Words aside, ESG’s role is non-negotiable

For those of us working at the intersection of pharmaceuticals, access to healthcare and sustainable development, there is a shift occurring and it’s leading many of our clients in the pharma industry to seek a refreshed approach to corporate sustainability communications.

Environmental, social and governance (ESG) criteria have been widely used by investors, regulators and consumers to assess the sustainability and ethical impact of companies. For the pharmaceutical industry, ESG has been a key driver of innovation, reputation and growth as well, to address the urgent challenges of climate change and health equity.

The issue is that while the rise of ESG has been hotly reported for several years, reflecting the desires of stakeholders for companies to ‘do no harm to the planet, its people, or your own governance’, the term itself has been increasingly caught up in a political and cultural quagmire. In recent years, ESG has faced a backlash from critics who claim that it is vague, inconsistent, politicised and greenwashed. Some argue that ESG is a distraction from the core business of delivering value to shareholders, while others question the validity and reliability of ESG ratings and reporting.

Despite the criticism, ESG is more relevant and urgent than ever, especially for the healthcare sector. The COVID-19 pandemic has exposed the fragility and inequality of the global health system, as well as the interdependence of human health and planetary health.  The pharmaceutical industry has a vital role to play in addressing these issues, not only by developing and delivering vaccines and treatments, but also by ensuring that they are accessible, affordable and equitable for all. ESG is an important tool for pharma companies to demonstrate their commitment and contribution to the health of patients, planet and business, as well as to attract and retain investors, talent and customers.

And terminology aside, our clients know that for a healthcare company, increasing access to healthcare and addressing the equity gap is not a just humanitarian issue, it’s a strategic one. The future of the pharmaceutical industry will increasingly depend on emerging markets, where the demand for medicines is growing rapidly due to population growth, urbanisation, rising incomes and changing disease patterns. By 2025, emerging markets are expected to account for 30% of the global pharmaceutical market, up from 18% in 2010. Therefore, the industry has a strong incentive to invest in these markets and to ensure that its products reach the people who need them most.

Integrating climate considerations into their pipeline development is essential not only for addressing immediate health crises but also for anticipating future medical needs. This strategic foresight will enable pharma companies to remain competitive and responsible by developing products that address both current health issues and those exacerbated by environmental changes. Moreover, by aligning their innovation strategies with sustainable practices, pharma companies can contribute to global efforts in mitigating the effects of climate change, potentially leading to a healthier planet and population.

To maintain a competitive edge, pharma companies need to adopt an approach to corporate sustainability communications that disengages from political and cultural anti-ESG rhetoric and focuses on outcomes. This means moving beyond generic and superficial statements and instead providing clear and credible evidence of their impact and value creation. It also means engaging with stakeholders in a transparent and authentic way, addressing the specific needs and expectations of different audiences and markets.  Ultimately, it means integrating ESG into their core strategy and operations and aligning it with their purpose and vision.

The pharmaceutical industry is at a crossroads, where it can either succumb to ESG criticism and risk losing stakeholder trust, or embrace it as an opportunity and catalyst for positive change, balancing the health of patients, planet and business and create long-term value for themselves and society.