ESG: THE CASE FOR HEALTHY LIFESTYLES
PLACING MORE EMPHASIS ON THE “S” WITHIN ESG
Many companies are expanding their focus of value creation to include all stakeholders, not just shareholders. Initiatives such as “ESG” or Environmental, Social, and Governance, have been developed to help measure and assess a company’s impact on the world. Thus far, much of the focus of ESG strategies has been on the Environmental aspect. While this is very important, we will make the case that placing more emphasis on the Societal aspect is of utmost importance. Specifically, we will show why including a focus on true disease prevention, i.e. healthy lifestyles, should be included in every company’s strategy, and tracked and reported within the ESG framework. When done correctly, proactively improving the health and wellbeing of employees is within everyone’s reach. It will deliver returns to both shareholders and society.
WHY PROACTIVELY IMPROVING THE HEALTH AND HAPPINESS IS AN URGENT NECESSITY:
Unhealthy lifestyles are the root cause of a rise in preventable chronic conditions around the world. Inadequate sleep, high levels of stress, unhappiness, physical inactivity and poor nutrition all pave the way to illness. These conditions include: type 2 diabetes, heart disease, most cancers, metabolic syndrome, COPD, arthritis, dementia and obesity [1]. This rise in preventable chronic conditions places a huge burden on society and leads to:
1) An untenable healthcare system
2) Inequality in the workplace
1) An untenable healthcare system
Health care costs are exploding:
The treatment of today’s lifestyle-driven chronic conditions absorbs more than 70% of total healthcare resource in the US [2]. Many other countries are following similar trends and are also seeing their health expenditures increasing to problematic levels. Approximately 90% of chronic conditions are preventable [3], but we continue to focus on the treatment of the symptoms of these conditions rather than invest in prevention. This situation is simply not sustainable.
Poor lifestyles lead to scarce accessibility and lower quality of care
Lifestyle driven conditions suck up resources, restricting access to health care for everyone. Keep in mind, that today’s chronic conditions are largely the result of past lifestyles. Today’s lifestyles, are unhealthier than those of our parents and grandparents. 72% of adults ages over 20 are overweight or obese. One fifth of children (ages 6 to 19) are obese [4]. This explains why we see chronic illness occurring at ever younger ages and also with more frequency. In 1960, 1.8% of children in the US had a chronic condition. By 2010 this number had increased to over 8% [5]. In 2015, 31 million adults suffered from three or more chronic conditions. According to The Partnership to Fight Chronic Disease this number will increase to 83 million by 2030 unless action to address it is taken immediately [6].
An inconvenient truth:
The economic impact of lifestyle-driven chronic conditions is far greater than that of climate change. According to a 2018 Milken Institute Report, the 2016 annual cost of chronic conditions to the US economy alone was $3.7 trillion [7]. This dwarfs figures from Morgan Stanley who estimate the total worldwide cost of climate disasters between 2016 and 2018 at $220 billion a year [8]. Millions of people across the globe die every year and hundreds of millions endure a lower quality of life due to chronic conditions. Assigning a fraction of the investment we are making in environmental issues to the creation of an ecosystem that reinforces healthy lifestyles, will deliver huge returns for both companies and society.
2) Inequality in the workplace
Access to work
Poor lifestyles materially impact an individual’s capacity to obtain employment. Numerous studies have shown that overweight and obese people are more likely to experience a harder time gaining employment [9]. The same holds true for individuals who struggle with their sleep or experience high levels of stress. Chronic conditions preclude many people from positions that require physical exertion and certain levels of strength and/or mobility [10]. Additionally, many people with chronic conditions suffer from lower self-esteem [11] and are more prone to depression [12], which can make the search for employment even more challenging.
Career advancement
Chronic illness can hinder career advancement [13]. When the ability to perform a job becomes limited, career plans and prospects often diminish. People who suffer from chronic illness are less likely to gain promotion for a variety of reasons.
3) More poverty and inequality within society
Those with chronic conditions, in addition to experiencing more difficulties in the workplace, often suffer further financial hardship at home. This is particularly true in communities that are already disadvantaged.
The uncovered medical costs
Even with health insurance, people with lifestyle-driven chronic conditions face larger medical costs due to high deductibles and out of pocket expenses that are not covered by insurance. Because of this, many are less likely to see doctors and dentists or order medications. As a result of all these factors, many often end up in the emergency room needing last-resort treatment [14]. Not surprisingly, out-of-pocket medical costs are cited as a leading factor in US personal bankruptcies [15].
Unhealthy lifestyles are hurting communities that are already disadvantaged
Poor lifestyles drive income inequality, hitting the lowest earners hardest. Lower incomes and poverty then in turn further exacerbate health problems, creating a negative feedback loop which is sometimes referred to as the health-poverty trap. This has been particularly true in many minority communities. Improving the health and wellbeing of lower income earners will therefore help reduce the growing inequalities in our society. Contributing to the creation of a better ecosystem, one where all people can lead healthier lifestyles, is a moral obligation.
4) A downward spiral of deteriorating health
Unhealthy lifestyles often cause multiple chronic conditions. Immune systems weaken and one condition leads to two and then two leads to three and so on. By 2014, 60% of Americans had one or more chronic conditions, and 42% had two or more [16]. The numbers today are even higher.
Unhealthy lifestyles impair immune systems [17]
Unhealthy lifestyles impair immune systems, making people more susceptible to viruses and bacterial infections, and decreasing their chances of recovery from disease. The most glaring example of this has been observed with the Covid-19 pandemic [18]. Evidence has emerged that chronic conditions, and in particular obesity, are highly correlated with Covid-19 hospitalizations and fatalities [19]. Given the high prevalence of these types of conditions, many governments decided to lock down their economies, in order to prevent healthcare systems from becoming overwhelmed. These lockdowns come at a tremendous cost. Current estimates of lost estimated worldwide output from Covid-19 are at over $4.4 trillion (IMF forecast of a 4.9% y/y contraction from 2019’s total global GDP of $90 trillion) [20].
HEALTHY LIFESTYLES – ROI FOR BOTH COMPANIES AND SOCIETY
While most ESG initiatives cost money and involve a trade-off between shareholder returns and societal benefit, driving lifestyle improvement benefits both shareholders and society. Unhealthy lifestyles cost companies billions through absenteeism, lost productivity and avoidable turnover. Happier and healthier employees cost less and are more productive. Intelligently implemented programs with proper measurement tools will generate a positive ROI and increase profitability.
Beyond the walls of the company, better employee health will reduce the pressure on our healthcare systems. Improved employee lifestyle habits will also positively influence family and friends. Shareholders, employees and the wider community benefit. A true win-win-win.
ESG ACCOUNTABILITY: THE NEED FOR METRICS AND DATA ANALYSIS TOOLS
One of the main issues with ESG initiatives to date has been the difficulty in measuring progress, scale and impact. In the area of lifestyle improvement, measurement is also critical. The two metrics currently proposed in the health and safety section of ESG [21] are backward looking and do not measure prevention efforts.
For that purpose, RENDLE has developed a number of predictive metrics that help measure critical aspects of disease prevention efforts. We strongly believe these should be essential components of the health section within the ESG framework. These metrics include:
Predictive metric number 1: Healthy lifestyle literacy
Healthy lifestyle literacy is the degree to which an individual has the capacity to obtain, communicate, process, and understand the basic facts that enable them to make healthy lifestyle choices. Healthy lifestyle literacy is a prerequisite for successful lifestyle improvement.
Predictive metric number 2: Healthy lifestyle score
The healthy lifestyle score is a normalized score measuring the health and wellbeing of a population taking into account sleep, stress, happiness, exercise, nutrition and their interplay. This score allows organizations to benchmark and see changes in the health and happiness of their population in an easy, straightforward manner. A rising score is a leading indicator of a decline in the number of chronic conditions within a population, and therefore, lower costs. By the same token, a falling score is an indicator of higher levels of chronic conditions and higher costs.
THE TIME IS NOW
ESG initiatives urgently need to incorporate healthy lifestyle metrics. For far too long we have ignored the role unhealthy lifestyles play in hurting lives, increasing inequality, damaging the economy and even negatively impacting the environment. The Covid-19 crisis provides us with the opportunity to re-think and reset business as usual. Let’s seize the moment and make real change that benefits all stakeholders.
For more information about how we can help drive lifestyle improvement within your organization, feel free to contact us . Thank you for your time.
We wish you true wealth.
Sources and references:
[1] About Chronic Diseases: Center for Chronic Disease Prevention and Health Promotion (NCCDPHP) - Centers for Disease Control, October 2019
[2] Health and Economic Costs of Chronic Diseases - Centers for Disease Control, March 2020
[3] Nutrition and Health Are Closely Related - US 2015-2020 Dietary Guidelines - health.gov
[4] Obesity and Overweight- National Center for Health Statistics - Centers for Disease Control, June 2016
[5] The Rise In Chronic Conditions Among Infants, Children, And Youth Can Be Met With Continued Health System Innovations - Health Affairs, December 2014
[6] Number of People with 3+ Chronic Diseases is Growing - Partnership to Fight Chronic Disease (PFCD), May 2017
[7] The Costs of Chronic Disease in the U.S.- Milken Institute, August 2018
[8] Five Sectors That Cannot Escape Climate Change - Morgan Stanley, March 2020
[9] Fat people earn less and have a harder time finding work - BBC, December 2016, March 2020
[10] Chronic Illness and Depression - Chronic Illness, Cleveland Clinic, January 2017
[11] How Obesity Can Affect Your Teen’s Self Esteem - Jamaica Hospital Newsletter, September 2014
[12] People with other chronic medical conditions have a higher risk of depression - National Institute of Mental Health (NIMH), December 2015
[13] What are some effects of a chronic illness? - Chronic Illness, Cleveland Clinic, January 2016
[14] Premier Inc. Identifies $8.3B Savings Opportunity in the ED with More Preventative and Coordinated Ambulatory Care - Premier, February 2019
[15] Medical Bankruptcy and the Economy - The Balance, November 2019
[16] Multiple Chronic Conditions in the United States - Partnership to Fight Chronic Disease (PFCD), RAND Corporation, May 2017
[17] Obesity, Inflammation and the Immune System - Proceedings of the Nutrition Society, March 2012
[18] Pandemic Makes Chronic Disease Prevention a Priority - Population Health Management, June 2020
[19] Evidence used to update the list of underlying medical conditions that increase a person’s risk of severe illness from COVID-19 - Centers for Disease Control, June 2020
[20] A Crisis Like No Other, An Uncertain Recovery - World Economic Outlook Update, International Monetary Fund, June 2020
[21] Toward Common Metrics and Consistent Reporting of Sustainable Value Creation - World Economic Forum, January 2020
About RENDLE:
RENDLE helps organizations drive lifestyle improvements in a structured, data-driven manner. Our methodology guarantees populations will improve their sleep, stress management, happiness, exercise and nutrition while reducing back pain, smoking and other costly conditions. For more details about how we can help your organization improve contact us.