What is Environmental, Social, Governance?
What is Environmental, Social, Governance (ESG), and what does it mean for Healthcare and Senior Living facilities? “ESG is a framework that helps stakeholders understand how an organization is managing risks and opportunities related to environmental, social and governance criteria1.”
ESG isn’t a set of regulations but rather a declared aspiration of individual corporations, who create guidelines for themselves to make internal changes in environmental, social, governance or any combination of the three. Many ESG roadmaps defer back to the United Nation’s codes about clean water, sanitation, climate action, diversity, carbon footprints and energy efficiency. We’ll take a closer look at:
- History of Environmental, Social, Governance (ESG)
- Why ESG is on the rise
- Why ESG is important to Senior Living and Healthcare
- Different avenues you could get started with the Environmental, Social, and Governance categories
- Cost-effective frameworks and tools to consider within each category
History of ESG: How Environmental, Social, Governance began
Environmental, Social, Governance “evolved from other historical movements that focused on health and safety issues, pollution reduction and corporate philanthropy2.” It began in the 1960s and grew into what we see today.
When did companies switch from Corporate Social Responsibility to Environmental, Social, Governance?
- Social Responsibility
- The growing movement focused on racial concerns in South Africa raises awareness globally
- Corporate Social Responsibility (the focus on internal policies) takes hold in United States2
- Companies begin to move from CSR to ESG3
- ESG today
- Companies in Senior Living and Healthcare are already switching over to be more ESG inclined. Some, such as Ventas, Inc. are already making net-zero commitments as soon as 20404. Other companies outside of the industry, including PepsiCo, have similar goals, such as a Net Water Positive goal for 2030.
Why is ESG becoming so popular?
There are three major categories that are affecting the rising popularity of ESG:
Greater awareness of climate change has increased pressure on companies to become more environmentally friendly.
There are newer, younger investors who prioritize differently than the older generation.
As technology becomes more advanced and companies have access to more data, they also have an increasing awareness of how they influence the world around them5.
How does ESG impact Healthcare and Senior Living?
Not only do stakeholders care about Environmental, Social, Governance, but customers, suppliers and employees are turning their attention to how sustainable an organization’s operations are1. While compliance is not enforced by the government, but rather is driven by individual companies, that doesn’t mean you want to discard it, and there’s one huge reason why: investors. There are a growing number of ESG rating agencies that assign ESG scores. Access to capital could be restricted if companies don’t score well on the ESG scale. However, there are also rewards for those who are performing well against ESG factors6.
What do investors look for in companies who commit to ESG?
Some key factors investors look for could include:
- Integration – what are you doing to enforce ESG within your company?
- Values – How well do your goals align with your company and its ESG goal?
- Impact – Are you seeing positive results?5
ESG in a Healthcare or Senior Living organization
Now that we’ve determined what Environmental Social Governance is, it’s time to take a look at a breakdown of different avenues you could take to begin your ESG initiatives, including:
- Possible metric tracking checklists for ESG
- How to measure your company’s ESG rating
- Steps you can take to improve ESG in your company
Again, it’s important to note that there are no official guidelines to ESG – we can list potential avenues, but ultimately your ESG plan will be unique to you!
Why ESG Should Matter to You
You might be saying, “so what?” when checking out ESG. You know your company performance already, why take on additional work? There are 5 key values that ESG could bring to your communities that shows how “a strong ESG proposition correlates with higher equity returns.9”
“ESG can impact cash flow in five important ways:
- Facilitating top-line growth
- Reducing costs
- Minimizing regulatory and legal interventions
- Increasing employee productivity
- Optimizing investment and capital expenditures”
ESG holds huge potential for ROI. In fact, “stock funds outperformed across global markets over the last five years if they were weighted toward companies with positive environmental, social and governance (ESG) scores9” Granted, ROI can differ from company to company, however the flexibility of ESG allows you to choose where you would like to focus your savings.
Starting ESG for your company
If you’re looking for available frameworks to base your own ESG goals off of, you won’t be in short supply of examples. To get started, we suggest you take a look at:
“Environmental factors refer to an organization’s environmental impact(s) and risk management practices1.” If you’re looking to evaluate your current environmental impact or wish to improve it, you may want to consider these key metrics:
Environmental Metric Checklist – possible framework questions
- Greenhouse gas emissions
- How is your company measuring greenhouse gas emissions?
- What methods is your company using to curb greenhouse gas emissions?
- Is your company reducing, reusing and recycling company materials when possible?
- Energy usage
- Is your company using a renewable energy provider?
- Is your company taking steps to reduce energy consumption, such as turning off lights, replacing lights with energy-saving light bulbs, and otherwise cutting down on energy usage?
- Is your company taking steps to track energy usage?
- Water usage
- Can your company accurately measure the amount of water used in its operations?7
- Is your company taking steps to reduce water consumption?
- Is there an active strategy for water consumption reduction?
Measuring the “E” in ESG
Becoming more cognizant of an organization’s environmental impacts. This could be something as simple as awareness over natural resources to greenhouse gas emissions and a building’s carbon footprint.
There are a variety of tools you can use to measure and track the “E” in ESG, including:
- Morningstar ESG Screener
- MSCI ESG Ratings & Climate Search Tool
- US Green Building Company
Ways to improve Environmental impact in ESG
Since ESG means something different to every organization, there really aren’t any official guidelines, rules or regulations. So, there isn’t a “three simple step to obtain ESG” guideline to offer. Instead, we can only suggest different options you have when searching for solutions to help you reduce energy use, waste and emissions.
- HVAC Systems to help ensure optimal system performance and efficiency
- OnSite to help you minimize medical waste and decrease transportation costs associated with disposal
- Assortment of certified and eco-friendly brands, furniture and products
- Assortment of Energy Star® certified equipment
- Compare FF&E standards with your sustainability guidelines
- Virtual site-walk for interior assessments to eliminate the environmental impact of travel
What is the “S” in ESG?
The Social aspect includes measuring an organization’s relationship with stakeholders, employees and the communities it operates in1. Oftentimes factoring things like wages, employee satisfaction and engagement. Think about what impact the organization is having on the people it interacts with, and what impact it actually wants to have.
Environmental Social Governance: Avenues to Help Measure “Social” Impact
“More than half of global institutional investors surveyed by French bank BNP Paribas last year said social issues were the most difficult to assess and integrate into their investment analysis9.”
That being said, there is one standout tool many businesses use to evaluate and track the “S” in ESG.
The first, most budget-friendly option to get started on the “Social” portion of your ESG journey is the Fitwel Platform. This platform helps you track and integrate people-centric metrics to quantify the “S” in ESG.
- Diversity & inclusion
- Is your company providing ongoing education in diversity, equity and inclusion?
- What percentage of your company is owned by individuals with a diverse background?
- Is your company actively recruiting diverse talent?
- Employee satisfaction & mental health
- What is the overall satisfaction rating of employees?
- Is compensation up to market standard?
- What does employee turnover look like in your organization?
- Company impact on the community
- Does your company offer volunteer opportunities for staff?
- Does your company actively seek charitable giving/matching opportunities?
- Does your company offer multiple avenues to engage with the community, including social media and public events?
Improving “Social” aspect of Environmental Social Governance
Other solutions to consider when setting a goal of improving relationships with residents and stakeholders could include:
Patient and/or Resident Health & Safety
- Indoor Air Quality products such as air filters and purifiers to help create cleaner air environments
- SafelyYou technology to implement person-centered fall prevention through video review
- Nurse Call and Wander Management systems to aid staff in responding to resident needs and safety
- Assortment of ADA products for use within building and by individuals
Community Engagement, Inclusion & Diversity
- Ongoing diversity and inclusion initiatives
- Strive for innovation and inclusivity.
Patient and/or Resident Engagement
- Assortment of technology and products to help improve the social-well being of residents
- Aptura could help create more sustainable spaces through building design with safety in mind
What is the “G” in ESG?
“Based on RobecoSAM’s definition, the governance score is referred to as the economic dimension score (EDS), as it evaluates the corporate governance performance of companies but includes additional key measurements that evaluate the quality of a company’s management systems as well as its ability to manage long-term risks and opportunities.”
There are some key areas to consider when evaluating the “G” in ESG:
- Business ethics & code of conduct:
- How susceptible is your company to bribery
- How susceptible is your company to corruption?
- Does your company policy include measurements to prevent bribery and corruption?
- Effectiveness of the company’s risk management:
- How profitable is your company?
- What’s the risk of unanticipated costs like staff accidents/injuries?
- How healthy is the overall financial system or market impacts of your company’s future performance?
- Supply chain management & strategies:
- What does your supply chain code of conduct look like?
- Does your supply chain share the same values as your own company?
- Did your supply chain commit any violations (corruption, environmental or human rights issues)?
- Taxation policies & awareness
- How well does your company avoid tax issues?
- How well does your company avoid financial tax risks?
- Does your company track tax risk/have any tax oversight and accountability practices?
- Long-term value creation
- How sustainable is the company’s profitability?
- How well does your company identify value-creation opportunities?
- How well does your company identify long-term issues?
- Social investments & impacts:
- How much progress is your company making to improve social and environmental progress?
- Does your company have a method to track ESG metrics?
- Does your company incorporate these metrics into your KPIs?12
Tools for measuring & tracking G in ESG
Investing in improving organizational governance has the potential to also help boost productivity and employee satisfaction by preventing burnout and creating efficiencies for staff.
You can get started with the Governance portion of ESG with some free or low-priced tools, including:
- Onservice (esg.conservice.com)
ESG Acronym Cheat Sheet
- ESG – Environmental Social Governance
- SDG – Sustainable Development Goals
- GRI – Global Reporting Initiative
- ISSB – International Sustainability Standards Board
- COP – Conference of the Parties
- ESRS – European Sustainability Reporting Standards
- SEC – U.S. Securities and Exchange Commission
- SASB – The Sustainability Accounting Standards Board
- FEMA – Federal Emergency Management Agency
- STBi – Science Based Targets Initiative
- UNGC – United Nations Global Compact
- WRI – World Resources institute
- WWF – World Wide Fund for Nature
Improving Governance in Environmental Social Governance
Think technology when searching to launch Governance initiatives. Here are some routes you could take:
Communication & Visibility
- DSSI® Platform connects care providers directly to established supply chains, delivering AI-powered procurement solutions to help increase efficiency and profitability
- TELS® Building Services seamlessly connects maintenance personnel to local service providers, helping you manage day-to-day maintenance or larger projects
Data & Compliance
- TELS® Platform tackles the day-to-day challenges of tracking building operations to help you improve compliance, increase visibility and boost operational efficiencies and drive savings
- DS smart® platform allows caregivers to instantly capture and transfer data from compatible equipment to an EMR
- Bac-Track monitors transmission risks and tracks infection through a cloud-based dashboard, helping you reduce risk while improving compliance
- Fire Protection to help manage environmental fire requirements with contracted testing and inspections