As ESG Advances to the Board Room, Can Supply Chain?

Oct. 27, 2023

As environmental, social and governance (ESG) issues gain more prominence in healthcare organization board rooms and C-suites, so too are opportunities for supply chain professionals to demonstrate their strategic value. Recently, the American College of Healthcare Executives (ACHE) published a special feature on the importance of ESG to the long-term viability of health systems. The article makes reference to the role of supply chain, but still in rather limited terms, focusing on its more traditional role in lowering costs, optimizing resource utilization, and reducing waste and negative environmental impacts. In this article, we will focus on how supply chain can secure a more integral role in helping craft and implement their organization’s ESG objectives. 

The higher priority being given to ESG-related topics is driven by growing regulatory, consumer, and employee interest in matters that impact the long-term health and well-being of individuals, families, entire communities, and the planet as a whole. Healthcare executives, in turn, recognize that this longer-term focus requires investments that may not see a return for a period of years and which, in today’s financially constrained environment, require board support. 

That’s not to say that all ESG activities cost more. There are plenty of examples where the ROI is quickly realized. Take Gunderson Health System as an example. By making a $2 million investment in its heating and cooling systems, the health system became the first in the nation to achieve energy independence in 2014 and now saves more than $1 million annually in energy costs. Providence Health hospitals in Oregon saved about half a million dollars a year just by switching to an anesthesia gas with a lower carbon footprint.1

These are compelling case studies of the opportunities to save both money and the environment, as well opportunities for the supply chain to advance more holistic sourcing decisions. Other investments are not as clear cut, taking either longer to achieve a return or resulting in savings in other areas, such as reducing the costs associated with chronic disease. Valley Children’s Hospital in California is investing $30 million in a renewable energy microgrid to meet 80 percent of its energy needs, while cutting its GHG emissions in half by 2030. Other institutions are shifting the focus of their fundraising campaigns. For example, rather than raising money to expand a hospital or service line, ProMedica has launched long-term initiatives to identify and address issues creating health disparities across its service area. Its first such campaign, begun in Toledo, Ohio, in 2016, identified food insecurity as a critical issue, leading to a variety of programs, including opening its own grocery store in a food desert near one of its hospitals. Such an effort requires considerable supply chain expertise, e.g., to optimize ordering and inventory management, while complying with regulatory mandates to ensure food safety. 

These are some very specific examples of what hospitals and health systems across the country are pursuing, often as part of much larger corporate strategies. ACHE emphasizes how addressing ESG initiatives improves not just environmental, social, and economic matters but also critical long-term sustainability of health systems, a fundamental responsibility of boards of trustees. At Cincinnati-based Bon Secours Mercy, the institution’s ESG Council (which includes supply chain) reports directly to the board, while other organizations provide regular executive-level updates to boards on the progress of various ESG initiatives. 

UPMC recently appointed two executives—one clinical, the other administrative—to collaborate on green initiatives in order to meet its commitment to halve its GHG emissions by 2030 as part of the White House Health Sector Climate Pledge.2 They have already worked to reduce GHG emissions in surgery and food waste, while expanding use of solar energy. Both have longstanding experience with the healthcare system, which they believe is key to working across multiple stakeholders to facilitate change. 

Multistakeholder engagement is another supply chain superpower; as the AHRMM Cost, Quality, Outcomes (CQO) Movement demonstrated, supply chain is the one discipline that works with both internal and external stakeholders to optimize management of the multitude of resources needed to not only take care of sick patients, but also to optimize population health. 

If you are a supply chain professional interested in advancing ESG initiatives and aligning more closely with your organization’s strategic objectives, here are some suggestions:

1.     Find out if and how your organization has incorporated ESG objectives into its overall strategy and identify areas where supply chain can play a role, from helping source products with less embodied carbon to providing more care (including access to key resources such as nutritional food) in disadvantaged communities.

2.      Establish relationships with the executives in your organization designated as the leads for ESG and/or sustainability (terms often used interchangeably) and express your interest and qualifications for being involved in corporate level initiatives.

3.      Engage your suppliers beyond just finding more sustainable products and contracting with diverse suppliers. Consider how you can collectively reduce GHG emissions and waste across the supply chain. As an example, see the May issue of Value.Delivered to learn how Rush Health, Johnson & Johnson, and Concordance consolidated orders to reduce the number of shipments (and the associated carbon footprint and packaging waste).

References
1. Anesthesia Gases Add To Global Warming, But Some Much Less Than Others : Shots - Health News : NPR
2. Health Sector Pledge | HHS.gov
About the Author

Karen Conway | CEO, Value Works

Karen Conway applies her knowledge of supply chain operations and systems thinking to align data and processes to improve health outcomes and the performance of organizations upon which an effective healthcare system depends.  After retiring in 2024 from GHX, where she served as Vice President of Healthcare Value, Conway established ValueWorks to advance the role of supply chain to achieve a value-based healthcare system that optimizes the cost and quality of care, while improving both equity and sustainability in care delivery. Conway is former national chair of AHRMM, the supply chain association for the American Hospital Association, and an honorary member of the Health Care Supplies Association in the UK.