Our current Covid-19 experience offers us many lessons but one major key learning stands out. Another systemic risk that will impact us all. Climate change and the importance of investing in sustainability-focused initiatives.
Back in March and when we could meet face to face, I took part in the Global InsurTech Summit. At the event, Stephanie Smith, COO of Allianz stated that sustainability will become a major decision-making criterion for insurers, reinsurers and brokers in the years to come. If it is aligned with growth objectives.
For years, companies of all kinds have pumped out ever more products and services to keep up with demand. Focusing on maximizing consumerism without regard for the environment has been severely destructive to the planet.
The amount of carbon dioxide in the Earth’s atmosphere has nearly doubled in the past 200 years, causing a rise of more than 1℃ in the global average temperature. On top of that, most countries are lagging far behind the goals set in the 2015 Paris Climate Accord.
The climate change problem has not gone unnoticed. Increasingly, corporate leaders, consumers, financiers, and politicians are demanding that steps be taken toward environmental sustainability.
Such calls for going green have been short-lived in the past. But this time around, they seem to be gaining momentum. Remember, products and services can be responsible and sustainable by aligning with customer demands and ensuring that the sustainability agenda is not just a CSR activity but part of the organization’s metrics and core values.
Here are 5 trends that I believe are changing today’s conversation around Sustainability.
Trend 1: Realizing that climate change matters
The first and perhaps most important thing that recently changed the sustainability conversation is the global acceptance that climate change is happening.
The inconvenient truth is that in the US, the wildfire season is getting longer and more destructive. Flood zones now encompass more homes that previously and hurricanes are striking with more devastating power than any time in recorded history.
The Arctic has now shifted to a new climate due to global warming, with open water and rain becoming typical of the region rather than ice and snow. The UK suffered flooding in February earlier this year, receiving more than 100 mm of rain in a single week. Australia experienced some of the most devastating wildfires that will forever change their ecosystem. The hurricanes that devastated the Caribbean in 2017 were also strengthened by climate change, while California braces for dangerous heat as wildfire battle continues.
More than that, people are realizing that the scale and cost of climate change are almost unimaginable. It could cost hundreds of billions of dollars in the US alone—and that’s one of the countries well-positioned to deal with a transforming climate.
The overwhelming effects continue to get worse and we must take sustainability and environmental responsibility seriously.
The urgency of climate change and the measurable consequence on the insurance industry (2017 was the largest loss for the insurance market globally on record given the level and frequency of natural disasters according to Aon Benfield Insurance Journal), means that action cannot be prolonged. The ‘investment in data’ is the single most important task. And this is complex and evolving as climate data is lacking currently in quality and standardisation. But tools and data are evolving everyday and in all this challenge is an unprecedented opportunity for innovation at all levels – to support operational needs whilst aiming for the transformation that the industry so desperately needs.
Nicole Anderson, Managing Partner, Redsand Ventures
Trend 2: Everyone has a role in sustainability
Indeed, everyone has a role to play in the current change and demand for a more sustainable world, and in creating a greener economy. This is not just for corporate leaders and political elites in developed nations. Everyone from farmers, energy producers, manufacturers, logistic transporters and factory workers to consumers have their part to play.
That’s because today’s supply chain isn’t local, but global. Even though we all know that the current crisis may change this radically with the resulting delivery delays and supply chain issues. It is well understood that demand for products in the US or Europe affects workers in China, and in turn rainforests in Southeast Asia, South America, and Africa. People around the world can see the effects and the loss of natural environments up close.
Feeling the huge effect of the problem and coming to terms with their own role in it, adds pressure for supply chains to change.
Trend 3: Few corporations are gradually leading the way
Critically, the rise of support for sustainability has already forced changes in the business community. Major multinational corporations like Nike, BMW and Coca-Cola have been working to reduce their environmental footprints for years. More recently, Microsoft and Amazon, two of the largest companies in the world, have announced plans to cut back on their carbon emissions. At the same time, many banks already appear on the Global 100 sustainability list. Gradually we are seeing a few insurance companies emerging on the list too.
These companies are not only pioneering a greener path for companies around the world to follow. They are also normalizing the idea that a more sustainable mode of operating the core business and influencing future product design are both possible. As a result, corporations continue to play a major role in leading the fight against climate change.
Trend 4: Consumers are demanding for products & services that are sustainability-led
Consumers are increasingly demanding that the products and services they buy have smaller environmental footprints.
A recent survey found that more than two-thirds of consumers are willing to pay more for sustainable products. Consumers are more likely to be loyal to companies doing their part to help the environment. Importantly, this trend is even more pronounced among Gen Z shoppers. The majority of whom haven’t yet entered their prime spending years.
This demand for sustainability is critical. It pushes companies to make their supply chains greener. Which in turn puts pressure on competitors and suppliers to themselves become more sustainable. The fact that younger consumers are driving this trend also means that the move towards sustainability isn’t going away anytime soon.
Trend 5: Sustainability offers opportunities for growth
The sustainability movement offers significant global opportunities for growth. A market analysis highlights that Sustainability is a $29Bn market. Growing at a CAGR of 27.1%, expected to become a $12 Trillion a year of market opportunities by 2030.
As an example, look at the renewable energy industry. An industry that grew almost entirely out of demand for reducing carbon emissions. It now contributes more than 11 million jobs around the world and has already received over $26Bn in investment across 780 young ventures. That number is poised to grow significantly higher as more companies and individuals work to reduce their carbon footprints.
Planet-damaging consumerism isn’t the only model available for economic growth going forward. A green global economy is possible despite the risks to more challenging industries. The development of a more sustainable economic model could have enormous positive impacts around the world.
After reviewing and talking to the most relevant Energy Efficient Tech, CleanTech, TransportTech, FoodTech companies, I am fascinated by the types of innovation that will soon impact the design of future products and services, processes, structures and value chains.
Over 40,000 young ventures are already positioning COVID-19 related solutions. 8,000 of these have received over $160Bn of investment to support their scale. The COVID-19 crisis has been devastating for many. It has also increased the awareness, relevance and importance of the sustainability topic, thinking and solution development. Many of this year’s advances will favour financing, investment and the insurance of sustainability-related activities within the Energy Tech, Environment Tech, The Climate Tech but also Safety Tech, HealthTech, Diversity & Inclusions, Economic Empowerment, Remote Engagement & Knowledge Sharing.
Sustainability is on the rise
Across the social, political, and economic spectrum, sustainability is a common refrain. The idea of creating a more environmentally friendly economy is gaining momentum. And that momentum is having important effects on how the world does business.
Importantly, the global focus on sustainability isn’t going anywhere. Individuals and companies are both moving towards the same goal of reducing environmental influences, from supply chains to product endpoints. It’s time to take a giant leap forward on environmental, social and governance responsibilities and to develop and measure metrics that truly matter.