How ESG fortifies the supply chain

The transformation happening within the supply chain is related to the broader push for health systems to understand and follow ESG principles.

The environmental and social pillars of ESG are heavily influenced by healthcare’s supply chain and the decisions that healthcare leaders make. The supply chain makes up the most significant percent of healthcare’s carbon footprint – 71% – and therefore, much can be done to improve environmental sustainability.

Additionally, as mission-based organizations that typically act as economic drivers in their communities, hospitals and health systems are becoming more inclined to allocate portions of their supply chain budget to support locally owned vendors as well as minority and womenowned businesses. Other socially responsible considerations are also emerging from providers, such as avoiding purchasing from areas where forced labor occurs.

Supply chain’s important role in ESG is recognized by leadership at AdventHealth. The system is currently standing up a systemwide ESG strategy focused on sustainability headed by Farabaugh, who leads the supply chain for the system, and the chief investment officer.

“Supply chain and (the investment office) are two big stakeholders that are needed to be able to get movement on any (ESG) goals that are set,” Farabaugh said.

Taking an environmental approach to supply chain

Despite being in the early stages, there are effective actions hospitals and health systems can take to reduce the supply chain’s environmental impact. The first is directing revenue cycle teams to assess the scope of products they purchase and their carbon impacts. GPOs can be partners in this effort because they are usually already requesting this information from suppliers, said Joe Bialowitz, director at Guidehouse, a consultancy.

Indeed, Premier does ask suppliers for environmental impact information. Hargraves said the quality of the information from suppliers continues to improve.

For suppliers, the data collection component can be strenuous. Medline, which is both a distributor and manufacturer of healthcare supplies, advocates for standardization around data collection of sustainability metrics.

“There’s an opportunity for manufacturers, distributors and healthcare systems to come together and have a lot of dialogue around where the need is for transparency so that we can all rally around the same topics,” said Francesca Olivier, vice president of ESG at Medline.

Once a provider has a sense of the carbon impact from their supply chain, the next step is to focus on areas with the greatest impact. “Your carbon footprint in your supply chain will be concentrated in a few product

areas,” said Britt Harter, partner at Guidehouse.

Purchasing products from vendors with sustainability as a central component is key as well. At CommonSpirit Health, sustainability of the supply chain begins in the initial conversations with prospective vendors. CommonSpirit is beginning to ask for the supplier’s carbon disclosure rating, also known as the CDP score, and its sciencebased carbon goals, said Kelly Paul, director of training, education and communications at CommonSpirit.

CommonSpirit’s commitment to sustainability is anchored by the C-suite and board, but frontline caregivers are encouraged to be involved in the work as well.

One memorable example of frontline involvement comes from early in the COVID-19 pandemic when PPE shortages were common. A surgeon based in CommonSpirit’s Arizona market came up with the idea to design reusable isolation gowns, and the system embraced the idea, partnering with a Phoenixbased manufacturer. About 200,000 gowns were ultimately produced, and they were reused 125 times or more. Paul said the effort resulted in about $600,000 in cost savings for the system.

While the financial benefit is compelling, to keep sustainability of the supply chain a priority, CommonSpirit also makes it a point to connect the work back to its mission.

“When we talk about sustainability, we focus on how it is impacting the health of our patients, the health of our community and the health of our planet — it’s all interconnected,” said Sister Mary Ellen Leciejewski, system vice president for environmental sustainability for CommonSpirit.

Working with diverse suppliers

While some hospitals and hospitals have years-old programs in place to purchase from diverse suppliers, 2020 was a turning point in elevating its importance.

The social justice movements sparked by the death of George Floyd inspired the New York-based Mount Sinai Health System to take a more intentional approach to their supplier diversity efforts to reflect the community it serves.

Mount Sinai re-implemented a formal supplier diversity program in January 2021. Since then, Patrice Gordon-Poyser, supplier diversity manager for Mount Sinai Health System, has been meeting with departments within Mount Sinai on a quarterly basis to discuss their supplier diversity spend in detail. The meetings also uncover opportunities to convert to diverse suppliers. A major part of GordonPoyser’s role is to identify contracts that are up for renewal and find diverse alternatives.

In regards to specific strategies for identifying diverse suppliers, Gordon-Poyser leverages several external tools, including from the New York State government, which certifies diversity-owned businesses. She said most states have similar programs healthcare leaders can leverage to identify diverse suppliers, and often GPOs have programs that can aid in the process.

The fact that seeking out diverse suppliers is Gordon-Poyser’s main job at Mount Sinai goes a long way toward ensuring it remains a stable priority. “Having a dedicated resource is key to having a successful program,” GordonPoyser said.

Ultimately, Mount Sinai’s longterm goal is to have its supplier diversity spend on par with the healthcare industry standard. “We are ambitious in our pursuits,” she said.

This kind of ambition is key to tackling such a large-scale challenge, as is committed collaboration by various stakeholders. GPOs have an important role to play. In addition to having about 400 contracts with diverse suppliers, Premier offers resources and tools to these businesses to help them scale and invest in supply development.

By activating and tapping into the resources available for supply diversification, health systems will see that ambitious goals are within reach.

“Having a dedicated resource is key to having a successful (supplier diversity) program.”

— Patrice Gordon-Poyser, Supplier Diversity Manager, Mount Sinai Health System