The Sustainability Accounting Standards Board's new industry-specific standards for corporate disclosures of environmental, social and governance factors provide a model for companies to disclose sustainability issues.
Key among the disclosures called for in the new standards for the healthcare industry is information on the safety of clinical trials, energy-intensity of facilities, procedures to safeguard patient health data, and safe manufacturing and distribution of drugs.
Companies have been facing increasing pressure from investors and activist shareholders to disclose ESG policies and operate in a more sustainable manner.
The Sustainability Accounting Standards Board, or SASB, on Nov. 7 published guidelines for 77 industries, including banking, healthcare, energy and technology, which provide a model for corporate disclosure of these issues. The standards are the result of six years of research and consultation with companies, SASB said.
While the SASB recommendations are non-binding, industry leaders including Merck & Co. Inc. have begun using the recommended standards. The Kenilworth, N.J.,-based pharmaceutical giant produces an annual sustainability report in line with previous SASB recommendations for its industry, with the most recent report issued in September.
Biotechnology & Pharmaceuticals
Biotechnology and pharmaceuticals companies develop new drugs, testing those new medicines in human clinical trials before selling the new products. The standards for this sector require disclosure of oversight practices for clinical trial management to ensure patient safety and quality.
Companies should provide details on how they have provided access to medications for priority diseases and in priority countries. With respect to drug safety, the standards suggest that companies disclose any products subject to alerts by the U.S. Food and Drug Administration, any fatalities associated with a medicine, any recalls and the number of products returned through take-back programs.
Drugmakers have faced pressure, especially in the U.S. for the rising price of prescription medications. The SASB standards require the disclosure of the percentage change of a drug's average list price compared to the previous year.
The disclosures should also include details on ethical marketing practices, including any litigation due to false marketing claims.
Drug Retailers
Drug retailers operate retail pharmacies and distribution centers that supply retail stores, according to SASB. These companies source drugs through wholesalers and distributors, and sales are driven by consumer sales of prescription and over-the-counter pharmaceutical products.
SASB's standards for drug retailers include disclosing energy use, data security and privacy, and integrity of the drug supply chain. Retailers should provide an explanation of procedures to protect patients' health data and any data breaches that resulted in the exposure of personally identifiable information.
Other suggested disclosures include the number of prescriptions filled for monitored medicines and procedures for preventing dosing errors.
Healthcare Delivery
The healthcare delivery industry includes owners of hospitals, clinics and other healthcare-related facilities. These facilities provide inpatient and outpatient care, surgery, mental health, rehabilitation, and clinical
laboratory services, according to SASB.
This industry should also disclose energy use and the percentage of renewable energy consumed, as well as the treatment of medical and hazardous waste. Healthcare facilities should disclose policies related to climate change; for instance, procedures for addressing physical risks due to an increased frequency and intensity of extreme weather events, and changes in morbidity and mortality rates of illnesses and diseases that are associated with a changing climate.
Data privacy and protection of patients' information is another important disclosure for the healthcare delivery industry, similar to the standards for drug retailers. Pricing of care was also an issue for this sector. SASB recommended disclosure of policies to ensure patients are informed about the price of their care before a procedure and a list of the facility's 25 most common services and pricing info for those services.
SASB flagged quality of care and patient satisfaction, including reporting on hospital performance scores and serious events that occur at healthcare facilities. Moreover, SASB suggested disclosures related to employee safety.
Healthcare Distributors
Healthcare distributors provide pharmaceutical products and medical equipment to hospitals, pharmacies, and physicians, according to SASB. Disclosure standards for the sector include reporting of fleet fuel management and a description of efforts to reduce the environmental impact of logistics. Companies should also disclose the environmental impact of packaging and the recycling of products.
This sector should disclose information related to business ethics, including procedures to minimize conflicts of interest and unethical business practices, and details of any litigation related to bribery, corruption or other unethical business practices.
Managed Care
The managed care industry offers insurance products for Medicare and Medicaid members, individuals and commercial customers, as well as administrative services for self-funded insurance plans and managing pharmacy benefits.
Privacy issues and protection of personal health data were again cited in the SASB standards for this sector. The managed care sector should disclose issues related to healthcare coverage and the Affordable Care Act, such as procedures surrounding the ACA's requirement that insurers spend at least 80% of their premium income on health care claims and quality improvement.
Managed care providers should also disclose data on plan performance, such as enrollee retention rates, the percentage of claims that are denied after appeal and the plan enrollee grievance rate. Usage of preventative healthcare programs, such as employee wellness programs related to smoking, mental illness, diet and exercise should also be disclosed.
Medical Equipment & Supplies
The medical equipment and services sector produces devices for medical, surgical, dental, ophthalmic and veterinary applications. According to the SASB standards for this sector, companies should disclose price change information for products and information on how prices are communicated to patients.
Product safety issues, such as the number of recalls, FDA warnings and any fatalities should be disclosed by the company. The sector should also report on ethical marketing, such as information on legal proceedings associated with false marketing claims and the promotion of off-label uses of medical devices. Business ethics disclosures similar to healthcare distributors were also noted for this sector.
The sector should also disclose processes to assess and manage environmental and human health considerations associated with chemicals in products.