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RIMS ERM Conference 2021: Integrating Net Zero Commitments into ERM Plans

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In a session titled “Integrating Net Zero Commitments into ERM Plans” at the RIMS ERM Conference 2021, Michelle Tuveson, executive director of the Cambridge Centre for Risk Studies, led an interactive session focused on how risk managers were handling their companies’ emission reduction pledges and efforts. Tuveson told the audience that while one-third of companies in G20 countries had signed onto “net zero” commitments—promises to eventually eliminate their companies’ carbon emissions completely—it is unclear how much analysis went into these pledges. As countries around the world start to require emission reporting, this lack of analysis (plus a lack of data to assess progress) is a major concern for these companies’ risk managers.

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The audience seemed to back up this assertion.

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Tuveson conducted a live poll, which revealed that most attendees felt that their industries were on the less prepared side for net zero developments and that their ERM and net zero plans were not very integrated. When asked which group was most driving their companies’ climate action, most answered that it was investors/rating agencies (31%), followed by the board and executive management (20%), consumers (17%), and peer companies (11%).

Tuveson was joined by Joerg Osterloh, director of enterprise risk management at Coca-Cola Europacific Partners, who outlined the company’s net zero activities.

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With a commitment to be net zero by 2040, it had already reduced emissions across the company by 30% by 2019. The company was prioritizing this effort partially because it saw climate change risks “front and center,” impacting all aspects of its supply chain.

Osterloh credited a strategy that included analyzing how much emissions each sector of the company’s business produced, then strategically addressing each. For Coca-Cola Europacific Partners, the most emissions came from drink packaging, which was not as easy to reduce as other categories like operations and supply cooling. Overall, Osterloh noted the importance of being fully transparent in the company’s net zero activities and its advocacy to influence public policy on transitioning to a low carbon future. He also stressed investing now in new technologies, rather than waiting for those technologies to mature.

At least some risk managers and their companies may already be following this advice. In a final poll, most audience members said that the focus of their companies’ net zero strategy was substituting renewable power (26%), followed by greening supply chains (19%), adopting new technologies (18%), altering products and services (15%), and purchasing carbon offsets (9%).

If you missed this session, it and many of the other sessions at RIMS ERM Conference 2021 can be viewed on-demand online.

RIMS ERM Conference 2021: Lloyd’s Chairman on the Vital Role of Risk Management in Fighting Climate Change

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With climate change quickly becoming one of the most important issues facing the world, Lloyd’s Chairman Bruce Carnegie-Brown stressed the importance of ESG initiatives to address the threat, as well as the vital role of risk managers, in today’s keynote address at the RIMS ERM Conference 2021 in New York City.

As evidenced by the increasing number of weather and climate-related natural disasters in recent years, the stakes couldn’t be higher for organizations and communities around the world, according to Carnegie-Brown. “Disruption, poorly managed, could destabilize our economy,” he said.

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“Delay could destroy our ecosystem.”

Failing to take action on the climate change threat is not a sustainable strategy and will only exacerbate the damage in the future, Carnegie-Brown warned. In the face of these threats, risk managers have an important role to play in helping their organizations embrace ESG and become more resilient. “A business’s risk operations are an essential component of building ESG into the organization—often they are the driving force.

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” he said. “Executives rely on their insight to power their decisions and navigate the pitfalls of new challenges. Like insurance, it enables braver decisions and more courageous action. Communicated effectively, that insight can establish a permanent place at the table for risk management.”

To be most effective, Carnegie-Brown suggested that risk managers play close attention to how they are perceived and how they interact with the rest of the organization. “If risk managers are perceived as being reactive, we need to make sure we are on the front-foot in understanding and assessing these emerging issues,” he said. “If we’re perceived as operating in the shadows, we need to be transparent in our methodology and in our motives. And if we’re perceived as obstructive, we should consider a flexible approach that allows our organizations to act innovatively and with an awareness of the potential risk.”

While it represents a daunting challenge, Carnegie-Brown saw an opportunity for risk managers to demonstrate their value by taking on the difficult task of developing organization-wide plans to address climate change. “Those plans must account for the multifaceted nature of environmental risk, they must employ the best of our skills and technologies to communicate the risk to our stakeholders, and they must be built to facilitate and orderly and urgent transition,” he said.

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“Achieving this will allow us to carve out a pioneering role for risk management in the fight against climate change, while helping our organizations to become more inviting to investors, more attractive to prospective employees, and more likely to last sustainably in the decades to come.”

RIMS ERM Conference 2021: A Case-Study Approach to “Solve Any DEI Issue in One Hour”

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At today’s RIMS ERM Conference 2021, a hybrid event with in-person experiences in New York City and virtual content online, many of the presenters focused on the intersection of ERM (enterprise risk management) with other mission-critical three-letter topics, including ESG (environmental, social and governance) and DEI (diversity, equity and inclusion).

In one of the afternoon’s sessions, “Identify and Solve Any Organizational DEI Issue In One Hour,” presenter Layne Kertamus, professional in residence of risk management and insurance at Utah Valley University, explored “new ways to talk about what needs to be said, and what needs to be listened to.”

“Most organizations that I’m aware of have moved past the idea that they have to do something on [DEI] issues for our stakeholders—it has moved on to ‘We cannot afford to not have some real results in these arenas’ and that should be motivation enough, if we needed any motivation,” Kertamus said. “The issue will not go away and it will evolve. Hopefully we can find a way to make this not just a prompt for change, but a real asset.”

Kertamus noted the particular challenges of the “frozen middle” in implementing meaningful DEI initiatives. Middle management feels pressure from both above and below to take DEI action, and “may react to hearing these goals with concern or dread—for example, thinking ‘My status and opportunities may now be more limited than they were before.’”

With the “why” and other background largely established, Kertamus focused the session on one approach to the “how” of DEI-related change. While many DEI discussions start with general open forums and reminders about being respectful and open, he noted that some of these approaches may lead to inauthentic or surface-level outcomes. To really get into an authentic plan that gains acceptance, Kertamus said, “sometimes we need to create environments where we can talk the way we need to talk.”

He proposed that organizations adopt a case study method to facilitate some of these discussions, outlining the “one hour” from his session’s title:

  • With this method, a “case presenter” brings their concern, challenge or passion to present a large-scale DEI-related issue in the workplace that impacts other stakeholders. A facilitator should be selected and need not be an expert, but must bring an open mind and a willingness to enforce time limits. A group of “peer consultants” is then gathered from across the company, perhaps at different levels or in different departments.
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  • First, the group listens to a five minute presentation from the case presenter, and then spends 10 minutes asking fact-based questions directed through the facilitator.
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    It is critical that the questions are directed and perhaps even pointed, but be focused on facts and not opinions or defenses.
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  • The largest segment of the process is a group diagnostic session, spending 20 minutes examining what, if anything, the presenter may have left out, may have ignored as a result of their own lived experience, or other gaps in the issue. It is critical not to jump to solutions in this phase—you may get “answers,” but the purpose here is true diagnosis.
  • The next 10 minutes should be spent on group action brainstorming, brainstorming solutions for the presenter, embracing all perspectives and bringing personal experience, values, and insight to the table. “Be willing to give the presenter bad news, if necessary,” Kertamus urged. For example, you may need to acknowledge that there is no solution, or that they missed a strategic opportunity along the way. The presenter should remain quiet and listen during this step.
  • Next, the presenter gets 10 minutes to respond to the discussion, speaking candidly and asking questions after listening to the group’s brainstorming session. “This can be a defensive time, they may feel beat up, but it can also be an opportunity for real connection, understanding, and for making agreements and commitments moving forward,” he said.
  • If agreements are made, one question is critical before adjourning: “When will you move forward using action steps recommended today?” This can be a critical moment in advancing concrete plans and changes in attitude or approach to DEI in the workplace.

While this approach can be used with a wide range of issues as the focus “case,” Kertamus noted it is particularly useful with “problems where someone cannot just use their authority to impose a change or solution,” for example, a leader who has tried to implement changes and build equity and inclusion as values in a department but keeps meeting resistance. “This is really for instances where you accept the mission of the organization and want to make it real or palpable, but cannot just impose it, you need to open other dialogues,” he said.

If you are not attending the RIMS ERM Conference 2021 live this week, “Identify and Solve Any Organizational DEI Issue In One Hour” and other sessions from the event will be available to stream online during the event or later on-demand.

Court Overturns Prop 22, California’s Gig Worker Classification Law

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On August 25, the Alameda County Superior Court in California declared that Proposition 22 (better known as Prop 22) violated the state’s constitution, overturning it and potentially putting a portion of the state’s gig work industry in peril. The controversial California ballot measure designated app-based gig workers like rideshare and food delivery drivers as independent contractors, meaning that the companies they ostensibly work for would not have to provide a minimum wage, health insurance, unemployment, sick leave or other benefits. Because the initiative was a ballot measure, the court found the law restricted the state legislature’s ability to regulate compensation rules, and said the measure also illegally prevented workers from collective bargaining and unionization. However, this ruling does not mean that gig workers will automatically be considered employees, as no previous law mandated that classification.

Before Prop 22’s passage in November 2020, California passed AB 5 in May 2019, which instituted a more rigorous test to determine whether workers were employees or independent contractors: if “the person is free from the control and direction of the hiring entity in connection with the performance of the work,” the work was outside the company’s usual business, and if the worker “customarily engaged in an independently established trade, occupation or business of the same nature as that involved in the work performed.”

Rideshare companies like Uber and Lyft essentially ignored AB 5 and poured $224 million into fighting for Prop 22, making it “the most expensive ballot measure in California history,” according to the Los Angeles Times. The measure passed with around 59% of the vote.

In a small concession for workers, Prop 22 did provide for a health insurance stipend, but an August 2021 UC Berkeley Labor Center survey of 500 drivers showed that only around 10% of workers were receiving it, and 40% had not heard about it at all. Since work hours are only defined by the time spent driving with a passenger, others do not work the required 15 hours per week on one app to qualify for the stipend. These and other factors prompted drivers and the Service Employees International Union (SEIU) to sue the state seeking to overturn the law.

For now, the Superior Court ruling will likely not change much for gig workers in California, as Uber and other companies have announced their intention to challenge it in higher courts and may ignore any of its other legal implications, leaving everyone involved with a shaky status quo: an overturned law that is effectively still being followed.

As Risk Management wrote in May, one danger of the continuing ambiguity surrounding gig worker classification is misclassifying workers, which can lead to heavy fines or lawsuits. For example, in January 2020, D.C.-based contractor Power Design Inc. agreed to pay $2.5 million for misclassifying 500 workers as independent contractors rather than employees. In August, food delivery app company Postmates settled with the city of Seattle for nearly $1 million for violating the city’s Gig Worker Paid Sick and Safe Time (PSST) ordinance. The payment will go to cover city fines and compensate more than 1,600 workers for back wages. Additionally, withholding benefits, overtime, and meal and rest breaks (whether a result of misclassification, or in general) can result in workers filing class action lawsuits against the company, potentially resulting in significant costs, impacting productivity and damaging the organization’s reputation.

Another risk for gig work companies is insufficient safety measures for workers. Unlike with formal employees, companies often do not provide gig workers with safety training and may not offer formal ways to report safety concerns. This creates an environment where workers who are often under pressure to complete as many rides or tasks as quickly as possible may get into accidents or leave dangers unreported, creating liabilities for themselves and the company.

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Other states have their own gig work regulations either on the books or in the works and President Joe Biden has expressed support for gig worker classification as employees, but there is currently no national legislation on this issue. However, in March, the House of Representatives passed the Protect the Right to Organize Act (or PRO Act), which would reclassify gig workers as employees, affording them all the benefits included in that status.

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The Senate has not yet taken up the measure.