Greening & Sustainability In health care and life sciences: Implementing a strategic response

Greening & Sustainability In health care and life sciences: Implementing a strategic response

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The report explores leading practices of companies in several industries where greening efforts are mature, and compares and contrasts them with efforts of health care organizations. Six impact zones based on the leading practices of these companies provide a comprehensive framework for a health care organization’s greening initiatives.

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Greening and Sustainability inHealth Care and Life Sciences 
 Implementing a Strategic Response
Produced by the Deloitte Centerfor Health Solutions
Greening and Sustainability inHealth Care and Life SciencesForewordGreening is a significant trend that is destined to impact each of the health careindustry’s major sectors. It is an imperative that will only grow in importance.Greening concerns more than providing an environmentally safe work environmentfor employees and promoting responsible business practices among suppliers whocontribute to value chains. It is a fundamentally different way to lead and operatean organization.The term “greening” is sometimes used synonymously with sustainability. We believe the two arecomplementary but distinct:Greening includes those policies, procedures, programs and investments built intoan organization’s business practices that promote, as well as contribute to, a safe,Sustainabilityhealthy and ecologically efficient environment for the benefit of their employees,customers, vendors, and local communities – effectively, it is the environmentalsustainability of the organization.GreeningaCdulVtualrueesnGreening practices represent a wide array of practices and policies, such as theprocurement and delivery of environmentally safe products and services, thepromotion of energy and natural resource efficiency, the reduction of waste andpollution, improvements to hazardous waste disposal, and the greening of an© 2008 Deloitte Development LLC. All rights reserved.organization’s workplace and customer environments.Sustainability includes greening and a second dimension: the beliefs, values and codes of conduct of the organization,reflected in the organization’s relationships to its community, employees, industry and competition. Sustainability, inmany ways, is about the ethos of the organization – the written and unwritten standards by which decisions are made.Greening refers to a distinct set of those decisions focused on environmentally safe and appropriate business processes.This analysis by the Deloitte Center for Health Solutions, part of Deloitte LLP,1 offers one view ofgreening in the health care industry. Based on our experience and observations, there is a business case for“ i ” – health care organizations can achieve both business and social value through greeninggo ng greeninitiatives. Further, we believe that every health care organization will be held accountable for its greeningefforts, and that greening is congruent with the missions of health care organizations to improve thehealth and well-being of our communities, and to contribute appropriately and favorably to a healthyculture and value system. We also believe that greening efforts in health care organizations are appropriateand necessary for two reasons: they are good business and they are the right thing to do for our employeesand communities. This analysis offers a framework for considering an organization’s response to what weconsider will be a major focus for our industry in years to come.
Paul H. Keckley, Ph.D.Executive DirectorDeloitte Center for Health Solutions
1 As used in this document, “Deloitte” means Deloitte LLP and its subsidiaries. Please seewww.deloitte.com/us/about for a detailed description of the legal structure of Deloitte LLP and its subsidiaries.
2
Greening and Sustainability inHealth Care and Life Sciences
Greening: Fad or Trend?Greening is not a fad; it is a long-term trend that will require everyhealth care organization to invest strategically and programmaticallyto conserve natural resources and create a healthy environment forcustomers, patients and employees. For many industries, greening has been a longstanding challenge:automakers and air pollution, chemical manufacturers and wastedisposal, power generation plants and air quality. These are just afew of the issues that have generated public concern and producedregulatory oversight that institutionalized programs to green theseorganizations and protect the communities in which they operate.
So what’s different now? In recent years, greening efforts haveexpanded in scope due to numerous factors. Among them:• Increased media attention – Recent greening cover stories haveappeared inThe Wall Street Journal, the Economist, Newsweek, and other major publications.• Increased consumer interest – In surveys linking corporatereputation to greening, 17 percent of consumers today are “greenmotivated,”2 and more than 24 percent of shareholder proposals in2008 are “green-related.”3• Increased attention to supplier relationships – Morecompanies sourcing suppliers are insuring they operate in agreen-responsible way. Increased regulatory scrutiny – Attention to water usage,carbon emissions, product composition (nanotechnology,hazardous materials), labeling, and performance reporting isincreasing. There has been a 300 percent increase in the number ofproposed climate change bills compared to five years ago;4 waterusage and product and packaging labeling are entering as the nextwave of regulatory focus.• Increased scientific focus on green solutions – Growingconsensus within the scientific community is linking human activitiesto climate change and recognizing that natural resources and ourability to access them are finite. Concurrently, increased analytic rigoris linking socially responsible business practices with bottom-lineperformance.Increased access to capital for greening efforts – Institutionalinvestors and private capital have flocked to green solutionstart-ups in recent months.So where is the health care and life sciences industry relative to thegreening trend? How are hospitals and facility-based providers, healthplans and other payors, and life sciences companies implementinggreen strategies within their value chains? Is greening in health careand life sciences ahead of, behind, or completely oblivious to thegreening trend in corporate America?This paper explores leading practices of companies across severalindustries where greening efforts are mature, and compares andcontrasts them with efforts of health care organizations. The intentof this review is to explore areas where health care stakeholdersand overseers might assess greening efforts and to offer a strategicframework for monitoring these efforts within each group.
2 Natural Marketing Institute 20063 Shareholder proposals were found in a database compiled by Interfaith Center for Corporate Responsibility, http://www.iccr.org/ethvest.php4 Ibid3
Greening and Sustainability inHealth Care and Life Sciences
In this analysis, health care organizations are categorized into fourmajor groups:1.Providers that are directly involved in patient care, usuallyoriginating services from a health care facility (e.g., hospitals, labs,diagnostic imaging facilities, surgery centers, medical offices).2.Health plans, other payors, and employers that are the primarypurchasers of health services and that leverage their influenceon the behaviors of providers and enrollees (e.g., commercialinsurance, long-term care insurance, Medicare, Medicaid,employer-sponsored insurance).3.Life sciences companies, including pharmaceutical,biotechnology and medical device companies, which manufactureand sell diagnostic and therapeutic compounds and devices toproviders and consumers.4.Regulators at the community, state and national levels thatoversee greening efforts and establish codes of conduct forgreening practices.Key Insights in this Analysis5Carpe Diem… Greening in the health care industry is stillevolving. There is a very real opportunity to seize a leadershipposition in greening that enhances overall business advantageand improves patient care.Going “green” is a long-term commitment… Leaders ingreening understand the compelling financial, regulatory, riskmitigation, broader marketplace, and community health statusimprovement opportunities inherent in evolving their healthcare business models. Greening is a journey.Greening is not an option… Greening is a critical businessissue that is quickly becoming a requirement. Unlike otherbusiness issues, sustainability is being shaped by drivers outsideof the health care industry’s control. Multiple stakeholders –shareholders, regulators, health consumers, and others acrossthe health care system – are demanding that companiesaddress sustainability, which indicates that this issue will bewith the industry, and all industries, for years to come.Transformative Business Model Innovation is RequiredLeading companies realize that truly green business models arefundamentally different, have far-reaching implications and arenot merely incremental to today’s health care operations.Be Careful of Unintended Consequences… Well-intentionedgreening programs may lead to net negative outcomes.Thoughtful consideration and a broader lifecycle perspectiveare necessary to understand the full impact of green initiativesthroughout an organization’s value chain, as well as theirultimate impact on the patient.Ad-Hoc Will Not Do the Trick… Leading companies addressgreening through a disciplined and structured approach. Thisapproach starts with strategic alignment at the top, evaluatesthe operational implications of greening strategies, drivescollaboration across the value chain, and develops governanceand control structures to guide and measure progress.
Defining “Greening” within SustainabilityConsistent with the U.N./Brundtland Commission definition, we havedeveloped a working definition of sustainability as“The continualimprovement of business operations to ensure long-term resourceavailability through environmental, socially sensitive, and transparentperformance as it relates to health consumers, business partners, andthe community.”Figure 1 highlights major environmental, social, and economic programswithin the scope of sustainability. These are consistent with the GlobalReporting Initiative (GRI)6 Reporting Framework.Figure 1: Types of Sustainability ProgramsEnvironmental Social Economic programs programs programs• Energy • Fair trade • Accountability/• Water • Local economic transparency• Emissionsdevelopment• Corporate• Waste reduction • Working governanceconditions • Shareholder value• Recycling • Health/nutrition • Economic• Re-use• Diversity performanceumaForestryHnrightsoFibnjaecntciivalesOArggriacnuilctufroeo/dsFaircompetition• Livestock • Anti-corruptionand bribery• Packaging • Safety• Product content • Social• Biodiversity philanthropy• Otherenvironmental© 2008 Deloitte Development LLC. All rights reserved.Within the broad scope of sustainability, certain efforts focus onthe specifics of greening – programs, policies and procedures thathelp achieve and maintain an environmentally-friendly environmentthat is safe for an organization’s employees, customers, vendors andsuppliers. Many of these programs are listed in the environmentalcolumn above, but some are directly linked to social and economicprograms as well; therefore, a broad view of greening is required tohelp identify cross-industry practices.
5 Adapted from the Deloitte publication,Sustainability: Balancing Opportunity and Risk in the Consumer Products Industry, June 20076 The Global Reporting Initiative is a framework for reporting economic, environmental, and social performance. GRI aims to make sustainabilityreporting by all organizations as routine and comparable as financial reporting.4
Greening and Sustainability inHealth Care and Life Sciences
Greening and Sustainability:Lessons from Other IndustriesOrganizations which are effective in their greening efforts dedicateresources and monitor adherence to policies, procedures, programs,business practices and relationships that reflect deliberate improvementsacross each dimension. Can lessons and leading practices from topperformers in other industries be applied to health care organizations?We believe they can.Case analysis of the Top Ten leaders in the Dow Jones SustainabilityIndex (Figure 2) suggests that an organization’s effectiveness ingreening requires proactive, programmatic efforts that cut acrossevery layer of the organization.These efforts are top-down andbottom-up; they are planned and spontaneous; they are constantlyreviewed and consistently expanded.Figure 2: Industry Leaders in Sustainability EffortsTop Ten Holdingsin the Dow JonesSustainabilityLink to Sustainability EffortsIndex NorthAmerica (DJSI NA)EGleecnterricalC o.http://www.ge.com/company/citizenship/index.htmlMht ft.com/About/icrosoft Corp.Cotrpp:/o/rwatwewCi.tmizicernosshoip/US/default.mspxProcter & Gamblehttp://www.pg.com/company/our_commitment/Co.sustainability.jhtmlttp://www.chevron.com/globalissues/Chevron Corp.chorporateresponsibility/2007/Johnsoonn &http://www.jnj.com/connect/cari g/JohnsnInternationalBusinesshttp://www.ibm.com/ibm/environment/Machines Corp.Cisco Systemshttp://www.cisco.com/web/about/citizenship/index.Corp.htmlPfizer Inc.http://www.pzer.com/responsibility/Citigroup Inc.http://www.citigroup.com/citigroup/citizen/index.htmIntel Corp.shutts-pu:/s/aw.pwdwf.corporateregister.com/a10723/intel07-Source: The Dow Jones Sustainability Index North America (DJSI NA) includes companies selectedaccording to a systematic corporate sustainability assessment that identifies sustainability leaders in 58 industry sectors. The underlying index methodology accounts for general as well as industry-specificsustainability trends and evaluates corporations based on a variety of criteria including climate changestrategies, energy consumption, human resources development, knowledge management, stakeholderrelations and corporate governance.
ov/index.cfm?c=healthcare.bus healthcare biz case7 http://www.energystar.g _ _ _8 All information sourced from http://ge.ecomagination.com/site/index.html, July 20085
Each of the top-ten companies on the Dow Jones Sustainability Indexis a stalwart of industry. Each could make the case to investors thatwhile their greening efforts began as regulatory compliance measures,they have now morphed into value-generators. Specific ROI data ongreening investments is still emerging, but organizations like the EPAhave developed a model that indicates that investment in greening canincrease earnings per share;7 also, the emergence of carbon marketspresents opportunities for green organizations to sell carbon offsetcredits as a new revenue stream.Beyond EPS and ROI, however, theseorganizations share a common attribute: to them, greening is aboutachieving business value and doing the “right” things for the sake ofthe doing right things – things that are both practical for their businessand beneficial to society and the environment as a whole. Justificationis neither financial nor circumstantial. Greening is thoughtful, proactive,long-term strategic initiative premised on a commonly-shared value – companies are obligated to protect resources…to leave the planet abetter place…to provide a work environment free of environmentalhazards and waste…to replenish natural resources and improve thequality of life for the citizens of the community in which it operates.These companies are investing in their own unique roadmaps togreening and sustainability, often venturing into applications andsolutions not previously considered or, in some cases, expected bycustomers or value-chain participants. In many ways, these efforts area window into the ethos of each organization – what matters to itsleaders…what constitutes business success…how the world is a betterplace because the company pursues a greater good.No doubt, greening is good business; however, the returns are oftenlong-term and, in some cases, customers are simply unaware orinsensitive to a company’s greening efforts. It is, nonetheless, a strategicfoundation upon which many industry leaders are betting their future.Case in Point: GE’s Ecomagination8As one of the largest companies in the U.S., General Electric Co. (GE) is apioneer in sustainability, driving such initiatives as far back as the 1970s.GE illustrates the value that sustainability and greening can generatefor a corporation when they are viewed as a business opportunity, achance to increase profits. In 2005, GE launched its “Ecomagination”campaign, a vision and commitment to harness the company’s productsand services to address the world’s pressing environmental issues. Tomake Ecomagination truly sustainable from a business perspective, GE setmeasurable performance targets at the campaign’s inception; the Boardof Directors has ultimate responsibility for the initiative and its outcomes.GE based its Ecomagination strategy on several commitments:• Double the investment in green R&D by increasing researchfunding for cleaner technologies from $700 million in 2005 to$1.5 billion in 2010.• Increase revenues generated from Ecomagination products to atleast $20 billion in 2010, with more aggressive targets thereafter.• Reduce greenhouse gas (GHG) emissions and improve the energyefficiency of GE’s operations. The company committed to reduceGHG emissions one percent by 2012 and to improve energyefficiency 30 percent by the end of 2012 (all compared to 2004).
Greening and Sustainability inHealth Care and Life Sciences
GE also established several mechanisms to track the commitmentsChevron11made through its Ecomagination strategy:• Chevron developed an approach to managing its greening efforts in2001, within a broader agenda of corporate responsibility. ThroughGE uses its annual Citizenship Report, Ecomagination report, webthese efforts, the company has improved its energy efficiency bysite and advertising to keep the public informed of its initiatives. 27 percent of 1992 levels, driving improvements in greenhouse gas• GE’s Citizenship Report covers the company’s worldwideeEnmviisrsoionnms.e nAtl,s oS opcairatl  aofn td hHee galrtehe In mapgaecnt dAa sfsoers sCmheenvtr o(En SisH IaA r),e cwehnitc h sustainability initiatives, goals, results and metrics.examines the impact that projects will have on the environment,• The Public Responsibilities Committee, which is part of GE’s Boardbiodiversity in local regions, and social and health aspects of localof Directors, has ultimate oversight for all citizenship, sustainability communities, as well as the health and safety of Chevron employees.and green initiatives. The ESHIA has been mandated for all new capital projects as of 2007.• Senior GE officers are regularly involved in reviewing corporateCisco12citizenship priorities, through the Citizenship Executive AdvisoryCouncil (CEA). The CEA is comprised of the SVP and General• Cisco drives end-to-end environmental responsibility throughoutCounsel, VP of Corporate Citizenship, VP of Environmental iatsn ds uspoplldy i cn haa isno tcioa lelyn sure othnaitb laell  mpraondnuecrt. s Gciavne nb teh saot utrhcee dc,o bmupilat Programs, VP of Ecomagination, and the Executive Director of resp s nyCorporate Communications.cohuatisno uargceens d9a5  apnedr cwenotr kosf  iwtist hm iatsn upfaartctnuerrisn tgo,  rCeisdcuoc eh acsa rab ogrne feon supipnlty,  • In 2006, the company introduced a Stakeholder Review Panelenergy useand availability, water usage, availability and qualityo,t lparnd  that is tasked with overseeing the quality of the reporting in the ste mana ement and hazardous wasCitizenship Report. use and wa g te management.itiEcomagination has been so successful that in 2007, GE raised its annualC• Ingr2o00u2p,13Citigroup (Citi) launched a comprehensive process to track,Ecomagination revenue target for 2010 from $20 billion to $25 billion. report, and manage its environmental footprint performance. Takinga whole-organization approach, Citi launched a web-based globalOther Companies Striving for Greening Successenvrifroornmmaennctea ld adtaat,a abnasde t rtaoi nseerdv fe aacisl itai erse pmoasintoargye rfso r witosr lednwviirdoen tmo eunstea l eOther multi-nationals have paralleled GE in launching aggressive and tphe database to track the performance of its buildings over the course noteworthy greening and sustainability programs. Examples include: of the year. This process involved over 400 employees and 14,000roMicrosoft9pmorpee rtthies, and encompa.s sAesd ovte ro f9 t0 himillion square feet of space in  Microsoft created a Chief Environmental Strategist position to drivereduce itasn  g1lo0b0 acl oeumnitsrsiieosns b yp 1ar0 percesn ti noifti a2t0iv0e5,  lCeivtie liss  sbtyr iv2i0n1g1 to .improved environmental sustainability within its organization, withclients and through worldwide partnerships.• Tpourfcuhrthers roefd gurceee int spcoawrbeor.nInf o2o0t0pr5i,n tC,itCiitpiuarlcshoasmeadk 1es0,s4ig7n8i McaWnth ofase• Internally, Microsoft has initiated green programs such as employeecertified re lectricbus transportation, which has eliminated nearly 25,000 miles of car l g en e power, and in 2006 purchased 52,283 MWhtraffic per day for its employees and reduced the company’s overall global y.carbon footprint.Intel14• Externally, Microsoft is improving the energy utilization of its products • Intel is number one of the National Top 25 Green Power Purchaserssuch as Windows Vista and Windows Server 2008, thus extending its recognized by the EPA. It has purchased 1,302,040,000 kilowattimpact to consumers’ energy utilization and environmental footprints. hours (kWh) of green power (46 percent of its total electricity use)from biomass, geothermal, solar, and wind sources.Procter & Gamble10rocess• As part of Proctor & Gamble’s (P&G) ongoing commitment to product • Icno 2m0p0a7n,y I’sn t4e5lnshmif tHei-dk t om aetlaelagda-ftree seilimcoann utfeacchtnuorilnoggyp for the.safety, all products undergo an environmental risk assessment relatedto “fate research,” or determining where a product goes in theenvironment after use, and how much goes there. In combinationwith the fate research, P&G also examines the impact that productingredients will have on organisms in the environment. All P&Gingredients must pass the environmental risk assessment before theyare distributed to the market.
9 All information sourced from http://www.microsoft.com/environment/, August 200810 All information sourced from http://www.pg.com/company/our_commitment/environment.shtml, August 200811 All information sourced from http://www.chevron.com/globalissues/corporateresponsibility/2007/, August 200812 All information sourced from http://www.cisco.com/web/about/citizenship/environment/index.html, August 200813 All information sourced from http://www.citigroup.com/citi/environment/index.htm, August 200814 All information sourced from http://www.intel.com/intel/environment/index.htm?iid=gg_about+intel_environment, August 20086
Greening and Sustainability inHealth Care and Life Sciences
What Can Be Learned From Other Industries?Zone 3: WorkforceHave health human resource strategies beenre-examined for the impact that going green will have on theEach of the companies cited above is methodically expanding its workforce? Have new work models been considered to increase thegreening efforts. In addition, each is careful about exploiting these loefforts for their public relations value. Rather, the companies inform number of employees working from home? Are emp yees trainedon green strategies and empowered to drive green initiatives?their employees and suppliers to align to an overarching greeningstrategy that achieves both business and social value.Zone 4: Technology– Has a comprehensive assessment of theexisting technology’s energy use and footprint been completed?The efforts, successes and, in some cases, tough lessons learned by Does the organization’s equipment and technology base maximizethese industry champions and others provide a useful framework for r technolohealth care and life sciences organizations to gauge their greening eexqisutiipnmg egnte eonr  technologgiye asc? qIsu itsihtei oenns vicroonnsimdeenretadl  iamndp aaclitg onfe nd ew efforts and plans. In our view, greening requires planning, investment within an overall green strategy and business case?and execution in six impact zones (Figure 3):Zone 5: Products and Services – Does the r anization inEach of the six impact zones is distinct; together they provide a o g tegratecomprehensive framework for an organizations greening effort. greenaitniog into service delivery from facility design to front-line staff To begin, an organization should assess its greening by answering odiperns? Has a comprehensive assessment of product usagea land  some key questions:suspppoliseasl  (aen.dg .,d edvriucgess,,  bolfooced  saunpdp tliisess uaen pdr oedquuicptsm, emnet)d ibceale/ns ucrogimcpleted oot rint? Do the Board aZone 1: Governance Do the Board and senior management tmo aunnadgeersmteanntd  ktnhoe wo rhgoawni zcaotinosnusm fer wipllingness to pay mightn db es enior adequately support and appropriately evaluate the organization’s inignr epelancine ga nefdf ourntsd?e Irss tao ocod mthprroeuhgehnsoiuvte  tbhottorgma-nuipz,a ttioopn-?d oWwhna ts tsrtaetpesg y ismerpviaccetse?d  Hwahs etnh et hoer gcaosntisz aotfi ognr eaesnsienssge adr et hree bercatnedd  equpirtyo douf cat s garened n e o healing environment?are being taken to address increasing patient, shareholder and otherstakeholder concerns related to sustainability?Zone 6: Supply Chain– Does senior management know theZone 2: Workplace  How h of the organizations energy is green magnitude of potential for a green shift in tahniez aproducts and services muc supplied to the organization? Does theenergy? Do the Board and senior management know the carbon to drive supplier improvements to its supoprlgy chaitni ofno ohtapvrien ta? s trategy footprint of the organization throughout the life cycles of its buildings, D oduct standardization committees across the clinical andvehicles and equipment? Are green standards such as energy and noon -pcrlinical domains have clear evaluation criteria that consider water use and re-capture, renewable materials and maximizing natural nd nt arm of thelight in place to optimize facility designs?porrogdaunicztast igorne eenm ipmopwaecrte?d I st ot hder isvoe ugrcrienegn  adeci spirooncsu?remeGreening across all six zones requires bottom-up, top-down,enterprise-wide decisions with an eye toward doing right thingsthe right way the first time.
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Figure 3: Greening Impact ZonesEffectively greening an organization requires integrated, enterprise-wide implementation of the policies, procedures, programs, services, structures, operating models and leadership in the six impact zones, across an organization’s value chain.
GovernanceWorkplaceWorkforceTechProdnudctsSCuhppilnynology a aServices
Wholly Sustainable Enterprise – a company that generates growth, profitability and value by applying principles of sustainability across the entire base of activity (Deloitte definition)
© 2008 Deloitte Development LLC. All rights reserved.