ESG and pharma: It’s time for a well-rounded approach 

By Sabrina Gérard, Head of Sustainability and Agility at Datwyler

The global pharmaceutical industry has long had to triage priorities to deliver for its customers and society at large. Developing and delivering new therapeutics is time-and energy-intensive, and the pandemic has starkly highlighted the challenges the world faces with supply chains and drug delivery systems.  

The race to develop Covid-19 vaccines and deploy them globally has demonstrated how successful the pharma industry can be when it’s working in concert with partners and lending its full capabilities to support scientific breakthroughs. But the monumental task of sharing vaccines and therapeutics worldwide to combat a new disease has also highlighted the importance of sustainability. Rather than take a backseat, sustainability—in terms of environmental, social and governance responsibilities—has become a pivotal corporate trait in today’s business landscape. 

Why ESG matters 

As the world enters this new phase, it’s clear that consumers, investors and other stakeholders, expect better performance from all types of companies around environmental, social and governance (ESG) issues. As Deloitte noted1, “the pace of societal change and environmental impact has increased dramatically, and companies are experiencing the financial and economic impacts of changing stakeholder expectations. As a result, if sustainability and ESG issues are not effectively managed, they may have a negative impact on a company’s operational performance and resilience.”  

Pharma companies are in fact well placed to increase stakeholders’ trust in their ESG credentials. Global RepTrak found2 that the pharma industry experienced an increase in positive reputation ratings as it played a crucial role in providing vaccines to combat Covid-19. To build upon these gains, it’s imperative for the pharma industry to double down on ESG initiatives and transparency in reporting them. Companies must not only act effectively to deliver on these goals but also report their results in a clear and transparent manner to avoid accusations of “greenwashing.”  

To quote a colleague, Paul Hälg, Board Chairman at Datwyler said: “The focus has been increasingly on CO2 emissions for some years now. The consequences of climate change, which are visible to everyone, show how necessary this is. The issue is also critical to our stakeholders, customers, investors, and employees, who all want to do their part. What worries me is the insufficient measurability and comparability of sustainability contributions.”  

With investor confidence and customer market share on the line, the pharma industry needs to ensure that all three pillars of ESG are integral to their business and clearly reported to all stakeholders. 

‘E’ is for environment 

As Hälg noted, the environmental component of an ESG strategy and tangible steps to reduce a company’s carbon emissions are more important than ever. The most recent IPCC report bluntly warns3 that without immediate and deep emissions reductions across all sectors, it will be impossible to limit global warming to 1.5° C. The pressure on industries and companies of all kinds is increasing, and pharma companies are realizing they can make valuable contributions to emissions reduction. 

For example, Sanofi recently announced its fleet of cars would be carbon neutral by 2030, Biogen is pledging $250 million to end its dependence on fossil fuels, and Novartis is aiming for a carbon-neutral supply chain by the end of this decade. Datwyler, with a focus on holistic carbon-footprint reduction, is implementing science-based targets to reduce emissions and become carbon neutral by 2030 while also pursuing product designs that account for lifecycle issues and can reduce waste and water usage. These actions should be adopted by companies throughout the pharma and healthcare industries to tackle environmental impacts from emissions and resource usage. To support these efforts, Datwyler and seven other companies that operate along the pharmaceutical supply chain founded the Alliance-to-Zero in 2021. The alliance aims to facilitate the transition of the pharma sector to compliance with net zero emissions in line with the goal of the Paris Climate Agreement.  

‘S’ is for social 

A recent PWC study found4 that from early 2020 to April 2021, 77% of press releases from a group of pharma companies focused on social-related priorities. And this should come as no surprise. With their emphasis on Covid-19 vaccines and pandemic-related therapeutics, pharma companies have rightly been working on social needs. The goal of a well-rounded ESG strategy is not to reduce the emphasis on the “social” aspect, but instead to bring up the environmental and governance initiatives to equal the social commitments. 

At the same time, these social initiatives should encompass Covid-19 responses and other social needs. Making investments to provide medicines and treatments to underserved communities should be an area of emphasis for pharma companies, as well as ensuring a safe and healthy environment for their own workforce. Datwyler, for example, instituted an onsite vaccination clinic at their location in India, and just as employers offer flu shots, they can consider adding Covid-19 vaccines to safeguard their employees. 

‘G’ is for governance 

The governance pillar of an ESG strategy should tie all these initiatives together. This is where transparency comes into play—a commitment from leadership and clear, regular reporting should be standard and be made available to all stakeholders.  

One challenge has been consistency in reporting formats. Currently, there is a combination of reporting types in the industry: the Global Reporting Initiative (GRI) and Sustainability Accounting Standards Board (SASB). The important thing to note is that there isn’t a “right” or “wrong” approach. So long as companies are consistent and provide hard data, they can achieve their reporting goals. And it’s never too late to start. Some companies have been releasing sustainability reports and ESG reporting for years, such as Datwyler, which has been reporting since 2009 and recently received another silver rating for its sustainability performance from EcoVadis, the globally recognised rating agency, placing Datwyler among the top 15% of more than 90,000 evaluated companies. Pfizer, on the other hand, released their first ESG report in 2020, and as major industry influencers like Pfizer do so, others will be motivated to give a clear accounting of their ESG initiatives too. 

Focusing on progress 

Far from diminishing in importance because of Covid-19, sustainability in all its forms is more crucial than ever before. The world is looking to pharma companies to deliver positive change as the pandemic evolves and to continue providing life-saving therapies to a global population. At the same time, the social and environmental issues highlighted by the pandemic reinforce the need for companies to take responsibility for ESG and make tangible progress, even if it’s incremental.  

Amid the new business and social landscape, now is the right time for the pharma industry to demonstrate how they can improve lives and improve the world at large.  

References

1: https://www2.deloitte.com/us/en/pages/audit/solutions/corporate-sustainability-reporting

2: https://www.fiercepharma.com/marketing/pharma-industry-reputation-gains-continue-to-stack-up-nabs-most-improved-status-annual

3: https://www.ipcc.ch/2022/04/04/ipcc-ar6-wgiii-pressrelease/

4: https://www.pwc.com/us/en/industries/health-industries/library/assets/pwc-esg-health-insights-pls.pdf

 

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