3 Major Insurance Strategies for Sustainable Businesses

With climate change being a topic of grave concern, more and more consumers are supporting sustainable brands. These businesses strive to carry out their daily operations without harming the environment.

Sustainability in business also addresses the effect the brand has on society at large. All sustainable companies have a positive influence on at least one of these areas (preferably both). The same could take several forms, including –

• Optimizing the supply chain to lower carbon footprint
• Ensuring only sustainable materials are used for manufacturing
• Powering facilities using renewable sources of energy
• Sponsoring youth awareness programs in the local community

Studies have shown that products marketed as sustainable have a 2.7x chance of selling out compared to those that are otherwise. As businesses come forward to integrate sustainability into their commercial activities, they must be careful of environmental, socio-economic, and governance (ESG) risks.

Examples include a rise in energy blackouts, natural disasters, regulatory changes, etc. The insurance industry is coming to the rescue with products that match the urgency of the situation. In this article, we will discuss three insurance strategies available for sustainable businesses.

Having Liability Coverage to Uphold Social Responsibility

In the face of damage to property or worker injuries within the business premises, companies may undergo legal challenges. Then there is the looming threat of an ESG lawsuit, the numbers of which have increased in recent years.

This lawsuit may be filed for a contractor’s illegal logging, misstatements about ESG investments, failure to disclose sustainability practices, etc. As a sustainable company, it’s crucial to uphold social responsibility by keeping one’s business practices transparent with investors and stakeholders.

However, liability insurance is the best defense should any legal charge be imposed for wrongdoing or harm. This policy may include –

• General liabilities like costs involved in a third party’s bodily injuries
• Professional liabilities like mistakes while offering business services
• Umbrella coverage that covers costs above the underlying liability policy
• Data breaches or cyber liabilities in case personally identifiable information is stolen

Besides the high cost of lawsuits, such liabilities threaten to damage a brand’s reputation and market credibility. With relevant liability coverage, companies can uphold an important part of sustainability – social responsibility through accountability and ethical standards.

Environmental Risk Mitigation

Climate experts consider 2023 to be a catastrophic year from the viewpoint of natural disasters. Regions worldwide witnessed an increase in the intensity and number of such events, including earthquakes, floods, droughts, wildfires, and more.

Such tragic occurrences can disturb a business’ sustainability practices. For instance – they can lead to supply chain disruptions, create communication barriers, damage property, and cause loss of personnel and data. Besides an emergency operations plan and data backup, companies must learn more about their available insurance options.

For instance – property and casualty insurers are launching newfound policies tailored to business needs. In other words, it’s possible to find coverage based on the damage a sustainable company is most vulnerable to (water or wind).

Moreover, Brooks, Todd & McNeil note that a solid workers’ compensation plan is required, as per the respective state’s guidelines. This protects the business against legal trouble and keeps its workers protected against injuries and illnesses due to climatic conditions.

In general, it’s possible to avail coverage for property repair, lost wages for workers, business interruption, and more. Besides, companies must develop a continuity plan with a complete backup of employee contacts, suppliers’ info, and payroll procedures.

Utilizing Policies That Cover the Use of Green Technologies

As mentioned in one of McKinsey & Company’s reports, the insurance industry is acting as a major catalyst for eco-friendly business practices. Its role covers three fronts – building business resilience, scaling up the climate economy, and furthering energy transition through asset management.

With green business practices taking center stage, sustainable companies have a wide range of ‘green’ insurance products to choose from. A company can invest in as many policies as they like based on their unique business needs. A few examples of such products include –

• Green property rebuilding coverage that pays for energy-efficient materials used in repairs or green appliances and equipment
• Massive discounts for businesses that have installed mitigation devices in catastrophe-prone areas
• Insurance policy for companies involved in the storage of greenhouse emissions for emission reduction, including power plants
• Service contracts and warranties for the use of green technologies, including wind or solar power, emissions treatment, etc.

As insurers provide such policies to encourage sustainable practices, businesses can meet consumer demands, increase profits, and gain a competitive advantage.

Final Thoughts

While business sustainability is not all about maximizing profits, organizations cannot overlook the inherent risks involved. In the final analysis, this practice is about developing a sense of balance, so stakeholders receive long-term value. Furthermore, it’s about being environmentally and socially responsible.

In the upcoming years, only those businesses that make sustainability a priority stand a chance at survival. As such, the insurance industry is in a pivotal position to build a resilient and climate-friendly future.