Biopharma Sustainability Considered Essential

May 18, 2020
Sandor Schoichet
Pharmaceutical Executive

Volume 40, Issue 5

The commercial and social value of non-financial performance.

A wonderful aspect of biopharma is the confluence of medicine, science, engineering, and business, all working together to advance a deeply shared mission: healthier lives, improving healthcare, and alleviation of suffering. It’s been a privilege working with the extraordinary diversity of people that it takes to make our industry work.

My goal in this column is to explore the idea of sustainability in biopharma. As I think of

it, “sustainability” refers to a company’s non-financial strategy and performance, the elements needed, in addition to a profitable business model, to drive long-term value for all stakeholders. These elements of sustainable business performance are often categorized into Environmental, Social, and Governance (ESG) topics. Sustainability is a perspective that integrates these different elements, one that has grown up in response to a wide range of stakeholder and regulatory concerns, and that is becoming an essential part of long-term business strategy.

The idea of sustainability has been sweeping through the international business world recently, as more and more research shows that effectively managing material ESG challenges also delivers above-average long-term financial returns. (A good point of entry here is The Comprehensive Case for Business Sustainability by Tensie Whelan and Carly Fink, Harvard Business Review, Oct. 21, 2016. Sustainability as BlackRock’s new Standard for Investing is the most recent statement on this front, from Larry Fink, CEO of BlackRock).

So, what does “sustainability” mean specifically for biopharma?  We’re not major emitters of CO2 like transportation, and we don’t damage the environment by our operations like resource extractors. Why is this idea essential to our long-term success? 

The answer starts with identifying the specific ESG topics that matter most for biopharma companies, and thinking about how they relate to the core mission of our industry. Over the past two years I’ve helped facilitate a Biopharma Investor ESG Communications Initiative, which brought biopharma and investor representatives together in a collaborative process aimed at improving communications between them.

The two groups converged on a shared pool of high-priority ESG topics for the sector. The topics are not ranked, as specific priorities vary widely from one company to another, reflecting different therapeutic specialties and business strategies. The consensus, however, is that all biopharmas should at least address this core set of topics when communicating with investors.

The topics include access to healthcare and medicine pricing; business ethics, integrity, and compliance; climate change; clinical trial practices; ESG governance; environmental impacts; human capital management; innovation in therapeutics, diagnostics, and business models; pharmaceuticals in the environment and anti-microbial resistance; product quality and patient safety; risk and crisis management; and supply chain management. 

How can these ESG topics help frame our thinking about a challenge like the COVID-19 pandemic, for instance? So far, there’s been a huge emphasis on innovation, both in terms of new diagnostics, treatments, and vaccines, and on collaborations that can accelerate R&D or production scale-up. But we need to address a much wider scope-almost every topic has a bearing on our response, and failing to address any of them will diminish the outcome of our efforts and the public perception of our industry for years to come. Take, for example, risk and crisis management. There are already indications that companies with better ESG performance are also doing better handling the crisis. An effective governance model for non-financial performance is the basis for an effective and coordinated response. 

Access to healthcare and medicine pricing will have their turn on the frontlines, too, hopefully sooner rather than later. There will be huge pressures to allow early access, and to scale-up not just manufacturing but also equitable global distribution and delivery, while keeping prices low. 

There’s a concept called the “social license to operate,” which refers to the broad social stance on the value of biopharma, and the laws, regulations, and social conventions that allow us to operate profitable research-based businesses on a sustainable long-term basis. What is the social value we’ll deliver over the next months and years? Will the outcome be a jumble of high-priced treatments available only in developed markets, or will it be an improved global healthcare system that adds to our resilience and helps put our society back on a healthy footing? 

 

Sandor Schoichet, Director, Meridian Management Consultants, and Co-Founder of the Biopharma Sustainability Roundtable. He can be reached at sschoichet@meridianmc.com

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