More U.S. insurers are appointing chief sustainability officers to address stakeholder demands for greater disclosure and more concrete action on environmental, social equity and governance concerns. Yet many are struggling to overcome common organizational hurdles hindering the execution of their agendas. Limited resources, lack of clarity about the mission and strategy, as well as a dearth of quantitative metrics to measure progress and the bottom-line impact of sustainability initiatives were among the challenges raised by chief sustainability officers (CSOs) or their equivalents from a wide range of insurers interviewed by the Deloitte Center for Financial Services. There also are opportunities, however, to overcome these obstacles and meet rising sustainability expectations among regulators, legislators, rating agencies, independent assessment firms, and investors, as well as an insurer's increasingly socially conscious customers and employees. Indeed, as outlined earlier this month in a Deloitte research report on empowering insurance CSOs, many carriers are striving to achieve bigger, bolder, and more impactful sustainability outcomes in addressing climate change, workforce diversity, financial inclusion, and other ESG goals by:

• Clarifying the mission and strategy. Definitions of sustainability cited by many interviewees were rather broad and aspirational. One interviewee described their ESG efforts simply as "positioning us to be a company that people can be proud of and confident to work for, do business with, and invest in over the long term." To be effective and satisfy demands for more tangible information and action, sustainability initiatives should be directly tied to an insurer's operational business plans and strategies.
• Moving beyond the 'goodness phase.' Interviewees often lamented that ESG efforts were being conflated with volunteerism, philanthropy, and good corporate citizenship. While laudable on their own merits, this misconception may imply a goal other than maximizing shareholder value — when, in fact, sustainability is all about how to reconcile the two. CSOs therefore should strive to demonstrate and communicate a clear correlation between sustainability and enhancement of customer experience, stakeholder engagement, and ultimately, improved ROI and shareholder value to get senior leadership and functional leaders on board.
• Establishing more definitive metrics. Most interviewees are striving to meet basic, qualitative goals, such as publishing an annual report, creating and/or serving on cross-functional sustainability committees, and forging internal partnerships with colleagues who share ESG responsibilities. These are important considerations, but insurers should also be setting more quantitative benchmarks to manage expectations, measure progress, and compare their status against peers. For example, the World Economic Forum recommended 21 core and 34 expanded metrics and disclosures coalesced around four interdependent pillars: planet, people, principles of governance, and prosperity in a September 2020 report prepared in collaboration with Deloitte LLP and other organizations.
• Bolstering CSO resources. Sustainability is a big job for the relatively small teams assembled at many of the insurers interviewed. While ESG activity and costs are spread across their organizations, most CSOs are getting by with only two or three full-time workers. Most are compensating by extending their reach to share the workload and spread the word throughout operating units and business lines. Some name sustainability 'champions' or 'ambassadors,' who serve as liaisons within their units and take part in deep-dive brainstorming sessions about ways to better satisfy ESG expectations. However, additional staff and budget would likely accelerate the execution of sustainability priorities while demonstrating greater corporate commitment.
• Shifting from reporting to transforming. Most insurer CSOs serve primarily as information clearinghouses, devoting the vast majority of their time to collecting and communicating details about existing ESG-related activities for internal and external consumption. Publishing an annual sustainability disclosure document and responding to a multitude of external data requests can be monumental tasks, precluding more proactive initiatives. While these reporting functions are often critical components to maintain and enhance an insurer's competitive position and respond to key stakeholders, insurers shouldn't allow such duties to keep CSOs from taking on more strategic roles facilitating transformation in product development, underwriting, investment policies, and public affairs, where their sustainability expertise and influence might be productively deployed.

What more might insurers do to empower CSOs and enable faster, more impactful activities? And how might CSOs take the initiative to elevate themselves and enhance their own capabilities? Insurers should be enabling their sustainability heads to go beyond data collection and reporting and raise their profile to drive overall strategy and integrate ESG considerations into everyday business decisions and operations. ESG accountability should be established for business leaders and incentives offered for lower-level department liaisons (figure 1). Insurers that fail to empower and properly equip CSO leaders to overcome these organizational hurdles may be outflanked by more proactive competitors, draw greater scrutiny from regulators and the growing ranks of ESG assessment firms, as well as raise red flags for investors and customers. For more details about the ESG challenges facing insurance company CSOs and ways they might be overcome, see Deloitte's full report on "Building a more sustainable insurance industry: How carriers can empower CSOs to tackle climate risk, diversity and inclusion, and governance transformation." Former NU Property & Casualty magazine Editor-in-Chief Sam J. Friedman ([email protected]) is insurance research leader at the Deloitte Center for Financial Services. These opinions are his own. This piece is published with permission from Deloitte and may not be reproduced. See www.deloitte.com/about to learn more about Deloitte's global network of member firms. Follow Sam on Twitter at @SamOnInsurance, as well as on LinkedIn. Read more columns and analyses by Sam J. Friedman:

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