In 2020 and 2021, Environmental, Social, and Governance (ESG) took center stage for many organizations as external stakeholders, regulators, legislators, and the public demanded a higher degree of accountability and integrity from the world’s leading companies. As companies considered how to best approach ESG in terms of business strategy, reporting methods, and internal responsibility, the Business Ethics Leadership Alliance (BELA) launched an ESG Working Group, which earlier this year produced Integrating ESG Into Your Organization: Selecting the Right Model.
The Working Group’s members represented a wide range of companies, including Gallagher, one of the world’s largest insurance brokerages. Gallagher has a long history of ethics and commitment to corporate social responsibility and is a ten-time World’s Most Ethical Companies honoree.
Gallagher incorporated the findings and output from the ESG Working Group into its own ESG structure, and continues its work on elevating transparency and ethics as a business differentiator. Ethisphere VP of Content and Thought Leadership Anne Walker spoke with Gallagher’s Global Chief Ethics Officer Tom Tropp, and Gallagher’s AVP of Enterprise Risk Management & Climate Change Initiatives Pooja Knight to discuss how their firm is integrating ESG into its larger business strategy.
Founded in 1927, Gallagher is one of the world’s largest insurance brokerage, risk management and consulting firms, with more than 34,000 people in more than 150 countries. As a publicly traded company (NYSE: AJG), what are the expectations for your company when it comes to Environmental, Social and Governance (ESG) and who is driving these expectations?
Tom: Gallagher’s culture is driving our focus on ESG. Our culture is incredibly unique, and for 93 years, it has focused our business’s reason for existence, which is to put the needs of people, clients and communities first. When people ask Pat Gallagher what we do for a living, he loves to say, “We put people’s lives back together.” That is what we do. So, I think that’s driving our focus here. ESG is nothing new with us. In fact, as ESG has condensed down into those three initials from CSR, and sustainability, and all those other terms, and we say, we’ve been doing this for 93 years.
I would say as ESG has become a key concern for our stakeholders, we are taking a harder look at our ESG practices and efforts and seeing what we can do as an organization to improve in this area. Our expectations are driven by our longstanding commitment to support the communities where we live and work and securing a future for our stakeholders. Our ESG efforts are at the forefront of that.
How did the ESG Working Group inform the way you were thinking about how you’re presenting ESG, both internally and externally, at Gallagher?
Pooja: Those Working Group meetings were instrumental in helping us further our ESG program and putting together an ESG committee. In those discussions, we came to a variety of models and inputs that we were using in our organization. As Tom and I reviewed the Working Group’s white paper, we took a look at one of the models and spun that out to form our ESG committee at our organization.
To Tom’s point earlier, this is really our culture. We’ve been doing this for quite some time, but I think it has evolved to the point where we can bring some more structure to it and making sure that we are taking a global approach while ensuring collaboration with all of our folks regionally and divisionally.
Tom: We took what we learned from the BELA group, and used that to formalize what we had already been doing with ESG, as well as improve various areas that we felt we needed to ramp up. It’s taken us well over a year to get some of those in place, but they’re in place now, and we’re pleased about that.
Can you talk about what those areas were at a high level?
Pooja: We’ve been looking at various ways to improve our ESG posture. From an environmental perspective, we spent quite a bit of time focusing on a host of metrics, such as employee commutes, travel, electricity, gas usage, waste, recycling, et cetera. Those are just a few. We looked at 2019 as our baseline to obtain that data—we also gathered data for 2020, but as you know, 2020 was a strange year for all of us and we’re still living it. So we felt that 2019 was a better baseline to assess where we were from a global carbon footprint.
We took that data and put it into an overall disclosure on what our global carbon footprint is and will use that to guide our discussions of what kind of reduction we want to move towards in future years. It’s a tough area in most companies to assess actuals as far as data, so you get as much as you can, and then you build estimates. But year over year, we’re looking to improve those estimates.
This new look at structure has really been figuring out how to involve regional stakeholders. Can you share a little bit about how you’re thinking about that, and how you came to your approach?
Tom: We are in 68 different countries, and when I see the diversity across our global organization, it amazes me. One of the things that I have learned through my 15 years at Gallagher is that what’s important in New Zealand may not be particularly important in Montreal, Canada. So in everything we do, but particularly in ESG, we want our coordination from Corporate but ownership in the field, learn what they’re doing, and then share that information globally.
One of my favorite stories about that is I was in Hawke’s Bay, New Zealand several years ago, and they did a wonderful project to rebuild a sea bird nesting area that had become overtaken by rats. The employees had organized the project and I had the great honor of joining them, and a number of employees were there and helped us clean up this bird site. We shared it on Gallagher’s intranet, and four different branch offices around the world read that and said, what a great idea. We have the same issue. They started doing what we did in Hawke’s Bay.
The whole idea, which we learned from the BELA group, is to take advantage of the wisdom of our people in the field, share that around the world, and make sure we’re coordinating it and helping those regions. But the ownership has to be in the field. They have to be dealing with what’s critical to them.
Pooja: We have an internal site called Share Your Cause, which brings a lot of our folks together. They gain ideas of what certain offices might be doing and leverage that across the board. We had an initiative earlier this year called 200 Days of Sustainability. The stories are amazing and show that there is so much that we can leverage as a company and share it across our global organization.
We know that ethics and compliance is integral to your organization. How has your approach impacted your ESG work?
Tom: We clarify between compliance and ethics. Compliance is what we must do; ethics is what we should do. But we’re being very careful—and this is something we learned from the BELA group, in addition to our own thinking—that we don’t segment ESG. Environment, social, and governance all work together. For example, Pooja is our global expert on environment and climate change. She’s done all the research. She will be in our new structure. She is the person globally that everybody goes to for counsel on climate change. But what she’s doing also is connected with the social aspect and with governance because there are legal issues to all of this in various parts of the world. Ultimately, we aspire for a collaborative effort across the environmental, social, and governance factors to help drive our ESG work and align on an overall corporate vision.
Pooja: Part of our ESG committee is to ensure we are sharing and understanding what local regulatory requirements might be and collaborating on the best way to address them. The UK, for example, has regulatory reporting requirements on climate change. Ensuring that we are providing the right data is a collaborative effort and requires coordination from Corporate. Australia and New Zealand are going to be doing that as well. And even more regulatory requirements are starting as we move along this journey, so it’s important that we all talk together.
You have reports on your website, but obviously there are other reports that you need to share at the local level and so forth. How do you approach reporting?
Tom: We report to a number of different rating organizations but the World’s Most Ethical Companies is the most comprehensive. It’s a huge project for us, but we do it every year without exception. Very often our people in the field will be working with a client or perspective client or community, and they want to know what our position is on ESG. That’s why we have all that data up on the website.
What advice would you give others looking to integrate ESG into their broader business strategy?
Tom: It has to be part of your culture. You can’t integrate something that you don’t really believe in. You have to be committed to this; once you have committed to it and it becomes part of your culture, you don’t have to worry about integrating it. It’s already there.
Pooja: ESG doesn’t happen overnight. It is a journey of improvement. You need to make sure that you’re focusing on what is the most important for your company, because this has such a large impact. But you also need to empower your employees to help you with this process, so they can take actions individually, as well.
Gallagher has such a strong history of ethics; how has it been a competitive advantage for you, especially as you evolve into ESG?
Tom: It is huge for us. The Ethisphere recognition allows us to tell people who we are and what we believe in. And it allows us to do it without bragging, because it’s an external recognition. But I will tell you, there is not a week that goes by that I don’t hear from a broker dealing with a potential new account who says we got new business because we are known for our high level of integrity as demonstrated by the World’s Most Ethical award. They said, we chose your company because you’re recognized as being a company of high integrity. It’s pretty rewarding.
About the Experts
Tom Tropp is the Global Chief Ethics Officer at Gallagher, a leading global insurance brokerage, risk management, and consulting firm based in Rolling Meadows, Illinois, United States.
Pooja Knight is AVP of Enterprise Risk Management & Climate Change Initiatives at Gallagher.
About the Author
Anne Walker is Ethisphere’s Vice President of Media & Communications.