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It’s time for ESG to incorporate health

August 25, 2021, 8:42 PM UTC
Companies following ESG principles should ensure they are prioritizing customers’ and employees’ health, writes Nigel Wilson.
Ben Hasty—MediaNews Group/Reading Eagle/Getty Images

ESG principles—environmental, social, and governance—are taking hold as an economic rationale for investment. I suggest that the next frontier for that dual mandate is health. Literally, I mean business doing health to drive better economic and social outcomes. 

Even pre-pandemic, the costs of poor health were huge, both on human life and productivity. Angus Deaton and Anne Case’s Deaths of Despair highlighted a widening gap in life expectancies between rich and poor, with poorer people spending more of their lives vulnerable to “Big D” conditions: diabetes, depression, and dementia. The coronavirus pandemic has demonstrated beyond doubt that economic performance depends on overall population health. The challenge now is to narrow health inequalities.

For most companies, public health lags behind the climate component of ESG initiatives. But it’s beginning to change. As they grapple to improve the “S” of ESG, I posit that “H,” for health, should be added to the acronym. As companies can influence the environment with their choices, products, and outreach, so too can they influence health outcomes.

This starts with businesses recognizing the importance of their own employees’ health. They can improve this by offering healthier cafeteria food, gym memberships, or well-being services. Companies are better off when they prevent physical and mental health issues from occurring, rather than controlling the costs of absenteeism and health care later on. Encouragingly, recent research suggests that companies are becoming aware of this at the highest levels of leadership

Companies should also measure the impact of their goods or services on customers’ health. Organizations should self-regulate before government regulators step in with product bans or punitive taxes. They should rethink how they source their materials, determining whether any partners in their supply chains are involved in activities that might harm consumers’ health. 

For furniture makers, this could mean finding alternatives to the toxic chemicals used in their products. Processed food companies could redesign their products to reverse gut bacteria imbalances common in Western diets. For alcohol distributors, this could involve offering barcodes for consumers to scan to learn about the health dangers of alcohol overuse. 

Organizations should look outside the box for ways to improve health. Companies can even incorporate employees into the process, crowdsourcing solutions through a digitized suggestion box. And large entities should consider appointing chief medical officers to reinforce their emphasis on consumer health, as Hy-Vee and Dollar General have done.

As with climate, ESHG investing is not only about avoiding risks, but also the upside of investing in new technologies. Many health food startups are gaining traction with savvy investors and disrupting massive CPG companies. Early investment VC funds can play an important role, nurturing startups involved in the care and well-being spaces.

The concept of ESHG is gaining momentum. The health challenge is just as urgent as the environmental crisis—and governments can only do so much. When the real weight of investors’ money is deployed to solve a social problem, meaningful change can happen rapidly, and that could happen with health.

Nigel Wilson is group chief executive of Legal & General.

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