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EPISODE TRANSCRIPT:

00:00:02

Alix McCabe: The natural world, it's a pretty magical place, and kind of integral to our existence. But do you consider a company's commitment to sustainability before you do business with them or buy their products?

00:00:15

Clip: Definitely, yeah. I would like to see what they're doing for their business.

00:00:19

Clip: I look for something that is actually a tangible sort of thing that proves that they're doing something, it's not just green washing.

00:00:26

Clip: It's on us as consumers to make our voice heard by choosing those products, even if they cost a little bit more.

00:00:32

Alix McCabe: ESG, environmental, social, and governance, is becoming a competitive differentiator for more and more organizations, but doing it right is the hard part.

00:00:41

Clip: It's not easy being green.

00:00:46

Alix McCabe: So let's take those three little letters, especially the E, and make some space for them on-

00:00:51

Audience: Wheel of Risk.

00:00:54

Alix McCabe: Welcome to Wheel of Risk, proudly presented by Allianz Trade. I'm your host, Alix McCabe. On every episode, we spin the wheel to choose a topic and then provide expert insights and actionable advice to help you keep your business solvent, secure, and well ahead of the competition. We have a very special guest to welcome to the show today. She's joining us all the way from Munich, Germany. Piril Kadibesegil is the Group Head of sustainability at Allianz Trade. Piril, thank you so much for braving the time difference to take part in our podcast today.

00:01:23

Piril Kadibesegil Yasar: Pleasure is all mine. Thanks for having me.

00:01:27

Alix McCabe: Well, it is certainly great to have you here and now as our studio audience is aware, the first order of business here is that we spin the wheel. It's actually heavier than it looks, so make sure you give it a really good tug.

00:01:38

Piril Kadibesegil Yasar: Okay, oh.

00:01:41

Alix McCabe: Oh, nice one. We couldn't have picked a better topic for someone in your position because you've landed on putting the E in ESG.

00:01:51

Piril Kadibesegil Yasar: Oh, wow.

00:01:52

Alix McCabe: Sustainability is a huge challenge that really does require an all hands on deck approach. So, let's dive in. For most of human history, spending or investing money has been primarily motivated by one thing, the potential for financial returns. But in the past few decades, a new set of criteria has become part of the equation, ESG. In simple terms, ESG is a framework for evaluating a company's sustainability and ethical impact on the world in which it operates. But why is it so important and how does it actually benefit businesses? Let's kick off our conversation with some table setting, Pırıl. How do you define ESG and why is that E at the front so critical right now?

00:02:39

Piril Kadibesegil Yasar: So basically ESG stands for environment, social and governance, and this is really looking at a company, all these three angles. I think they're equally important, complimentary to each other and if you ask me why personally, E is at the front is basically because everything starts with the environment that we live in around this planet.

00:03:02

Alix McCabe: Makes sense. So, how and where did the ESG movement originate?

00:03:07

Piril Kadibesegil Yasar: So I would say ESG movement was always there at the very beginning throughout the human history, so it's never been absent, but if you ask me when these things became a bit more " corporate" and became more as a framework, I would put the Brundtland Commission in the late 1980s, early 1990s when they started defining, and they actually have in one of the meetings with the United Nations, with the Brundtland Commission, have one of the most known definition for sustainability, which is putting the needs of today without compromising the next generations.

00:03:44

Alix McCabe: The needs of today without compromising the next generations, that's a good way to describe it. Let's zoom in a little closer on the E part of ESG. So, what's the business case for sustainability? Are companies embracing it simply because it's the " right thing to do," or are there tangible benefits?

00:04:00

Piril Kadibesegil Yasar: So I would say when you look at sustainability or ESG, they're complimentary. I always say it's like putting your 3D glasses on. So you start seeing the third dimension that we have been, or we might have been neglecting for quite a long time. Yes, there is a business case because now we are asking companies to look when they're digging a hole in our backyard to ensure that they're also not polluting the community that we are all living in, or when they are working on a hydro dam, they're also treating the community that occupies that land with a respect. So it's really being a good corporate citizen. So yes, there is a business case, as well as it's the right thing to do.

00:04:39

Alix McCabe: Yeah, it's both. How is the push for greater sustainability playing out, in terms of the number and variety of positions that companies are creating and filling? We've even seen this in our own company.

00:04:49

Piril Kadibesegil Yasar: That's a funny thing that you ask, because when I was studying, the position that I occupy today did not exist. And when we're looking into the positions now being posted, I had a very funny conversation with one of my colleagues in the past and they were saying, "Oh, we are looking for a very specific ESG expertise that has someone for 10 years." And I said, "That job did not existed for 10 years, it's only for a couple years."

00:05:12

Alix McCabe: It wasn't around 10 years ago,

00:05:14

Piril Kadibesegil Yasar: It wasn't around for 10 years, but we assume that all this information or the knowledge that we are building up has been around for so long. But I also see that when I look at a corporation, the integration of sustainability has achieved so high levels. So when you look at finance now, you find people responsible for non- financial reporting, sustainability reporting. When you go to compliance, there's a person responsible for sustainability regulation. Couple years back, you didn't have these expertise, so you know how much in- depth this has gone.

00:05:44

Alix McCabe: Really into different parts of the business, as it should.

00:05:47

Piril Kadibesegil Yasar: Correct.

00:05:56

Alix McCabe: So I'd like to talk a bit more about how the impacts of climate change are forcing individual sectors to adapt or change their thinking. You were speaking a little bit about finance just a minute ago. So let's start with the insurance industry, which we are in. How has its perspective shifted in recent years, would you say?

00:06:14

Piril Kadibesegil Yasar: So I think insurance industry has been long aware of the impact of the weather events that's coming because of global warming. When you start reading the IPCC reports 10 years back, 15 years back, today, we are living the realities of those reports, unfortunately. And if you look at 2023, the natural catastrophes cost more than $ 100 billion in insurance claims and the majority of all these events have been happening in the last 10 years. So the longevity, the solvency of insurance companies really started depending on how we are dealing with the weather. If we want an insurable world, we know that we need to limit the global warming to 1. 5.

00:06:55

Alix McCabe: So, okay, what about the impact on trade or supply chains and businesses that depend on shipping goods overseas?

00:07:04

Piril Kadibesegil Yasar: Excellent question, because trade is very, I would say, interrelated to the weather and ecosystem that we're living. So a very basic example, when you look at Panama Canal, it's responsible for 5% of global trade. And last year, because of these extreme weather events, there was a huge drought that delayed half of the deliveries all around the world.

00:07:28

Alix McCabe: Wow.

00:07:29

Piril Kadibesegil Yasar: It's the same thing when you look at Germany with the Rhine River or you look at the wildfires and it's destroying the crops and it's changing the arena, the play field for trade as well.

00:07:40

Alix McCabe: So Pırıl, finally, let's talk about the world of finance. How does ESG factor into investment decisions?

00:07:46

Piril Kadibesegil Yasar: So when you look at ESG, it really is a way of we look at risk mitigation as well, because you're not looking at company solely from a financial perspective. You're looking at different aspects that compliments how a company is governed. It looks at the ecosystem that it lives in. So in investment, we have always seen that this is, again, when you incorporate ESG factors into your investment decision making, and it also has a secondary purpose. Investment can also push the world to a net- zero economy. You can as an asset manager, take money from one pocket to another. This is also where the UN Asset Owners Alliance, which Allianz is the chairperson, has been trying to accomplish.

00:08:29

Alix McCabe: So it's really a more well- rounded look at the full business, not just the financial elements.

00:08:33

Piril Kadibesegil Yasar: Absolutely.

00:08:34

Alix McCabe: So, Piril, how can you tell as either a potential business partner or customer, if a company is actually walking the walk when it comes to sustainability, or if they're just kind of talking the talk?

00:08:45

Piril Kadibesegil Yasar: I look at how incorporated sustainability in their business strategy, because it's not only about financial, it's not about ESG, so how everything comes together. So when you are selling a product, when you're producing a product, if a company can demonstrate that at every step they're taking in consideration the environment, social and governance perspectives, you can start feeling it. This is why I say it's like wearing this 3D glasses. You see it in a company if they have that third dimension or not.

00:09:16

Alix McCabe: You can certainly tell when you work. I mean, from my perspective, when you work for a company that's actually walking the walk, rather than just talking the talk, as an employee in that company, which from my view, being in human resources, interestingly I wanted to share this with you. More and more of our candidates, our external candidates who we interview for jobs are asking us very explicitly, what is your ESG strategy? What is your view on sustainability? Is this part of your company values? So it's becoming important in the employment market as well, very important.

00:09:45

Piril Kadibesegil Yasar: I absolutely agree with this, and I think especially after COVID, the next generation is looking for more purposeful jobs.

00:09:52

Alix McCabe: Absolutely.

00:09:54

Piril Kadibesegil Yasar: They want to make sure even if they work in accounting or in different departments, they want to know they work for a company that their values match together. I think that's the key part.

00:10:02

Alix McCabe: 100%. It's not just about the compensation and benefits.

00:10:06

Piril Kadibesegil Yasar: No.

00:10:06

Alix McCabe: So, let's bring it a little closer to home and talk about Allianz Trade a little bit. How does Allianz Trade seek to understand a company's commitment to ESG before establishing a business relationship with them?

00:10:18

Piril Kadibesegil Yasar: So we have two views to how we evaluate a company. We first look at from a risk mitigation point of view. So as I mentioned, it's not only the financials that's important to us, it's also how a company reacts to its environment, social and governance topics. So we especially look at certain sensitive areas in business and we see if it's a mining company, if it's a company working animal fair, or if it's a company working in infrastructure, we start looking into understanding whether their project has an impact on the environment. If so, how then that environment is being evaluated by certain certifications. Is there any complaints from the community that is being impacted by this infrastructure project? So we go really in detail and ensure that the company has addressed all the concerns or they're already excellent in performing these parts. So that's the first part.

And then the second part is really working with companies who are heavy emitters, like coal, because we are committed to 1. 5 degree to keep the world in a net- zero economy. At here, we work together with these heavy emitters to ensure that the journey that they're going complies with our commitments.

00:11:43

Alix McCabe: I know embracing ESG is a journey and not necessarily a destination. So, how would you describe Allianz Trade's own journey, in terms of sustainability and the environment?

00:11:54

Piril Kadibesegil Yasar: So forward and straight, the topic of sustainability, environment, climate change is not something new, we have been working on for many, many years. But it started from a risk perspective because we are an insurance company, we started looking from how ESG factors are incorporated into the clients and customers, the projects that we work in. But it ramped up eventually, especially after the 2015 COP where we agreed in the Paris Agreement to limit the world warming to 1. 5 degree. And then we started looking how we can contribute, what we need to do, who we need to work together, and this is where then we started our commitment for coal phase out. And here we also then started engaging more and more with non- governmental organizations, intergovernmental organizations, trade associations, to really ensure that we are building a future that is sustainable.

00:12:48

Alix McCabe: That's great. I'd like to ask you something about your own journey, because you mentioned earlier that when you were studying in your field, that the job that you have today wasn't even in existence. That's pretty brave to go into a field where maybe the future is undefined. So what got you interested in started on these topics, Piril?

00:13:08

Piril Kadibesegil Yasar: I would say by coincidence, I started getting more and more exposure to the topic. I started reading back then, it's called the GRI, Global Reporting Initiative. It was very few companies who were publishing this and I got really interested and I said okay, so these companies are publicly reporting what they're good and bad at sustainability and environment, and they're making public commitments, and I found that really inspiring and transformative. That's why I think for me, I didn't think whether this job would have an future or not, to me it was more a purpose calling, and I always feel it. So I always say I love my job so much, it doesn't feel like it's a job.

00:13:51

Alix McCabe: It doesn't feel like work.

00:13:52

Piril Kadibesegil Yasar: Exactly.

00:13:54

Alix McCabe: I get that, that's great. So what lessons have you learned from our own ESG efforts that other organizations, whether big or small, could potentially benefit from?

00:14:04

Piril Kadibesegil Yasar: I would say big or small, everybody can start doing something today. Even if you start just looking at your water consumption, your business travel, or how you source things, who you work with. Every step counts because sometimes companies get stuck with saying that, oh, I don't have this big commitment that I need to do, and then they step back. However, sustainability as we just discussed, is a journey. So you need to start somewhere, and when you start the journey, you actually see that it gets not maybe easier so to say, because it's a very complex thing, but it gets more clear, the pathway you need to take and you get more and more community to help you. And you start seeing also the impact that you're creating. Your customer or your suppliers start changing, you become in a support group of sustainability. So I would say if there's one thing that I would give as maybe a learning is just to start today from somewhere and not wait for the perfect thing.

00:15:04

Alix McCabe: That's great advice, get started. And then one last question on this topic. What would you say, Piril, to a business owner who maybe isn't convinced of the value of ESG?

00:15:15

Piril Kadibesegil Yasar: I think ESG, especially when you're a business owner, it starts with being a good corporate citizen to your community. It's really looking back to your own footprint saying that, am I actually causing any damage to my neighbor? When I am working with an employee, am I giving the right benefits? Am I treating them fairly? In terms of governance, when you look at it, am I rightfully paying my taxes? Am I really being ethical about how I'm treating my customers or suppliers? It is as easy as just being a good corporate citizen.

00:15:50

Alix McCabe: Wise words. Don't worry, Piril, that sound doesn't mean there's an extreme weather event coming our way. It's actually time for the lightning round.

00:16:01

Piril Kadibesegil Yasar: Oh, wow.

00:16:02

Alix McCabe: So here's how it works. I'm going to share some examples of sustainability initiatives undertaken by various real world companies, and I want you to give them one, two, or three stars based on how important you think they are.

00:16:15

Piril Kadibesegil Yasar: All right.

00:16:16

Alix McCabe: Okay, great. So let's start with a simple one. Transitioning to a paperless office. So no more printing, no more business cards, it's all done digitally. How would you rank an initiative like that? One, two, or three stars?

00:16:29

Piril Kadibesegil Yasar: I would say one star because it's a good start.

00:16:32

Alix McCabe: Right.

00:16:32

Piril Kadibesegil Yasar: But if you look at it, it's just the very beginning of your journey.

00:16:36

Alix McCabe: And I think a lot of companies do take that as an initial step. Like you were saying before, just get started, right? That's one that you can tackle without too many resources to make it happen.

00:16:45

Piril Kadibesegil Yasar: Exactly.

00:16:46

Alix McCabe: Okay. So I know this one has its fans as well as its critics, but what is your take on companies buying carbon offsets?

00:16:53

Piril Kadibesegil Yasar: This is a very difficult one. I need to explain first.

00:16:56

Alix McCabe: Okay, please do.

00:16:57

Piril Kadibesegil Yasar: First, it depends on where the company is, in terms of category, to decrease to 90% of its own footprint and then the remaining 10%, they should be looking into the offsetting because you can't offset everything. So if this company is already done the first part and doing carbon offsets, I would say three stars. But if they're not doing the first part and they're relying on carbon offsets, I even take one point off from them.

00:17:25

Alix McCabe: You would deduct stars in that case?

00:17:27

Piril Kadibesegil Yasar: I would deduct stars, yes.

00:17:28

Alix McCabe: Makes sense. Okay, so next up, how many stars for companies that pledge to track and measure their carbon footprints?

00:17:35

Piril Kadibesegil Yasar: Three. This is one of the most important one. So three stars, because you need to measure and track to understand your whole footprint and this is where everything starts. It used to be more verbal in sustainability, now it's getting more and more data oriented, and this is one of the core parts.

00:17:55

Alix McCabe: It's much more data oriented. Without that baseline, how do you know where you can improve, right?

00:18:00

Piril Kadibesegil Yasar: Exactly, and this is where the credibility comes. Where is your baseline? How are you measuring? What is your then target in the next three years and so? This is what makes your sustainability journey more credible in the eyes of others, so that you become really transparent.

00:18:16

Alix McCabe: More credible and concrete, okay. Finally, this has become a big one since the pandemic, but what are your thoughts on remote work? Is that a win for sustainability?

00:18:26

Piril Kadibesegil Yasar: For sustainability, absolutely, because then it's really helping companies as well as people to reduce their footprint, especially from the travel emissions. I am also a big fan of remote working because of the human aspect, it allows people the flexibility that they need. So as long as you have the option to be in the office or home, depending on your availability and your desire, I think this is the best combination.

00:18:53

Alix McCabe: So how many stars for that one?

00:18:55

Piril Kadibesegil Yasar: I would give three.

00:18:57

Alix McCabe: Three stars, I agree. Amazing, thank you for playing our game, Piril. Before we wrap up, I wonder if you could share some final advice for our listeners who might be maybe starting their own sustainability journey. What's the best place to begin?

00:19:12

Piril Kadibesegil Yasar: What I usually suggest is look at your most favorite brands and go into their website, start reading their sustainability webpages, or if you can, start reading their sustainability reports, and really evaluate in the eyes of not only as a consumer, a fan of this brand, but also from your own values. Do you agree now that you know a bit more how they produce the product that you're using or how they're treating their employees? I think this is the best way to start, to look at your favorite brands through the sustainability eye.

00:19:48

Alix McCabe: That's great advice. This has been a super informative conversation. Unfortunately, that music means we are out of time for today. And it may sound a little saccharine, but this is one of those challenges where if we get it right, we're really all winners. So Piril, thank you so much for joining me today.

00:20:05

Piril Kadibesegil Yasar: It was a pleasure, thank you.

00:20:10

Alix McCabe:  My guest today has been Piril Kadibesegil, our Group Head of Sustainability based in Munich, Germany. I'm Alix McCabe, and this is Wheel of Risk, brought to you by Allianz Trade. Thanks for listening. If you learned something today, which we hope you did, we'd appreciate it if you could leave us a nice review wherever you get your podcasts. And to find out more about our own sustainability efforts, you can visit our website, Allianz-trade.com. That's A- L- L- I- A- N- Z- T- R- A- D- E. com. Talk to you soon.