Prescription for sustainability: How pharma companies are nailing (or failing) the ESG game

In recent years, there has been an increasing emphasis on sustainability across various industries. At the same time, however, the term “sustainability” has been expanding beyond the narrow definition of lowering carbon emissions. It is now an umbrella term for a wide range of environmental, social and governance (ESG) issues.

The pharmaceutical sector, which plays a crucial role in improving global health, has not been exempt from the drive towards sustainability, with emphasis on the need for robust ESG goals being placed on the industry to address all three main ESG areas.

By addressing these issues and incorporating sustainable practices, the industry can enhance its reputation, build stakeholder trust, manage risks, foster innovation, ensure long-term viability and meet regulatory compliance requirements.

Here, Maria O’Hanlon, Scientific Content Writer at ramarketing examines where the pharma industry is excelling when it comes to sustainability and ESG, and which aspects it should be focusing on.

The ESG challenge

The pharma industry, like any other manufacturing sector, contributes to global greenhouse gas emissions. Its impact on the environment is complex, arising mainly from R&D activity, supply chains, transportation and disposal of pharmaceutical products. The challenge of ESG is to reduce this impact while taking social sustainability and governance issues into account.

Social sustainability objectives compel companies to account for their impact on local communities. This requires finding the delicate balance between creating and delivering life-saving drugs while being profitable, and answering the needs of communities involved in and affected by this process.

Governance is focused not only on regulatory frameworks but also on the willingness of companies to commit to meaningful action, regulatory compliance and transparency in sharing data about their activities, quality standards and ethical business practices.

Why should ESG be important to pharma?

ESG considerations are of significant importance to pharmaceutical companies for several reasons, including reputation, stakeholder trust, risk management, innovation, long-term creation and regulatory compliance.

Practices aligned with ESG aspirations play a vital role in shaping a pharma company’s reputation in the market, helping to build trust among stakeholders. By demonstrating a commitment to sustainable practices and ethical conduct, trust is fostered among investors, employees, healthcare providers, patients and the general public. A 2020 survey’s finding that 60% of consumers would pay more for a sustainable product could be applied to pharma and give products a competitive edge.

ESG considerations also help pharma companies identify and manage potential environmental risks — such as pollution or resource scarcity — that could impact supply chains. Managing these risks could save money and resources in the long run, which is particularly beneficial to smaller pharma companies. This aligns with regulatory compliance, as environmental stewardship and showing awareness of pollution risks can foster positive relationships with regulators and ensure compliance with legal obligations.

By focusing on sustainable practices, pharma companies can develop innovative solutions that address environmental and societal challenges. Investing in research to improve patient access to medicines in low-income communities can create new market opportunities and drive growth.

Companies excelling at ESG

Some big players in the pharma space are setting the tone by excelling in their ESG goals.

Novartis has demonstrated a strong commitment to sustainability and ESG principles, having set targets to become carbon neutral by 2025 within its own operations (and across the supply chain by 2030). Novartis’ ESG aims are focusing on ensuring access to healthcare for underserved populations, looking to create therapies that address a range of diseases, such as largely neglected tropical diseases.

GSK aims to achieve carbon neutrality by 2050, investing in renewable energy, energy-efficient technologies and sustainable packaging solutions to support its goals. Improving access to healthcare by making products affordable and accessible in low-income countries is another goal, with GSK implementing tiered pricing strategies. Looking at the supply chain, GSK has also established guidelines and audits to ensure compliance with its supplier code of conduct, which covers areas such as labour rights and environmental standards.

Johnson & Johnson has been recognized for its comprehensive approach to sustainability and ESG. By prioritising responsible sourcing, waste reduction and energy conservation, the company has made significant strides in reducing water consumption and greenhouse gas emissions. Additionally, Johnson & Johnson has remained committed to diversity and inclusion, with an effort to advance gender equity and support underrepresented communities.

It is important to note that sustainability and ESG practices are dynamic. Companies must continuously evolve their strategies to meet emerging market challenges. The actions outlined by the companies above show the industry’s commitment to continued sustainability and maintained ESG principles.

Strategies to overcome ESG challenges faced by pharma

Navigating the path to successfully implementing ESG principles in the pharma industry can present its challenges. However, with strategic approaches and proactive measures, these obstacles can be effectively addressed and overcome.

• Drug pricing: One of the significant challenges facing the pharma industry is the issue of drug pricing. High prices can limit access to life-saving therapies, particularly in low-income countries. Balancing the need for profitability with affordability is difficult. However, pharma companies must find sustainable ways to combat this issue and prioritize access to essential therapies.
• Supply chain sustainability: Ensuring sustainability throughout supply chains can be challenging because they are intricate and often global in scope. Pharma companies must monitor and address potential environmental impacts such as waste generation and water usage, often in multiple international locations. Social impacts are also important to consider when looking to maintain a sustainable supply chain. Companies should examine and maintain appropriate labor conditions. Transparent reporting can help to drive positive impact in this area.
• Clinical trial transparency: Transparency in clinical trials is an essential aspect of ESG for pharma companies to consider. Clinical trial data transparency builds trust with stakeholders and allows for independent scrutiny of trial results. An effort is needed to ensure the availability of comprehensive and unbiased trial information. Regulations tightening around clinical trials and industry-wide standards being maintained can help promote greater transparency.
• Clinical trial diversity, equity and inclusion (DEI): Ensuring clinical trials provide equal access and opportunities for diverse populations to participate in them is essential. DEI aims to address historical disparities and promote participation of underrepresented groups in research. By prioritizing these principles, the validity and generalisability of trial results will improve healthcare outcomes for all. Historically, clinical trials for sickle cell anemia often relied heavily on white middle-aged men as participants, leading to significant underrepresentation of diverse populations affected by the disease. This lack of diversity in trial populations has hindered the understanding of how different ethnicities and genders respond to treatments. To address this issue, recent efforts have focused on promoting inclusivity and diversity in sickle cell anemia trials, ensuring that individuals from diverse backgrounds are included to improve the accuracy and relevance of research findings for all affected communities.
• Promoting green chemistry: Green chemistry is a field focused on the invention, design and application of chemical products and processes to reduce or fully eliminate the use or generation of hazardous substances. Implementing green chemistry practices often requires significant investment in R&D to identify and develop environmentally friendly alternatives to conventional processes. This could include designing new synthesis routes and optimizing manufacturing processes. The upfront costs associated with this could be a barrier, especially for smaller pharma companies. Developing green chemistry practices can also mean navigating complex regulatory frameworks and obtaining approvals, which can result in lengthy time scales and further loss of resources.

Recently, the ACS Green Chemistry Institute formed the ACS GCI Pharmaceutical Roundtable to encourage innovation while catalyzing the integration of green chemistry, with members of the Roundtable including AstraZeneca, Bayer, Lilly, GSK, Merck & Co., Novartis, Pfizer and Takeda, among others. Pfizer CentreOne has recently developed Enviero, a brand of sustainably sourced progesterone, representing a significant step towards sustainable production of pharma compounds. The involvement of other pharmaceutical companies in this endeavor should help to push toward wider adoption of green chemistry in the field.

Looking to the future

Pharma companies are increasingly recognizing the importance of ESG in their operations. Most are taking significant steps towards reducing their environmental footprint, with the overall goal of improving access to medicines worldwide.

To drive meaningful change, collaboration among companies, policymakers and stakeholders is essential. By embracing sustainable practices and integrating ESG principles into their core strategies, pharma companies can contribute to a healthier world while ensuring their long-term success.

Read about ramarketing’s ESG mission here.