Health care companies get new sustainability accounting standards

The Sustainable Shareholder

Health care companies get new sustainability accounting standards

Pills image by PhotoStock10 via Shutterstock.

The nation's top sustainability accounting nonprofit has issued new accounting standards for several health care subsectors, including biotechnology and pharmaceuticals.

The American National Standards Institute authorized the Sustainable Accounting Standards Board (SASB) to develop sustainability accounting standards to help publicly listed corporations report sustainability issues to investors and the public.

The SASB is in the process of setting sector-specific standards for the disclosure of environmental, social and governance (ESG) issues in SEC filings for 80 industries across 10 economic sectors. The new SASB provisional standards released this month are aimed at industries in the health care sector, including biotechnology, pharmaceuticals, medical equipment and supplies, health care delivery, health care distributors and managed care.

I think the standards, based on dozens of specific metrics, are well conceived as drafted thus far. Such information never has been standardized in a way that could properly inform investors, so the emergence of the SASB’s standards sets a high and uniform bar for how companies must share information. There is no doubt among sustainable investors that such information will relate directly to share value.

Product focus for biotech and pharmaceuticals standards

For the biotech and pharmaceuticals industries, companies must disclose ways they offer medicines to high-priority countries, recalls, unused product takebacks and safety issues, such as adverse side effects. Companies must discuss clinical trial safety protocols and any legal or regulatory fines or settlements therein. They must divulge how product prices compare to the Consumer Price Index. Fines or settlements for false advertising, corruption and poor manufacturing practices also must be revealed, while employee recruitment, retention and training programs must be elucidated. Product traceability, manufacturing energy and water use, and waste procedures also are measured.

Other sustainability topics for the biotech and pharmaceutical standards address supply chain management, consumer access, safety, employee relations, marketing, pricing, corruption, counterfeiting and natural resource and energy conservation.

Interesting health care delivery standards

I find the standards for health care delivery intriguing. They address quality of care issues, such as health care acquired infection rates, patient satisfaction, ratings on clinical process and outcome domains, and excessive serious reportable events.

These companies also must share their strategies for facilitating access for low-income patients, including including alternative pricing mechanisms, billing and pricing frameworks. Patient privacy procedures must meet a high standard. Employee turnover and talent recruitment and retention strategies also are assessed, as are incidents of fines and settlements for Medicare and Medicaid fraud. In the environmental arena, energy use and waste generation are evaluated, while companies must reveal strategies for how climate change risks may affect business operations.

Both the health care delivery and managed care subsectors must discuss access, privacy, transparency, fraud, employee relations, improved outcomes, plan literacy and performance, energy and waste efficiency, and climate change impacts on human health.

Managed care industry disclosure zeroes in on cost

Specific standards pertinent to managed care relate to cost and revenue schemes that enable access to care, claim denial rates, grievance rates, Medicare plan rating and employee retention rate.

Clarity in pricing and coverage is assessed, as is the privacy and security of customer data. Regarding medical care, enrollment in wellness programs and the coverage of preventive services is highly valued.

A good start

It is encouraging to see the breadth and depth of these accounting standards.

Considering the breadth of reporting systems, such as those from the Global Reporting Initiative and the International Integrated Reporting Council, the value of the SASB’s disclosure protocols will help investors to understand the material risks and opportunities of the companies they may own.

Pills image by PhotoStock10 via Shutterstock.