ESG (Environmental Social & Governance) and Care Home Sector Impact

Background

Sophie leads on Environmental Social Governance (ESG) at Albert Goodman and is passionate about supporting care homes on their sustainability journey.

Sophie comments “The time to act is now. Even if others in your sector are not yet making ESG changes, there is merit in being the first mover to gain competitive advantage or to get ahead of the changes which are inevitably coming down the line. We can offer a host of support from carbon footprint calculating, Streamlined Energy and Carbon Reporting compliance and review of sustainability strategy against the UN Sustainability Goals or your own care home aspirations.”

Enhance your care home business with ESG

ESG and business performance are very often linked. This is no accident. Care home businesses who are thinking about how they treat the environment, their people and their residents are creating long term relationships and value which repays through growth.

What is ESG?

An ESG approach to a care home business gets care home owners engaged with the business itself, what it stands for, its people and stakeholders on a 360 degree basis. The term covers:

Environment – thinking about how the care home impacts the world that we live in, its use of resources and the resulting carbon footprint. This then links through to risk, by considering the way in which the care home will operate if global warming is not halted and we continue to see extreme weathers, temperatures, periods of draught and rising water levels. How will we keep the care home and the residents at the right temperature?

When a care home is seeking to embrace change, such as energy efficiency, sustainable materials and waste management innovation, all become factors in a changing care home environment.

Social – thinking about how the care home provider treats their people, residents, stakeholders and those within their local communities. What their carers and all support staff have to say about working at the care home creates an impression of the care home business itself which others will receive. Care providers want the entire team to be their care home ambassadors to enhance their reputation which in turn enables the care home to grow organically through word of mouth and referral.

Care homes are ambassadors for promoting diversity and inclusion whether this is within their teams or their service offering such as menu diversity catering for different faiths and needs.

A well led care provision is certain to have the well-being of all at the heart of their person-centred care.

Governance – a care home provider will be thinking about how to get engagement with care home stakeholders, holding themselves to account on the care home performance, setting targets and policies to keep the care home business safe and growing with the ability to track and monitor progress against these targets and policies.

In short ESG influences the care provision’s reputation, financial longevity and sustainability.  Increasingly ESG is becoming a factor when addressing the financing of a care home, whether through acquisition, refurbishment or refinancing of an existing commercial loan.

Why does ESG matter in a care home environment?

ESG is key to all stakeholders attached to the care home.  It is becoming a frequently asked question when interviewing new people to join care teams, when tendering for new care home business opportunities and when looking to engage with new suppliers including providers of finance.  Running a care home in a way which is considerate to all by thinking about the “triple bottom line” of People, Planet and Profits is becoming increasingly ethical.

Some examples of why sustainability may matter to your care home stakeholders are as follows:

ESG Regulation

Although ESG regulation is increasing at the larger end of the market making it mandatory for large entities to measure, track and report on their environmental performance, there is not at the moment the same pressure on smaller businesses.

However, if you have large organisations in your care home supply chain you may not escape the trickle down effect as there is already increased pressure for these large businesses to look at their scope 3 emissions and challenge supply chains on ESG.

One particular regulation which is worthy of note is the Streamlined energy and carbon reporting regulations (SECR) which may impact large care home groups. These regulations require care homes meeting the companies act large entity limits to report on their carbon footprint from the energy consumed in the running of the care homes, the miles travelled by any care home vehicles and through the business mileage of care home workers. This information is then required to be disclosed within the care home’s financial statements. 

Although just a snap shot, all of the above are strengthening the need for ESG consideration for all care homes. This is creating pressure for ESG to be entwined through all of the care home’s business strategy and planning such that it is simply what you do as opposed to being an after thought or bolt on.

Seven Steps to ESG Sustainability

So how can you get your care home business to a position whereby you have an ESG first approach? We would advocate following a seven step process to get your business ESG ready.

1.       Engagement from the top

Before you can look to embed ESG within your care home business it is important that you have engagement from the very top and that you are truly committed to building ESG in to your care home business strategy.

Unless the leaders of the care home are engaged in this then success will not be achieved. ESG can not be delegated to facilities or a sub committee of people without there being a clear commitment from the top to engage with ESG and make change to the care home business.

It is likely that an ESG project will require changes to the way in which the care home is run, to policies, processes and systems so care home owners need to be very clear what the level of commitment is and what is to be achieved. For example, it is no use committing to become net zero if you are looking to purchase a new care home and have not considered the EPC rating of the building, or how you may get clean energy or whether there is the possibility for electric charge points for vehicles or solar panels on the roof.

2.       Where to start?

Once you have engagement from the leadership of the care home you then need to understand your starting point. Where are we today? You cannot put together a journey to your end destination if you do not know from where you are starting this journey. This initial discovery could be engaging in a carbon foot print for the care home from an environment and “green” perspective. Alternatively it could be a more holistic ESG approach such as completing an ESG health check and comparing where you are against best practice goals and parameters such as the UN Development Goals.

3.       What matters?

Once you have a clear understanding of your starting position you can then start to think about what matters? This should then be your focus. The area of ESG is very wide so you should seek to see what is material to the care home.

• What do your people and stakeholders care about?
• What are your biggest impacts on the environment?
• How could you make the biggest difference to the local community and your residents?

Answering these questions can ensure that the care home focuses on what will add the most value to the business and is more likely to reward the care home stakeholders.

4.       Engage with stakeholders

If you truly want to make a difference to your stakeholders ask them for their feedback around ESG.  Engaging with your residents, your carers, the local community, your lenders and all other stakeholders will give you clarity around their concerns and will help them to feel connected to your business.  It will also bring to their attention the ESG journey that the care home has embarked on and is likely to generate PR interest.

5.       Plan ahead

Once you have captured, where you are, what matters and have the involvement of your stakeholders you can then start to set some objectives for the care home and time frames within which you feel that these can be achieved.

In doing this you need to ensure that the objectives are SMART:

An example of an objective might be to switch to a renewable energy tariff by the end of the year. It could be to reduce the use of single use plastic by the care home kitchen by 25% over the year, or perhaps measure the current carbon footprint based on last year’s data within the next 3 months.  What innovative PPE is available in accordance with IPC regulation?

6.      Tell people what you are doing

Communication is the next step. If your care home is doing something great, why make it a best kept secret? Let everyone know! Once you have engaged with stakeholders and they have given up their time to share their thoughts you need to let them know what impact they have had on the care home. This will not only keep their interest but by sharing good news stories it will further enhance their engagement with what you are doing and promote your care home.

Reporting of carbon footprints is mandatory for large organisations who are subject to Streamlined energy and carbon reporting regulations (SECR), however, if care businesses are already preparing this information then why not share this information and let others know that you have started on your carbon reduction journey.

7.       Hold people to account / incentivise

Once the care home’s ESG plan is set out you need to make sure that people know that you are actually required to deliver on this! The care home business should consider how this will be done.

For example:

• Is it part of the care home strategic objectives / targets for the year to take the actions that have been agreed and drive them through?
• Are sustainability responsibilities and targets part of an updated job description for leaders of the care home?
• Are those objectives asked about and challenged in their reviews?
• Is the ESG plan discussed at care home board meetings?

Many questions but without clarity of these points the ESG plan will not be delivered! The ESG plan really needs to be kept live and be fully integrated in to the way in which the care home operates such that it is part of the organisational culture, systems and processes.

Support for the Seven Steps to Sustainability

Care home owners will naturally be very busy running their care homes and may wonder how on earth they will find the time to work through all of the seven steps without support. It is important that each step is progressed properly, and that time is dedicated to it.

You will be able to find professional advisors who will be able to support you through the steps above and offer their services for the carbon foot print exercise, ESG Health checks and the communication of this information within your financial statements.

Although it is acknowledged this is time consuming the start is to have the initial discussion around what is your appetite for ESG? Add it to your next board meeting agenda and see where the question takes you!