2023-05-22| Special

A Close Look at the Evolution of ESG in Biopharma

by Sahana Shankar
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The biopharma industry is in full acceleration post the pandemic, which spurred major acceleration in research and development programs across all biomedical requirements. Preclinical and clinical programs are funded at an unprecedented rate, given the market is prime for faster drug development and approval. Hence, this is also the right time to push for more efforts from the sector to adapt and report on their ESG initiatives.

ESG-related issues have gained prominence in biopharma companies, more so since the Paris Agreement in 2015. Surveys indicate that more and more biotechs are aware that ESG will gain prominence and need to update their ESG disclosure reports to expected standards and facilitate comparisons of portfolios for investors. Companies are creating jobs to work solely on sustainability. As per the GlobalData Filings Analytics database, the mention of ESG in Pharma companies’ transcripts, investor communications and CSR reports has tripled from 2016 to 2021.

ESG strategies are dependent on a company’s public profile, revenue and growth rate. Larger companies with many commercial products invite scrutiny from investors and consumers regarding their ESG initiatives across a broad spectrum. Small and mid-size companies which focus more on research and development mainly focus on limiting their environmental impact.

Related Article: Why ESG Is a Smart Choice for Investors and Businesses

Core ESG Initiatives in Biotech

Collectively the biopharma industry has identified and prioritised several ESG topics such as access to healthcare, patient safety, pricing, clinical trial practices, environmental impacts, crisis and risk management, etc.

Climate change and environmental impact stand out as core ESG focus for many of the larger biopharma companies, as assessed by their ESG disclosure reports in the last few years. The strategies center around reducing carbon footprint and GHG emissions and promoting conservation and resource optimization. Given the nature of biopharma manufacturing and its demand, it is understandably difficult to drastically reduce energy consumption and limit GHG emissions and hence the industry has incorporated forward-looking statements to let investors know that they are aware of their responsibility towards building sustainable business models.

Human rights, diversity and inclusion score high on social reforms in biopharma. Most companies invest in incubators and mentorship programs to increase the representation of women, underserved communities and minorities in the biopharma workforce.

Companies are also managing their human capital by investing in their employees’ professional development. On the governance front, data security and compliance programs receive a lot of attention. The pharma sector is also working on developing strategies to address ethical issues such as antitrust, drug safety, personal data collection and sharing, price-fixing,
unlawful promotion of drugs etc.

Collective Initiatives Towards ESG Commitment

To help the companies in the biotech and pharma sector, there has been an increase in the formation of collaborative efforts to develop standards and metrics that can be incorporated and reported easily. Several guidelines and frameworks are currently
available, some of which are listed below:

● The climate pledge is a commitment by companies to be carbon-neutral by 2040. It was founded in 2019 by Amazon and Global Optimism to encourage companies to measure and report on GHG emissions regularly and implement
decarbonization practices. It has over 400 signatories as of March 2023. However, top biopharma companies are yet to join with only Novartis and GSK on the list currently.

● SBTi is the Science-Based Targets initiative, which is open to all businesses. It provides a measurable metric for companies to reduce GHG emissions and evaluate their sustainability measures. As of 2021, 2253 companies are part of this initiative and have registered a 29% reduction in scope 1 and 2 emissions from 2015 to 2020. Astra Zeneca, Johnson and Johnson, Pfizer, Novartis Bayer, Merck, GSK, Sanofi, Takeda, Gilead and Amgen are part of the SBTi and have committed to reducing emissions within 5-10 years of setting the target.

● ‘Healthcare without harm’ is a global non-governmental organisation which works on assisting biotech companies to reduce their adverse environmental impact. It leverages the healthcare sector’s collective purchasing power to incorporate systems to deal with medical waste, toxic materials, develop safer chemicals, healthy food, sustainable procurement and logistics while protecting the local climate and resources.

● Energize- a collaborative program from 10 global pharmas (AstraZeneca, Johnson and Johnson, Biogen, GSK, MSD, Novartis, Pfizer, Novo Nordisk, Sanofi and Takeda) in partnership with Schneider Electric and Carnstone was formed at COP26 in 2021, to engage all pharmaceutical suppliers in climate action. It helps participant companies to learn about renewable energy and track scope 2 GHG emissions at each level of the pharmaceutical production chain, so that scope 3 emissions can be reduced.

In addition, each pharma/biotech has its own sustainability program, such as Amgen’s Healthy Planet and AstraZeneca’s Ambition Zero Carbon. However, there is no consensus on ‘standard practices’ for disclosures. Moving forward, the pressing issue is to streamline the ESG efforts of all companies into a uniform framework to measure, compare and improve performance.

ESG has moved beyond token corporate social responsibility measures and is now an integral part of a biopharma company’s vision and mission, given that investors and consumers demand sustainability. It has proven to enhance financial performance and also improve engagement of the business with their immediate communities.

Considering that the biopharma and healthcare sector is a major contributor to GHG emissions, investors and stakeholders are encouraging the adoption of mandatory ESG policies and robust reporting.

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