Welcome to the latest edition of Gilmartin Group’s ESG newsletter. With a special focus on the healthcare sector, this newsletter sheds light on the latest trends in the rapidly evolving ESG space, covering developments with companies, investors, regulators, and policymakers.
In The Spotlight
A recent report by Bain & Company revealed a growing disconnect between corporate priorities and consumer concerns with ESG issues.
While sustainability is becoming less of a focus for CEOs, who are now prioritizing artificial intelligence, economic growth, inflation, and geopolitical instability in their strategic planning, consumers are increasingly worried about climate change. The study found that 60% of consumers report heightened concern about climate issues compared to two years ago, primarily due to their firsthand experiences with extreme weather events.
This shift in consumer sentiment comes at a time when chief executives are deprioritizing sustainability initiatives in favor of other pressing business challenges. Companies are recalibrating their environmental, social, and governance ambitions, recognizing the challenges and costs associated with decarbonization. An analysis by WSJ Pro found that “company boards are mentioning sustainability in their financial reports almost as much as ever, but are talking about it less in earnings calls and marketing materials”.
However, according to Bain, customer and business to business demand for sustainable practices remains strong, with 36% of businesses willing to change suppliers based on sustainability performance.
A Note on ESG Ratings
Last month, CDP released a report tracking the progress of ESG ratings and data products regulations.
According to CDP, there has been a surge in the usage of ESG ratings, with 94% of investors relying on them at least monthly. However, despite their widespread adoption, ESG ratings continue to face scrutiny regarding their reliability and consistency. In this report, CDP monitored these developments and offered guidance to policymakers on how to maximize impact while preventing fragmentation.
Since the release of the International Organization of Securities Commission’s (IOSCO) 2021 Report, which urged financial regulators to consider enhanced oversight and conflicts of interest protocols over ESG ratings, several jurisdictions have developed regulatory frameworks or codes of conduct to govern ESG rating providers. New regulations in Japan, Hong Kong, Singapore, the UK, India, and the EU align with IOSCO’s guidelines but vary in execution, particularly in defining ESG ratings and data products.
CDP stresses that interoperability across policy initiatives is key, as these varying definitions could lead to regulatory fragmentation. As more nations develop policies, and some jurisdictions transition from voluntary codes to formal regulation, aligning policies globally will be essential in increasing transparency and reducing compliance costs.
The Healthcare View
Medical Product Outsourcing (MPO), a publication covering the growing trends of medical device outsource manufacturing, recently released several best practices and pathways to improved medical device sustainability.
The best practices are heavily focused on product design and lifecycle management. When designing medical device products, companies should try to prioritize methods that utilize minimal materials and resources, considering size, and getting rid of unnecessary components. This will be made easier as 3D printer technology, nanotechnology, and artificial intelligence evolves.
Sustainable procurement should also be a focus area, and companies should strive to partner with vendors that provide more biodegradable, recyclable, and biocompatible materials, such as bioplastics like bio-PET, bio-based nylons, or materials such as glass and stainless steel, which are more easily reusable compared to traditional plastics. At the same time, medical device companies should focus on ecofriendly packaging by simplifying packaging design and eliminating plastics and petroleum-based foam, leading to both waste and cost reductions. Manufacturers can also adopt a closed-loop system to minimize waste at the end of medical device life cycles. This could include product take-back programs where products are returned and taken apart for remanufacturing so they can be refurbished.
In The Weeds
In August, Wells Fargo released its Sustainability and Governance Report, highlighting the bank’s sustainability strategy and commitment to ESG.
In the report, Wells Fargo pledged to allocate $500 billion towards sustainable finance initiatives by 2030. The bank plans to achieve carbon neutrality across its entire value chain, including direct operations, purchased energy, and financed emissions by 2050. Wells Fargo is also actively supporting its clients’ transitions to more sustainable operations by providing financial support to adopt green technology. Chief Executive Officer Charlie Scharf stated, “We are integrating climate considerations into our risk management programs and highlighting initiatives that support a low-carbon economy”.
Scharf also shed light on Wells Fargo’s general approach to ESG:
“We continue to be balanced in our approach to environmental, social, and governance (ESG) issues, and we recognize that consumers and businesses want to do business with a company that has a strong reputation. A strong reputation is achieved not just from strong financial performance, but from actively supporting employees, customers, and communities – especially those most in need.”
To learn more about how Gilmartin strategically partners with our clients, please contact our team today.
Authored by: Tamsin Stringer, ESG, Gilmartin Group & Patrick Smith, ESG, Gilmartin Group