Pharma ESG efforts overwhelmingly skew social, while environment and governance come up short: study

Pharma companies' environmental, social and governance (ESG) efforts skew heavily toward the S, or social, a recent study found.

A whopping 77% of pharma ESG efforts over the past 16 months were social, while just 12% were environmental and 11% governance, according to PwC's analysis of 32 pharma and life science companies.

However, as ESG expectations from investors, consumers and the government continue to grow, pharma should look to expand, or at least get better at communicating, positive environmental and governance initiatives, said Trine Tsouderos, leader of PwC’s Health Research Institute.

“One of the insights we had was that there may be more work going on around the other E and G pillars, but maybe companies haven’t reported it publicly,” she said.

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PwC purposefully examined only public press releases and media to find pharmas’ ESG efforts, because that’s what investors and the public also see.

Social activities dominate at pharma companies in part because that’s how they were founded, Tsouderos said, noting, “Most pharma companies were founded with some kind of health mission, so the idea of a social mission as a foundation for the business is really familiar.”

One area in which pharma is looking to improve is diversity, especially in clinical trials—not only pushed by the emergence of COVID-19 health inequities but also with an eye to the future.

The U.S. population is increasingly diverse, and, “if drugmakers are developing a drug now that might be approved 10 years down the road, they’d better know how well it works with the population we’re going to have in 10 years,” she said.

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For investors, ESG is a growing issue. More than $51 billion in new investor money poured into ESG funds last year—breaking the record for a fifth consecutive year, according to Morningstar research. The total accounted for one-fourth of the money pouring into all U.S. stock and bond mutual funds last year, up from just a 1% share in 2014.

ESG measures also matter to people. In a late 2020 PwC survey, 62% of consumers viewed companies more positively if they took active socially responsible health measures. Among younger 18- to 34-year-olds, the percentage jumped to 70%.

“Decisions are being made everyday by investors, by consumers and also by the government around what your company is doing—or not doing,” Tsouderos said.