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Appreciating the Value of Sustainability in Health Care

Appreciating-the-Value-of-Sustainability-in-Health-Care

“Hospitals and care systems that pursue sustainability initiatives find benefits in multiple areas,” noted a 2014 report from the American Hospital Association and the Health Research and Educational Trust, “Environmental Sustainability in Hospitals: The Value of Efficiency.”

According to the study, “Environmental sustainability is also good business, as it helps lower operational costs and allows hospitals to direct more resources to patient care.” Among examples cited in the report are Memorial Hermann Health System saving $47 million through energy improvements over five years; Kaiser Permanente saving $4 million annually by simply buying energy-efficient computers; and the University of Arkansas for Medical Sciences making enough savings from just one project that it could “create 60 new beds, remodel five operating suites, build out a floor of a cancer institute, and buy seven acres of land.”

Other industries have demonstrated the financial benefits of sustainability. The Project ROI report, co-sponsored by Verizon and the Campbell Soup Co., concluded, “Corporate responsibility practices have great potential to deliver financial returns on investment ROI as well as related business and competitive benefits.” The report quantifies that 4% to 6% market value increases are possible, with a 4% reduction in systematic risk. The benefit to shareholders over 15 years can amount to $1.28 billion, with a 2% to 10% reduction in share price volatility.

In terms of marketing, sales and brand reputation, corporate responsibility commitments – including Environmentally Preferable Purchasing (EPP) — can lead to a 20% revenue increase, the Project ROI report noted. Brand and reputation improvements can add 11% to the company’s value.

Case studies abound. The hotel industry is also seeing significant payoffs to taking a green path — in both brand building and revenue. According to Sustainable Brands, “Four years after launching its corporate responsibility strategy, Travel with Purpose, Hilton Worldwide said its investments in global partnerships and sustainability programs is not only driving positive social impact, but also supporting long-term business success.”

Again, the results are tangible. Hilton has reduced its energy use by 14.5% since 2009. It also slashed carbon dioxide production by 20.9%, waste by 27.6% and water consumption by 14.1%. Total savings amount to more than $550 million globally.

Hilton is one of the companies that, as Harvard Business Review described it, are reshaping products and markets, and redefining productivity in the value chain. “A number of companies known for their hard-nosed approach to business — including GE, Walmart, Nestlé, Johnson & Johnson and Unilever — have already embarked on important initiatives in these areas,” the magazine reported.

Military Out Front

The U.S. military, too, has saved money and lives by focusing on sustainability.

“There’s a synergy between the military mission and the search for saving money and reducing energy demand,” said Sarah E. Light, a Wharton professor of legal studies and business ethics. Speaking at the Wharton conference, “Sustainability & Health Care: Creating & Capturing Value,” sponsored by Johnson & Johnson and Wharton’s Initiative for Environmental Leadership (IGEL), she pointed out that leaders of the nation’s military have concluded, “Global warming is a threat magnifier and energy efficiency is a force multiplier.”

When the services are measured together, the military is the world’s largest energy user, and also the biggest landlord — in control of 2.2 billion square feet of building space and 28 million acres. By 2025, each branch will need a gigawatt of electric power generation. The environmental impact could be quite large, but Congress has given the Department of Defense authority to enter into 30-year power purchase agreements and create a forward-thinking Operational Energy office.

In 2012, an Operational Energy Strategy report noted, “Today’s military missions require large and growing amounts of energy with supply lines that can be costly, vulnerable to disruption, and a burden on Warfighters. The Department needs to improve its ability to measure operational energy consumption, reduce demand and increase the efficiency of energy use to enhance combat effectiveness.” Today, the military has become a large-scale early adopter of renewable energy. “They’re building enormous solar arrays, geothermal, biomass and wind,” Light said. “At Fort Bliss, they’re using electric vehicles for trips around the base.”

If the private sector has demonstrated the financial advantages of sustainability, what Light called “the military-environmental complex,” it shows that, “mission-driven institutions can reframe to address climate change.”

Slow Progress for Health Care

Eric Olson, senior vice president at Business for Social Responsibility, said the simple fact that savings are available, “doesn’t guarantee anything. … Energy savings are important to the P&L of a company, but the opportunity may never get to the chief financial officer if the electricity bills report up through a different chain than the person reporting on electricity usage. They just continue to pay more.”

For this reason, it’s important that the value of sustainability be understood from the executive suite to the ground level, and that is, indeed, finally happening. “We’ve done a good job of making the business case for sustainability,” said Gary Cohen, president and co-founder of both Health Care Without Harm and Practice Greenhealth. “And the challenge of a warming planet changes everything. The sense of responsibility has trickled up to the C-suite. It’s a total mind shift.”

At Inova Health System, leadership from the top has driven an extraordinary level of attention to sustainability. In fact, measuring energy efficiency has become such a priority that when the organization found the building sub-metering options in the marketplace to be inadequate, it built its own systems. “The product didn’t exist in the marketplace,” said Seema Wadhwa, assistant vice president for sustainability and wellness at Inova. “Instead, we built that capacity ourselves and are now rolling it out live.”

Others in health care — hospitals, clinics, suppliers and group purchasing organizations — are following suit, as a growing number learn the value of sustainability. A 2012 Commonwealth Fund study looked at hospitals that are reducing energy use and waste, and achieving efficiencies in the operating room. Its striking conclusion: “Savings achievable through these interventions could exceed $5.4 billion over five years and $15 billion over 10 years.”

The report concluded with the striking recommendation “that all hospitals adopt such programs and, in cases where capital investments could be financially burdensome, that public funds be used to provide loans or grants, particularly to safety-net hospitals.”

In the four years since that report, the importance of sustainability has begun to take root all along the health care supply chain. But the progress has been slow, because the vast percentage of purchasing decisions are still being made with the environment as a secondary consideration.

“We have to normalize these strategies, so they’re no longer the exception,” said Cohen. “Because of the savings potential and our growing consciousness about the global environmental crisis, we need to make it go a lot faster.”

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