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How health organizations can integrate ESG priorities

What’s right for the world is good for business

Providers, payers and pharmaceutical and life sciences organizations have historically embraced the social pillar of environmental, social and governance (ESG) efforts, caring for patients and creating medications, vaccines and devices that improve human health and save lives. PwC’s Health Research Institute (HRI) analyzed the ESG efforts of 45 health systems and payers and 32 pharmaceutical and life sciences companies, finding health organizations could reap additional rewards by also embedding more of an environmental and governance focus into their overall strategy.

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ESG for providers and payers
ESG for pharma and life sciences

What steps are healthcare organizations taking when it comes to ESG?

For-profit and not-for-profit healthcare organizations have different motivators, audiences and reporting requirements when it comes to ESG, but both serve communities that are increasingly aware of what socially responsible organizations look like. Additionally, government bodies, regulators, investors and consumers have increased expectations for responsible business practices. Providers and payers have ample opportunities to differentiate themselves by improving their reporting and storytelling around ESG, and to build trust with the communities they serve, and with investors, donors and other stakeholders.

Environmental: Small steps can deliver value

While Leadership in Energy and Environmental Design (LEED) and green building initiatives have been pursued by payers, hospitals and academic medical centers for some time, some organizations have woven environmental changes throughout their operations, from using compostable cafeteria packaging to rethinking how to lower the environmental impact of supplies used in the delivery of care.

Social: Taking action

With many healthcare organizations serving as a community anchor for employment and initiatives to improve health, some have focused on calculating the results of their programs to more directly tie their efforts to societal impact. Many healthcare organizations have internal initiatives underway related to improving board diversity and transparency, enhancing diversity and inclusion programs for their workforce, upskilling staff and bolstering workplace safety initiatives.

Governance and reporting: Tone at the top

To report their ESG efforts, healthcare organizations used a variety of methods, such as corporate sustainability reports and their community health needs assessments. But the governance pillar showed the most room for growth as not many organizations reported activity in this area, from board structure and pay equity to policies to help prevent possible fraud and ethics breaches. Exposure to fraud or ethics violations could lead to costly fines, lawsuits or reputational damage for healthcare organizations, so having solid governance strategies in place can help preserve the brand and mitigate risk.

ESG implications: Healthcare organizations

Embed ESG in your strategy and purpose. Many healthcare organizations have the opportunity to move beyond press releases to build meaningful ESG efforts throughout their business — from their supply chains to environmental footprints, from recruiting efforts to executive leadership composition. As any ESG strategy should, these steps mostly already align with organizations’ overall mission to improve community health. Broader public awareness about sustainability and corporate responsibility means organizations can differentiate themselves by acting early to build ESG strategies that can enhance reputations with customers, employees, investors and analysts. ESG is a critical driver to capture opportunity and keep ahead of vulnerability. 

Measure for transparency and accountability. Some healthcare organizations may be able to take giant leaps in their ESG reporting by better measuring and quantifying what they are already doing in these arenas, to be sure they are sharing the value they are already creating for society. It may require new processes to capture data, or working with third parties, but healthcare leaders can use proven tactics and smarter technologies to identify, measure and hold their business accountable to ESG principles. Some have already started expanding data collection efforts to better report on societal racial inequities in outcomes and the steps they are taking to address them. Healthcare organizations can take a proactive approach to telling their story — to employees, customers, shareholders, suppliers and other stakeholders — using these trusted metrics and disclosures.

Create a practical plan for action. Creating value and impact through ESG means viewing it as more than an obligatory requirement and developing a tangible and practical plan that you can act on. It requires people and technology working together so organizations can see more, go deeper and act faster to make ESG-driven changes to their operations, value chain and organization. Providers and payers can consider how to operate the business more efficiently throughout, from electricity use to travel, and take first steps in new areas, to more effectively advance their ESG goals in each pillar.

What steps are pharmaceutical and life sciences organizations taking when it comes to ESG?

This may be the ideal time for pharmaceutical and life sciences organizations to embrace a broader ESG strategy. Government bodies, regulators, investors and consumers have increased expectations for responsible business practices. ESG principles should be embedded throughout a business through an actionable plan, as a company’s ESG performance can be a good indicator of future success. Thorough ESG plans also can create a cost advantage when sustainability measures are embedded into product development, such as through green chemistry.

Environment: Abundant potential

HRI’s analysis of corporate sustainability reports from 32 pharmaceutical and life sciences companies found that most are reporting CO2 emissions and setting targets for when they expect to be carbon neutral. The environmental pillar offers further opportunity for pharmaceutical and life sciences companies to make strides toward aligning ESG with many manufacturers’ business strategies. Additionally, pharmaceutical production is a water-intensive process, creating an opportunity for companies to consider innovations aimed at reducing water usage and waste to shrink their carbon footprints. For distributors, HRI’s analysis of corporate sustainability and responsibility reports found that many environmental efforts are focused on fuel efficiency and route optimization to mitigate the environmental impact of transportation.

Social: Taking action

For pharmaceutical companies, a logical target in the social pillar is diversity among clinical trial participants. When drugmakers developing new treatments design clinical trials and decide where to launch them, the companies in effect create the universe of patients who could benefit from the therapies. If prospective drug treatments are not tested in the individuals most affected by the condition — those most likely to benefit from the drugs after approval — access to healthcare for those individuals could be compromised. HRI’s analysis of press releases and corporate sustainability reports from life sciences companies revealed that some are making headway to address clinical trial diversity.

Product safety is another area where companies can produce social benefits. One possibility: taking proactive measures to help ensure drugs and devices are being used correctly in the right patients at the right time. The inadequacies of the supply chain for devices and other medical products were laid bare amid the COVID-19 pandemic. Companies now have the opportunity to address these issues, while also improving some social metrics of ESG reporting.

Governance and reporting: Tone at the top

One challenge for pharmaceutical and life sciences companies is settling on a reporting framework. Often, a single reporting framework may not meet their specific needs. An HRI analysis of ESG reporting frameworks across 32 pharmaceutical and life sciences companies found that 25% were using a combination of two — the Global Reporting Initiative (GRI) and Sustainability Accounting Standards Board (SASB). In selecting a framework, companies should consider which metrics make the most sense to publicly commit to and report on. These decisions may depend on which factors are the most material to their business and what types of organizations are most interested in the results (e.g. investors or regulators).

ESG Implications: Pharmaceutical and life sciences organizations

Embed ESG in your strategy and purpose. Many pharmaceutical and life science companies have the opportunity to move beyond platitudes to build action-oriented ESG efforts throughout their business ⁠— from supply chains to environmental footprint, clinical trial diversity to executive leadership composition. Like any ESG strategy should, these steps should already align with the organizations’ overall mission. Broader public awareness about sustainability and corporate responsibility means organizations can differentiate themselves by acting early to build ESG strategies that enhance reputations with customers, employees, investors and analysts. ESG is a critical driver to capture opportunity and keep ahead of vulnerability. 

Measure for transparency and accountability. Some pharmaceutical and life sciences companies may be able to take giant leaps in their ESG reporting by better measuring, quantifying and communicating what they already are doing in these arenas, to be sure they are sharing the value they already create for society. It may require new processes to capture data, or working with third parties, but leaders can use proven tactics and smarter technologies to identify, measure and hold their business accountable to ESG principles. Companies can take a proactive approach to telling their story — to employees, customers, shareholders, suppliers and other stakeholders — using these trusted metrics and disclosures.

Create a practical plan for action. Creating value and impact through ESG means viewing it as more than a charity effort, and developing a tangible and practical plan you can act on. It requires people and technology working together so companies can see more, go deeper and act faster to make ESG-driven changes to their operations, value chain and organization. Pharmaceutical and life science companies can consider how to operate the business more efficiently throughout, from electricity use to travel, and take first steps in new areas, or more fully advance their ESG goals in each pillar.

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Laura  Robinette

Laura Robinette

Partner, Health Industries Trust Solutions Leader, PwC US

Trine K. Tsouderos

Trine K. Tsouderos

Business Insights, Sectors Leader and Health Research Institute Leader, PwC US

Tel: +1 (312) 241 3824

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