A short guide to ESG in the pharmaceutical industry

A short guide to ESG in the pharmaceutical industry

Environmental, Social, and Governance criteria (ESG) are an indispensable component of today’s business world. Their task is to provide a framework for assessing the sustainability and ethical impact of investments and business practices.

Noor Polak, Pontoon Solutions

Noor Polak, Account Portfolio VP, Pontoon Solutions

For the pharmaceutical industry, ESG represents an opportunity to showcase its mission of saving lives and promoting health. In terms of social impact, the pharmaceutical industry’s commitment to ESG can underscore its push for health equity. This commitment to reducing health disparities not only supports societal well-being but also aligns with the industry’s broader goals. However, despite having a substantial portfolio of ESG-related initiatives, the pharmaceutical sector has often fallen short in effectively communicating its efforts to the broader public.

Additionally, authentic ESG commitments are critical for pharmaceutical leaders’ employer brand and talent strategy. To attract and retain professionals able to impact the ongoing ESG transition, pharma companies need to demonstrate a deep understanding of their environmental, social, and governance strategy.

With that in mind, here’s a short guide to ESG in the pharmaceutical industry. Apart from briefly explaining each component of ESG and sharing industry news, it provides insights on how ESG relates to overall talent strategy and what Pontoon can do to move organisations along in their green talent acquisition journey.

E is for environmental commitments

The life science industry is primed to attract purpose-driven talent by emphasising its sustainable strategies, particularly the social implications of promoting better health. Nonetheless, there’s room for improvement in environmental stewardship. A concerning statistic from the University of Bath reveals that the production of every kilogram of drug results in roughly 100 kg of waste, indicating a need for greater efficiency. Additionally, billions of usable medicines are globally destroyed every year, which has a social and environmental impact.

With the pharmaceutical industry being reportedly more emission-intensive than the automotive sector, companies should aspire to reduce their levels of greenhouse gas emissions, conserve water, and implement green chemistry solutions to cut down on excess by-products in the manufacturing process. Reducing environmental impact also requires designing recyclable drug packaging and proper waste management, including the proper disposal of hazardous materials.

Of course, environmental commitments can be boosted by national efforts and international collaboration. A great example of such a collaboration can be found in the Nordic countries, renowned for their balanced approach to market economics and social responsibility.

Nordic pharma leads the way in sustainability commitments

The Nordic Pharmaceutical Forum (NPF), representing Finland, Iceland, Norway, Sweden, and Denmark, is working together to integrate environmental requirements into their joint agreements. This approach not only ensures competitive pricing and supply security but also advances their environmental goals.

For instance, Norwegian policymakers have set an ambitious target to reduce 40% of carbon dioxide emissions from healthcare services by 2030. In response, one of the Norwegian healthcare procurement organisations has recently declared its intention to curtail the usage of asthma inhalers that do not adhere to environmental regulations. This strategic move underscores the organisation’s commitment to prioritise innovative proposals that effectively mitigate greenhouse gas emissions.

Even if your company is not operating in any of these countries, staying informed about local regulations, learning how to use governmental funding to pursue ESG commitments, and drawing inspiration from foreign companies can help your business and strengthen your employer brand.

S is for social obligations

The social component of ESG ratings in pharma can be divided into three main topics:

  • Employee management: Driving employee satisfaction, ensuring a diversified workforce through strategic sourcing, and providing increased transparency over gender pay ratios.
  • Health and safety: Compliance with health standards and deployment of proactive safety technologies reduces the risk of exposure to accidents or leaks – both literal leaks of harmful substances and metaphorical leaks of sensitive data.
  • Reputational risk: This type of risk comes not only from lawsuits but also from abusive price gauging. Pharma companies in the US have a particularly bad reputation for purposefully driving up drug prices to charge more for life-saving drugs. Insulin is probably one of the most widely discussed examples, with US manufacturers charging rapid-acting insulin at over $113 per standard unit compared to $8 in other countries. While the latest Inflation Reduction Act might regulate US drug prices, companies should also take proactive steps to prevent reputational damage by curbing unethical pricing.

G is for governance strategies

Issues in this category should be geared toward advancing a transparent ownership structure, respectful relations with stakeholders, financial clarity, and risk mitigation. Eliminating corruption and bribery, as well as withdrawing from aggressive tax strategies that can result in tax penalties are also crucial to preventing reputational damage.

Governance is also about how a pharmaceutical company presents its ESG efforts to their employees, external stakeholders, and the public. Credibility and transparency are the cornerstone of successful ESG engagement. Companies must deliver on their promises and not merely engage in performative marketing. There is a growing intolerance for companies that overpromise and underdeliver on ESG commitments, as watchdog groups and NGOs closely scrutinise corporate actions.

ESG also demands greater accountability and transparent reporting. Research shows that 68% of people working for pharmaceutical organisations believe that their company did not have an ESG strategy or are unable to say whether or not an ESG plan was in action. This shows that companies need to substantiate their actions with evidence, data, and reporting, improving metrics and accountability.

What does ESG mean for your talent strategy?

The complex and interdisciplinary nature of issues related to ESG requires a whole array of roles and skills – data privacy and cybersecurity professionals, scientists and packaging designers upskilled in green skills and waste management, legal and accounting talent, to name a few. This is why pharmaceutical organisations should look for flexible, dynamic, and data-driven talent solutions for both contingent and permanent hiring programmes. They should also instil a culture of lifelong learning and upskilling to prepare themselves and their workforce for current and upcoming environmental, social, and governance challenges.

Recommended strategies

In summary, to embrace their ESG commitments and attract talent that is able to deliver them, pharmaceutical companies should consider the following strategies:

  • Develop specialised talent pools: Recognise the diverse skill set demands of ESG initiatives. Build talent pools with professionals skilled in data privacy, cybersecurity, green technology, waste management, legal, and ethical expertise. Consider unconventional candidates with non-STEM backgrounds. The ethical dimension of ESG in pharma might benefit from targeting professionals with humanities degrees, including in philosophy (particularly ethics) or social sciences. Industry-specific upskilling is a small price to pay for these individuals’ unique and innovative perspective.
  • Stay informed: Stay updated on industry trends, regulations, and emerging ESG requirements within the pharmaceutical sector. Being well-informed allows you to proactively match the right talent with evolving industry needs.
  • Highlight ethical values: Underscore the importance of ethical values and a commitment to sustainability when engaging with candidates. Look for candidates who align with the pharmaceutical industry’s mission of improving health and well-being. When employees share your vision, they are more engaged at work, which can translate to improved retention rates.
  • Assess soft skills: Beyond technical qualifications, pharmaceutical companies should assess candidates’ soft skills, including their commitment to ethics, adaptability, and their ability to communicate ESG goals effectively.
  • Partner in real time: Exchange regularly with your partners, be transparent and provide them with information in real-time, so you can set together realistic targets and projects.

How Pontoon can help

Pontoon’s experience with pharmaceutical clients makes us prepared to tailor your recruitment strategies to attract talent capable of driving your ESG commitments. By understanding that ESG is also crucial for talent attraction and retention – with 86% of employees preferring to work for companies who share their values – we can help you to weave in environmental, social, and governance causes into your employee value proposition (EVP) strategy.

ESG is one of the key components of Pontoon Instinct, our new advisory service dedicated to helping organisations develop and implement strategies that enhance the sustainability of human capital.

As Frederik Otto, Head of Client ESG & Impact at Pontoon observes:

A pivotal step for businesses is to transparently communicate how they tackle environmental issues, how they improve society overall, and what targets they have set for themselves. This means not only showcasing impressive ‘As Is’ figures but also juxtaposing them against clearly defined objectives and timelines. Such transparency not only provides context but also illuminates areas that need attention, guiding the development of effective strategies, including talent management.

Check Pontoon Instinct’s Unveiling ESG strategies whitepaper to discover more of Pontoon Instinct’s insights and do not hesitate to contact us to learn how we can support you on your ESG journey.


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