On March 17, 2022, the Gilmartin ESG team hosted a webinar with a panel of leaders from three healthcare companies that have integrated ESG into their decision-making and reporting processes. If you were unable to attend, you can watch a replay of the conversation. Matt Berner, Managing Director of ESG Advisory at Gilmartin Group, and Patrick Smith, ESG Analyst at Gilmartin Group, interviewed Angie Wirick, CFO at AtriCure; Sara Scheuerlein, Associate General Counsel at Outset Medical; and Nathan Sanfaçon, Sr. Specialist, Corporate Social Responsibility at Illumina. The panelists are deeply involved in ESG programs and reporting processes at their companies, and their backgrounds as finance, legal, and CSR experts, respectively, enabled them to bring diverse perspectives to the discussion.
The conversation centered around a number of key topics for healthcare companies to consider during the ESG reporting process, such as issue prioritization, data collection, reporting standards and best practices, and overall ESG management and strategic oversight. We recommend watching the full webinar to capture all the insights the panel shared, but here are a few central points we wanted to highlight.
What made you conclude that now was the time to start working on your first ESG reports?
“We noticed that ESG was coming up more frequently in the conversations we were having with our shareholders, and investors increasingly wanted to know how we were managing and addressing ESG issues,” said Angie Wirick, CFO at AtriCure. “That was really an important consideration for us, but equally as important, we have been committed to our patients for over two decades and were really excited about the opportunity to tell our story through the ESG report.”
Building off Angie’s comments, Sara Scheuerlein from Outset said that “there were several factors that drove the timing of our report.” After Outset went public in the fall of 2020, Sara noted that “investors were already reaching out to us for ESG information. We saw launching our first ESG report as a way to engage directly with investors on topics they wanted to see enhanced transparency around.” Sara also remarked that the report was an opportunity to highlight sustainability efforts the company already had underway, including the development of a new manufacturing site in Mexico where environmental sustainability was a key focus.
How did you identify and prioritize the ESG issues you addressed in your ESG reports?
AtriCure’s ESG report was “informed by multiple different frameworks that are used to evaluate corporate ESG performance, but was ultimately aligned with the Sustainability Accounting Standards Board (SASB) standards for the Medical Equipment & Supplies industry,” said Angie. AtriCure also conducted an in-depth review of the company’s scores with the major ESG ratings firms to identify issues with the highest impact on each score, although, as Angie stated, improving AtriCure’s ESG scores was not the primary consideration in preparing the ESG report. Noting that Outset took a similar approach to prioritizing ESG issues, Sara said that Outset’s report “included what we believed would be most impactful and material not only for our investors, but also for our other stakeholders—customers, patients, and employees.”
Since Illumina has gone through the ESG issue prioritization process several times, Nathan said the company has learned that the process is “truly never ending,” adding that “stakeholders’ perceptions and interests change rapidly, and 2021 and 2022 were great examples of that.” Nathan also said that “different stakeholders are going to be concerned with different issues, and they will have different perceptions about how you’re performing against those issues.” When asked about the ESG issues that Illumina believes are the most important in the healthcare industry, Nathan observed, “Something that always rises to the top for us is patient health. As companies focused on health, we need to keep humanity at the center of what we’re doing. Another piece of that is ensuring equitable access to our technology. The final piece is what we call ‘integrity,’ which means operating ethically, responsibly, building trust with key stakeholders, and being transparent to help foster that trust.”
How did you validate the data and manage the information that you disclosed in your ESG reports?
At AtriCure, Angie said the company “followed a process that’s very similar to how we tie out our financials for quarterly and annual SEC filings.” Sara noted that Outset also followed a process that was “not unlike what we do for our SEC filings” and that she paid careful attention to “consistency between the disclosures in our ESG report and the disclosures in our SEC filings.” Angie added that she “was very fortunate to partner with our Director of External Reporting, who was a co-lead on our ESG efforts. As a key contributor to this process, she paid very close attention throughout the drafting process and data collection as to what data was going into the report, the sources, and then the backup that we used to substantiate everything.” Angie also mentioned that data management was “an area where getting into the weeds myself was very beneficial. As we pieced together some of the SASB disclosure topics for the first time, it was a really great crash course for us in ESG.”
As Nathan discussed, Illumina received Limited Assurance from a third party to verify some of the data in their report, such as GHG emissions data. Nathan said that “to have external validation and assurance really helps build trust in our data” and that receiving Limited Assurance helped Illumina “identify ways to improve our processes and shore up the accuracy of our data. It also helped define the boundary and scope for our data collection. Similar to our financial reporting processes, we want to make sure that our ESG data is as robust as our financials.”
What feedback have you received since publishing your ESG reports?
According to Sara, the reaction to Outset’s inaugural ESG report was very positive, especially because the company “is among a fairly small group of companies, in our industry at least, that have issued a report so close on the heels of becoming a public company. The fact that we prioritized getting something out there so quickly, and that it was comprehensive and thoughtful as opposed to checking the boxes, is being viewed as a really solid first step.” Angie remarked that AtriCure’s investors have said the report was “a great step for us at this stage of our lifecycle.” Angie was also “incredibly surprised by the number of employees who read the report and rallied around it, and then provided feedback as well.”
As Illumina nears the publication of their third ESG report, Nathan said that “expectations have definitely grown for us. After our first report, we heard ‘good job’ and ‘great to set this baseline,’ but then we heard ‘ok, what’s coming next?’ For example, we started reporting in-line with the Global Reporting Initiative (GRI) framework for the first report, but we had a lot of interest in SASB and Task Force on Climate-Related Financial Disclosures (TCFD) disclosures, which informed our next report. Nathan also noticed that, for Illumina, “the conversation has shifted to getting better at how we measure our social impact at a larger scale and how we can ensure we are increasing access and driving innovation and affordability.
At Gilmartin Group, our dedicated ESG team has extensive working knowledge of industry-leading ESG evaluation criteria. Recognizing that the ESG landscape is evolving rapidly, we frequently release relevant news, updates, and guidance to assist companies who want to take the next step on their ESG journeys. Contact our team today for guidance surrounding your ESG journey.
Patrick Smith, Analyst
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