Understanding ESG
In the past two years, ESG factors have gained even greater importance in investment decisions. Notably, 90% of S&P 500 companies published sustainability reports in 2021, up from 86% in 2020. A 2021 survey revealed that 88% of institutional investors now factor in ESG considerations, signifying an enduring trend in the investment landscape. Credit rating agencies have also joined this momentum, with 24 global agencies actively monitoring ESG criteria, thereby shaping investment choices and capital allocations. Moreover, a striking 91% of banks are actively engaged in monitoring ESG criteria, emphasising its significance.1
Yet, transparency and accessibility of ESG information remain challenges. A recent survey found that only 27% of global institutional investors believe current ESG reporting offers a clear view of long-term value creation. This underscores the ongoing need for improved ESG reporting standards to align with investor expectations.
ESG, or environmental, social and governance, serves as a structured framework for risk management and value generation. It addresses both internal and external risks, from climate change's business disruptions to employee well-being's impact on performance. Effective ESG risk management mitigates disruptions, yielding stakeholder value. Regulatory momentum in the financial sector is also evident, with the European Union's Sustainable Finance Disclosure Regulation (SFDR) effective from 2021. It mandates disclosure of ESG integration in investment decisions, reinforcing ESG's relevance.
These developments underline ESG's central role in decision-making and regulatory landscapes, driving a shift towards responsible and sustainable business practices and the requirement of an ESG strategy. To create an effective ESG strategy, a company must first understand the material topics that are relevant to its business and identify any gaps in addressing these topics. Once identified, targets must be defined to quantify and monitor progress towards managing the material topics and related risks. Making progress in this area helps to strengthen corporate credibility and confidence in business continuity with investors and other stakeholders, from employees to communities within the company's area of influence. Metrics and data are critical components of any ESG strategy or agenda.
With an increasing number of investors looking to align their investments with their values by examining ESG data, many companies are still grappling with defining actions and reporting results related to their ESG performance.
ESG and Health
The COVID-19 pandemic has brought health to the forefront of global concerns and has highlighted the crucial interdependence between public health, economic wellbeing, and social equity. Consequently, many investors are acknowledging the significance of including health considerations in their ESG frameworks.
While ESG factors have traditionally focused on environmental impact, labour practices, and corporate governance, health has often been overlooked. Considering health as a separate ESG factor emphasises its importance as an essential component of overall wellbeing. Health can have significant implications on economic productivity, social equity, and environmental sustainability. Therefore, it is vital for companies to consider the health implications of their policies and operations.
These are some reasons why ESGH should be considered as an integral and separate part of the overall ESG framework:
Health is a Fundamental Human Right
The World Health Organization (WHO) defines health as "a state of complete physical, mental and social wellbeing and not merely the absence of disease or infirmity."2 As such, it is considered a fundamental human right. Companies have a responsibility to ensure their operations do not negatively impact the health of employees, individuals, clients, consumers, and communities. Hence, companies should better understand the impact of their operations on public health and take steps to mitigate any negative effects.
Health Impacts Economic Productivity
Health plays a crucial role in economic productivity. Healthy employees are more productive, take fewer sick days, and are less likely to suffer from work-related injuries or illnesses. Therefore, companies that prioritise employee health are likely to see higher levels of productivity and profitability.
A Harvard Business Review study found that companies with highly effective wellness programmes had a 6-to-1 return on investment (ROI) in healthcare savings. In other words, for every dollar invested on wellness programmes, the company saved $6 in healthcare savings3. However, only some types of high-quality wellness programmes will ensure reduction in claims and, therefore, lower insurance premiums4.
Moreover, when employees are healthy, they are more productive and efficient, which can lead to higher levels of output and profitability for a company. Employers that invest in employee health (e.g. wellness programmes or offer health insurance benefits), can reduce absenteeism and presenteeism5. It can also lead to employees feeling valued and supported which, in turn, prompts to greater job satisfaction, motivation and engagement.
A healthy workforce is crucial for economic productivity, and companies can achieve this by prioritising employee health and wellness. This will not only lead to a more productive and engaged workforce, but also to reduced healthcare costs and improved financial stability. In addition, investing in community health initiatives can lead to a healthier workforce and consumer base, benefiting the company in the long term.
Health is Linked to Social Equity
Social equity closely links health, with marginalised communities often experiencing poorer health outcomes. Organisations can achieve multiple benefits by prioritising health and understanding the needs and challenges of different groups. They can promote social equity, develop better products and services, and build stronger relationships with communities.
Contributing to social equity is becoming increasingly important for companies, as individuals are prioritising it when choosing where to work. Attracting and retaining talent can lead to increased innovation, creativity, and better problem-solving. Failing to prioritise social equity can lead to legal and reputational risks for companies.
Health is Linked to Environmental Sustainability
Furthermore, health is closely linked to environmental sustainability. Companies can help improve public health by promoting clean air policies, reducing emissions, implementing sustainable water management practices, reducing their carbon footprint, and promoting sustainable agriculture and food systems.
By recognising the importance of health in the broader ESG framework and taking action to prioritise it, companies can benefit from a healthier, more productive, and engaged workforce, contribute to social equity, and promote environmental sustainability.
Health in ESG Reporting and Disclosures
Given the growing interest of investors in health data on ESG reports, several frameworks now require companies to report on health-related issues, including the Global Reporting Initiative (GRI), Sustainability Accounting Standards Board (SASB), Task Force on Climate Related Financial Disclosures (TCFD), and the UN Sustainable Development Goals (SDGs). The GRI, for instance, mandates companies to reveal their strategies for ensuring the health and safety of employees, customers, and stakeholders. It also addresses health-related aspects like healthcare access and community well-being. However, these requirements might not be exhaustive. SASB's industry-tailored criteria and TCFD encompass health metrics but with distinct emphases. TCFD zeroes in on climate-related physical hazards, including health impacts. The push for sustainability reporting urges businesses to disclose operational and supply chain physical risks, emphasising the need to address health-linked concerns.
The metrics for reporting health data will depend on the industry and material topics of each company. The basic metrics that all companies should report on include:
Employee Health, Safety and Wellbeing: This could include metrics such as workplace injury rates, employee wellness programmes, and safety training.
Community Health: Companies should report on their impact on the health of the communities in which they operate, including metrics related to air and water quality, health-related incidents or accidents, and any health programmes or initiatives implemented in the community.
Product Health and Safety: Metrics may include product recalls, safety testing procedures, and any research or development initiatives aimed at improving product safety.
Environmental Health: Companies should report on their impact on the environment and the potential health impacts of their operations. This could include metrics such as greenhouse gas emissions, water and air pollution, and any remediation or conservation efforts.
Companies should also provide detailed information on their policies, practices, and procedures related to health and safety. Such information helps investors and stakeholders understand the company's approach to managing health and safety risks and enables comparisons between different companies in the same industry.
How International SOS Can Help
Recent global disruptions have vividly highlighted the extensive repercussions of crises on individuals and businesses, accentuating the significance of safeguarding the workforce. In the evolving landscape of ESG (environmental, social, and governance) principles and the challenges posed by climate change, International SOS offers an array of tailored solutions that empower organisations to navigate these complexities.
With a holistic approach, International SOS equips organisations to expertly navigate disruptions, whether during crisis scenarios or daily operations. Our expertise lies in guiding organisations towards ESG integration and enhancing workforce well-being, all while emphasising the critical inclusion of health metrics within ESG reporting frameworks.
- Consulting Solutions: Our consultants provide expert guidance on integrating climate resilience into health and security strategies. Our medical consultants can assess the organisation's vulnerabilities, design tailored solutions, and aid in the implementation of climate-responsive health and security measures.
- Climate-Resilient Health and Safety Protocols: We support in the development and implementation of health and safety protocols that account for climate-related challenges, such as extreme weather events, heatwaves, and air quality concerns. These protocols can include guidelines for employee protection, evacuation plans, and measures to ensure business continuity during climate-induced disruptions.
- Emergency Medical Response: We offer specialised medical response teams equipped to handle climate-related health emergencies. This can include training medical personnel to address heat-related illnesses, vector-borne diseases, and other health risks exacerbated by climate change.
- Health Risk Assessments: We conduct thorough assessments to identify climate health-related risks. This can help organisations develop targeted strategies to mitigate these risks and protect employees' health.
- Mental Health Support: We offer mental health support services to address the psychological impacts of climate change-related events. Extreme weather events, natural disasters, and changing environmental conditions can contribute to stress, anxiety, and trauma. Providing access to counselling and mental health resources can help employees cope with these challenges.
- Health Surveillance and Monitoring: We implement health surveillance systems to monitor and detect climate-related health risks in real time. This can involve tracking disease outbreaks, air quality, and other health indicators to enable swift response and intervention.
- Training and Awareness Programmes: We conduct regular training sessions to raise awareness among employees about climate-related health risks and the necessary preventive measures. Educating employees about staying safe during extreme weather events and understanding the health impacts of climate change can empower them to take proactive steps.
- Travel Risk Management: For companies with global operations, we provide employees with climate-specific travel advisories and safety guidelines. This includes informing them about potential health risks in specific regions due to climate-related factors and how to mitigate them.
- Public Health Collaboration: We collaborate with public health authorities, local communities, and relevant organisations to develop coordinated responses to climate-related health challenges. This can involve participating in community health initiatives and disaster preparedness programmes.
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Gartner (2021), The ESG Imperative: 7 Factors for Finance Leaders to Consider. https://www.gartner.com/smarterwithgartner/the-esg-imperative-7-factors-for-finance-leaders-to-consider
- World Health Organization. Constitution. https://www.who.int/about/governance/constitution
- Harvard Business Review, 2010. What’s the Hard Return on Employee Wellness Programs? https://hbr.org/2010/12/whats-the-hard-return-on-employee-wellness-programs
- Harvard Business Review, 2016. Meet the Wellness Programs that Save Companies Money. https://hbr.org/2016/04/meet-the-wellness-programs-that-save-companies-money
- Presenteeism – when employees are present at work but not fully productive due to health (mental or physical) issues.