Building resilience with emerging technologies

Embracing renewables is a critical step for a brand’s reputation, not to mention the environment. But with new technology comes emerging risks – pretty big ones – that are worth being aware of.

Solar energy, lithium batteries and electric vehicles have all been great achievements in sustainability, but they’re still far from perfect. Until safety measures catch up, brokers need to stay vigilant about the risks.

The two biggest risks? Fire safety and the scarcity of lithium.

According to data from Australian fire departments, more than 450 fires have been linked to lithium-ion batteries in the 18 months leading up to February 2023. It’s a problem that brokers need to be aware of.

“We’re getting battery fires that are burning down a factory because they either weren’t charged safely, the batteries were of unknown quality, or they weren’t being supervised when they were being charged,” says Chris Wood, Automotive Risk Manager and Technical Specialist at Allianz.

“And they’re not just taking out the business. They’re taking out the businesses around them. I was looking at an example the other day. It was $120,000 for the commercial property fire, but then we got a $1.9 million liability claim from the businesses around it. And that fire was caused by charging scooters,” Wood added.

If you’re working with a business that works with e-scooters, there are lots to think about.

“We give these products of questionable quality to kids, then they use them as kids do. We know rough use/abuse is one of the major causes of lithium battery fires. It’s called thermal runaway,” says Wood.

“If you’ve ever seen a thermal runaway, it has jet-like flames that chew out a couple of metres from each side, it gives off toxic vapour. And if it’s in a confined space, like a garage, it can fill the whole void up and then explode.

“The incidents are very low, so it’s not a frequency issue but it’s the severity.”

There are simple but important safety measures that brokers can pass on to their clients to minimise risk. Director of Steadfast Risk Engineering, Josh Giansiracusa, recommends all electric vehicle owners have a blue diamond sticker on their cars for quick identification.

“So that if you were in an accident, or if there was a certain emergency situation, responders will respond differently to an electric vehicle as opposed to petrol,” he says.

Changing the way we approach refuelling

It’s likely that in the next few years, our home and work garage setup will change, along with the safety needs of a home with an electric vehicle charging unit.

“Even a thermographic scan is very beneficial because what that does is picks up hotspots within your electrical system.

“So you can take imaging and it’ll give you a heat rating and say, ‘Oh, since you’ve installed the battery charger, your whole property’s electrical system seems to be lighting up like a Christmas tree,” Giansiracusa adds.

Safety is one aspect brokers need to consider – the other is the reputational risk to big businesses.

According to the Office of the Chief Economist, demand for lithium worldwide is set to rise by 40 per cent in the next two years, while Australia is looking to triple its lithium exports in the next 12 months. With all this demand, the risk of misrepresenting what a business may be able to achieve is real.

“When organisations are making representations as to the availability of lithium and supply from a particular prospect or mine, as always, proceed with caution,” says Dylan Moller, Senior Technical Claims Lead with Gallagher.

“With lithium in particular, there are a number of risks from the mining process, to the ability to reach targets (both in terms of availability and timing), and safety, with a risk of harm or misrepresentation.”

Risks of harm and misrepresentation are important considerations from an insurance perspective. However, one of the most topical risks at the moment comes from the crack-down on false or misleading representations on ESG and carbon targets (greenwashing). Companies may face accusations and charges related to greenwashing if they say they’ll reach certain targets and then don’t.

“There is always a difficulty in being as accurate as you can be. The critical matters are having the evidence to support those representations, not using vague language, and constantly reviewing progress,” adds Moller.

Moller believes there will be standardised expectations and regulations across sustainability and carbon targets soon to bring Australia in line with G20 and global initiatives, and it’s something businesses and brokers need to stay up to date with.

“Brokers can help their clients through understanding what their targets are and understanding the evidence that backs it, and to ensure the data, evidence and strategy behind checking these targets is really up to date, reasonable and achievable.”

Reaching net zero is commendable, but are we moving too quickly to meet those targets safely?

Basil Taylor, Manager at Allianz Risk Consultants Australia, says the real hazard is misunderstanding what each individual business needs to move to a sustainable model.

“If we’re going to do this net zero transition, what does that look like for my business when we think of turnover, supply chains, volume, and growth? And how can we do things smarter and differently, but at the same time, keep the business sustainable and profitable?” says Taylor.

It’s a Catch-22 because as customers seek out businesses with a sustainable footprint, there’s also a reputational risk of not going green.

“So, when we think of reputational brand value and brand awareness, how does that look for that business? What can they do and what shouldn’t they do to enhance their reputation?”

There’s a feeling this space will change a lot over the next decade, and sharing knowledge will be key to staying on top of those changes.

Taylor says, “I think that learning partnership is crucial and sharing experiences is key to that learning. So, sharing experiences for the broker and the client and the insurer and then taking that further to ask, ‘What did we learn from that experience?’”

Tips for brokers

1. Sustainability targets are important benchmarks towards a greener world, but we’re still playing catch up in the renewables space when it comes to safety and supply.

2. Lithium batteries are a fire waiting to happen, if not handled correctly.

3. A brand poses considerable risk to its reputation if it doesn’t look to reduce its carbon footprint. At the same time, businesses need to be confident in what they’re promising so as not to be seen as greenwashing.

4. Sharing experiences around these emerging technologies is the best way to protect everyone.