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Whether it’s who they do business with, the impact of their operations on the environment, or how they govern themselves and comply with the law, organizations everywhere are facing a pivotal moment.
For years, businesses have been talking about corporate social responsibility, their championing of various causes and their commitment to doing good, but now the statements they make and actions they take on a wide range of environmental, social and governance issues are being evaluated and measured by an array of stakeholders. From customers to employees, investors and regulators, organizations are being scrutinized on their ESG commitments and held to account.
Russia’s invasion of Ukraine has thrown this issue into sharp focus. Since the start of the conflict, more than 400 companies have withdrawn from Russia, according to the Yale School of Management. What began with a handful of bold moves by corporations spanning oil and gas, consulting and technology sectors in the immediate days following the Feb. 24 invasion, soon gathered momentum with CEOs of consumer products companies, fashion and fast-food behemoths like McDonald’s joining their peers.
Insurers and reinsurers, too, have been part of the exodus as major players such as Allianz, Munich Re, Swiss Re and Zurich responded to global economic and financial sanctions against Russia and took steps to mitigate their exposure to the war. Leading brokers Marsh & McLennan, Aon and Willis Towers Watson followed suit. Marsh McLennan and Willis said they would exit the Russian insurance market, while Aon said it would suspend operations in the country and put its staff there on paid leave. FERMA, the Federation of European Risk Management Associations, said it had suspended Russian member RusRisk.
As with any corporate strategic decision, these actions are more complex than a simple withdrawal or non-renewal would suggest, and the ultimate effects have yet to fully resonate. Yale’s initial list of companies leaving and those staying in Russia, for example, has become a more nuanced catalog of those companies withdrawing all business, those suspending operations, those reducing activities and those remaining.
Whichever category a business falls into, what has been demonstrated is that companies can no longer ignore ESG-related risks and the potential damage to their reputation.
Nor should they. Researchers have found that companies that pay attention to and act on ESG concerns, beyond the humanitarian need to do the right thing, will see the value to their organizations and their stock prices. Whether it’s climate; cybersecurity and data privacy; diversity, equity and inclusion; or executive compensation, being transparent about their operations is also critical if businesses are to manage ESG-related litigation and regulatory risks. With their risk mitigation skills and risk transfer capabilities, risk managers, brokers and insurers are arguably at the center of opportunity and risk when it comes to ESG. But moving forward will be less straightforward than a simple check of the box