Insurers Deliver First Green Dividend

In a recent Wall St. Journal cartoon, an industrial tycoon quipped, “The environment has been around for billions of years … I see no reason to coddle it.”

This is yet another illustration of how reform of agricultural policy towards Earth-friendly and sustainable practices can morph into a type of consumer jingoism found on bags of fancy coffee, bars of chocolate and boutique jeans. Such a “let them eat cake” approach can render sustainable agriculture into “a marketplace of the faithful … as priced by the agnostic.”

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In its own way, Rekerdres and Sons Insurance has done something about it. Completing the first year of the world’s first “Green Endorsement” covering trade in sustainable commodities, Rekerdres delivered on behalf of its slip of insurers a dividend in respect of dedicated sustainable commodity operations.

Sustainability has many contexts, but the most evocative sense of what to avoid comes from Leonard Garden, Ecom director of Sustainable Operations in Côte d’Ivoire. He refers to the “tragedy of the commons” as the point where one entity overuses common natural resources to the extent that a downward spiral is triggered for neighbors who previously peacefully and sustainably co-existed.

To be valid in the long run, sustainability must have both a moral and economic rationale. The Green Endorsement is a dividend where premium is returned for the achievement of mutual goals and benefits. Also, and just as importantly, the beneficiary cannot be the Coverholder, but rather the organization that administers the sustainability program.

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The first global commodity merchant to qualify, Ecom Agroindustrial Corp. Ltd., has directed its dividend over to the audited Ecom Foundation, which is dedicated to improving living standards for producers in coffee, cotton and cocoa regions. Since commodities are already traded very competitively and the allocation for insurance comes from just a sliver of the raw cost of goods, innovative thinking was needed to get existing risk capital to do more. The Green Endorsement applies “Best Management Practices” to three basic core criteria: Industrial hygiene standards over personnel and property; hands-on merchant/producer training;and transparent/traceable/trustworthy operations.

The Big Picture

An analogy drawn from a small town can illustrate the importance of looking beyond insurance dollars. History shows that small towns making the extra effort to build a fire station attract new investment, and the station is also a proud new source of leadership and reliability.

Turning to sustainable operations, two years of loss data show inherently cleaner, better and safer physical risks. But the surprise is that just like a small town fire station, sustainable suppliers also set a tone of community leadership and integrity.

In the last five years, insurance losses from theft, fraud and deception at the hands of conventional supply chains have reached global epidemic levels, including a theft loss exceeding $200 million (USD) in one infamous case. By comparison, there have been no such losses from sustainable suppliers, owing in part to the higher levels of trader/producer control needed for traceability.

The merchant’s commercial infrastructure – banks, insurers, and logistics providers – now have several new reasons, along with this powerful new litmus test of a Green Dividend, to help recognize merchant clients who organize and trade in sustainable commodities. This same commercial infrastructure – in annual reports to shareholders, employees and directors – will in turn be able to champion their core activities as safer, greener and more socially responsible.

Caption (photo):
Ted Rekerdres (right) delivers Insurers’ Sustainable Dividend check to Ecom’s Leonard Garden in Port San Pedro, Cote d’ Ivoire in November.

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