Sustainability and ESG in healthcare – what does it mean for private hospitals, clinics and technology providers?

Many people use the terms “sustainability” and “ESG” interchangeably, and both are often used as shorthand for carbon reduction schemes or more generally green initiatives. However, whereas sustainability is by definition a fairly vague concept, ESG is more clearly defined – environmental, social and governance. And as a result, in many ways it is more helpful for companies to focus on ESG since it can provide a framework for specific initiatives and criteria.

ESG is a huge area in its own right, and takes its starting point from the United Nations 17 Sustainable Development Goals, which range from the elimination of poverty, to clean sanitation, gender equality, climate action, sustainable cities and communities, and good health and well-being. 

And so ESG can be seen as demonstrating a shift in emphasis from short-term profit maximisation as the primary objective of corporations towards a business model with positive societal impact covering three areas: ESG. 

Investment and financing are clearly important to support companies operating within the independent healthcare sector and more investors than ever are screening companies for ESG criteria when making investment decisions. ESG activity is increasingly a material factor influencing asset valuations, investment decisions and, consequently, access to capital. 

From a financing perspective, ‘green’ bonds and loans are available to fund environmentally focussed projects, and sustainability linked loans incentivise borrowers to meet their sustainability commitments and reduce their environmental impact. 

Likewise, other stakeholders including employees and consumers want to see companies considering these factors, and shareholders are also demanding action.

As a result, healthcare companies are being required to respond, for example through incorporation of sustainability linked financing into their business operations. 

Achieving net carbon zero is becoming increasingly important from the perspective of governments and organisations alike worldwide. In the UK the NHS currently procures products from over 80,000 suppliers and, as such is an essential customer for the independent sector. Its Greener NHS programme commits it to two targets: 

• Reducing the NHS carbon footprint for emissions it controls directly to net zero by 2040, with an 80% reduction targeted between 2028 and 2032.
• Reducing the NHS carbon footprint plus, that is for emissions which it does not control directly, but can influence, to net zero by 2045, with an 80% reduction targeted between 2036 and 2039.

How will the NHS meet these targets? The answer lies in the fact that 60% of the NHS carbon footprint is based within the NHS supply chain, which means that the NHS will need to use public procurement as leverage to effect change.

For example, recent UK public procurement Policy Statements (PPNs) reference to the need to consider ‘green’ concerns; 

• PPN 06/20: Taking account of social value in the award of central government contracts, which is to be applied to the NHS from 2022
• PPN 05/21: which mandates that contracting authorities should consider national priority outcomes including ‘tackling climate change and reducing waste’ in all their procurement activities
• PPN 06/21: ‘Taking Account of Carbon Reduction plans in the procurement of major government contracts’ mandates that as a selection criteria contracting authorities should require bidding suppliers to provide a Carbon Reduction Plan (using a defined template) confirming the supplier’s commitment to achieving net zero by 2050 in the UK, and setting out the environmental management measures that they have in place and which will be in effect and utilised during the performance of the contract. 

Building on this, the NHS has published a “Net Zero Supplier Roadmap” which requires that by the end of the decade the NHS will no longer purchase from suppliers who do not meet or exceed its carbon zero commitments.

In view of these policy statements, the NHS, alongside wider government, is now effecting change through its supply chain contracts, which providers will need to be aware of when contracting with government bodies and the NHS.

Independent providers are clearly taking the move to carbon zero onboard with the Independent Healthcare Providers Network announcing an industry-wide commitment for independent healthcare providers to go beyond the NHS target to achieve net zero by 2035 (with a net zero supply chain by 2045). Some members have committed beyond that ambitious target to achieve net zero by 2030. 

Other sustainability-related opportunities and challenges for the sector lie in innovating to create healthcare products and devices which are more environmentally friendly and designing healthcare pathways which enable the sector to reduce its contribution to carbon emissions. From a social perspective, product and pathway innovations may also support healthcare systems to improve access to healthcare for less well-served communities. 

In terms of products, there are many examples throughout healthcare services of items which continue to be used at great cost to the environment. The challenge is to eliminate these, whilst maintaining access to often life-changing treatments for patients. A simple example is the metered dose asthma inhaler, the propellants in which are greenhouse gases accounting for 13% of the UK NHS carbon footprint. Similarly damaging is the plastic used in throwaway devices which product innovators are currently working to eliminate. 

The industrial process of remanufacturing, a step beyond simply recycling, is another innovation starting to take hold within the healthcare sector. This involves breaking down products or their components before restoring them to useful life and is an effective way of reducing waste and environmental impact. Examples of healthcare devices which are being restored in this way include neonatal monitors and surgical tools including forceps, endoscopes, and cytoscopes. The challenge with this approach is guaranteeing the safety of the remanufactured devices, but if this can be achieved, this is a clear step to more sustainable use of such devices. 

Before, and increasingly since, Covid, digital access to healthcare is being given greater priority. Of course, digital healthcare solutions have grown exponentially during the pandemic, and they support sustainability initiatives in many ways, from reducing the need to travel to hospital centres, therefore effecting a reduction in carbon footprint, to increasing access to care and information for people regardless of their ability to engage in traditionally delivered services. Examples include apps which help people to manage and treat a wide variety of conditions from diabetes to mental health, and physiotherapy. 

And in terms of infrastructure, Community Diagnostic Centres, as well as supporting the Covid recovery plan, will take healthcare services closer to the communities that most need them. Private sector clinic and hospital providers can also demonstrate their environmental commitments through infrastructure projects, powering their own premises using renewable sources, and partnering with public sector providers to help them do the same. 

The ESG agenda needs focus now. It is tempting to think of it as a long-term issue, but actually it is a short-term one requiring decisions and actions without delay. Whether the imperative is moral, related to investment and financing, or supplying to government and the NHS, businesses need to apply ESG to their wider decision-making and processes across all levels of the business and supply chain. 

The good news as demonstrated by the examples above, is that there are a multitude of ways in which these issues can be addressed, and private hospitals, clinics and technology providers are already making the most of the many opportunities to do so.