Regulatory Rapporteur
July/August 2024 | Volume 21 | No.7
Abstract
Environmental, social and governance (ESG) factors form a framework for approaching and evaluating a company’s sustainability and ethical impact. Within this article, we look at how these factors help stakeholders and investors evaluate a consultancy’s commitment to responsible business practices and their effects on society and the environment. Businesses can harness the opportunities that arise from adopting a sustainability mindset and approach. These contribute not only to business value but also to positive impacts on people and the planet.
In today’s rapidly evolving business landscape, sustainability has emerged as a pivotal concern, influencing various aspects of corporate governance and operations. Environmental, social and governance (ESG) factors form a framework for approaching and evaluating a company’s sustainability and ethical impact. These factors help stakeholders and investors assess a company’s commitment to responsible business practices and their effect on society and the environment.
While larger companies in the pharmaceutical and biotechnology industry may have well-established sustainability strategies, the value of ESG in regulatory affairs consultancies within this industry is not always evident. This article explores the value of ESG in these contexts, focusing on the opportunities and responsibilities for these entities to develop strategies that support their people, address their impact on the planet and contribute to the greater good of society, for both internal and external clients and stakeholders.
Governance: embedding sustainable practice to create long-term value
A solid sustainability approach begins with good governance. It is the cornerstone of building socially responsible practices. As regulatory compliance is a critical component of governance, regulatory groups arguably possess a deeper understanding of good governance than other sectors, recognising the vital importance of transparency and integrity.
Aside from regulatory and legal compliance, other areas of ESG governance include responsible business and resource management, robust business ethics reporting, board diversity, executive compensation, anti-corruption measures and performance disclosure related to the transition to a green economy. For many businesses, good governance may involve reallocating capital to sustainable solutions.
In ESG, once compliance is maintained, the focus shifts to integrating sustainable business practices in every decision, embedding sustainability into the overarching business strategy to gain traction and importance, and fostering the long-term value that sustainability initiatives can deliver.
Environment: the issues facing regulatory consulting groups
The direct environmental impact of regulatory consultancies could be perceived as minor, relating to office energy, waste and business travel. However, their influence on the environment can be high when advising clients, particularly regarding energy use and waste management during drug manufacturing, responsible packaging and waste management, and scrutinising the environmental implications of the transport of products.
Within the office environment, small changes can lead to a significant impact when championed by leadership. For example, this could be through implementing paperless offices, installing motion sensors on lighting, providing segregated waste bins and installing electric vehicle charge points. These office-based initiatives encourage positive employee behaviour and are often requested by employees, but they can also lead to cost and time savings while reducing the business’s impact on the environment.
There is also a macro picture to consider. Regardless of how large or small a company is, climate change has implications for consultancies and their clients, whether directly impacting operations through weather or scarcities or impacting people. In healthcare specifically, changing global temperatures will continue to affect people’s health and lifestyle. The UN Intergovernmental Panel on Climate Change (IPCC) reports that over three billion people live in areas ’highly vulnerable‘ to climate change, with the impacts spanning air quality, food and water security, disease, extreme heat and weather, and social impact.1[1]
This is a fast-moving area, and regulatory affairs professionals within consultancies need to anticipate rapid legislative changes relating to sustainability, both in how it affects their clients and their own operations. Getting ahead and moving beyond compliance to integrating ESG into every decision will help foster resilience to change, both legislative and otherwise, particularly as pharmaceutical companies and biotechnology industries often face scrutiny due to their high energy consumption, waste generation and potential impact on delicate ecosystems.
Social: people and communities, internally and externally
The social aspect of ESG is crucial as it focuses on the wellbeing of employees and others working along the value chain, fostering a healthy company culture and promoting diversity, equity and inclusion. It encompasses efforts to create supportive cultures where employees are respected, valued and offered equal opportunities for growth and development.
Intrinsically, parts of the healthcare industry often place a significant emphasis on the social elements of ESG, improving access to healthcare services, making treatments more affordable, addressing disparities in access, reaching out to underserved communities and providing financial assistance programmes. Those working within the sector often focus on making life-saving drugs and therapies more affordable, advocating reasonable drug pricing and introducing initiatives to assist individuals from all socioeconomic backgrounds in obtaining necessary treatments.
The work of regulatory groups for their clients is only one aspect of a comprehensive ESG approach. It is equally important to focus on internal matters for the wellbeing of direct employees and to foster a healthy company culture. This includes, but is not limited to, prioritising employee health and wellbeing through relevant employee benefits, wellness programmes and mental health support. For example, the provision of comprehensive healthcare, including elements such as critical illness cover or access to health providers, gives employees greater security in the event of illness and contributes to the attraction and retention of talent.
Promoting internal diversity, equity and inclusion (DE&I) within regulatory consultancies is essential, just as in any other business. Efforts to create supportive cultures where employees are respected, valued and offered equal opportunities for growth and development should involve implementing policies to address disparities and biases, promoting diversity in leadership roles and encouraging open dialogue about societal issues within the workplace.
Responsibility and opportunity in an ESG approach
Ultimately, there is both responsibility and opportunity in adopting robust ESG strategies within regulatory affairs, impacting regulatory consultancies and the clients they serve. Adopting such approaches is not entirely altruistic. Good ESG practices can help build a resilient, commercially viable business model for the long term, providing opportunities for innovation, cost and process efficiencies, and better engagement with employees, clients and the supply chain. By integrating ESG considerations into their strategies, small and mid-size pharmaceutical companies can improve their reputation, manage risks more effectively and attract investors who increasingly assess ESG performance alongside financial metrics, while fulfilling their mission of advancing healthcare.1[1]
Conclusion
Many businesses are progressing in their journey towards developing a strategic approach to ESG that aligns both with the nature of their business and market and their employees and wider stakeholders. By identifying the most material issues and developing ambitions along with a practical roadmap to address them, businesses can harness the opportunities that arise from adopting a sustainability mindset and approach. Sustainability not only contributes to long-term business value but also has a positive impact on people and the planet, creating a mutually beneficial outcome.
References
[1] Intergovernmental Panel on Climate Change (2023) Climate Change 2023 Synthesis Report.
