The core building blocks of trust must be operationalized for pharma companies to strengthen their social contract, deliver business value, and improve patients’ quality of life.
Trust within the pharmaceutical industry continues to be a puzzling problem. The industry brings innovative medicines to people in need, improving human health and saving lives. This raison d’etre would seem to correlate highly with trust. Yet, the industry consistently struggles with consumer and public trust.
As measured by various trust metrics,1-3 pharma generally lags behind other industries or health subsectors in capturing public confidence. Although trust metrics increased thanks to pharma’s contributions during the COVID-19 pandemic, levels of distrust remain high.
However, trust—especially within the context of healthcare—is fundamental to a pharma company’s ability to deliver on its mission, both from business value and social contract perspectives. Trust directly impacts the quality and effectiveness of the pharma industry’s interactions with patients, partners in healthcare provision, regulators and policymakers, and society overall. In virtually no other industry outside of the healthcare ecosystem is an organization’s social contract more directly tied to its business value than in the pharma industry, where the core purpose is to improve quality of life.
In general, trust is the belief in the reliability, authority, truthfulness, or capability of someone or something. That’s fairly straightforward. However, defining—much less measuring—trust in relation to a specific pharma company is a challenging task.
To demystify this concept and apply it to the real-world activities of pharma organizations, we created a “hierarchy of trust,” which is composed of three building blocks (see Figure 1 below). Like Maslow’s hierarchy of needs,4 each element must be met to ascend to the next. Our hierarchy of trust can be supplemented with Deloitte’s “four trust-building signals” (humanity, transparency, capability, and reliability).5
Because the social contract is less regulated, we focus our efforts there. To see how pharma companies benchmark in their environmental, social, and governance (ESG) and sustainability efforts versus other industries, we refer to the Dow Jones Sustainability World Index. This index scores companies identified by S&P Global’s Corporate Sustainability Assessment across economic, social, and environmental dimensions. Interestingly, only seven pharma companies rank within the index’s top decile, representing only 28% of the pharma and biotechnology companies included in the index. This is a relatively poor showing compared to other sectors. For example, 70% of electrical utility companies, 60% of telecommunication services, and 38% of banks included in the index were rated within the top decile.6
Turning to the Pharma 50 companies ranked in Pharm Exec's report, we investigated what these organizations are doing to operationalize trust and strengthen their social contract. We performed multifaceted research on the trust-building efforts of all top 50 pharma companies by leveraging publicly available sources and combining qualitative and quantitative research methods. To break down the topic of trust operationalization, we focus on four dimensions of how effectively pharma organizations deliver on this subject (see Figure 2 below).
Most of the top 50 pharma companies share a high commitment to operationalizing trust and ensuring that commitment is presented in a transparent and accessible way. Figure 2 shows a prioritization of trust and reputation through the various metrics, which are outlined in the rest of this article. This bodes well for the future of the industry.
The following are four ways in which companies can operationalize trust.
To foster the trust needed for an effective social contract, pharma companies establish a foundation through ethically grounded governance. They also embrace the socially minded role that corporate boards can play.
The role of board committees. The majority of the Pharma 50 companies (72%) cover ESG/sustainability or corporate social responsibility (CSR) themes through existing board committees, primarily the corporate governance committee. The remaining 28% created at least one separate board committee that addresses key elements of our trust hierarchy, including public policy and sustainability (AbbVie), sustainability (AstraZeneca, Grifols), ESG (Bayer, Organon), or CSR (Sun Pharmaceutical Industries).
In the case of GSK, trust is explicitly mentioned under the terms of reference of its corporate responsibility committee that “considers the company’s trust priority and has oversight of GSK’s responsible business approach and ESG strategy, performance, and reporting, which reflect the most important issues for responsible and sustainable business growth.”7
Board member expertise. An intentionally composed corporate board enables pharma companies to tap into specific skill sets and knowledge bases directly linked to patients and healthcare providers. In an analysis performed in partnership with BoardEx, we see that, on average, five to six board members on each of the top 50 pharma companies demonstrate extensive previous experience working in health services, academic medicine, education, the not-for-profit space, and/or government. Additionally, an average of three current board members on each of the top 50 pharma boards have at least one board seat in the broader “quality of life” ecosystem.
Appointing board directors with relevant backgrounds and experience can provide valuable perspectives and insights that help pharma companies navigate complex challenges, enabling them to be trusted partners in public health.
Organizational culture refers to the shared mindsets and behaviors that define an organization’s “personality.” Culture shapes trust, either positively or negatively. Companies with a culture of transparency, inclusion, and fairness tend to foster high levels of trust among their employees.
Trust accelerates organizational success. Research shows that employees in high-trust companies report 106% more energy at work, 76% more engagement, 74% less stress, 50% higher productivity, and 29% more satisfaction with their lives. They collaborate better with their colleagues and stay with their employers longer than people working at low-trust companies.8
Actively developing organizational “personality.” Appreciating the fact that trust is built from the inside out, at least 13 of the top 50 pharma companies launched culture-related initiatives in the last few years, as reported in their company publications. The cohort of these companies contains large-cap and midsize pharma (e.g., Pfizer’s Purpose Blueprint; GSK’s Ahead Together; Boehringer Ingelheim’s Our FOCUS; and Daiichi Sankyo’s One DS Culture) and emerging large players (e.g., Moderna’s Moderna Mindsets; Viatris’ The Viatris Way; and BioNTech’s Culture Campus). All these initiatives share the goal to anchor purpose in the day-to-day, create value for patients and society, empower team members, and, ultimately, engender trust internally with their employees and externally with patients, healthcare professionals, regulators, policymakers, and investors.
Driving employee satisfaction.Employee perception provides a strong indication of the company’s internally-felt trustworthiness. We looked into several leading cross-industry employer rankings and employer review websites, such as Great Place To Work, Forbes, Fortune, and Glassdoor. Fourteen out of the top 50 pharma companies appear on at least one of those renowned employer rankings in 2022–2023 editions. This speaks to satisfaction with working conditions, development opportunities, collegiality and collaboration, culture, and values, among other criteria for selection.
Pharma leaders need to commit to and model the purpose that is at the center of their actions, decisions, and strategies. Equally as important, they need to communicate the “why” behind their decisions and demonstrate core behaviors that drive trust, such as honesty, integrity, courage, empathy, and vulnerability.
Consistent and intentional leadership development, linked to strategy, is a critical foundation for building these required behaviors and mindsets, which we address more fully ahead. Development alone, however, is not sufficient. Companies also need to hold leaders accountable. Here, we approach the question of leadership’s commitment from two angles: 1) whether the leaders are incentivized to attend to the social contract; and 2) how companies publicly commit to different trust-building elements in their company’s reports.
Executive compensation and monetary incentives. Positive financial incentives may accelerate the transformation and support the culture of ethics and sustainability. In designing incentive plans for their executives, 28 of the 41 companies with publicly available compensation structures include performance metrics directly related to the topics of DE&I, ESG, and/or sustainability. The definition and granularity of those metrics vary among companies, and the majority of them are related to corporate targets shared by the leadership team (versus individual objectives) and in annual bonus plans (versus long-term incentives). The weighting factor of individual trust-building focus areas demonstrates a larger variability, ranging from 5% (e.g., ESG as part of the annual incentive cash bonus program at Incyte), to 10% (e.g., sustainability and social impact as a short-term incentive for Bristol Myers Squibb’s executives), to 16% (e.g., “build trust with society” in Novartis’ CEO scorecard), to 25% (e.g., ESG in variable remuneration of Grifols’ executive directors).
Increased transparency. Transparency is essential for building trust. By evaluating the Pharma 50 companies’ transparency about their trust-building efforts, we examined their public disclosures that go beyond financial reports and clinical trial data, such as sustainability and DE&I reports. Almost all of the top 50 pharma companies (46) publish at least one annual report (mainly on ESG, sustainability, CSR, and/or DE&I) as part of the integrated annual report or as a standalone publication. Twelve companies stand out in their willingness to communicate openly and respond to constituent inquiries. They also bolster reporting to two or three reports, adding topics directly addressing health as a societal issue (e.g., Johnson & Johnson’s Health for Humanity report; BMS’ Global Access and Health Equity report; and Novartis’ Novartis in Society report).
Formalizing roles within a trust-building area and elevating them to the c-level can increase accountability and drive the company’s efforts in a more integrated fashion. Bringing on board a dedicated resource/team can result in broader implications for the company and its reputation, such as providing specialized expertise and knowledge, setting clear responsibilities, orchestrating cross-functional collaboration, and improving credibility with internal and external constituents.
The role of ethics and compliance. At 11 of the top 50 pharma companies, the chief ethics and compliance officers directly report to the CEO or the board. Twenty-seven companies consider ethics and compliance as integral parts of larger functions elevated to the c-level, mainly legal.
Other dedicated trust-building roles. Of the top 50 pharma companies, 26 expanded the range of dedicated roles by:
By working to improve aspects relating to governance, culture, leadership, and structure, a company can effectively demonstrate its commitment to transparency and reliability to not only its internal teams but the general public. The trust built through these efforts—as well as enhanced capabilities and a focus on societal contributions—can go a long way toward building goodwill for a company as well as the individuals leading it.
With widespread trust-building activities within the industry, we can then examine what steps pharma leaders must take to establish and maintain the trust needed to deliver on the social contract. Outstanding leadership requires the ability to adjust one’s focus seamlessly across three perspectives, which we think of as “lenses.” Those lenses (as detailed in Figure 3 below) include:
While all lenses are vital, trust-building requires significant attention to the inner scope and the relational lens. This does not mean that the visionary and operational lenses don’t contribute to the social contract.
The visionary lens enables pharma leaders to scan their environments and seek innovative ways to add value, learning from competitors and other industries alike to build all aspects of the hierarchy of trust. Without an active operational lens, those great ideas are not translated into reality. Trust stems from consistent action, not just ideas.
Pharma leaders must begin with the inner scope because building trust first requires that leaders trust themselves. True trust in oneself does not manifest as arrogance but instead shows up as having the courage and clear-sightedness to demonstrate authenticity, humility, and vulnerability needed to foster a culture of trust. This enables leaders to lean into the relational lens within the company and with other constituencies, which includes transparency, inclusion, and follow-through.
These recommendations for extending and strengthening the bedrock of trust will allow pharma leaders to create an even greater impact on the health and well-being of their communities. The resulting effects can benefit a company’s teams and “quality of life” ecosystem as well as the entire world, every moment of every day.
Lynn Foster, Senior Partner, Leadership Advisory; Morten Nielsen, Senior Partner, Life Sciences; and Saule Serikova, Global Leader, Commercial Strategy and Insights; all with WittKieffer
Acknowledgment: We appreciate the contributions of Michael Castleman, Luigi Frezza, Aoife Kearins, and Susan Snyder in developing this article.