The Healthcare Sector – Taking Care of ESG Issues?

health care

Our moms taught us (yours probably did too) that nothing matters more than our health. Access to health care is something we deeply appreciate (and many of us take for granted). We are grateful for health care professionals and the facilities where they take care of us, the research professionals that develop and produce medicines that can cure sickness and eliminate pain, and the medical device manufacturers who produce the equipment needed for diagnoses, treatment, and rehabilitation. 

The health care sector occupies a special place in the world and faces environmental, social, and governance (ESG) issues that are unique in many respects. While some of the ESG issues in health care are similar to what other industries are confronting, here, we look at E, S, and G from a health care perspective.

Health care and the Environment

According to Stat, the health care sector emits 4.4 percent of global greenhouse gas (GHG) emissions globally. In the U.S., it is much higher at 8.5 percent. Through their GHG emissions, the health care sector is contributing to many of the problems it treats. In a recent report, the World Economic Forum published this graphic which speaks volumes about how GHGs and climate change affect health care:

Source: Centers for Disease Control and Prevention

Health care and the Social pillar of ESG

Employee satisfaction and engagement is critical in any sector for a company to attract and retain a skilled workforce. Most of us probably take it for granted that doctors, nurses, and other health care providers do their work because they want to help people, heal the sick, take care of those in need. But sometimes health care professionals and their staff are the ones who need care. 

Physician burnout recently reached record highs, according to a survey conducted by the American Medical Association, the Mayo Clinic, Stanford University School of Medicine and the University of Colorado School of Medicine. The survey, taken during the Omicron wave of the COVID pandemic, found that 63 percent of physicians showed at least one symptom of burnout in 2021, compared with 38 percent in 2020, 44 percent in 2017, 54 percent in 2014 and close to 55 percent in 2011. The trends were consistent across nearly all medical specialties.

There is an alarming shortage of nurses in the U.S., with HealthCareDive reporting that half of nurses have considered leaving the profession, according to recent polls by staffing agency ConnectRN. Among the top reasons: staffing shortages, followed by the need for a better work-life balance, mental health concerns, and a lack of appreciation. Home health aides, who bathe, dress, and do light housekeeping for chronically ill patients and people with disabilities for an hourly wage that that is often below what fast-food workers earn are quitting in droves.

All of this shows that the health care sector has much to do in the “S” pillar to take better care of the people who do so much to take care of all of us. We should all (for selfish reasons as well as altruistic ones) support that effort.

Environmental Health Disparities – E&S Combined 

In the health care sector, the E&S pillars are very much intertwined. As if fighting climate change wasn’t enough of a reason to address emissions, according to Vizient, a leading health care performance improvement consulting firm, the impact of pollution on health is roughly equivalent to the impact of medical errors. 

Hospitals are places where caring people are on a mission to heal, but according to the WEF, the hospital buildings themselves have the highest energy intensity of all publicly funded buildings, and emit 2.5 times more GHGs than commercial buildings. Switching to renewable energy would improve the sector’s environmental impact (physician, heal thyself?). Medical equipment is also energy-intensive—industry initiatives such as those developed by European trade association COCIR, show it is possible to improve the energy and material efficiency of medical imaging equipment. 

The graphic above reminds us that air pollution contributes to asthma and cardiovascular disease. We don’t have to use emotionally-charged phrases like “social justice” to agree that low income communities, where minority populations are often overrepresented, tend to suffer from greater exposures to air pollution and toxic substances, such as those produced by oil refineries and chemical plants. Low-income neighborhoods are more likely to be close to those industrial areas because these activities drive down adjacent property values. Major thoroughfares tend to run through these areas, producing more air pollution than in non-industrial areas and neighborhoods that see less vehicle traffic. 

The National Institute of Environmental Health Sciences explains that environmental health disparities exist when “communities exposed to a combination of poor environmental quality and social inequities have more sickness and disease than wealthier, less polluted communities.” SmartCitiesDive cites a study showing poor neighborhoods are less likely to receive investments in projects like urban greening that seek to improve air quality. The health care industry feels the impact of these environmental and social disparities when attempting to treat patient populations in these communities, whose health care facilities are often lacking.

What about Governance and Health Care?

Governance in the health care sector also involves unique challenges, from how to manage an organization that is highly dependent on doctors who often want to make their own decisions without “bureaucratic interference,” to the incredible sensitivity of the patient data that health care providers collect. These issues represent significant sources of reputational risk—a data breach can cause a financially devastating loss of trust among patients and communities. Insurance companies that provide malpractice insurance also have a stake in governance in the health care industry. 

The Lancet and Financial Times Commission on “Governing Health Futures 2030” stated that the “massive challenges and opportunities posed by digital transformations of health and health care constitute a powerful call for governance at multiple scales.” The same publication notes that health care is rapidly becoming a high-stakes domain “due to the increasing economic relevance of health data and the growing appetite for digital solutions” in the sector.

Data governance is particularly challenging and important in the industry. Data technology firm Dimensional Insight cites a number of these challenges (we note that these points also highlight the need for services that Dimensional Insight provides, but they are all valid). We “tweaked” them to emphasize our point of view.

  1. Lack of support. Executives and boards often do not provide sufficient support for a holistic approach to data governance.
  2. Resources allocation issues. Organizations need staffers who are qualified to serve on a governance committee, including executives, medical personnel, cybersecurity experts, database architects, and data analysts.
  3. Lack of staff integration. Those who own the responsibility for managing and securing data are often too far removed from the business activities that generate the data to be as effective as they could be.
  4. Lack of trust in, and adequate protection for patient data. Data that is siloed, inconsistent, and unstandardized is almost sure to cause a lack of trust in the results. As the medical field becomes increasingly dependent on artificial intelligence, it is essential that the data used to train those AI algorithms is reliable and secure. 

Summing up, E, S, and G issues are relevant to the health care sector in ways that merit special attention, highlighting the importance of sector-based analyses when evaluating sustainability. OWL’s data can help investors and corporations compare exposures to relevant issues within and across sectors to produce valid, actionable insights. Contact us to learn more.