Practical ways that ESG strategy can enhance health and aged care organisations

As widely reported, catastrophic flooding in New South Wales in May 2025 left thousands of properties damaged, several communities stranded, and five people dead. And while climate change induced heatwaves, bushfires, floods and droughts impact all Australians, the reality is it’s our most vulnerable citizens who are most affected by these extreme weather events.

Guided by the ‘first, do no harm’ principle, health and aged care leaders must look closely at their own organisations’ contribution to climate change. In Australia, the healthcare system is currently responsible for approximately seven per cent of total emissions.

In December 2023, the Australian Government issued the National Health and Climate Strategy, a whole-of-government plan to address the health and wellbeing impacts of climate change, along with the contribution of greenhouse gas emissions generated by the health system. Part of this framework includes the development of a decarbonisation roadmap and an emissions reduction trajectory. An update on progress so far is expected by 2026.

The Australian Sustainability Reporting Standards(ASRS), is a set of ‘climate-first’ standards designed to guide organisations on how to prepare sustainability reports. Australia’s largest companies will issue their inaugural Sustainability Reports in coming months. These reports consider how climate risks and opportunities are addressed within an organisation’s governance, risk management, strategy, and organisational metrics and targets.

For each of those four pillars, health and aged care organisations¹ will need to identify, assess, manage and report against both climate-related risks and – importantly – climate-related opportunities within their business and value chain. While most health and aged care organisations will not be captured under the mandatory sustainability reporting standards this year, it’s likely they will be indirectly impacted by businesses they interact with in their value chain. Given this, the ASRS can be considered a useful guide to capture, communicate and continue to build trust with stakeholders as their climate and broader sustainability related interests and demands evolve.

When preparing for voluntary and mandatory requirements of the ASRS, health and aged care leaders should be asking:

• Do we meet the reporting threshold criteria and, if so, when do we need to be ready to report?
  
• What can we leverage from the work already being done and where do we need to fill the gaps?
  
• Are we collecting quality sustainability data? Do we know how our data is defined, sourced, governed and processed?
  
• Are our sustainability risks integrated into the broader risk management framework?
  
• Do we have inhouse knowledge and expertise to report against the ASRS, or is investment needed to build the capacity of our people?
  
• What support does our Board and workforce need to understand their sustainability-related obligations and the key climate risks and opportunities facing the business?
  

Leaders can build long-term value through ESG strategies, and one of the most powerful ways to create value is through circular supply chains. Health and aged care organisations are resource and materials-intensive businesses—relying on supply chains that stretch across the globe. Australia is further squeezed by relatively high labour costs and weak productivity growth². 

All this leads to higher expenditure while creating waste. But circular supply chains can reverse this. They provide ways to repurpose waste into new materials—minimising risk and providing new revenue streams—while contributing to an organisation’s sustainability responsibilities. 

To create circular supply chains of their own, health and aged care leaders must rethink their existing processes and consider opportunities to redesign their supply chains. This starts with a clear understanding of:

• the market in Australia
• a vision and strategy for waste
• a detailed design of the supply chain (often involving the careful stitching together of various key stakeholders).

Before embarking on reconfiguring and augmenting supply chains, there are several questions health and aged care leaders can ask themselves and their colleagues:

• What are our sustainability targets and timeframes? How aligned is our current supply chain/procurement approach with our sustainability strategy and vision?
  
• What materials do we currently generate, and what components are created? How consistent/homogenous are those components?
• How much leakage is generated across our value chain, and where is this leakage (i.e. not just at end-of-life)? Where are the biggest opportunities to stem leakage and create circularity?
• Are we currently tapping into local circular economy initiatives (e.g. leveraging local companies/entrepreneurs with circular products or solutions, or grant funding initiatives to support local manufacturing)? What are the barriers/enablers to accessing these?
• What governance and controls do we have in place to track progress on our sustainability agenda? What does ‘good’ look like for us (e.g. no landfill) and how do we know when we’ve achieved it?

ESG is about more than carbon emissions and reducing waste. It’s also very much about people and social justice; which brings us to human rights and modern slavery.

Human rights are intertwined with the health and aged care sector given Australia’s right to health—the enjoyment of the highest attainable standard of physical and mental health³—including the essential and interrelated elements of availability, accessibility, acceptability and quality. 

Human rights

Social issues have become a core part of health and aged care business strategies, and the Australian Government has made several moves to further prioritise human rights. We saw the Aged Care Bill 2024 passed in parliament last November, which is expected to become the new Aged Care Act from 1 November 2025.

The Act will embed a rights-based approach to empower individuals in their decision-making, set obligations for aged care providers and workers to deliver high-quality care, and provide pathways for upholding rights where concerns or issues need to be escalated and addressed.

Modern slavery

Then there’s Australia’s modern slavery legislation, which requires business leaders to dive deeper into the undercurrents of their businesses—including their supply chains—from a human rights perspective.

The Modern Slavery Act 2018 defines modern slavery as serious exploitation through coercion, threats or deception. The Act requires Australian businesses with more than $100 million in annual consolidated revenue to submit an annual Modern Slavery Statement to the Attorney General's Department. All statements must outline how a business is identifying, assessing and addressing its risks in this area.

The Act underwent an independent statutory review in 2023, resulting in a report outlining 30 recommended changes designed to strengthen reporting. The government's response to the report backed 25 of the 30 recommendations, and in July 2025 a public consultation process was launched seeking feedback on how some of these recommendations can be progressed⁴.

Further waves of legislation appear inevitable with a broader global trend towards mandatory human rights due diligence and reporting. Failure to respect human rights are increasingly likely to carry hefty reputational and commercial consequences for health and aged care organisations.

Practical steps towards compliance

How can leaders ensure their organisations meet the social expectations of their stakeholders? The first step is identifying the risks hidden in the depths of your supply chains, which may include medical supplies and PPE, catering, cleaning and laundry services, or use of a migrant workforce. To mitigate and eradicate risks, health and aged care organisations need visibility of who their suppliers are, where they operate, and how these suppliers protect their workers’ rights.

Tools like the publicly available Global Slavery Index⁵ can help identify risks based on location, industry and worker vulnerability. Additionally, dialogue with existing and prospective suppliers can facilitate knowledge sharing and collaborative solutions designed to support human rights and worker protections.

For leaders seeking a clearer view of human rights and modern slavery risks, instructive questions include:

• What is the risk profile of our tier one and identified tier two suppliers? How do they measure up to the Global Slavery Index? How vulnerable are their workers?
• What risk assessments do we undertake when we onboard a new supplier? How do we articulate our requirements and verify that our suppliers meet these?
• What kind of dialogue do we have with existing suppliers? How might we support them to meet our ESG expectations?

In our experience, health and aged care leaders can take several proven steps to embed sustainability in the core of their organisations. These include:

• Mobilise a cross-functional working group: Combining skills and expertise from across your organisation (e.g. finance, risk, sustainability, clinic managers, healthcare professionals, legal, IT) can be crucial to address the broad scope and complexity of sustainability
• Map your value chain: Understanding your material upstream and downstream impacts can help improve and prioritise transparency and traceability on priority sustainability issues. This visibility can then reveal your organisation’s wider ESG performance and potential. After mapping their value chains, we’ve seen health and aged care leaders find new opportunities to meet Scope 3 emissions reporting obligations to address human rights risk, to construct supply chain circularity, and to better manage energy demand
• Embed sustainability skills: Adding sustainability knowledge and experience to board and management skills’ matrices (and linking sustainability KPIs to remuneration) can help sharpen individual and collective focus on sustainability risk management, decision-making frameworks and ESG targets
• Conduct a gap analysis: Much of the information required to comply with mandatory reporting, such as the ASRS or the Modern Slavery Act, may not yet factor into enterprise resource planning (ERP) and other central source systems. To facilitate this, leaders should prioritise data accuracy and efficiency in these areas
• Build a value creation model: A solid value creation roadmap should include public-facing outcomes and be embedded within your organisational strategy. This demands a genuine shift in mindset, where health leaders look beyond risk mitigation and compliance to leverage sustainability opportunities and create financial value and better patient outcomes
• Reinforce internal and external reporting: While there is potential to leverage health and aged care organisations’ current processes to meet existing reporting requirements, we expect there will be incremental changes requiring more transparency over sustainability strategies and operations, not to mention formal external assurance (e.g. ASRS). A fresh look at internal and external reporting is therefore required
• Join forces with others: Sustainability progress requires collective effort. For example, Australia’s medicines and health technologies continue to be primarily imported from overseas. Consider how you can work with—and what you can learn from—government departments, industry peers, sustainability consultants, activists and supply chain partners.

With so many waves of regulatory change on the horizon, health and aged care leaders have much to gain from robust sustainability strategies and reinvigorated supply chains. By prioritising the full breadth of sustainability concerns, leaders can safeguard their organisations’ future, boost the bottom line and contribute to a healthier planet and society. 

An AI ambition that clearly defines the vision for AI and how it aligns with an organisation’s strategic goals can ensure initiatives drive meaningful outcomes. 

What to do: Identify the problems AI can solve, from administrative inefficiencies to clinical applications, and begin with low-risk use cases, scaling as confidence grows to secure buy-in and longer-term investments.