Focus on environmental, social and governance, or ESG, issues has become more prevalent in recent years, driven largely by climate change, calls for social justice reform and inequities exposed by the pandemic. Healthcare organizations innately hold a deep commitment to socially responsible values, but stakeholders today expect more—and in ways that can affect organizational reputation and community trust.
According to the 2022 Edelman Trust Barometer, an annual global trust and credibility survey, societal leadership is now a core function of business. CEOs are expected to lead and shape policy on such topics as global warming, wage inequity and other ESG issues. Meanwhile, a 2021 PricewaterhouseCoopers Health Research Institute consumer survey found that nearly two-thirds of respondents would view an organization more positively if it was taking action to address social determinants of health.
It’s true that by the nature of our work, our mission-driven efforts are inherent in all that we do. Yet prioritizing our organizations’ work on ESG is increasingly vital to patients, and strengthens both sustainability and financial performance. As with any initiative, engaging the governing board on these priorities is an essential step. Here are a few thoughts about how leaders can partner with their boards on this topic.
Ensure ESG is part of the organization’s strategy. Securing the board’s commitment to these issues can be a first step. Building awareness and prioritizing ESG in board discussions can generate buy-in, paving the way to embedding it in the organization’s mission, purpose and strategy, and driving it through all areas of the business—such as environmental footprint, supply chain practices, and recruitment and retention. Regular progress reports can keep the board informed to hold leaders accountable and include ESG as part of strategy and risk considerations. By ingraining ESG into the organization’s core, board members can be well-positioned to champion it through ongoing guidance, advice and support.
Disclose progress on ESG issues. Of the top 50 health systems by revenue, only 24% publicly report their ESG efforts, according to a recent Guidehouse analysis. Yet a 2021 report by KPMG states that more healthcare stakeholders, including regulators and investors, are requesting that organizations disclose ESG criteria and metrics. For example, the U.S. Internal Revenue Service requires nonprofit hospitals to demonstrate benefit by assessing community health needs every three years to maintain their tax-exempt status. Leaders can work with the board to review performance on initiatives and establish reporting systems that inform stakeholders about the return on investment such as the impact made on health outcomes. This can be accomplished by expanding an organization’s annual report to include progress on ESG priorities, or developing a separate sustainability report, for example.
Diversify the boardroom: Strong environmental sustainability strategies have equity, diversity and inclusion at the center, and that starts with the board. Finding the right composition and structure, one with a balance of relevant backgrounds, experience and skills, can generate healthy dynamics and relationships that lead to innovative ideas. When selecting new members, choosing candidates who support and view the organization’s ESG priorities as opportunities can propel those focus areas forward. A diverse board also fosters equity, diversity and inclusion at all levels, from the C-suite to hourly workers, which aligns fully with any ESG strategy.
How boards allocate oversight of ESG priorities will depend on the organization, whether it be by the full board, existing committees or a newly formed ESG-specific committee. There is no one-size-fits-all approach to it. What is universal, though, is that ESG and sustainability are new imperatives of healthcare organizations, steeped in the ongoing mission of patient care. Partnering with—and preparing—boards to engage on these priorities can broaden that mission in ways that promote socially responsible leadership.
Deborah J. Bowen, FACHE, CAE, is president/CEO of the American College of Healthcare Executives (dbowen@ache.org).