is a continuous process far beyond the initial data gathering and analysis. It requires permanent monitoring and actioning of further improvements.
Using the cloud, it is possible to combine real-time datasets from multiple divisions and sources to build a clear picture of virtually every impact a business operation can have on environmental KPIs. Data from the front-end and back-end can be harmonized to understand these impacts and deliver services that meet exact needs.
Optimal data use requires holistic steering and reporting capabilities enabled by specialist intelligent platforms. Crucial support is provided here by artificial intelligence (AI). Yet the first step is to establish a baseline of operations and processes and then assess how to make improvements.
“Data is key however a modelling framework to connect data with reporting is fundamental,” adds Gil.
Increasing energy efficiency of buildings
A key area of energy inefficiency is with buildings. For example, European Commission data suggests that 75% of buildings in the EU are not energy efficient. To address this, technological advances mean sensors can monitor the energy efficiency of buildings. From there, a strategy can be devised to reduce energy loss and consumption as much as possible. Data may also reveal heat loss in specific areas that require maintenance.
Given that 50% of power for buildings is predicted to come from renewables by 2030, insurers must focus on supporting this transition. Furthermore, automated data platforms can manage renewable energy supplies more effectively – such as determining the optimum time to use energy from solar panels on the roof of a building and when to switch to grid supplies.
“We help our customers to increase energy efficiency and reduce costs. But at the same time, to reduce their CO2 footprints,” adds Gil. “It all goes together hand.”
HR management platforms for ESG
Data management platforms can help make insurance businesses fairer and more diverse, which is a fundamental principle of ESG.
Intelligent data platforms can also help HR departments keep track of KPIs to ensure that productivity levels are where they should be. If there are any areas of concern, there will be opportunities to explore potential improvements.
“It’s very important to make sure that you get the diversity within the company, that you are allowing everyone the same opportunities for promotions and career development,” adds Gil.
Then there are the ways that businesses with a positive ESG profile can approve the appeal of working for the company and improve retention rates. Some reports suggest that a sustainable company makes 84% of employees more likely to want to work for them.
For an insurance business, adopting an intuitive data management platform supported by the cloud will break down barriers between siloed data and bolster cybersecurity while accelerating the adoption of ESG standards in an evolving landscape.
Through an effective digital platform supported by AI and machine learning, an insurance business can manage its environmental footprint, move to a circular economy with zero waste, and eliminate inequality with enhanced social responsibility.
“Companies capable of moving to the cloud to transform and digitalize their business will be in a better position to take advantage of new technologies, data-driven insights, be compliant with regulations and have a positive, economic, environmental and social impact,” adds Gil.
To learn more about the technologies transforming insurance, download the exclusive report below.
