Prepare your board to address ESG strategy

The world has changed. COVID-19 transformed the healthcare sector, bringing health disparities to the forefront of public health. The pandemic was also a turning point for ESG (environmental, social and governance) and sustainability.

Multiple stakeholders demand sustainable strategies, business models, operations and investments across ESG. Current and future talent emphasize an organization’s purpose and social/environmental values and commitments. And consumers and investors believe that an organization should behave ethically toward people and the planet.

Steps that healthcare boards can take to deliver an ESG strategy

Delivering an ESG strategy requires governance and oversight. Here are ways that healthcare boards can help:

Align corporate strategy to ESG priorities

Emerging ESG issues range from business continuity and risk assessment to resilience, social and economic equity, and crisis management. Boards can support the C-Suite with in-depth discussions to ensure alignment of priorities, clarity of roles and ongoing advice and support.

Ascension has anchored its commitment to environmental sustainability around three pillars: net-zero places, which includes energy efficiency, mobility and renewable energy; healthy communities, which embraces partnership, community engagement and public policy; and responsible supply chain, which focuses on sourcing and waste.

Orchestrate ongoing conversations on ESG issues

Boards should address ESG priorities via one-on-one dialogues, roundtables and public forums. Among the issues: What are the organization’s most pressing short- and long-term ESG liabilities? What do stakeholders care about and expect from the organization? Why, how, when, where and with what budget should the organization address these issues? For example, how well does the organization perform on diversity, equity, and inclusion (DEI), and social justice? Do governance policies ensure the implementation of ESG best practices and innovations?

Tenet’s board has already formed a committee to tackle ESG issues. The committee shapes ESG strategy and provides oversight on ESG issues, including climate change, conservation of energy and natural resources, environmental and supply chain sustainability, human rights and diversity and inclusion. The committee also provides guidance to the Board on ESG matters and maintains accountability through active reporting and measurement.

Back up your board with an integrated ESG and sustainability culture

ESG deliberations should not be limited to the boardroom. The preferred solution: Build a culture where ESG is embedded in mission, vision, values and strategic imperatives, bolstered by enterprise-wide metrics, risk management processes and reporting. Reinvent leadership to drive ESG, making sure that ESG strategy permeates all organizational levels-- from hourly workers and managers to C-suite executives and payer, supplier and employer partners.

Eugene Woods, CEO of Atrium Health, frames environmental sustainability, as “giving our best to our patients and the Earth.” He invites team members to engage with each other on sustainability projects via a special Environmental Sustainability PeopleConnect page.

Choose board members for ESG knowledge, skill, experience and leadership style

The best board members respect ESG as a pathway to doing well by doing right. They see ESG not as a risk or check-the- boxes exercise but as an opportunity to enhance the organization’s reputation and financial position and build resilience, engagement and loyalty.

Create structures to address ESG issues

ESG risks and opportunities should be integrated into organizational strategy with attention to progress against goals, messaging, risk assessment and reporting. Doing so will guide the board’s audit, compensation, nominating and governance committees on how to address ESG. After ensuring alignment, it is critical to revisit existing structures in which you allow for new or adjust existing committees and associated charters accordingly.

The Cleveland Clinic has created the Office for a Healthy Environment, which offers a “structure for environmental stewardship” that embraces clinic buildings, operations and purchasing.

Disclose progress on ESG strategy

Investors, shareholders, activists, lenders, regulators, customers and employees ask questions and expect answers. Conduct robust reviews of ESG using common frameworks such as the Taskforce on Climate-related Financial Disclosures (TCFD) and the Sustainability Accounting Standards Board (SASB).

Allina Health reports on environmental sustainability via updates on infrastructure projects that reduce electricity usage and lower greenhouse gas emissions. Each project is explained via sustainability features like an electric vehicle charging station, solar garden and community promenade.

Align ESG objectives with senior leader success

Send a strong signal that ESG is a priority to the enterprise. Incorporate one or more ESG metrics into executive compensation strategy and program design – with implications for how annual and/or long-term incentives are structured and administered.

Looking to the future, what can you expect to see around ESG?

Expect more public scrutiny on ESG strategy

Rely on board members to articulate the organization’s ESG strategy and share stories of diversity, climate successes and employee well-being. At the same time, tap a range of stakeholders for feedback on ESG hits and misses:

• How has the organization contributed to climate resilience?
• How well has the company collected, analyzed and used ESG data?
• How does the business score on clean energy, ESG-linked CEO compensation, human capital management and gender equity?

Look forward to media vigilance on ESG

The media can easily tell the difference between limp promises and clinical and business performance. The best approach is to share clear, candid and consistent stories on ESG initiatives via media interviews, presentations, social media and thought leadership vehicles like white papers and issue briefs.

Like other media outlets, CNN has developed a team to cover climate change, with Bill Weir serving as chief climate correspondent. Meanwhile, e-newsletters like the Hill’s Equilibrium/Sustainability zero in on “the growing global battle over the future of sustainability.”

Engage with donors and investors

Donors seek organizations that commit to communities and make social responsibility job one. Investors look for organizations that reject token gestures, easy fixes and “greenwashing” for long-term performance on ESG. Telling your ESG story—from assessment and implementation to results and lessons learned--will ensure ongoing opportunities for revenue generation.

Advocate Aurora Health reiterates its multi-pronged commitment to sustainability while calling attention to its System for Change award from Practice Greenhealth. The award recognizes Advocate Aurora for its ability to “ set system-wide sustainability goals, track performance data, benchmark, and support organizational learning and implementation.”

Start your ESG journey today

ESG and sustainability are no longer buzzwords. As with any change initiative, executives should review risks, opportunities and performance from multiple perspectives before they set goals and objectives to sustain, enhance or optimize. They can then develop a strategic ESG and sustainability roadmap, framework and action plan, followed by measurement of key performance indicators and progress reports.

At Korn Ferry, we believe in human-centric change, founded on the notion that change is most successful when organizations are in tune with, sense and respond to human needs. This means that a clear, comprehensive, people-focused approach is necessary for organizations to implement successful ESG strategies. We start with five critical people questions to help organizations on their journey to becoming “ESG-enabled”.

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