Health care industry lags in addressing the E in ESG: Nearly 7K tons of waste created daily

The health care industry’s purpose is to tend to patient health and safety. But at the same time, the industry is lagging in attacking the environmental challenges that threaten public health in the U.S. and across the globe – the “E” in environmental, social and governance (ESG) initiatives that the business world is much more aware of.

That’s according to studies and sustainability experts, who say the health care industry’s insufficient attention to environmental issues could pose big challenges for health care organizations and their legal departments as investors and other stakeholders increase calls for environmental accountability.

Study after study document the industry’s challenges in addressing the E in ESG. A 2019 report by Arup and Health Care Without Harm found that the global health care industry is responsible for two gigatons of carbon dioxide each year, or 4.4% of worldwide net emissions—the equivalent of 514 coal-fired power plants.

A 2018 JAMA Network Open study found that U.S. health care delivery industry consumes vast resources, the majority of which become waste—nearly 7,000 tons of hospital waste is created daily.

Even so, many health care organizations have not made the environment a front-and-center issues, studies show. A 2021 PwC study, for instance, found that 53% of for-profit health care companies and 62% of nonprofit health care organizations lack a dedicated ESG officer. And many organizations are not yet quantifying their environmental impact.

“The business world has substantially surpassed the health care delivery industry in responding to the demand for greater accountability for the environmental and social impacts of the enterprise,” Drs. Emily Senay and Philip Landrigan wrote in a 2019 study.

“It is a business maxim that ‘you can’t manage what you don’t measure,’” the report said, adding that health care organizations are part of the climate change problem “but critical to the solution.”

The industry has such steep environmental costs because it is both a major producer of waste and major consumer of energy, said Britt Harter, a partner in the consulting firm Guidehouse’s energy, sustainability and infrastructure team.

“This both gives them an opportunity to address those concerns because they’re under their control, but also heightens the scrutiny because they are directly within their control,” Harter said.

One reason for the waste deluge is that the importance of sterility leads health care providers to rely on disposable products and tools.

But James Flynn, managing partner of the Ohio law firm Bricker & Eckler, said he’s watched many legal departments at health care facilities spend more time managing crises, such as the COVID-19 pandemic, than thinking about bigger environmental goals.

He said one reason is that many health care providers are nonprofit and thus don’t have outside investors scrutinizing and pressuring them.

“Investors are driving a lot of these behaviors, at least on the for-profit side. Nonprofits don’t have that pressure point,” Flynn said. “There’s actually not as much awareness, understanding or education about what ESG is outside of Wall Street.”

John Maxwell, a business professor at Indiana University who is a founding member of the Alliance for Research on Corporate Sustainability, said health care organizations need to have a point person to drive sustainability efforts.

“If [nonnprofit organizations] are serious, they’ll identify somebody who’s going to be in charge of ESG, if they don’t have somebody already,” Maxwell said. “That person will compare existing ESG reporting to what other companies are doing.”

Organizations also need to compile data to measure environmental impact and progress reducing it, Maxwell said, something that many public companies are doing but many nonprofits are not.

For example, Becker’s Hospital Review named the 68 greenest hospitals in America in 2018 but was only able to provide emissions information for seven of the hospitals named, according to the New England Journal of Medicine.

Among nonprofits, Renton, Washington-based Providence Health and Services stands out for being proactive. Providence, which operates 51 hospitals and more than 800 medical facilities on the West Coast, tracks environmental and sustainability data internally and turns it into long-term goals, Chief Legal Officer Anna Newsom said.

Providence has set a goal of becoming carbon-negative by 2030, a path that requires tracking of everything from volatile anesthetics and nitrous oxide to business travel and employee commuting.

Newsom said Providence already is seeing progress, with carbon emissions dropping 11.7% since 2019.

“The fact that we have made so much progress on the goals that we set for ourselves is a good measure of how our caregivers have managed to find an additional reserve of strength to do the right thing for our planet,” Newsom said.

She said the legal department plays a key role in making sure Providence keeps up the momentum. She said legal departments across the health care industry will need to do the same.

“This is not just an issue for legal to weigh in on. Nor is it solely in the hands of another department,” she said. “This is a matter of survival for all of us.”

Hugo Guzman is a reporter on ALM’s in-house desk based in California, covering legal departments in the biotechnology and pharmaceutical industry, as well as other major corporations. Connect with him at hguzman@alm.com today.