In early June, BrownFlynn presented at the annual CleanMed conference, the health care industry’s largest conference for professionals on the leading edge of sustainability within the industry. The session, which focused on reporting as a management tool, was conducted along with VHA (which provided a unique supplier perspective), SASB (which presented its work on the identifying of the most material issues for the industry) and BrownFlynn (which outlined the larger context of sustainability and value of measuring, managing and reporting on sustainability performance).
The packed room represented health care professionals at every stage of the reporting process and from every part of the industry’s value chain. The panel spoke about the business case for reporting and the many tools available to help define materiality, manage sustainability issues and effectively communicate performance to a range of stakeholders. The interactive session also involved several industry professionals from the audience who shared their stories of navigating sustainability and the reporting process, as well as several other important issues such as active engagement with suppliers.
One example in particular was Inova Health System. It was the top-ranked hospital (Inova Fairfax Hospital) in the Washington, D.C., area in 12 specialties (including gynecology and neonatology) for two straight years, according to U.S. News & World Report. Inova has been reporting since 2010, and recently went through a rigorous materiality assessment that resulted in its soon-to-be published GRI G4 sustainability report.
“Inova has been committed to following GRI’s reporting process for several years, with a goal of promoting transparency in reporting within the health care industry," said Carolyn Billetdeaux, sustainability associate at Inova Health System. "In terms of report content and the stakeholder engagement process, you really can see how this year’s G4 report differs from those of previous years." Billetdeaux added that materiality assessments have helped turn Inova's annual reporting process into ongoing dialogue with its stakeholders, and the outcomes of that process allowed it to maximize the relevance of the information shared and adjust its broader strategy.
Inova Health System is also a founding sponsor of the Healthier Hospitals Initiative (HHI), a national campaign that aims to implement a new approach to improving environmental health and sustainability across the health care sector. HHI is part of a larger industry-wide movement that includes Health Care Without Harm, Practice Greenhealth and the Center for Health Design. HHI comprises 12 of the largest, most influential health systems in the nation. Overall, more than 500 hospitals are involved and represent $20 billion in health care purchasing dollars. This group includes well-known institutions such as Dignity Health, Kaiser Permanente and Cleveland Clinic, health systems that are making a big impact on sustainability in the sector.
Dignity Health (formerly known as Catholic Healthcare West) was not only the first to produce a GRI report in the industry, but also actively exercised its shareholder influence to engage suppliers on particularly environmental and social issues of greatest significance to Dignity and its key stakeholders (patients, patient families, employees and the local community). Sustainability issues of significance to Dignity include the link between poverty and poor health, access to prescription drugs for the uninsured or underinsured, workplace diversity and supplier product responsibility. In fact, the shareholder advocacy team set a precedent when it used a shareholder resolution to engage a key supplier on the issue of carcinogens in medical supplies and equipment.
“Advancing sustainability initiatives in our own operations and in our supply chain is integral to our mission of promoting the broader health of the communities we serve and the planet we share," said Sister Susan Vickers, vice president of community health for Dignity Health. "We consistently raise issues of concern with our vendors and engage them in identifying more environmentally preferable products and services.”
Industry influence on the economy
Few people realize the actual size of health care, including the sectors that it encompasses, or the extent of its supply chain. Recent economic data identifies the health care sector consisting of biotechnology, pharmaceuticals, medical equipment and supplies, healthcare delivery, healthcare services and supply chain, and managed care, which in turn represents close to 20 percent of the U.S. GDP. Given the obvious influence of this sector on the economy as a whole, it is important to not only understand how and why these health care systems are managing their own operational footprints, but also where they are heading with respect to sustainable procurement.
Kaiser Permanente is one of the nation’s largest not-for-profit healthcare providers, serving about 9.3 million people in 39 hospitals and 618 medical offices across the country. Kaiser Permanente comprises the Kaiser Foundation Hospitals, Inc., Kaiser Foundation Health Plan, Inc. and the Permanente Medical Groups, with a 2013 operating revenue of more than $53 billion. In 2010, Kaiser Permanente launched a Sustainability Scorecard for medical products. The health care provider requires suppliers to provide environmental data for $1 billion worth of medical equipment and products used annually in their hospitals, medical offices and other facilities.
This scorecard was the first of its kind in the health care sector, and not only allows Kaiser Permanente to evaluate the sustainability of each medical item it purchases, but helps it encourage its suppliers to provide more sustainable products. The scorecard is one initiative described in a book due out later this month, “Greening Health Care: How Hospitals Can Heal the Planet” by Kathy Gerwig, Kaiser Permanente’s environmental stewardship officer. “The book presents practical solutions for health care organizations and clinicians to improve their environments and the health of their communities,” said Gerwig.
Managing a massive supply chain
Due to the wide range of goods and services procured by hospitals, a unique layer is woven into the healthcare industry known as the Group Purchasing Organization (GPO) — an entity that leverages the purchasing power of a group of organizations in order to obtain discounts from vendors based on this purchasing power. One example of a healthcare GPO is VHA.
VHA is a national network of about 5,000 not-for-profit healthcare organizations that work together to leverage savings in their supply chains, and has produced five sustainability reports, with the most recent two reports in accordance with the GRI Guidelines. VHA is the majority owner of Novation LLC, the largest supply chain company in health care which provides the market data and analytical capabilities to help members make better purchasing decisions. In 2011, VHA acquired Provista, a leading supply chain improvement company that leverages Novation’s contracting services to help health care organizations and professionals improve their performance.
Similar to the health care industry and its respective associations, ever other industry has its own industry associations, many of which are exploring how they can help their members navigate sustainability. One leading example of industry associations helping members manage and improve their sustainability performance is the Automotive Industry Action Group. AIAG has created an entire curriculum dedicated to training its members on corporate responsibility, including reporting, conflict minerals, chemical management, greenhouse gas emissions and self-assessments. Further, industry-leading original equipment managers (OEMs) such as General Motors, Ford and Chrysler have adopted the GRI Guidelines as their preferred sustainability reporting framework. AIAG became a GRI Organizational Stakeholder in 2012 and is offering a series of GRI training sessions.
Similarly, the Electronics Industry Citizenship Coalition is a group of leading electronics companies working together to improve efficiency as well as social, ethical and environmental responsibility in the global supply chain. EICC members have to adopt the Code of Conduct that was established to ensure worker safety and fairness, environmental responsibility and business efficiency. This Code is reviewed every three years in collaboration with its members and stakeholders. One of EICC’s members, Intel, conducts an annual Supplier Sustainability Leadership Summit that is attended by senior managers from about 75 of its top tier suppliers. In 2013 the summit focused on sustainability reporting, and in 2014 the summit will focus on transparency. Webinars will lead up to this summit and will address Intel’s expectations of suppliers, including using GRI as the framework for sustainability reporting.
Public, private, large and small
As we’ve explored in previous articles such as “The long journey to sustainable procurement” and “Government leaders dive into G4 reporting,” the most profound influence on the sustainability field is due to the increasing demand on suppliers to disclose sustainability information. Walmart’s influence on its supply chain was only the tip of the iceberg. Not only are an increasing number of corporations (public and private) seeking disclosure from suppliers, but a growing number of public and private institutions are doing so as well, such as cities, counties, states and federal agencies, universities and educational organizations, and as outlined above, non-profit and for-profit health care systems. In addition, similar to the healthcare associations mentioned above, every industry has a related association and more of these industry groups are not only looking at their members' sustainability performance, but also developing their own supply chain initiatives and programs.
Recognizing that this wave is rapidly growing (and in some areas the wave is already breaking) can help you and your organization strategically prepare and manage this new demand for sustainability information. Understanding materiality as related to sustainability reporting is a key part of your sustainability journey, as is understanding what your peers are doing and what your stakeholders expect.
NexGen — Impact Sourcing
As touched on above, responsible procurement and supply chain management is evolving in a very interesting way. While the Intel story shares a new level of positive impact that can come from a progressive supply chain engagement approach, some organizations are looking at supply chain through an even broader sustainability lens — the lens of Impact Sourcing. A great article titled “Impact Sourcing 101: Innovative Outsourcing with Positive Business and Social Impact” by Sarah Troup (Rockefeller Foundation) discusses how this business model is helping to innovate the way companies create shared value through their services supply chain.
For example, service sector companies are employing high potential workers in disadvantaged areas (such as parts of Africa and India) to help meet and exceed cost and quality objectives, as well as enable these workers to earn a higher income — sometimes up to 200 percent more than they would earn in another job. Furthermore, studies show this idea is catching on. A recent survey found that 46 percent of companies were likely to engage in Impact Sourcing if they participate in corporate social responsibility (CSR) initiatives. The fact that companies are both meeting their business needs while giving people they might otherwise overlook an opportunity to work and learn valuable workplace and technical skills makes for an inherently more responsible supply chain. It also contributes to broader impacts in family and community such as the reduction of poverty and further investments in family health care and education.
So the question becomes: How and who do you choose? Because a massive supply chain is difficult at best to manage, how do you prioritize key suppliers to engage with more deeply, more proactively and in alignment with your larger sustainability objectives? And how do you go about such engagement? As referenced above, there are several ways to prioritize. Intel focuses on its top 75 suppliers as these comprise the majority of its supply chain. Other companies may choose to focus on areas where their operations have the biggest impact on the socioeconomic conditions of the people who live and work there. Regardless of prioritization, the common thread in working effectively with your supply chain is engagement — or more specifically, education. More often than not, many companies in your supply chain do not have the necessary capacity to easily respond to the myriad of sustainability demands they are increasingly receiving. Providing these companies with tailored training and helping them understand the growing interest in transparency on material sustainability issues is not only mutually beneficial, but benefits the broader, common sustainability interests of the marketplace. Rewarding transparency with continued contracts reinforces this transparency and helps us all make a strong business case for sustainability.