Why climate resilience is key to building the health care organization of the future

Considering the impact on human health of these increasingly common extreme environmental events and conditions, many stakeholders across the health care ecosystem are finally beginning to feel a broad sense of urgency. The medical research community now fully recognizes the human health impacts of climate change, as more than 200 medical journals released an unprecedented joint statement last September citing it as the “greatest threat” to global public health.¹⁰ The issue has become a priority for the US government, and human health played a markedly more central role in the dialogues of the United Nations’ COP26 global climate conference. And, as part of the broader portfolio of environmental, social, and governance (ESG) priorities, companies across the sector are increasingly focused on reducing their operational footprint, even beginning to address health impacts of climate change.

At Intermountain Healthcare, for example, climate change has become an organizational priority, driving investments in renewable energy, decarbonization, and energy efficiency. And even for health plan organizations, with a smaller direct emissions footprint than their provider and life sciences counterparts, climate and sustainability initiatives have become leadership priorities. Centene, for example, has increasingly prioritized environmental and climate issues over the past few years with a focus not just on emissions reduction but the impact of environmental factors on the health of their members. Health care ESG coalition groups have also emerged as important players in recent years as organizations have begun to tackle climate-related challenges head on.

Organizations such as Bon Secours Mercy Health have joined health care ESG coalition groups such as the nationwide Healthcare Anchor Network to collaborate across organizations on social determinants of health, including those which are affected by environmental issues.

At the same time, health care is rapidly shifting its focus from a reactive treatment of diseases and illnesses to a model that equitably and proactively promotes health and wellness across populations. This change will likely continue to accelerate as data and technology, deployed in a decentralized fashion directly with consumers outside of traditional care settings, allow us to have “always-on” measurements of health, better understand the underlying causal mechanisms of health and wellness, and predict disease and illness. This shift alone portends dramatic changes for players across the health care industry, demanding new business models from both incumbents and disruptors. However, climate change and its related impacts can present an enormous challenge to the realization of this healthier future.

Climate change not only contributes to a host of health issues, but it can also exacerbate the health inequities that the industry has recently begun working in earnest to rectify.

That’s because the communities that are the most vulnerable to the effects of a changing climate tend to be those least equipped to manage and recover from the physical, economic, mental, and social devastation that accompanies it.

Indeed, addressing the “greatest threat” to global public health is no small undertaking. It likely requires health organizations to mitigate their own sizable carbon emissions, transform their operations to meet emerging needs, and engage across the sector to create more sustainable supply chains. Organizations should understand the vulnerabilities in the patient populations they care for, as well as the geography-based expected climate impacts for their regions they serve. As first responders to human health emergencies, and as organizations dedicated to health and well-being, life sciences and health care organizations hold a responsibility to prove resiliency in times of need and to contribute to building healthier communities. Without organizational-level changes to become more climate resilient, a healthier and more equitable Future of Health may not be achieved.

The impact of climate change on people, populations, and the Future of Health

Beyond the walls of clinical care settings, there are social, economic, and environmental factors that account for 80–90% of “the modifiable contributors to healthy outcomes.”¹¹ Central to the Future of Health is the realization that addressing these drivers of health is imperative to delivering more holistic, equitable, and proactive care (figure 2).

Climate change stands out as the key force multiplier (a driver of health whose fluctuations amplify the effects, whether positive or negative, of another driver in an exponential, non-linear way) among those drivers and a cross-cutting challenge to a vision of equitable wellness. In this sense, climate change is both an urgent environmental and social priority area as part of the broader ESG portfolio.

The most apparent and associated effects of climate change originate from its impacts on our physical environment, namely extreme temperatures, poor air quality, and precipitation extremes (from droughts to severe storms). These impacts extend well past personal health to threaten food security, stable housing, secure employment, and entire community relationships. Even the most powerful natural events such as hurricanes give way to subtle, yet far-reaching, impacts on the housing and labor market, regional wealth and local economies, and the physical and mental health of citizens. Both Kaiser Permanente and Ascension, for example, have closely connected their environmental impact work to the drivers of health, outlining how the environment affects the populations they serve, and the resulting impact on community.

And the most vulnerable populations are often at the greatest risk of the worst impacts. Children, the elderly, and those with existing health conditions are already at greater risk if they belong to indigenous populations and other historically marginalized communities, who often live with inadequate infrastructure and a lack of resources resulting from long-term discrimination.¹² The way green space is distributed across a city is one example that demonstrates how decades of neglect and disinvestment result in fewer natural resources, too. Due to the historic practice of “redlining”, or labeling neighborhoods as “high risk” based on their racial or ethnic composition, formerly redlined neighborhoods today still tend to have fewer trees and more asphalt.¹³ That means that neighborhoods made up of historically marginalized populations tend to be more exposed to more extreme heat than majority-white neighborhoods due to physical features such as being more “built up” and enjoying less vegetation:¹⁴ San Francisco’s Urban Forestry Plan notes that the higher-income areas in its community enjoys 30% canopy cover, compared to only 5–8% in areas where immigrants and lower-income residents live.¹⁵

Nationally, higher-income (and often, white) communities tend to pollute and emit more per capita due to higher relative purchasing power and consumption—Black and Hispanic communities are exposed to 60% excess pollution than what is caused by their emissions.¹⁶

An uneven distribution of pollution and exposure to waste, paired with unequal access to green space and basic health care, often leads to avoidable and premature deaths. A longitudinal study modeling the life expectancy for 136 nations found a strong correlation between shortened life spans and low-air-quality areas, with income inequality identified as an amplifying factor between this negative association. In other words, the greater the income disparity in a nation, the greater the effect of air pollution on life expectancy.¹⁷ By disproportionately affecting historically under-resourcecd populations, therefore, climate change threatens the achievement of equitable populationwide health and wellness.

Accounting for the bottom-line costs of rising emissions

The financial impacts of climate change are already being felt throughout the health care industry, from damaged equipment and facilities to interrupted services and lost revenue. In 2015, extreme winter storms cost Brigham and Women’s Hospital US$10 million due to the cancellation of elective surgeries, and reduced admissions and outpatient services. Superstorm Sandy similarly interrupted care delivery within the New York City health system, which shut down six hospitals and 26 residential care facilities. This reduced hospital capacity by 8% in the immediate aftermath; a month later, capacity was still down by 5%.¹⁸

Extreme weather events, from winter storms to heat waves, are threatening energy reliability and driving higher energy costs across businesses and households alike. In Texas, where energy grid investments in weatherization were not made to address freezing temperatures, power outages during the winter storm and deep freeze of February 2021 are estimated to have cost the equivalent of US$4.3 billion, according to an estimate by the Federal Reserve Bank of Dallas.¹⁹ These energy disruptions not only drive up energy costs but threaten lives during times of increased acute care needs of the local population by disrupting providers of essential health services and products.

Multiplied across a global economy, climate change is expected to create untold shortages and supply-chain interruptions as well. The COVID-19 pandemic illuminated the delicate nature of medical and clinical supply chains, which are highly regulated (and therefore typically not readily flexible in emergencies) and involve difficult-to-source components. Unlike products such as automobiles and smartphones, which share common components across brands, medical devices such as ventilators require specially manufactured equipment which slows the supply chain’s ability to scale up capacity. These barriers to entry limit the number of US suppliers approved to manufacture essential equipment, like personal protective equipment (PPE).

This challenge became a crisis in March 2020, when the nation’s emergency stockpile had dwindled to 12 million N95 respirators, with a four-month turnaround for enough supply to serve the needs of the country.²⁰ States, hospital systems, and the federal government were forced to compete for the same limited resources and to pay a significant premium over list prices. This type of shortage can be replicated several times over when natural disasters strike a highly populated area, driving up costs, threatening timely care, and reducing the effectiveness of provider emergency operations.

But climate change is a two-way street for health care organizations. The global health care industry is not only affected by climate change, but is also a significant driver of global greenhouse gas (GHG) emissions, contributing about 4.5% of worldwide, with the US health care system responsible for about a quarter of those emissions.²¹ In the United States, the contribution of the health care industry to GHG emissions is even more pronounced than the global average, contributing an estimated 8–9.8% of total national emissions.²² The world’s top three emitters—the United States, China, and the European Union—account for 56% of the world’s total health care climate footprint.²³

While the race to net zero is picking up speed across industries, stakeholders in the health care ecosystem should ultimately seek to go beyond net zero in emissions reduction. While it can serve as an important framework with which to develop organizational goals and motivate action in the near term, maximizing decarbonization efforts beyond net zero will best serve the health and wellness of communities. For example, Genentech, a member of the Roche Group, is looking beyond net zero and has established a roadmap to reach “true zero emissions” for its scope 1 and scope 2 emissions by 2050.

Health care organizations can now lead a path of strong and corrective response to the benefit of both the populations they serve, including their employees and other stakeholders. The organizations with sustainable and resilient operations will most likely also be the ones most empowered to establish equitable wellness across diverse populations and address climate change’s disproportionate impact on these communities.

Strategies to mitigate risks, build resiliency, and contribute to climate action

As health care organizations increasingly recognize climate-related threats to health, they can design a climate resilience program that addresses both the immediate needs as well as the systemic challenges. There are three interrelated strategies—mitigation, adaptation, transformation—that can reduce operational risks while advancing an organization’s readiness for the Future of Health.

Mitigation efforts are designed to minimize an organization’s contribution to the root causes of climate change by reducing GHG emissions through activities such as using renewable energy. Adaptation strategies improve an organization’s resiliency and prepare it to better meet evolving care needs amidst a changing climate (e.g., financial incentives for health systems to pursue sustainability activities, investments in climate-resilient infrastructure). The third opportunity for health care organizations, is to invest in transformation by pioneering new products, services, and models that meet future health care needs while also proactively promoting health and wellness.

Taken together, these strategies can help determine an organization’s biggest climate vulnerabilities and contributions, enable prioritization of investment areas, and ensure that investment decisions are ultimately compatible with the organization’s strategic vision and the emerging Future of Health ecosystem.

To better understand the leading practices shaping the industry, Deloitte interviewed sustainability leaders from companies across the sector: life sciences organizations, health care providers, health plans, and consumer health organizations. In the following sections, we explore each of these strategies in further detail, incorporating examples from the research to provide specific questions you can ask to help frame your climate resiliency strategy.

Mitigation strategies

As in other industries, life sciences and health care organizations have primarily focused on the mitigation of direct emissions and energy consumption by setting ambitious goals and taking concrete actions to reduce their footprint. These programs may include things such as incorporating sources of renewable energy, introducing waste management programs, and exploring new hybrid models to reduce transportation-related emissions. While most industry participants we interviewed have focused their mitigation efforts on Scope 1 and 2 emissions, Scope 3 emissions remain more elusive. Reducing Scope 3 emissions (indirect emissions resulting from the value chain) is the most challenging; as a whole, the industry remains focused on gathering supplier data to accurately reflect the full scope of its carbon footprint.

If your organization is interested in establishing a baseline for your carbon mitigation efforts, you can begin by taking a thorough inventory of both direct and partner emissions. Here are some of the foundational questions you can ask as part of that assessment.

Questions to help inform your climate mitigation strategy

• What are your organization’s biggest drivers of GHG emissions?
• What is the current state of your emissions reporting and what blind spots exist? Can you leverage any of your current capabilities, tools, and/or solutions to eliminate these blind spots and enhance reporting?
• Is government funding, tax credits (federal, state, local), or preferred investment vehicles (e.g., Green Bonds, ESH Bonds) available to subsidize or provide preferred funding for investments in clean energy infrastructure?
• What level of visibility do you have into your supply chain’s GHG emissions footprint? What about the emissions of contractual partners?
• Can you incorporate climate-related reporting requirements, or emission-reduction incentives into your supplier and partner contracts?
• Can you use current partnerships, alliances, group purchasing organizations, or even coordination with competitors, to foster demand for a more sustainable supply chain?

Adaptation strategies

Many health care organizations are also investing in programs to better adapt to extreme weather events and regional climate changes, such as drought and sea level rise. For the time-being, these tend to be focused on the operations, but adaptations to how organizations deliver their products and services, or adaptations that address the climate impacts on health of their patients and members, are on the radar for sustainability leaders within many leading companies. Genentech, for example, views access and affordability as critical levers to reaching under-resourced communities who are at greater health risk for the diseases they are working to treat. Advancing diversity, equity and inclusion, from scientific research to its sustainability initiatives, is a core commitment for the company that includes collaboration across the Sustainability team, Chief Diversity Office, and Access & External Affairs department. Investing in capabilities such as data mapping (e.g., integrating data on drought impacts into patient geographies) and predictive analytics (e.g., leveraging risk stratification scoring to prioritize of system waste reduction effort) are among the ideas that can improve an organization’s understanding of how climate is impacting the populations it serves. These types of tools also point to new opportunities for health care organizations to adapt their products, services, and interventions to meet the emerging needs. While leading firms are exploring new solutions to address the impacts of climate on health, robust adaptation strategies and direct interventions with patients and members remain on the horizon.

Although product and business model adaptations are still in their nascent phases, the work to develop these outcomes will likely require coordination at all levels. Those who wish to invest in adaptation should account for not just direct climate risks to an organization’s operations, but also to its suppliers and, most importantly, the health of its patients, members, and/or customers. Here is a list of questions you can ask to frame what climate adaptation might mean to your organization.

Questions to inform a climate adaptation strategy

• To what extreme weather events are your operations most vulnerable? How will these events evolve over the next 10–20 years?
• How have your operations been impacted by severe weather events over the past 3–5 years?
• How many days annually do you project the electrical grids that power your operations will be negatively impacted by extreme weather? How do you project this will change over the next 10–20 years?
• What preparations and investments have been made to improve resiliency to current extreme weather events? Emerging weather events?
• Is government funding, tax credits (federal, state, local), or preferred investment vehicles (e.g., ESG bonds) available to subsidize investments in or provide preferred funding for on-site, sustainable energy, and electricity infrastructure?
• What are your highest priority supply-chain relationships? What are the biggest climate-related threats to continuity for these suppliers? What steps have these suppliers taken to build resiliency into their operations? What type of alternatives have you built into your supplier relationships to withstand supply-chain disruptions?
• What are the biggest climate-related health risks among your patients, members, or customer populations? How will these risks evolve over the next 10–20 years?
• What interventions, products, or services are you providing and/or investing in to address these climate-related health risks? What investments are being made to proactively address emerging health risks?
• Beyond operational risk, are your organization’s investment portfolios exposed to any ESG-related risk (e.g., investments in fossil fuel assets)? What are some of the risks that could stem from greater ESG reporting requirements demanded by regulators or institutional investors?

Transforming to solve the system-level challenges

Beyond the strategies available to them, health care organizations should also be ready to deploy the innovative technologies and care models that have become central health care investments in recent years, accelerated by the COVID-19 pandemic, to deliver on these strategies. These technologies (e.g., remote sensing, virtual platforms) and care models (e.g., hospital-at-home, on-demand virtual PCPs) are simultaneously paving the way for the Future of Health while providing health systems, health plans, and life sciences companies with capabilities to address their contributions to climate change. These identified technologies and capabilities can enable the emergence of new business models that deliver health and well-being services in a more flexible, site-agnostic, and personalized manner.

Some leading organizations are already beginning to connect climate and sustainability with business transformation, with a common linkage between footprint reduction, a transformed talent deployment model, and the use of virtual platforms. Nevertheless, there remains a significant opportunity within the health ecosystem to think more holistically about how climate and sustainability strategies fit into and complement overall business transformation over the next 5–10 years.

Importantly, the assets, capabilities, and business models that can drive climate resiliency within organizations can also be deployed to proactively contribute to a more equitable health system long-term. Do your current investments in physical or technical infrastructure align with the capabilities needed to succeed in the Future of Health? Some of these outcomes could include innovations in care delivery models, such as virtual care platforms or improving proactive interventions against climate-induced illnesses for health plan members. Understanding these opportunities for change does not mean an organization needs to fully align to a single 20-year business model. Rather, the investments made to address priorities in the short-to-medium term should align with long-term organizational considerations to thrive in the Future of Health.

There is fertile ground for collaboration across the sector, given the carbon emissions that come from the broader value chain. Sustainability and ESG leaders have already shown an appetite for taking a cross-firm, ecosystemwide approach, by partnering to identify solutions to population-level health issues. As more and more firms make prioritize sustainability and climate action, and make public commitments around their efforts, this type of collaboration will encourage even more information-sharing and learning across the sector.

The supply chain's footprint makes an ecosystem approach critical

In the health care ecosystem, a large majority of emissions—over 70% for US health systems—originates from supply chain processes. Supply-chain emissions are particularly complicated to address because they involve engagement and alignment with third-party suppliers, many of whom do not have established systems in place for data collection and reporting. Even those who do might use different methods for measuring their footprint, which complicates matters for organizations seeking a single standard of comparison. Widespread collaboration among industry groups can be critical to achieving industrywide net zero emissions.

Even for a large company like CVS Health, partnering with other environmental leaders has been critical to driving sustainable practices amongst suppliers. Furthermore, CVS Health leadership has found that working closely with suppliers early on to outline expectations for energy use, fleet management, and general sustainability goals can help establish a stronger and more productive working relationship. This learning and collaboration model is of particular importance given the emissions that are generated outside the four walls of any one industry participant. Among some of the most important opportunities for collaboration is expanding and improving the data available from across supply chains to target emissions reduction strategies more accurately. Although many companies are still in the early stages of assessing their value-chain footprint, it is imperative to create an environment of cooperation across the health care ecosystem, as climate resiliency cannot be effectively achieved without broader system change.

Efforts have already been launched to improve supply-chain transparency and move towards all-scope emissions reductions. Two examples include the Pharmaceutical Supply Chain Initiative (PSCI), a coalition of over 45 pharmaceutical and health care companies that have pledged to maintain transparency and integrity in their supply chain practices through a shared audit program²⁵ and Energize—a collaboration between 10 global pharmaceutical companies to increase renewable energy access for hundreds of pharmaceutical suppliers.²⁶  This precompetitive effort on behalf of an entire industry can help enable suppliers to access the resources needed to participate in the market for power purchase agreements (PPAs). By overcoming the barrier of complexity in the PPA contracting process, participating suppliers can be more equipped to purchase and transition to renewable energy, significantly reducing their Scope 2 emissions (and thus, the pharmaceutical companies’ Scope 3 emissions).

Health care stakeholders can also look beyond the sector for leading practices. David Cannady, chief strategy officer of Bon Secours Mercy Health, noted that BSMH leverages the forum provided by Cintrifuse, a Cincinnati-based innovation hub, to discuss approaches to supply-chain footprint reduction with large organizations in the consumer goods and retail sectors. Given that other sectors are often more mature, on average, in their sustainability efforts, health care organizations can look to these multi-industry hubs and any relationships they may have with nonhealth care organizations to learn approaches and leading practices around supply-chain footprint reduction. Efforts such as these can be used as foundational infrastructure to build more broader efforts across the health ecosystem and generate lessons learned and leading practices to accelerate mitigation.

These early efforts by leading and innovative firms are important to laying the blueprint for the fast followers, beginning to establish best practices, and generating a “bandwagon” effect around sustainability. As more firms make public commitments to sustainability, firms will be more inclined to provide transparency into their methods and approaches to the benefit as the sector as whole.

Building the vision of resiliency and innovation

While optimizing the climate resiliency of an organization is a significant undertaking, organizations can focus on an initial set of strategic activities and questions to jump-start their move towards climate resiliency.

Since the questions and considerations range from financial and operational to clinical, it is important to have a dedicated leader to answer questions, to incorporate input from across the organization, and to develop a road map accordingly. This point person should be able to foster close collaboration across functions, across levels of an organization, and with members of the industry. Kaiser Permanente, for example, achieved its carbon-neutral commitment through cross-functional engagement between executives across all of its operational areas. And at Ascension, sustainability of climate efforts are driven by both top-down and bottom-up channels. Employees proactively advocate for sustainability initiatives up to the leadership levels of the organization. Indeed, offering such an engaged culture of sustainability can be a critical component of talent attraction and retention for today's value-driven workforce.

For those organizations that are ready to start creating the benefits here are some of the near-term activities that can start the journey to greater sustainability:

1. Set climate resiliency as an enterprisewide strategy: Align across key stakeholders on strategic priorities for addressing climate change and how they fit into the organization’s overarching vision.
2. Create a role focused on climate resiliency: Dedicate a C-suite leader to a role committed to driving the organization’s sustainability agenda and addressing the causes and impacts of climate change. Beyond a specific focus on climate and environment, this role can provide leadership over your organization’s broader ESG portfolio.
3. Take a comprehensive snapshot of your business: Expand your data aperture and competencies to develop a strong understanding of its own carbon footprint, climate-related health challenges of its geographies, and associated vulnerabilities.
4. Assess your risks: Conduct a deep dive into not only the organization’s own operations, but also those of its suppliers and partners, and the health risks of the population it serves.
5. Look towards the future: Understand not only your organization’s current climate risks, but how those risks will evolve over the coming decade.

Even if your organization has prioritized environmental and climate issues for some years, these strategic questions and considerations can still be leveraged to do a health check on your current path. They can help ensure that you are thinking holistically about climate change, health, and your organization in your current efforts and, if necessary, can help recalibrate your priority areas and investments appropriately with your organization’s overarching, long-term vision, and the Future of Health ecosystem.