Illustrative Use Cases of Sustainability Enablement in IT Sourcing | Market Insights™
August 9, 2024
Sustainability
Sustainability
Climate change and the volatility it can cause has a demonstrable impact on GDP. However, traditional GDP calculations often neglect to include the impact of environmental degradation, resource depletion, and societal disruption caused by the climate crisis. The broader picture of economic health, therefore, is not as complete and robust as it could be.
Our experts, Cecilia Van Cauwenberghe, Meenakshi Narayanan, and Rita N. Soni, discussed the critical need to consider sustainability as an integral part of GDP discussions, as well as key initiatives integrating economic factors, climate change, and GDP by economists and other research institutions.
Attendees understood more about the relationship between economic inclusion, climate change, and GDP and learned how to make GDP calculations more inclusive of sustainability considerations.
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Sustainability in insurance transcends traditional practices, weaving Environmental, Social, and Governance (ESG) elements into the core of day-to-day operations, thereby safeguarding the future of stakeholders and the planet. In this evolving industry, embracing sustainability is no longer optional but essential for mitigating climate risks, meeting regulatory demands, and ensuring long-term value in a world facing complex environmental and social challenges. Reach out to us to explore this topic further.
Sustainability is becoming increasingly critical in the insurance sector due to the escalating unpredictability of losses driven by climate change, economic instability, and social inequalities. As per a report by the National Oceanic and Atmospheric Administration (NOAA), in 2023 alone, the United States witnessed 25 climate-related disasters that each resulted in damages exceeding US$1 billion, nearly doubling the annual average from the previous five years and leading to 464 fatalities. Such extreme weather events, occurring in regions where they were previously uncommon, are compelling insurers to acknowledge their responsibility in environmental protection. Additionally, shifts in consumer behavior are influencing the move towards sustainable practices. A growing number of consumers, about 25%, are now willing to pay a premium for environmentally friendly products, such as electric vehicles and sustainably sourced clothing, expecting that the companies they patronize uphold similar ethical standards.
Regulatory changes are also pushing the insurance industry towards greater transparency and sustainability. In the first half of 2023, there were over 1,715 adjustments to the US state insurance regulations, many of which address climate issues. A notable example is the California Climate Risk Disclosure Survey, which requires insurers to disclose how they are managing climate-related risks. Moreover, entities such as the Securities and Exchange Commission (SEC) are preparing to enforce new mandates requiring climate risk disclosures, potentially impacting publicly traded insurance firms that do not proactively address climate change.
As a result, insurers have started developing and offering new products across personal, commercial, and specialty lines. In personal lines, companies have begun offering green property insurance, which covers eco-friendly materials and energy-efficient upgrades following a loss, as well as discounts for hybrid or electric vehicle owners to encourage sustainable transportation choices. In commercial lines, insurers in geographies like the US and EU now provide insurance for renewable energy projects and green building coverage, helping businesses transition to sustainable practices. These include coverage for renewable energy equipment, green construction materials, and tools to manage climate-related risks. Specialty lines see innovations driven by InsurTech, such as parametric insurance for climate risks and the use of IoT devices for real-time environmental monitoring, enhancing risk mitigation and encouraging eco-friendly behaviors.
Insurers integrating sustainable practices into their value chains include:
Currently, while the integration of sustainability into corporate strategies is becoming crucial for many firms, the actual implementation of these strategies in a tangible way remains a very early stage for many companies. According to a global survey, 25% of insurers identified “grasping ESG-related regulations and guidelines” as their primary challenge in advancing their ESG initiatives. This was followed by 17% who cited “determining the most effective actions to take on ESG” as a key hurdle and 15% who pointed to “aligning ESG efforts with customer expectations” as a significant concern.
Besides the difficulties of managing risks in a world altered by climate change, the insurance sector also contends with issues arising from regulatory, operational, and market-related complexities.
In the insurance sector, several unpredictable developments stand out, including emerging risks such as an aging population, climate change, and cyber threats, along with the rise of the sharing economy affecting freelancer, auto, and home insurance markets and the integration of technology in the smart economy. Social factors, such as evolving consumer expectations for corporate responsibility and equitable services, also play a crucial role, as do governance issues like regulatory changes and corporate transparency. While accurately forecasting the future remains a challenge, identifying catalysts for market changes is possible. By combining historical data with industry insights, we can use a specifically designed model to construct various future scenarios. These scenarios illustrate potential outcomes and opportunities driven by key trends in environmental, social, and governance (ESG) aspects under different conditions [Exhibit 1]. With this approach, we can strategize effectively, choosing paths that optimize financial gains, enhance social impact, or minimize risks.
Driving sustainability in insurance is not just about compliance with regulatory changes and risk management; it also involves capitalizing on new opportunities and fostering a more sustainable, resilient world. As financial intermediaries and risk managers, insurers have a unique ability to drive and support sustainable practices across different industries and communities. The following strategic key objectives present a structured approach for insurance companies to embed sustainability into each stage of their value chain, along with key performance metrics to align with broader societal goals [Exhibit 2].
By embedding sustainability into its core identity and fostering innovation, the insurance industry can go beyond managing risks to actively stewarding the planet and its people. This transformation will not only reshape the industry but also significantly contribute to a sustainable, resilient, and equitable global future.
To discuss more on the importance of sustainability in the insurance space, please reach out to Debasruti Mitra at [email protected] and [email protected] and stay updated by accessing Everest Group’s latest research on Insurance Business Processes.
Watch the webinar, What’s Next in Financial Services? Driving Transformation Through Sourcing, Technology, and Operations, to learn how the banking, financial services, and insurance (BFSI) industry is driving business transformation in response to evolving customer needs and the rapid adoption of AI and cloud technologies.
With increasing customer preferences for environmentally friendly products and evolving government regulations, retail and consumer packaged goods (RCPG) enterprises are being compelled to embrace sustainable practices. Read on to learn how they are actively engaging with the rapidly evolving sustainability technology ecosystem to expedite their ESG journeys.
Contact us to speak to an analyst on this topic.
Sustainability has long been a pivotal issue, but changing consumer behavior, a shifting regulatory landscape, and escalating climate change impacts have intensified pressure on industries to address their Environmental, Social, and Governance (ESG) footprint. Our recent research revealed that:
79% of consumers are willing to switch brands based on their environmental and social practices.
5% of revenue is the cost of waste and waste disposal on average for retailers and CPG companies.
Companies with consistently high ESG performance tended to score more than 2x on total shareholder return than those with medium ESG performance.
The retail consumer packaged goods (RCPG) industry is now more committed than ever to sustainable practices, recognizing the urgency of integrating sustainability in retail and CPG operations. This involves mitigating climate risks, enhancing long-term resilience, and contributing to a sustainable future through technological investments, product innovation, supply chain optimization, and transparent disclosures. Many firms have embarked on the journey to become purpose-driven organizations, embedding sustainability into their core business strategies.
From our analysis, the following key areas emerge:
For instance, Walmart leverages an ESG data management system to track and report its sustainability performance, focusing on monitoring energy consumption, carbon emissions, and waste management
For instance, Nestlé uses blockchain technology to track milk and palm oil supply chains, ensuring sustainable and ethical sourcing while providing transparency from origin to the final product
For instance, PepsiCo uses predictive analytics tools to evaluate the impact of climate change on agricultural supply chains. This allows the company to develop strategies to mitigate risks related to crop yields and water availability, ensuring long-term sustainability
For instance, SHEIN has launched a new apparel collection made from “deadstock,” the excess, unsold, and leftover fabric inventory that is typically discarded by fashion brands. SHEIN is utilizing Queen of Raw’s proprietary software, Materia MX, to source existing materials from brands and retailers looking to responsibly clear out their excess fabric inventory rather than have it go to waste in landfills
For instance, Patagonia uses QR codes to provide customers with detailed information about product sustainability, enhancing consumer trust and reducing the need for single-use tags, thereby promoting a more sustainable consumer experience
For instance, Tesco uses IoT technology for real-time inventory tracking, reducing waste from overstocking and spoilage, enhancing sustainability by ensuring products are sold before expiration
A framework to guide RCPG enterprises in their sustainable business model transformation journey
As enterprises navigate the transformation to derive more value from their sustainability investments, The Everest Group framework for guiding Retail Consumer Packaged Goods (RCPG) enterprises in sustainable business model transformation involves four key steps: Commit, Define, Invest, and Sustain. This approach provides a structured path to integrating sustainability into core business strategies.
The outlook for sustainability in retail and CPG
Consumer demand for sustainable products continues to rise as awareness of environmental impacts grows. This drives innovation and investment in sustainable practices, resulting in new products and business models that prioritize sustainability. Companies that embrace these changes will build stronger, more resilient brands. Ultimately, successful companies will be those that integrate sustainability into their core strategies, ensuring every aspect of their operations is environmentally mindful. This approach not only contributes to a healthier planet but also creates value for stakeholders and ensures long-term success in an increasingly eco-conscious marketplace. By embedding sustainability into their business models and leveraging advanced technologies, retail, and CPG companies can achieve environmental goals while driving growth and profitability.
Everest Group will continue to follow the evolution in this space. To discuss sustainability in retail and the CPG industry, please reach out to Abhishek Mundra, [email protected], Ambika Kini, [email protected], and Shraddha Pandey, [email protected].
Watch this event on LinkedIn which was delivered live on Wednesday, June 12, 2024
While the impact sourcing model continues to gain momentum with service providers embracing inclusive talent strategies, enterprise buyers are yet to recognize the win-win value of the model.
Watch this interactive LinkedIn Live event to discover the vast advantages impact sourcing delivers for enterprises and learn practical approaches to achieving business benefits while driving social impact. Attendees will also gain a better understanding of current sustainability commitments and goals that enterprises today are targeting. 🌱📈
During this collaborative LinkedIn Live session, we discussed:
• What are the key benefits for buyers of impact sourcing? 💼💡
• How can enterprises find impact sourcing opportunities? 🌍🔍
• How do enterprises promote impact sourcing in their services contracts? 📝🤝
Access the on-demand webinar, delivered live on May 30, 2024.
Sustainability has emerged as a critical imperative across industries amid growing concerns about climate change, resource depletion, and social inequalities. As enterprises near their commitment deadlines, they are looking to partner with leading sustainability enablement service providers for their tech, industry, and ESG domain expertise.
Sustainability enablement service providers offer instrumental solutions; however, knowing which provider to choose can be complex. Enterprises need partners who can not only address their immediate sustainability needs but also align with their long-term strategic objectives.
Watch this webinar as our sustainability experts presented the detailed profiles and capabilities of twenty-five sustainability enablement technology and services providers featured on the Sustainability Enablement Technology Services PEAK Matrix® and key trends to follow.
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6:00 p.m. to 9:00 p.m.
Facilitated by Everest Group
SLB is subscribed to Everest Group memberships. As you know, Everest Group hosts events to help our member GCC clients exchange perspectives and best practices and to help us deliver well-rounded insights for our members.
We are excited to extend an invitation to you for the SLB Industry Networking Dinner Event, moderated by Everest Group, an in-person roundtable discussion. Topics covered will include:
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Session details
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Roundtable guidelines
The only price of admission is participation. Attendees should be prepared to share their experiences and be willing to engage in discourse. Participation is limited to enterprises/GCCs (no service providers). Everest Group will approve attendance to ensure an appropriate size
and mix of participants. The roundtable includes introductions, a short presentation, and a facilitated discussion.
Kindly confirm your attendance by Thursday, May 9 by reverting on this email. This Executive Roundtable is a unique opportunity to connect with industry leaders, share perspectives, and collectively shape a more inclusive and forward-thinking workplace. If you have any questions or require further information, please don’t hesitate to contact us.
We look forward to your participation in this event!
As business and IT leaders embark on a sustainability journey, the need to understand the organization’s effect on the environment is critical, especially the carbon dioxide it emits.
A starting point in an enterprise’s net-zero journey requires understanding carbon data management, said Ambika Kini, a Senior Analyst with research firm Everest Group. What constitutes effective management varies by industry and even specific business models. “Enterprises can benefit tremendously by investing in the carbon accounting software best suited for their needs,” Kini said.
In today’s business environment, sustainability has evolved from a mere buzzword to a vital imperative for enterprises across diverse industries. This shift is driven by escalating concerns over climate change, resource scarcity, and social disparities, compelling businesses to lessen their environmental footprint and actively contribute to societal well-being. To address these challenges, sustainability enablement technology and services have become indispensable tools, providing instrumental solutions to navigate the complexities of sustainability initiatives. These technologies encompass various applications, including renewable energy, supply chain optimization, and waste reduction strategies.
Despite the growing recognition of sustainability’s significance, enterprises face significant hurdles in integrating sustainable practices into their operations. The lack of tangible market proof points, coupled with the ongoing evolution of standards and best practices, presents a formidable challenge to decision-making. Enterprises struggle to identify partners that can meet their immediate sustainability needs while aligning with long-term strategic goals. Successfully navigating this complex landscape requires careful deliberation and informed decision-making. Enterprises must select partners that provide innovative solutions and demonstrate a dedication to sustainability principles and values. By doing so, businesses can effectively navigate sustainability challenges while driving positive environmental and social impact.
Contents:
In this report, we:
Scope:
The PEAK Matrix® provides an objective, data-driven assessment of service and technology providers based on their overall capability and market impact across different global services markets, classifying them into three categories: Leaders, Major Contenders, and Aspirants.
In this podcast, Everest Group’s Rita Soni emphasizes the importance of integrating sustainability into procurement practices, highlighting impact sourcing to address social inequities. By prioritizing hiring from marginalized communities or supporting initiatives like second chance hiring, businesses can not only create positive societal impact but also gain tangible benefits such as lower absenteeism and higher retention rates.
As businesses seek to expand into new markets, particularly in emerging economies, Rita Soni underscores the significance of patience and understanding local dynamics. Partnering with local providers, leveraging recruitment firms, and investing in training initiatives are essential steps to navigate the challenges and capitalize on the opportunities presented by diverse markets, ensuring sustainable growth and success.
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