In August this year, Greece was beset with hundreds of deadly and devastating wildfires fanned by high winds and soaring temperatures, causing widespread evacuations throughout the country. Just two weeks later, Storm Daniel, which would soon become the deadliest Mediterranean tropical-like cyclone in history, struck the northeastern coast of Libya. Words like “unprecedented” and “historic” begin to lose their impact as climate-driven disasters bring death and destruction, and threaten the very habitability of towns and cities where people have lived for centuries.
Such events, and their aftermath, highlight the urgency behind addressing ESG: a strategic framework with three elements – environment, social and governance – for assessing operations and practices to improve ethical impact and sustainability. The tragedy of Storm Daniel was a case study in failures in all three of these areas:
- Environment: On a global scale, failure to reduce carbon emissions increases temperatures and makes wildfires and storms more severe.
- Social: Lack of local community involvement and knowledge in disaster planning and response.
- Governance: Allowing infrastructure, such as dams and drainage facilities, to deteriorate over time to unsafe levels, due to corruption and lack of effective, centralised governance.
Can ESG boost the region’s healthspan video
2023: A year to boost ESG in our region
The COP28 event in Dubai has put ESG front of mind throughout the region. As governments and industries seek to strengthen non-oil-based sectors for diversification and resilience and envision giga-projects that will transform landscapes and economies, our region is arguably one of the best positioned to showcase and leverage the ESG strategic value framework across sectors, including healthcare. Notably, this year’s COP featured a dedicated Health Day for the first time, highlighting the importance of pursuing sustainable, climate-resistant, and equitable healthcare ecosystems.
Our 2023 ESG survey, “Moving from Start-up to Scale-up on ESG”, which was released in March, found substantial progress in ESG adoption in our region from the previous year’s survey. Among the findings, 64% of the survey respondents reported that they had adopted a formal ESG strategy, and the number of companies that were waiting to create one declined by more than half – from 16% to only 7%. Additionally, two-thirds of the respondents want their organisation's CEO and board to increase the time they allocate to ESG-related issues.
In addition, 40% of the respondents said that they hope that COP28 will lead governments to improve ESG infrastructure and provide incentives for sustainable growth. Some of them call such an undertaking a “Green New Deal” for the region, providing practical support that can further accelerate ESG progress. This is especially vital in promoting ESG in healthcare because more than 70% of healthcare provision1 in the region is currently provided by the public sector.
Healthspan: Driving the longevity leap
When it comes to healthcare, one particular area of focus that encompasses all three areas of ESG is lengthening the “healthspan” of the population. The missions and values of healthcare organisations make them the ideal platforms for addressing social issues since they have long embraced the social responsibility regarding the health and well-being of populations in the areas they serve. This is seen throughout the world and here in the region, in population health efforts that are designed to address chronic diseases and social determinants of health.
One example in the region is the PureHealth Group – the largest integrated healthcare network in the United Arab Emirates (UAE). In Forbes Middle East’s March 2023 issue, the cover article featured Shaista Asif, Co-Founder and Group COO of PureHealth Group, expressing the group's ultimate goal: achieving longevity for people by helping them live healthier for longer.2 And they have put a number to that goal: expanding the average lifespan in the UAE from 78 years to 101 years by 2071. This goal is aligned with the UAE Centennial Plan 2071.
This goal goes beyond just increasing the lifespan – from merely adding years to peoples’ lives to lengthening their healthspan and ensuring that people live independently in good health and are socially engaged during those extended years. The ESG perspective is particularly suited to healthspan efforts because not only are the corporate social responsibility (social and governance) elements at play here, but also those related to the environment.
The roadmap to ESG success in healthcare
Improving healthspan is an example of how healthcare organisations in the region can shine in all major areas of ESG, while historically, they have shown their best work in the ‘Social’ realm. This has been accomplished by addressing the needs of the wider society, including expanding access to healthcare as seen through mandatory insurance rollout mandates across the GCC, providing education on how to manage health, and overcoming adverse social determinants of health. Additionally, in the current era of value-based care, this includes finding new ways to maintain and improve the health of populations – lowering costs while improving outcomes. On the other hand, healthcare organisations also have the potential of creating enormous impact through the ‘E’ and ‘G’ lens, improving environmental sustainability and responsible corporate governance.
The following are some of the most challenging issues in these areas:
Healthcare providers and pharmaceutical facilities take up substantial space and contribute to significant inefficiency and waste – both hazardous and non-hazardous. They also have high power demands, among the highest in any industry, accounting for 5% to 6% of global energy consumption. Additionally, healthcare is responsible for 4.4% of global carbon emissions. In simple terms, it means that if healthcare was a country, it would be the fifth largest emitter in the world.3
Healthcare organisations can reduce their substantial environmental footprint through:
continuing the regional trend that was accelerated by the global health crisis of aggressive technology investments to digitise care provision, cutting down on physical infrastructure and the associated waste and energy consumption resulting from patient travel and in-person care provision
more at-home care programmes, especially since the ageing population (50+ years) is the fastest growing cohort in the region
advanced medical waste management and recycling practices
green manufacturing and other environmental friendly practices in pharma and device manufacturing
energy-efficient initiatives, such as next generation green hospital designs and innovative concepts, such as ‘hospital in the cloud’
Healthcare organisations in the region have undertaken several environmental initiatives, and their progress thus far has been encouraging. Some of the examples include:
- Emirates Health Services (EHS) in the UAE implemented an AI platform to identify avoidable in-person visits and convert them to virtual visits achieving significant reduction in carbon emissions.4
- Abu Dhabi’s Sheikh Shakhbout Medical City (SSMC) hospital permanently discontinued the use of environmentally harmful anaesthetic agent – Desflurane – which is 2,540 times more potent as a greenhouse gas than an equivalent mass of CO2. The Desflurane example is a trend observed in many countries globally and an example of a medical drug being banned for environmental reasons.5
- In 2021, PureHealth became the first health company in the Middle East, Africa, and Asia to commit to net zero emissions by 2040, in alignment with the Science Based Targets initiative (SBTi), which drives ambitious climate action in the private sector by enabling organisations to set science-based emissions reduction targets.
Customers of healthcare providers are patients who often come to them in the most vulnerable times of their lives, so they should expect to be treated fairly and equitably. Payer-provider-patient dynamics accentuate the need for transparency, which is a key concern for many regulators. Data privacy and confidentiality are of utmost importance in the healthcare sector, as the sensitive and private data of patients is involved. Meeting these expectations builds trust that the healthcare system has the needs of the population at the forefront while it conducts its vital work. Healthcare organisations need to create and maintain the necessary governance structures and processes to ensure that they are:
- Protecting the confidentiality of patient data.
- Promoting and maintaining transparency in operations, procedures, and medical advice.
- Exercising corporate responsibility through judicious board makeups.
- Aligning the enterprise’s strategic vision around ethical principles to prevent potential frauds and ethical breaches.
These “E” and “G” issues (of ESG) are especially critical in a region where 42% of the population is aged 18 years to 42 years. In our research, we have seen that younger people view organisations positively when they perceive them to be ethical and believe that they are taking steps in addressing issues such as carbon footprint and social responsibility. Also, as more young people in the region gain commercial health insurance, because of the growing mandates, they will likely have more latitude over where they take their healthcare business.
Several major healthcare providers and life sciences/pharmaceutical manufacturing organisations in the region are aligning their organisations around the ESG principles, most visibly by creating “roadmaps” that put ESG at the centre of their strategic plans for the future.
Tamer Group is a major provider of medical, pharmaceutical and nutrition products and services. The company calls ESG a “core purpose” in its business, and is creating an ESG roadmap that is aligned with the United Nations’ Sustainable Development Goals and Saudi Arabia’s Vision 2030 targets. Dr. Sulaiman Al Habib Medical Group (HMG) operates 20 medical facilities across Saudi Arabia, UAE, and Bahrain. HMG is developing the first private medical city in Saudi Arabia and says it is “working to become a benchmark for ESG in the region”,6 according to its 2022 Annual Report. The company is developing a four-phase ESG roadmap that began in 2022 and is expected to be completed by 2024.
ESG: From the heart or the pocketbook?
Increasingly, ESG adoption is considered a touchstone that socially and environmentally inclined potential investors, donors, and clients use when evaluating organisations with which they will choose to associate. This begs the question: How much of this emphasis is from the “heart” and how much is reactionary because of the regulatory compliance and business pressures? The second question is: Does it matter?
Whether you are an actual business or a government entity that wants to attract business to its shores, reporting will be key to staying competitive and advertising your commitment to the world. Globally, organisations have made significant progress in their ESG efforts in the first two stages of the Global Reporting Initiative (GRI), which developed the most widely used sustainability standards. These two areas are:
- Issue identification: identifying ESG issues that are most relevant to business and its stakeholders.
- Assessment/analysis: how the identified issues affect the organisation and impact people impacted by it.
The third stage – Reporting – is what HMG, one of the largest healthcare platforms in the GCC, and many other organisations are currently working towards in their ESG roadmap processes.
GRI has identified 40 high-impact sectors for sustainability, broken into four major groups based on their impacts. Unfortunately, despite the huge ESG footprint we have presented in this article, GRI has placed the healthcare sector in its lowest priority group.7
There are also regional standard metrics that are becoming urgent priorities for companies that are listed on the exchanges and are major considerations for investors. In January 2023, the Exchanges Committee of the Gulf Cooperation Council (GCC) published a unified set of ESG disclosure guidelines for GCC-listed companies. These 29 standards cover a wide range of issues, including ethics; greenhouse gas emissions; gender diversity and pay issues; energy and water use; data privacy and more.
“The International Sustainability Standards Board (ISSB) issued the first two sustainability reporting standards (S1 and S2) on 26 June 2023, which are effective for annual reporting periods beginning January 1, 2024. Although these standards are not yet adopted by the regulators in the GCC, given that IFRS is the prevailing financial reporting standard in the GCC, it is expected that the ISSB standards will potentially be considered by the local regulators in some shape or form when defining local ESG reporting requirements.”
In business, there is no escaping the fact that regulatory pressure is growing for implementing ESG. Any organisation that wants to be part of the several “giga” development projects in the region, especially in Saudi Arabia, such as NOEM, AlUla, and the Red Sea Project, will have to be all-in on every element of ESG. These massive, futuristic, world-changing city and tourism developments will involve a myriad of industries, and they will all need healthcare to be part of the vision.
“New giga-projects have the unique opportunity to reimagine the way they provide infrastructure and services in a way that is sustainable and future-proofed. One way they can do that, within the healthcare context, is by focussing on prevention rather than cure, by moving data instead of people, enabling them to provide preventative services at home. Doing so will enable healthcare asset provision to meet the ESG agenda as it serves the community more effectively and reduces the amount and size of healthcare assets that need to be provided, while enabling these assets to be more investable.”
What’s next for ESG in the region’s healthcare market?
Simply put, the answer to the question above is: Keep doing the good work on “S” and start making further strides in “E” and “G”.
We have mainly addressed healthcare providers here, but, in life sciences and pharmaceutical manufacturing and distribution, governments in the region are making a huge push for manufacturing and distribution to happen locally, partly due to the harsh experience with supply chain disruptions during the global health crisis. Like providers, health-related manufacturing and distribution operations also create massive physical and environmental footprints, and this must be addressed from an ESG perspective, as necessary expansion occurs.
“While localisation of pharmaceutical manufacturing is an essential step in creating drug supply security, reducing reliance on imports and bringing down overall healthcare costs, it is important to factor in the wider ESG impact of this sector. Manufacturing of some pharmaceutical products, such as Active Pharmaceutical Ingredients (APIs), often creates unintended chemical waste and other byproducts that need to be treated. As manufacturing technologies improve, the region has a responsibility to not just create new sectors but do so with a future first and sustainable approach.”
Tamer Group is one organisation in this sector that is going beyond the “S” with ESG.8 Its initiatives include:
- Conserving the environment: The company’s warehouses and distribution facilities are LEED certified, and the company participates in the King Khalid Sustainability Award. Another of its initiatives is safeguarding communities from environmental waste.
- Promoting diversity: This includes empowering women and people with disabilities to become economically independent.
- Educating communities: On an individual level, this is done by providing university scholarship opportunities for “talented underprivileged students”.
ESG initiatives and strategy development, such as those outlined by HMG, PureHealth and Tamer Group represent the direction in which healthcare providers, payers, pharma and life sciences organisations need to keep moving.
Through our work in the region, we have seen encouraging signs of progress in ESG adoption, particularly those fuelled by the government. For instance, the Emerald Muashir Awards initiative recognises the hard work of healthcare facilities to sustainably advance their services, ensuring high-quality patient care, and creating a future-proof healthcare ecosystem. The award winners were announced recently by the Department of Health – Abu Dhabi (DoH) during COP28.9
To continue this progress, healthcare organisations must continue formal adoption of ESG strategies. Significant strides forward in the future will be indicated by:
- The number of healthcare organisations with formal ESG roadmaps fully implemented, embedding ESG into their strategy and purpose.
- A substantial increase in the amount of time CEOs and board members allocate towards ESG-related issues in risk management, compliance, and leveraging the circular economy. This demonstrates alignment around ESG issues as they relate to the core values and mission of improving community health.
- An increasing number of healthcare organisations that create and actively develop specific, high-level management roles related to ESG, such as Chief Sustainability Officer (CSO). Organisations that create these roles are demonstrating that they are serious about making ESG a vital part of their corporate culture.
- Demonstrating an enhanced focus on the environment and governance aspects of ESG commensurate with their commitment to social priorities.
- A higher percentage of healthcare organisations that provide ESG reporting in a comprehensive ESG-specific report that is formally audited or assured. ESG reporting will be critical as stock exchanges and regulators in the Middle East increase insistence on it, as these trends are heading globally. Measuring transparency, accountability, ethics and fraud policies demonstrates ESG maturity to investors, potential partners, and the community at large.
On that note, another key indicator of ESG commitment in Middle East healthcare will be the number of organisations that are differentiating themselves by actively creating greater awareness in the public about their ESG activities. Telling the story to a wide range of stakeholders helps create opportunities, enhance reputation, attract and retain top-tier talent, and guard against vulnerabilities.
ESG and its role in increasing healthspan in the region
To have a longer healthspan, people need to stop having their lives cut short by polluted air and water and climate-driven disasters, so all industries, including the healthcare sector, need to focus on the environment. While we’re on the subject of disasters, the recent Morocco earthquake was not a climate disaster, but many of those thousands of deaths might have been prevented by social and governance improvements, such as enhancing building codes, building better roads and maintaining existing ones for access in emergencies, and providing public education for all citizens in disaster preparedness.
Healthcare providers – both in the public and private sectors – and manufacturers in pharmaceuticals and life sciences will have a central role if we are to succeed in significantly increasing the number of years people in the region are able to live healthily. But, it will take a whole-of-society approach that goes far beyond perfecting precision medicine and addressing social determinants of health.
As the health of the planet and its people revives, businesses will thrive!
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Amar Patel
Partner, Healthcare Sector Lead for Deals, PwC Middle East
