ESG: the importance of sustainable practices and their application in the Health sector

Before the acronym ESG was the concept we know today, the idea of social responsibility in business was viewed primarily from the perspective of Milton Friedman. That's because, in 1970, the economist published in The New York Times the article "The Social Responsibility of Business Is to Increase Its Profits”, where he argued that the greatest responsibility of companies was to maximize profits for shareholders.

Over the years, the debate about social responsibility gained breadth, until it became what we now know as ESG — a term used for the first time in 2004 bKofi Annan, who at the time was Secretary General of the United Nations (UN). At the time, through the campaign "Who Cares Wins" Annan provoked leaders to think about results other than financial profit.

Since then, the acronym for “Environmental, Social and Governance” came to mean a bigger idea. The current interpretation indicates the institutions' commitment to their employees, clients, investors, the environment, and society as a whole.

In the health sector, as ESG definitions and practices have gained maturity, it is understood that aligning with this approach not only means reducing costs, carbon emissions, and improving a company's reputation, but also expand access to health services of quality.

Does the healthcare sector need to think about ESG?

Health leaders often discuss how the sector's problems feed back on each other. For example, not encouraging disease prevention practices implies an overburdened health system. Meanwhile, the absence of innovation and agility in processes results in wasted resources and increased costs.

Although there are currently those who question the returns that ESG practices generate to companies, the perspective offered by the most recent data is that the adoption of these measures is moving towards a point of maturity and already generating financial returns.

For example, according to the report "ESG 2024 Overview”, prepared by Amcham, 7 out of 10 brazilian companies have already started adopting sustainable practices. In addition, compared to 2023, there was an increase of 24% in the number of Brazilian companies that adhered to sustainable practices. In 2023, the 'Melhores para o Brasil' survey demonstrated that companies with ESG practices achieved financial returns 615% higher than the Ibovespa index.

Therefore,the pillars of ESG align with the ambitions of a healthier system - that is, less likely to collapse - and fairer. Therefore, let's see below some examples and data that show how the adoption of ESG practices has contributed to reducing waste and improving processes in the health sector.

How to make a positive impact on health

Environmental

Representing the letter" from the acronym ESG, are the environmental issues associated with the health sector. In 2019, a study by Health Care Without Harm, made in partnership with ARUP, pointed out that the sector is responsible for approximately 4.4% of global CO2 emissions — as a percentage, it may seem like a low value, but it's equivalent to the emissions of 514 coal-fired power plants.

With regard to pollution, low air quality can contribute to “simpler” conditions - such as tonsillitis, pharyngitis, asthma, pneumonia - or even to more serious cases, such as lung cancer and cardiovascular system overload, which increases the risk of heart attack. According to this article, cases of acute myocardial infarction represent a significant cost for the Unified Health System (SUS), exceeding R$ 794 million.

The adoption of renewable energy has shown great potential for reducing emissions in the hospital sector. For example, in Portugal, hospitals have implemented solar panels technologies, significantly reducing CO2 emissions. Another example is the NHS (National Health Service) sustainability program in the United Kingdom, which plans to reduce its carbon emissions by 80% by 2028, with the use of renewable energy, according to a sustainability report published in 2020.

Still on the environmental line, in 2020, the United Nations (UN) pointed out that, in Brazil, about 253 thousand tons of medical waste annually. Hospital waste is a major contributor to soil and water contamination, which can lead to various health damage - such as poisoning an organ or tissue, inducing cancer, causing infection, and even fetal malformations.

No wonder, standard 306 of the National Health Surveillance Agency (ANVISA) determines that medical waste must be separated into 5 categories: potentially infecting; chemicals; radioactive waste; common waste; and sharps.

In this sense, the adoption of technologies such as solar energy, retraining of materials and a resource management help to significantly reduce the environmental footprint and risks to society.

Social

In a convergence of interests, strategies for better operational efficiency contribute to both environmental and social issues and business sustainability. In fact, the adoption of ESG practices focusing on the social pillar reduces inequalities in access, promotes preventive health, and improves the patient experience.

To this end, healthcare companies are increasingly turning to SaaS (Software as a Service) technologies. For instance, management systems and artificial intelligence, that optimize hospital processes, in addition to contributing to the reduction of costs and better efficiency of care and other tasks.

According to the World Health Organization (WHO), about 40% of waste in outpatient health care in the country they are the result of inadequate or ineffective care measures. As a strategy for this scenario, it is increasingly common for companies to resort to practices of digitalization and telemedicine, because they not only reduce the carbon footprint, but also expand access to care, especially in remote areas.

Regarding accessibility, it is worth noting that in Brazil, three out of every four brazilians face barriers to accessing health services. The information is from a study done by researchers from University College London, in partnership with Haleon And the Economist Impact, who interviewed more than 42,000 people from 40 countries. Among the main difficulties faced by brazilians, the research reiterates that:

• 56% alleges lack of available appointments;
• 29% Mention inconvenient service times;
• For 15% of the interviewees, there is the question of the distance or cost of transportation.

Governance

When it comes to governance, the priority lies in formalized processes and structures for the application of good practices, in addition to valuing transparency. In 2023, Amcham pointed out in the “ESG Panorama 2023” report that 64% brazilian companies already have strategies formalized of ESG.

In practical terms, health data governance - when well structured - allows gathering information that contributes to increasing the efficiency and resilience of health systems, in addition to improving access to services and promoting health equity.

For example, a study carried out in Kenya, demonstrated that the implementation of improved governance structures and the use of data panels contributed to identification and resolution of bottlenecks in public health supply chains, improving the availability of essential products to the population.

Examples from Green Rock

At Green Rock, the practice of ESG is not just a goal, but a strategy to generate a healthier and more inclusive future. Although our trajectory is just beginning, as presented below, several initiatives of portfolio of investments have already demonstrated positive impacts on society.

Through the methodology of Social Return on Investment (SROI), the manager measures and values the social, environmental, and economic impact of her initiatives, going beyond traditional financial indicators.

Since its founding in 2019, Green Rock has invested R$ 70 million in more than 20 companies, directly impacting more than 2 million lives. Among the results achieved in 2023, the following stand out:

• R$ 96 million in value generated for society, reflecting the positive impact on communities and health systems;
• Around 30,000 tests and treatments performed, expanding access to essential care;
• More than 30,000 hours optimized in the healthcare sector, promoting efficiency in operations and service;
• 354,654 patients benefited with access to health care, showing the effectiveness of the supported solutions.

Finally, although ESG requires continuous and gradual efforts, every effort contributes to a future with healthier people and businesses.