By Abraham Malinga
Communications Intern- ICPAU
The Chief Executive Officers in Uganda’s insurance industry have emphasised the urgency of a framework to regulate the application of Environmental, Social and Corporate Governance (ESG) practices in the insurance industry.
While delivering a presentation on ESG implementation in the Ugandan context, Mr Sande Protazio, an officer at Insurance Regulatory Authority noted that at the national level, regulators must put in place frameworks to motivate organisations to implement ESG practices, while at the organisational level, ESG must be incorporated into strategy.
Although Africa’s contribution to global emissions is minimal, economic and geographical factors make it the most climate vulnerable continent. 30 percent of the world’s 40 most vulnerable countries are in Sub-Saharan African.
Mr Ronald Musoke the Chief Executive Officer of the Uganda Reinsurance Company noted that the whereas the environment is affected by pollution, poor water quality, emissions, deforestation, and poor waste disposal practices, among others, the social component comprises fair work conditions, equality and diversity, community engagement, and human rights, among others, and governance covers tax compliance and transparency, ethical behaviour, compliance with the laws, and sustainability management by the board.
In an era defined by heightened environmental consciousness, a growing awareness of social inequalities, and an increased demand for ethical governance, the concept of ESG has emerged as a guiding beacon for business and investors alike. ESG represents a transformative framework that transcends traditional profit-focused paradigms, urging organisations to not only measure their financial success but also to evaluate their impact on the planet, society, and corporate governance. In this rapidly evolving landscape, understanding ESG is not just a matter of corporate responsibility, but a strategic imperative.
To this end, identifying and managing ESG risks has become a paramount concern for organisations across all industries. ESG risks include disregard for human rights, non-compliance with laws, release of pollutants into the environment, corruption practices, bribery, and unsafe working environments for employees.
Accountants have been urged to enhance risk management through identifying risks, assessing internal controls, identifying mitigations, and monitoring and communicating these to management.
Chief Financial Officers are further tasked to address ESG and climate disclosure in the financial reporting mainstream, messaging on ESG, and demonstration to investors, obtaining ESG data for inclusion in the financial report, and adequate budget for ESG related activities. Insurance also plays a pivotal role in ESG risk management.
The benefits of ESG implementation are numerous. They include expanded customer markets and top line growth, stronger capital inflows and public financing opportunities, more optimal internal capital allocation, reduced resources footprint and lower energy costs, and talent, collaboration and partnering attractiveness, for environment, acceptance of new projects, avoidance of more expensive options, supply chain assurance, and talent optimisation with effective diversity and equality practices for the social, and regulatory endorsement, potential to raise the standards bar, role in developing industry voluntary codes, and investor assurance and attractiveness, for the governance pillar.
Mr Musoke emphasised that ESG implementation should not take a one-size-fits-all approach and can be executed in a full scale manner or a phased approach with the low, medium and high levels, depending on the resources of the organisation.
He gave an example of a phased strategy under environment, which would entail installation of energy efficient electronics at the low level, switching to a fully digital communications system under medium, and development of new products and services which minimise environmental impact across the entire supply chain, at the high level.
Mr Jonan Kisakye, the Chief Executive Officer of the Uganda Insurers Association noted the need to mount pressure on manufacturers of plastic bottled beverages regarding ESG compliance.
Some of the components of ESG include fair working conditions, safeguarding employees and customers at their work places, equality and diversity in terms of sex, age, religion, culture and tribe among others, community engagement such as CSR activities like blood donation and human rights.
The insurers were panellist for a topic on implementing ESG in the Ugandan context at the 28th Annual Seminar on 20 September. Organised by the Institute of Certified Public Accountants of Uganda, the Annual Seminar is being held under the theme, empowering change for corporate and personal growth at the Imperial Resort Beach Hotel in Entebbe. It runs from 20-22 September 2023.
