Shawview Consulting’s Brendan Shaw casts his eye over the increased industry focus on Environment, Social, and Governance (ESG) issues in recent years, urging pharma companies to deliver on their ESG promises and capitalise on doing good while achieving commercial success.
It is our choices, Harry, that show what we truly are, far more than our abilities
Albus Dumbledore, Harry Potter and the Chamber of Secrets
Harry Potter might not be a story about ESG, but Dumbledore provides some sage advice for pharma companies in a world where magic myths and fantasy can sometimes be everywhere.
Across the world, the ESG bandwagon is experiencing a crisis of confidence after too many companies across many industries have been caught out drinking the Kool-Aid while doing some pretty bad things.
But like a long-suffering apprentice whose talents are finally realised, the rise of ESG in business could be a boon for the pharmaceutical industry.
What is ESG?
There’s a lot written about ESG (Environment, Social, Governance) principles in business these days, some of it good and some of it baloney.
But basically, ESG is about companies and industries doing good things while being commercially successful.
Whether it’s been stakeholder capitalism, conscious capitalism, corporate social responsibility, triple bottom line, social ventures, impact investment, ethical investment, shared value or ESG, we have seen various iterations around this basic idea that companies can both make money for their shareholders and make a better world for everyone else.
The growing attention on companies doing good for the world has been driven, in part, by a community perception of the failures of governments to address many of the world’s problems. Various reports from the OECD, World Economic Forum and Edelman have showed this over time.
People are looking to businesses for competent management of social change at the same time they’re losing faith in other societal institutions. However, arguably, there’s a renewed debate about governments doing good following the Covid pandemic after the way some governments did – or didn’t – handle that well.
There’s a push across the world for industries, businesses, governments and countries to do more to support the achievement of the UN Sustainable Development Goals and make the world a better place.
Be it promoting human rights and welfare, protecting the environment, making sure no one gets left behind, preserving heritage and culture, or making sure everyone in the world lives a healthy life, institutions and organisations across all sectors are increasingly being asked: ‘What are you doing about it?’.
What does ESG mean for the pharmaceutical industry?
As an industry that is fundamentally about saving lives and keeping people healthy, the pharmaceutical industry can be one of the good guys if it does more to show what it’s been doing all these years.
The pharmaceutical industry’s raison d’etre is about social good. The pharmaceutical industry doesn’t encourage excessive gambling, it doesn’t sell tobacco or make those cheap throw-away plastic toys that fast food restaurants give away to kids to market fast food.
No, the pharmaceutical industry makes medicines, vaccines and treatments that save lives, cure disease, and make the world a better place. This is the industry that helped save the world from Covid-19 – although this is still unfinished business in some parts of the world.
For years, the pharmaceutical industry has been doing a lot of things that would fall under the umbrella of ESG but, despite some good efforts it hasn’t always done a great job of communicating it to the wider world.
There’s a swathe of initiatives, programs and strategies that individual companies and the broader parts of the pharmaceutical industry have implemented for years that can be classified under the E, S and G categories. From everything like tiered pricing strategies and access to medicines programs through to campaigns to fight fake medicines, companies and industry associations have a lot of good, credible initiatives the industry can talk about.
But there’s more to be done by the industry, both in documenting what it already is doing, and in fully embracing the commercial opportunities that come with changing world circumstances.
ESG myths and fantasy
But, and here’s the rub. It needs to be credible.
The adage for good leadership I learned from a colleague – just do what you say you’ll do – is worth remembering here.
In any industry anywhere on the planet right now, a company that makes grandiose claims of how it is saving the world and is then caught out coming up short is crucified. Mercilessly.
It’s become a blood sport for NGOs, activist groups and retired business journalists to find examples of this.
Whether it’s green companies trying to advertise environmentally-friendly trucks that are fake, high-ESG scoring banks that talk about equality but are more likely to reject mortgages in poor communities, or mining companies that score high ESG ratings while blowing up 50,000 year old indigenous heritage sites, the world is getting sick and tired of companies that engage in all the marketing and PR palaver around ESG but don’t walk the talk.
The shine is starting to come off the ESG agenda and the old phrase of ‘under promise and over deliver’ has never been truer than in the ESG space right now.
Pharma companies might want to keep this in mind.
They might also need to think even more about how to compete and collaborate in this space to develop new markets, new business models, new innovations, new partnerships, and new solutions.
Pharma companies have done a pretty good job over the years starting new partnerships between themselves and with external groups that traditionally they wouldn’t have gone near. But more needs to be done.
And not just by the usual suspects, but by all companies.
This includes those emerging market pharmaceutical companies that have enormous opportunities to build success internationally but, in some cases, have perhaps held back for now for fear of cost imposts, the risk of failure or, in rare cases, the risk of getting caught.
The magic of ESG – communication, accountability and reporting
The other big shift happening right now in the ESG space is the need for companies to be serious about reporting what they do.
There’s a push for accountability and authenticity in documenting what companies are doing. Evidence, data, standards and reporting have come of age in the ESG era.
For the pharmaceutical industry, this means following through on initiatives to improve the world, doing more to develop its own knowledge, share best practices, and expand reporting, metrics and accountability.
Operating in a data-rich industry, pharmaceutical companies already have a good track record in this space. Things like working with the regular Access to Medicines Foundation reports on access strategies, developing their own reports and metrics on successful access programs, improving transparency on things like clinical trial outcomes and patent landscapes, or instituting reporting structures on engagements with health care professionals are all good examples.
But more needs to be done here. Examples worth further exploration include sharing best practices and knowledge, standardising reporting on a range of access to medicines programs and improving environmental monitoring on things like production processes and supply chains.
The key to all of this may be a more open and up-front discussion about how the business realities and social aspects of the pharmaceutical industry are linked and need each other. The experience with Covid told us that it’s possible for companies to talk with the public about their commercial and social sides together and for people to understand the links between business and health.
Also critical for some companies in some parts of the world is ensuring that their quality standards in manufacturing, clinical efficacy and environmental performance are really what they say they are.
The future’s looking bright
There are enormous opportunities for pharmaceutical companies in the ESG space if they continue working to understand it, engage in it and – dare I say – even drive it.
But it must be done as a genuine and open business strategy to build business and improve society, rather than a marketing exercise made for regulators, governments, analysts and Instagram influencers.
The pharmaceutical companies that get this right will be part of the solution to addressing some of the world’s big challenges … and will probably be much more commercially successful as a result.
And therein lies the magic in the ESG landscape for companies.
Brendan Shaw is the Principal of Shawview Consulting and an Adjunct Professor in pharmacy in the Faculty of Medicine and Health at the University of Sydney.