Why Senior Living, Social Services, and Healthcare Providers Should Pay Attention to ESG
“ESG” seems to be becoming the new buzzword, but what does this mean in the context of care industries?
In short, ESG focuses on a company’s behavior regarding their Environmental, Social, and Governance practices. Although the concept of ESG, or corporate responsibility, has been around for some time, it is now trickling down to organizations outside of the publicly traded space. While not a requirement in the healthcare, senior living, and social service spaces, there is an argument behind the business strategy to embrace ESG.
Considerations of ESG
Reasons as to why senior living, social service, and health care organizations may want to consider thoughtful ESG efforts include:
- Building a trusted brand amongst consumers, workforce, and the community at large. Consumers and other stakeholders are more environmentally and socially conscious than ever before, according to McKinsey & Company. A living, breathing ESG effort may help strengthen an organization’s presence in the community as a reputable provider.
- Aiding in recruitment and retention efforts. In today’s labor market, particularly in these industries, it is imperative to be an employer of choice. Diversity, Equity, and Inclusion (DEI) is a major component of ESG, and when done correctly can aid in attracting, engaging, and retaining a diverse workforce. Employee Resource Groups (ERGs) may be an introductory area of DEI for employees to start exploring.
- Strengthen defensibility regarding liability claims. An organization’s ESG efforts may come into play in the event of litigation. This can help to clearly communicate with jurors and others of important services the organization offers in a community, along with strong and ethical governance standards.
- Increase desirability to investors and lenders. From a mergers and acquisitions standpoint, potential acquirers may seek additional information regarding the ESG status of the organization it is looking to acquire. ESG is also becoming a consideration for lenders when reviewing loan requests. Additionally, ESG may help defend tax-exempt status for non-profits.
- Opportunity for cost savings and revenue growth. Such components as implementing energy-efficient technology, reducing waste in supply chain, decreased employee turnover, reduced costs in liability claims and premiums, and being a desirable investment opportunity may lead to improved overall financial performance.
The mission and services of care industry providers naturally fits in with concepts of ESG. Organizations may already have many components of ESG in place but may now want to consider how they are evidencing and communicating these practices with stakeholders.
Tips for Getting Started with an ESG Framework and Goals
- Gaining support from C-suite leaders and the Board of Directors is critical.
- Do not feel like everything needs to be solidified before you start. Identify what initiatives are already in place that fit into ESG. Define what matters most to the organization and what the purpose of ESG is for you.
- Create a committee or workgroup and determine who will lead ESG initiatives in the organization.
- Identify priorities of focus based on organizational needs.
- Start with G and S. Strong governance is a key component to the framework of ESG, so consider fine-tuning the Corporate Compliance Program. DEI may be a great place to focus efforts for the “Social” component if there is not yet formal organizational structure around.
- Assess and plan for how the important work done in the organization and overall community impact is evidenced and communicated to stakeholders.
Key Takeaways:
ESG encompasses an organization’s approach to Environmental, Social, and Governance practices. For senior living, social service, and health care industries, there are unique risk management and insurance coverage considerations. To learn more about how your organization can benefit from ESG & ways to get started, contact your M3 account executive.
