Everything You Need to Know About ESG

Key Topics:

Environmental Social Governance: An Overview

One of the biggest buzzwords in business in the last few years is Environmental Social Governance ("ESG"), and it's a term that continues to gain traction in the smallest startups to the largest publicly traded companies. A more socially-aware public and push for corporate transparency mean that many organizations are prioritizing creating equitable impact in their industry and in the world through social and environment investment initiatives.

 Environmental, Social, and Goverance principles and how they relate to one another in a circular flow chart.

While the practice of investing in ESG began in the 1960s1, sustainability efforts and corporate responsibility are no longer reserved for non-profits. The power of the conscientious consumer led to a shift in operating principles for the biggest investors and corporations, but let's look at what ESG is in practice.

ESG Definition

Ecological Social Responsibility and Governance - this is a non-financial indicator that investors can use to make ethically-minded investments and gauge a company's commitment to sustainability, preservation, corporate diversity, employee wellness, ethical supply practices, etc.

ESG Demand and Reporting

Investor interest in corporations who focus on ethical practices and transparency increased recently, and the value of money is at the core of the investment. However, investors are not the only ones interested in ESG.

The 2022 EY U.S. CEO Survey found that a majority (82%) of US chief executives see ESG as a value driver for their business.2

In adopting ESG, corporations determine their areas of focus and self-report their contributions and policies to the public annually. Self-reporting has been a bit controversial3 but the Global Reporting Initiative (GRI) is looking to change that fact. They have developed more than 200 sustainability reporting guidelines, all of which are free of charge4.

The U.S. Securities and Exchange Commission (SEC) has also proposed rules to enhance and standardize climate-related disclosures for investors.5 The federal government has taken action in various agencies to lead efforts to combat climate change and also develop jobs in cleaner sectors in hopes to achieve sustainability.

Learn more about how the SEC is responding to investor demand for ESG here.

How Environmental, Social and Governance Criteria Work

So how does it work?

ESG causes vary and can include environmental standards concerning water conservation or emission reduction, or they can be commitment to advance social issues like diversity, equity, and inclusion. Other areas of commitment that fall under ESG include corporate governance measures, like anti-corruption and capped executive compensation.

While the healthcare industry has been slower to embrace ESG, government may mandate a more immediate understanding for the industry that represents 20% of the US economy.

"As the market and now regulators begin to coalesce on the demand for sustainable strategies, business models, operations and investments across Environmental Social and Governance (ESG) and sustainability criteria, the healthcare sector has a pivotal opportunity to unlock value."
- Marc Sher partner in Charger, KPMG LLP's Global and U.S. Healthcare Audit Practice6

ESG in Healthcare

"The question for health systems is, are we going to be a follower or are we going to be a leader (on ESG)? We want to be a leader, so let's get on top of it, and let's begin to have these discussions."
- Randy Oostra, ProMedica7

PwC's Health Research Institute analysis of company websites' leadership team found that 47% of for-profit healthcare companies had an ESG leadership role while only 38% of not-for-profit had an ESG leadership role.

Diagram showing the percentages of ESG leadership roles in healthcare within the profit and non-profit sectors. There are only 47% in for-profit and only 38% in not-for-profit.

In reality, many healthcare systems are already tackling ESG by a different name. For example, many have programs in place to focus on diversity and inclusion, social determinants of health, or the social aspect, as many institutions are organized as not-for-profit industries.

One prime example is Ochsner Health, which partnered with local and state leaders to create a comprehensive strategy with a 10-year commitment to enhance healthcare access and improve health equity and outcomes.

Are you curious if your facility is already working on ESG initiatives? The NEJM Catalysts shares Selected Examples of ESG Categories Relevant to Healthcare:

Environmental (Planet) Social (People) Governance (Profit)
Waste & Pollution Diversity, Equity, Inclusion Corporate Ethical Behavior
Energy Efficiency Safety & Well-Being Corporate Governance Accounting/Tax Transparency
Climate Change Quality of Care Compliance

Besides implementing themselves, healthcare organization should ensure their partners share in the commitment. This helps maximize a healthcare facilities ESG benefits.

To learn how ActivePure Medical helps with ESG, contact us.

ESHG Definition

The Stanford Social Innovation Review (SSIR) recommends we add a letter: ESHG.

"While Public Health might be implicit in Social, it is not explicit. Therefore, by attaching an "H" for "Health" and broadening the mandate to ESHG, we'll come closer to a more inclusive form of capitalism, one that places equal emphasis on causing human capital to flourish as it does on financial capital."
- Nigel Wilson, SSIR10

They are not alone. Business for Health is also aiming to get Health added highlighting the need to identify commercial determinants of health, as well.

"Businesses have direct influence on health through their direct influence on employees' health as employers, the nature of the products and services they sell, and their external, both direct and indirect, influence on the environments and communities in which they operate and impact."11

ESG (or ESHG) Assessment and Resources

These investment practices are about much more than the appearance of morality and public appeal. This is a growing trend that is here to stay.

Continue to follow along with us as we expand coverage of ESG in the following weeks. Next, we'll break down each letter and dive into its impact on healthcare.

Can't wait? Our friends at Corporate Impact Group created an ESG assessment tool that takes less than five minutes to complete: Take Assessment.

Their ESG assessment helps companies assess their starting point and understand potential opportunities to move forward. The results will help better understand your personal preferences and the possible options for your company, such as what policies and procedures you will implement and what causes you will pursue. The assessment is a great discussion starter for your leadership team as you look to develop and implement an ESG policy and strategy.

"ESG has become a key differentiator for companies in recruiting and retaining talent, something especially important given the labor shortage concerns with healthcare and the impact it is having on patient safety. We know each healthcare system has unique challenges, so we create a customized plan that fits their desired outcomes and that becomes a competitive advantage for their providers."
– Kenny Brown, Managing Partner at Corporate Impact Group

About Corporate Impact Group: Corporate Impact Group designs and implements ESG programs that meet stakeholders' objectives by mitigating the risks around environmental, social, and governance issues.

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