ESG has become a major developing theme in dictating the operational decision for the corporate world, especially post-pandemic for various pharma companies. ESG (Environmental, Social, Governance) is an approach to evaluating a sustainable and responsible company. It goes above and beyond the goal of maximizing profit, as ESG focuses on how these factors may influence their employees, clients, and the communities in which the business may operate. The core purpose of ESG investments is to positively impact and sustainably promote e-commerce.

Within this article, we will dive deeper into defining ESG, some policies and benefits, and the role that ESG plays within the pharmaceutical industry.

What is ESG?

ESG is a framework also used for assessing how well a company may compare to others in terms of specific metrics. ESG is a criterion all investors should evaluate, regardless of the industry. 

Environmental: concerns include waste production, pollution, climate change, etc. This concept focuses on how efficiently a company is managing its resources and how they are looking after the environment. Standard policies implemented to promote this include investing in clean, renewable energy and lowering carbon footprint in the industry. 

Social: involves how well a company treats its clients and workers and maintaining concerns around diversity, inclusion, human rights, etc. In the Social factor, companies usually implement clear policies against child or forced labor and ensure workers are treated and paid fairly. 

Governance: involves how well run a company is in terms of its corporate structure. For example, equal representation of board members is an important Governance factor to evaluate when assessing an organization. Other Governance factors to monitor include account risk management, anti-bribery policies, and the company's ethics.

Overall, ESG provides another way to analyze a company without looking at the profit or losses; instead, we are looking at how it impacts the broader society and future generations.

How does ESG affect Consumers, Investors, and Employees?

The history of ESG dates to the 1960s when numerous pension funds realized they could affect the community on a grand scale by using their capital assets to create affordable housing and health facilities.

This further fueled how ESG may benefit different stakeholders of the company. In terms of consumers, they are more inclined to do business with companies that provide goods and services aligned with their personal beliefs, such as improving society.

As for employees, they obtain a higher level of satisfaction with having these ESG policies protecting them from dangerous and unethical situations; this also prevents job turnaround in the long run for the company.

Finally, the ESG strategy provides investors with a low-risk investment that would have long-term returns since the company's brand and reputation are improved with ESG policies. 

ESG in Pharma

ESG has influenced the pharmaceutical industry to change its way of manufacturing and marketing products to the public. Some rising concerns within the industry, including climate change, access to medications, drug pricing, and gouging, are combated with ESG policies and efforts.

These macroeconomic trends influence the future of pharma companies. In order to address climate change, companies like Fisher & Paykel Healthcare and AstraZeneca have dedicated resources to ensure carbon-negative emissions for the near future (1).

These companies also provide access to medications in developing countries that can save millions of lives since many countries do not have the infrastructure to provide this, or pharma companies are providing unaffordable prices to the population. 

What are Pharma Companies doing in ESG?

ESG provides pharmaceutical companies a competitive advantage economically and socially compared to their peers. When assessing ESG policies, one can also anticipate how successful an organization will be in the future.

A perfect example of this within the Nordics region, tenders had favored friendly manufacturing and transportation of medicines (2). These tenders promoted a concept of green innovation within the pharmaceutical industry by setting criteria for eco-transport.

The humanistic approach to promoting clean manufacturing and transportation of pharmaceutical goods had decreased carbon dioxide by a minimum of 21% within the Nordic regions (2). 

This change to further promote ESG guidelines had influenced Norways Hospital Procurement trusts (Sykehusinnkjøp) to ensure environmental certification of supply and production should become a standard for the pharmaceutical industry's future. 

Norway's hospital drug procurement systems had also received support from the Public Procurement Appeals Council (KOFA), which determined that even though costs may increase within the medical field,  overall, the environmental consequences would be much less.

Norway eventually aims to ensure zero emissions during transport in the near future. Even major companies such as AbbVie have promoted the ESG criterion by promising to source 100% energy from renewable sources by 2035 (3). Along with this initiative, AbbVie has promoted itself as a zero-waste company by ensuring pay is equitable amongst all genders and ethnicities at their company. Despite these changes, AbbVie continues to provide affordable pricing for all its medications by introducing co-pay assistance programs. (3)

It is impressive to have a pharma giant pave the path and influence other companies to promote ESG criteria. Even Amgen recently introduced its green funding plan of a $750 million bond for environmental projects encouraging clean transportation and renewable energy  (4).

Other companies like Teva, Merck, and Pfizer are all establishing green bonds to ensure their company is taking one step toward leaving a positive environmental impact.

Recommendations for Companies

For future companies looking to implement policies that involve ESG, it would be best for an organization to implement them within their vision or mission statement and slowly integrate changes throughout the workflow.

We must remember to make the world a cleaner and sustainable place while understanding that changes may not occur overnight. Implementing these policies may be seen as unfeasible or costly, thus deterring investors and upcoming profits.

If searching for ways to start, leadership can enact small changes such as using electric or hybrid cars for transportation or removing plastic items used within the daily workforce. Any leader looking to implement ESG must understand that the goal is to improve the brand and reputation of the organization. 

Work Cited:

GlobalData Thematic Research. (2022, February 22). ESG – Healthcare: Macroeconomic trends. Pharmaceutical Technology; Pharmaceutical Technology. 

‌GlobalData UK Ltd. (2022, May 17). GlobalData Plc: ESG Poised to Become a Major Theme of the Decade. GlobeNewswire News Room; GlobalData UK Ltd. 

DeFeudis, N. (2022, June 6). AbbVie unveils diversity, climate and accessibility strategies in new report. Endpoints News; Endpoints News. 

‌Beth Snyder Bulik. (2022, February 23). Pharma sustainability: Amgen debuts $750M “green bond,” Merck initiates ESG goal review. Endpoints News; Endpoints News