ESG: Healthcare administrators reveal how it drives strategy

Environmental, Social and Governance (ESG) in healthcare is here to stay. Although this framework was first used by corporations and public companies to demonstrate their commitment to social responsibility to shareholders, health systems are beginning to see the value of the ESG agenda for several reasons.

1. They believe they should play a role in creating a more ethical world.
2. They’re mission-driven organizations that want to address health equity, including the social determinants of health.
3. They understand the relationship between the patient populations they serve and issues like climate change, DEI and supplier diversity.
4. They understand the business benefits of ESG.

So how are leading health systems incorporating ESG into their strategy? Medline partnered with Practice Greenhealth to find out by doing a comprehensive assessment of 46 health systems.

Let’s explore the results of the assessment and how ESG is shifting the industry, including the healthcare supply chain.

ESG programs and initiatives first appeared in the corporate world. The result of an evolution in the role companies are expected to play in society, ESG represents an expansion of Corporate Social Responsibility (CSR) model.

In this broader approach, environmental and social responsibility is fully integrated into strategy and paired with a strong governance framework. ESG issues are then reported on with the same rigor companies bring to their financials, including quantifiable targets and measurable impact assessments.

Healthcare systems—long focused on saving lives and improving human health—have always been mission-driven organizations. However, the widespread adoption of ESG by public companies has led them to formalize these efforts by tracking and reporting on key metrics.

When the U.S. Securities and Exchange Commission implements their proposed ESG reporting rules around climate-related disclosures, healthcare organizations will likely face increasing pressure to enhance and standardize their data strategy. While these requirements will only directly impact for-profit providers, it could have a downstream impact on their partners and vendors when these providers reach out to meet their reporting goals.

Leaders in the healthcare sector often focus their ESG strategy around addressing social determinants of health—or the factors that prevent people from having equal access to good health. After the COVID-19 pandemic, there’s heightened awareness in the industry of how social and racial disparities can lead to poor health outcomes.

Other focuses include sustainable products and packaging, climate change and how environmental factors impact human health. Health systems evaluate their business decisions to assess the impact on the health of their patients, staff and communities.

From their buying decisions to their overall strategy, health systems are fully integrating this approach. It’s now routine for them to request information from suppliers on everything from environmental sustainability to ethical sourcing to diversity, equity and inclusion (DEI).

Health systems are paying more attention to the healthcare supply chain to ensure ethically sourced products. They want safe, sustainable products produced by people who are treated well. For them, a leading ESG priority is respecting human rights throughout the supply chain and avoiding the use of forced labor. They do not support poor working conditions for ethical reasons. Additionally, they don’t want those conditions to lead to poor products that can harm patients or residents.

Recently, Practice Greenhealth, the leading healthcare member organization in the U.S., and Medline partnered to conduct a comprehensive assessment of health systems. They surveyed decision makers at 46 organizations on the extent to which ESG is incorporated into healthcare purchasing decisions. Additionally, they reviewed recent requests for information to assess the number and nature of ESG-related requests.

ESG priorities can vary by region. “In the U.S., environmental sustainability, diversity, equity and inclusion, and supplier diversity are top priorities. In Europe, ethical sourcing is more of a focus, while supplier diversity is hardly considered a concept,” says Evelyn Miller, Medline senior manager, ESG.

Suppliers are responding to this shift in buying behavior. Medline is ensuring that their products are made responsibly by applying rigorous ethical standards to every link in their supply chain. “By embracing ESG now, we’re positioning Medline to succeed in the future,” says Miller.

Currently, Medline is prioritizing diversity, equity and inclusion, ethical sourcing, GHG emissions, supplier diversity, and sustainable products, programs and packaging. The plan is to address immediate ESG drivers, while simultaneously launching the infrastructure to realize and sustain long-term performance, including the creation of global data.

“ESG in a sense is mandatory for the company to undertake because what is driving us to do these things are regulatory compliance and customer expectations, both of which we need to satisfy,” said Alex Liberman, Medline Chief Legal Officer, who oversees the company’s ESG effort. In addition, “we take a lot of pride in making Medline net positive in the world. Everyone involved is very sincere and energized about this undertaking.”

Health systems have always been mission-oriented organizations, but the widespread adoption of ESG in the corporate world is driving them to formalize their efforts, especially around reporting. Our survey shows that ESG is impacting purchasing decisions, and many vendors are prioritizing ESG as they reshape the healthcare supply chain.

References:

1. Survey data on file.