Can ESG Handle Adding an H?

The concept of corporate sustainability has evolved over time beyond just environmental concerns such as carbon emissions and pollution. It now incorporates social and governance issues ­– the “S” and “G” to go with the “E” of what is commonly known as ESG. But if there’s room for three pillars of sustainability, why not a fourth?

Public health advocates would like to know. They’re pushing for companies to incorporate protecting and promoting health as a metric in their ESG frameworks. Think of it as “ESG+H.”

To be fair, taking an active role in supporting employee well-being isn’t new. Many companies’ human resources departments run programs promoting healthy lifestyles as a matter of course. “The Office” even lampooned the trend in a storyline involving a weight-loss challenge among the branches of fictional paper company Dunder Mifflin. Advocates now want to see employers strengthen those programs, calling for more rigorous health and wellness strategies.

Naturally, promoting health and wellness can help employers lower health care costs, although the link between health and wellness strategies and measurable reductions in health care expenditures might not show up until further down the road. The business case goes a step further: Healthier employees are more effective at their jobs, which strengthens the bottom line.

For example, according to consulting firm McKinsey & Company, premature deaths and lost productivity tied to diseases such as diabetes and mental disorders cost the U.S. economy in excess of $3 trillion per year. Other benefits of prioritizing health include better on-the-job productivity, fewer absences and deeper employee loyalty. Garnering a reputation for caring about the health of your employees doesn’t hurt recruiting efforts, either.

As with many strategic decisions of publicly traded companies, major investors probably represent the best hope for ESG+H going mainstream. In fact, much like ESG, a growing body of evidence suggests that businesses committed to health and wellness outperform their competitors. For instance, a 2021 article published in the Journal of Occupational and Environmental Medicine showed that the returns from companies recognized for their commitment to employee wellness beat the performance of the broader market by 2% per year in a 10-year period.

And what better time to get serious about employee health than during a global pandemic? The COVID-19 crisis has shined a spotlight on concerns about public health and inequities in health care delivery for going on three years now. Meanwhile, the pandemic has played a key role in the Great Resignation of workers re-evaluating everything about their careers – from where and how they work to changing fields altogether.

From that perspective, ESG+H sounds like an idea whose time has come. However, it’s worth noting that while ESG programs feel ubiquitous in corporate America today, acceptance came slowly over time. Until workers and investors make health and wellness a corporate accountability priority, don’t count on them getting much traction in C-suites.