With ESG issues playing an increasingly central role in organizations across the globe and governments taking ever more firm stances on policies that reflect ESG values, companies are facing the pressure to adopt ESG measures.
The good news is that efforts to track your organization towards ESG adoption is a bet on a winning horse. With 87 percent of the next generation of leaders, today’s millennials, believing that ESG is important, those companies who adopted ESG practices over ten years ago are ahead of the curve, but those who start today won’t get left behind.
Companies benefit widely from ESG adoption
Organizations that have put in the legwork of adopting policies geared towards ESG can attest that it’s a process that can take time to see results. However, the more mature an organization’s ESG program is, the greater the financial results the company is able to reap.
The benefits of ESG are manifold. At the basic level, many organizations are forced to adopt ESG policies due to changes in governmental standards, particularly where the environment is concerned. But, beyond being dragged along by ESG to avoid compliance problems, those who seek to address it more proactively are concerned about other factors as well, such as creating a holistically more human-centered working environment that reflects and fulfills the needs of their workforce and community.
ESG efforts have been very effective at bolstering the success of the organizations that have adopted them. An equity analyst from Bank of America found that companies with robust ESG policies “avoided financial trauma and difficulties” across the board. Additionally, a direct relationship was discovered that companies that ranked within the top 20% of ESG ratings has lower earnings volatility. High ESG scores attract partnerships and investors.
How can healthcare organizations benefit from ESG practices?
For healthcare organizations, adopting ESG practices has enormous potential to recuperate a sense of trust in a system that has been labeled as broken and that is seen to have largely failed not only patients but health care workers in America during the Covid-19 pandemic.
Additionally, in a context where efforts are being made to stem the health care worker drain, addressing employee and patient well-being and introducing policies that, as Forbes Magazine put it, “Get ‘Health’ Into ESG Mandates,” health care organizations should be looking closely at how they can adopt an ESG agenda to not only survive through the post-pandemic wake, but to thrive within a new values system that has the potential to address many of the old system’s inherent flaws.
How to formulate an effective ESG program for your healthcare organizations
Assess your organization’s current status – To know where you’re going, you need to know where you are. Perform an analysis of your company’s performance in areas such as:
- Ethical purchasing in your supply chain
- Community and economic development
- Labor standards
- Staff diversity
- Patient equity
An ESG analysis will help you see where your organization’s strengths and weaknesses lie and allow you to pinpoint risk areas.
Don’t separate E, S and G – At its core, ESG doesn’t encompass three separate areas, but three interrelated areas. When efforts are made to address one area, ripple effects are felt in the other two. When organizations create silos in their structures, they limit their ability to find meaningful solutions.
A great example of this in the healthcare industry was presented by a representative from Bon Secours Health System Foundation in Baltimore during a roundtable discussion on ESG in the healthcare industry: “The reason we at Bon Secours got into housing 20-plus years ago was because the community said the No. 1 concern they had around health was rats and trash. Well, what was the source of rats and trash? The source was all the vacant boarded-up housing because Baltimore used to be a city of a million people but is now a city of about 625,000 people. All that blight is there because people use vacant homes as dumps, drug havens, and stuff like that. The housing intervention was that response to what the community said was the highest priority.”
Create your strategy – Organizations that have implemented ESG practices successfully warn against tacking ESG programs onto an existing company strategy. For ESG to really work, it must be part of your organization’s core mission. Looking at ESG as an extra or an addendum will ensure wasted time and resources. When crafting your new ESG strategy, be prepared for an in-depth reexamination of every level of your organization and be aware that this change is going to require significant time and resources to be successful. Bringing in a third-party ESG advisor or partnering with an organization with a high ESG rating can help your organization develop a plan that will ensure long-term sustainability of your goals.
Make sure all levels are onboard – Any organization that wants to have an effective ESG program needs the buy-in of members at all levels of the organization. This means a lot of time spent in board meetings, a lot of resources spent on performing analysis and trainings, a lot of trials, errors and, eventually, a lot of benefits reaped.
Empower HR to tackle ESG skills gaps - According to an analysis published by Kearney, 33 percent of companies can identify capabilities gaps related to implementing ESG. On the other hand, 49 percent of employees prefer working for organizations that “actively manage workforce health and financial wellbeing” and 37 percent prefer working for companies that are “committed to environmental protection and social justice.”
What this means is that the higher an organization’s ESG rating, the bigger the talent pool it has available to fill in capabilities gaps. If you empower your HR department to connect your gaps with the ESG-focused talent pool, you can solve your capabilities issues through:
- Upskilling – Offering trainings for employees on ESG initiatives such as “train(ing) HR managers in unconscious bias, or train(ing) sourcing managers to know which ESG metrics to ask for in an RFP.”
- Recruitment – Finding people who already have the knowledge and skills your organization needs to support your ESG goals.
Be transparent – Transparency, accountability and reporting are essential pillars of organizations focused on ESG agendas. Laura Robinette, Partner & Trust Solutions Health Industries Leader at PwC said that, “without the ability to find this information quickly, stakeholders may conclude that healthcare organizations do not have an ESG program or haven’t considered the impact of ESG issues, such as climate change, on their organization. This could potentially result in poor ESG ratings and a competitive disadvantage among peers that may be communicating ESG impact in a more effective manner.”
What healthcare organizations can accomplish with an ESG plan
- Ensure greater employee retention and satisfaction
- Attract younger employees with commitment to ESG policies
- Draw the attention of investors who see organizations with high ESG ratings as high-value investment opportunities
- Reduce carbon footprint on the environment
- Improve living and health standards in their communities
For more specific metrics, PwC’s report ESG for healthcare organizations: What’s right for the world is good for business is full of examples of what organizations can do when their ESG strategy is geared for impactful measures.
Health organizations that embed ESG in their core mission are building more sustainable organizations that are oriented towards the future. Robust ESG programs help organizations cut costs, increase revenues, build positive reputations, retain employees, and attract investors. Each organization’s ESG path is unique, but the important thing is to start planning an ESG strategy today.