The way that executive heads of organisations and business managers are engrossed in thought to implement appropriate sustainable business practices has never been felt recently in the post-Covid-19 era.
Resultantly the Graduate School of Business & Leadership (GSB&L) at the University of KwaZulu-Natal (UKZN) is concerned with how the driving players in the field practise sustainable measure practices for the profitability of their respective businesses.
Sustainability is one of the most-used “buzz” words of every business organisation since it has a prominent bearing at all levels in every industry. The insurance cover niche sector is not an exception to the rule and shows a remarkable potential interest in aspects of sustainability.
One cannot deny that the exponential growth of contradictions between environmental issues and economic growth has become an important challenge for businesses worldwide.
As posited by the World Economic Forum, environmental risks affecting every society, individual and organisation are classified as the major top risks the world is confronting.
Those risks which culminate from environmental degradation where carbon dioxide/methane emissions form the bedrock of climate change are classified as the biggest threats to achieving Sustainable Development Goals.
The growing trend of climate change-related risks could generate an increase in mortality rates, environmental issues, a negative impact of resources control, economic losses and a lack of profitability.
“Go Green” as a Solution
The learners, researchers and academics at GSB&L are conscious of the responses, whether it is technological or societal responses, to climate change-related threats that are developing, however, the missing efficient practices to mitigate sustainable risks are still felt, hence the need for improved theories and practices of “Go green” sustainable business practices.
Sustainable insurance businesses require multidimensional interventions of eco-innovative practices and measures. To achieve business success in the cover niche many insurers focus constantly on their growth in increasing their market share and retaining better risks.
Insurers should always look for new ways to differentiate themselves from their competitors. In developing and offering new green products and services related to potential sustainability, the green insurance movement is the new wave and can be the solution.
The insurance arena has witnessed the urgent call for innovative financial strategies. The cover sector is progressively putting much focus on sustainability due to the adverse impact of climate change on profitability as a whole.
One cannot deny the hike in the number of heatwaves, floods and storms recently and these have caused billions in economic losses during the last decade in the EU, as per a recent study of Eurostat.
In Africa, an analysis of unpredictable climatic risk events revealed that extreme weather events due to climate change have taken many lives on the continent.
The organisations have the potential to broaden the economic transformation in assisting governments to achieve sustainability goals.
With the elapsing of time, the providers have progressively been placing most of their priority on sustainability measures, hence highlighting the need for green sustainable behaviours and green products and services.
In advocating for the drive of sustainability, the providers can quantify risk, by reducing risks. The United Nations Environment Programme Finance Initiative- Principles for Sustainable Insurance (PSI) released a guideline on how the providers should manage sustainability challenges.
The guideline can easily assist insurers in their self-alignment strategies with environmental, social and governance standards (ESG practices).
Green measures and sustainability in the insurance niche
An important inclusion in the financial market recently has been the element of sustainability in the insurance niche. Insurance companies, investors and risk managers play a critical role in the promotion of environmental, social, and governance practices.
The insurance industry across the world is reacting to the challenges related to sustainability with actions taken strategically on both investment and underwriting of insurance operations.
The largest insurance companies factor in the environmental, social and governance components into the provision of insurance coverage, underwriting strategies, and reallocating capital towards green assets.
A growing number of insurance supervisors and regulators are starting to incorporate sustainability into the way they oversee the sector to comply with the regulators that expect companies to be sustainable.
Avenues to include sustainability in the insurance industry are possible. Sustainability in this arena can be related to lowering insurance premiums for example, electric vehicles (EVs) as a measure for green initiatives, agreeing with the authorities about the criteria for tax incentives that are associated with green sustainable insurance, advocating for new green products and also encouraging investments in insurance projects that comply with the criteria of green as a sustainable measure.
Green sustainable insurance can also include new products that are intended to tackle climate change such as weather-indexed insurance, and crop insurance products that lead to customers’ green behaviours and sustainability.
Sustainability-related practices are predicted to be incorporated into the operations of businesses and ventures across the industries and jurisdictions.
For example, insurance companies may require companies to uphold environmental, social and governance practices principles for certain insurance policies and this can be a pre-requirement for a project.
Further, green finance is a pivotal aspect of the element of sustainable development. It enhances financial flows through insurance, investment and credit loans from public, non-profit, and private organisations for sustainable projects.
Developing people for an improved world
The academics at the GSB&L encourage applications for our postgraduate and Master’s programmes with an opportunity to research important gaps which currently affect businesses and society.
The students and academics at GSB&L have been looking at new sustainable business practices in different spheres, identifying challenges and developing new models that speak to green sustainable behaviours and measures.
Professor Bibi Chummun is an Associate Professor lecturing in the postgraduate diploma and MBA programmes at the University of KwaZulu-Natal Graduate School of Business and Leadership.