Wineries must manage ESG risk to avoid sour grapes | Business Insurance

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Like other industries, many wineries have embarked on an ESG push. Major sustainability initiatives in recent years have included recycling and waste treatment, working with green carriers, and the introduction of compostable packaging.

Wineries have also moved to use sheep and goats to cut grass and chickens for pest control. Recycling has also been extended to pomace (wine residues, skins, stems and seeds).

In addition to the environmental benefits, wineries have reported cost savings thanks to ESG efforts and the introduction of solar power. In Australia, the sixth-largest winery, De Bortoli Wine, was able to save “thousands” of Australian dollars a year by generating 5.5% of its electricity using the technology, according to a 2016 report from Wine Australia.

In the US, California leads in wine production (the state produces at least 85% of the country’s wine, according to NAAW figures) and also leads in small-scale solar production, according to Chester Energy and Policy, which cited investigations by the US Energy Information Administration that found California was responsible for 43% of the nation’s total small-scale solar PV production in 2016.

read more: California wineries threatened by rising temperatures and a longer wildfire season

“From a financial standpoint, efficient use of energy and water can reduce overall operating costs,” said Justin Guerra, risk management specialist for PAK Programs (pictured). Insurance business.

However, the drive towards sustainability has opened companies to new risks. Solar power has the potential to cause a case of sour grapes for wineries if the risks are not properly accounted for, according to Guerra.

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“Large solar infrastructure adds weight load to any structure,” Guerra said.

“Depending on the angle and position of the panels, they can also add risks related to wind, lightning or other weather issues.”

Solar panels also add complexity to the power grid and require regular maintenance and cleaning, according to Guerra, while some risks are potentially devastating.

“Some of these systems also run on battery backup power at night or on cloudy days and use battery compartments that, if not well ventilated, present risks of fire and exposure to hydrogen gas,” Guerra said.

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Despite the risks, solar power can be a “great” initiative, Guerra said, and agents and brokers should help customers go green.

“With climate change an increasingly present risk factor contributing to the devastating impact on wineries in recent years, it is important to work towards a sustainable future,” according to Guerra.

“[Agents should] ensure that any ESG equipment or infrastructure is added to the policy with the appropriate coverage and patiently work with clients to address any potential exposures that sustainability may bring.”

For some wineries, ESG efforts have translated into increased financial leverage on top of operating cost savings.

“With a better reputation and greener products, some wineries have seen higher sales,” said Guerra.

In addition to the financial advantages, there is another potential benefit for wineries looking to strengthen their ESG efforts, and it is reflected across all sectors.

Read more: Climate and ESG increasingly crucial in risk management

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“It can help with recruiting, as data shows the next generation is more motivated to work for companies that embrace their environmental responsibility and offer a motivating mission that employees can get behind,” Guerra said.

“This can translate into a stronger and more motivated workforce.”

The transition to a greener model is not without its risks, and Guerra stressed the importance of preparation and planning.

“As companies change their main source of energy or change their harvesting practices to accommodate sustainability, there will always be financial and operational risks,” he said.

“With new exhibits to manage and additional training for staff members to teach them how to work through these new processes, business owners need to be prepared and educated on how to properly implement sustainability initiatives.

“Before making any major changes, we always recommend that business owners talk to their insurer to make sure they’re taking the right steps to keep their business safe while becoming more environmentally conscious.”