The aim
When Alliance Medical was acquired by South African healthcare operator Life Healthcare, its governance structure around sustainability changed considerably. In South Africa, corporate governance principles recommend that strategy, risk, performance and sustainability are seen as inseparable and that companies prepare an integrated report that reflects this. Public companies are also required to appoint a social and ethics committee.
“Having that formal governance structure creates a discipline,” says European HR director Pete Winchester, reflecting that while the importance of ESG (environmental, social and governance) has risen up the agenda considerably in the UK in recent years, being required to attend board committees and present on sustainability really drives home its importance. “Everyone talks about the importance of ‘bottom-up’, hearing about what staff, customers and suppliers want around sustainability, and of course that is important,” he adds. “But you can’t underestimate the importance of top-down. That board committee structure gave us a real top-down incentive to focus our resources around this. You need a proper structured governance framework, where people understand they have to measure it, set targets and report against those targets. It puts it on a similar footing to financial reporting, and without that structure, I think there’s a danger teams may lose some direction.”
Focusing on structure and governance can also help to ensure consistency of approach across a range of international markets. And it should be a major catalyst to positive change, Winchester explains. “It’s about putting your senior executives on notice that ESG is important. That doesn’t necessarily mean financially. While we have done that, the bigger catalyst for us was putting senior executives in a position where it would be immediately obvious if no progress had been made. Having that personal credibility attached to it was a stronger driver than any financial metric.”
How was change achieved?
ESG accountabilities have been introduced into executive teams and each European country now has a regional ESG lead, making sustainability and cascading messaging around this an explicit part of a management team member’s job. In addition, a new role has been introduced: European ESG manager, leading on ESG across the region. Regional management teams have what Life Healthcare calls ‘strategic innovation measures’ connected to ESG built into their reward structures.
While Winchester feels the argument has been won about the importance of sustainability to businesses, both in terms of doing the right thing and being commercially successful (given it is increasingly what society and customers expect), he has been pleasantly surprised to see some senior leaders who may have been initially more reticent proactively pushing environmental initiatives in their region. “They’re not doing that because we’ve told them to do it; it’s because they’ve built up momentum,” he adds. “Once you get the momentum, it becomes self-fulfilling.”
Once senior leaders have bought into the importance of sustainability, HR has a role to play in embedding it throughout the organisation’s structure, processes and policies. “Framing existing practice in environmental terms creates a platform from which to build,” says Winchester, pointing out that many organisations already do things that support environmental sustainability, even if they weren’t originally introduced for that reason. “That doesn’t mean you should lose sight of them or apologise for that; they are still positive.”
How has change affected the organisation?
On job design, for instance, existing roles and activities have been framed as having environmental accountabilities, despite not being standalone ‘sustainability’ roles. Winchester gives the example of building sustainability into role design, by making sure one of the priorities of the logistics team is to minimise the amount of time that lorries moving scanners spend on the road. “Partly that’s cost-driven, but it also has an environmental impact,” he says. “Or think about the energy use that goes into scans: the more productive we can get in terms of scans, the more energy-efficient we are in delivering our service. It’s about establishing a culture where this is front of mind when people are thinking about jobs, objectives and targets. Taking a small number of environment-focused decisions and setting a small number of environment-focused objectives can have a major impact.”
Other practical examples of embedding sustainability into people practice have included downsizing the head office, restricting overseas travel and using remote recruitment methods where possible. Alliance Medical has also introduced an electric car scheme and chosen a sustainable pension fund for the default UK pension option.
Top tips
- Get the governance structure right to drive change top-down.
- Think about what you are already doing that supports sustainability.
- Small changes can add up to make a big impact.
For people professionals, the key to making a difference is recognising environmental sustainability has to be a team effort, with shared aspirations and objectives. As Winchester says: “You can do the cultural piece, the EVP, the internal comms, but ultimately if the people delivering your business on a day-to-day basis don’t make different decisions, you won’t make the progress you want.”
