As a consequence of globalisation, public expectations have risen that businesses should behave responsibly and accountably in terms of minimizing their environmental and social footprint. Even though this footprint is low for the insurance industry due to the service nature of its operations, headline risk has nonetheless increased. Through its financial services, the insurance industry is a key enabler of most extractive, manufacturing and distribution activities by its corporate clients. Some of these activities can lead to unwanted environmental or social risks and ethical dilemmas. For example, think of the construction of a hydro-electric dam which, on one hand, implies major socioeconomic transformation in a particular location, but that also destroys a pristine environment, reduces biodiversity, and forces resettlement of people. Even though the provision of insurance to the construction company is obviously legal, it can trigger harsh punitive measures in terms of vocal public disapproval. Consequently, our association with such projects as their “enablers” can potentially have a damaging effect on the stakeholder trust and reputation we have built over the past years and decades, as both individual companies and as the insurance sector in general. This publication makes the case that environmental, social and ethical challenges (in short: sustainability challenges) inherent to business transactions require systematic detection, assessment and management.
