ESG, New Turf for Compliance

With the increasing creation of ESG frameworks within pharmaceutical companies large and small, compliance has been put in the position of thinking about its role in ESG. According to Kirsten Liston, principal and founder, ReThink Compliance, who spoke on “Creating a Compliance Guide to Environmental, Social and Governance (ESG) Involvements” at the PCC 2023 conference this week, “Industry is still getting [its] head around this.”

Emily Mason, Vice President, Compliance, Amgen, who joined Liston, oversees global compliance and privacy. She said, “ESG has been an exciting area. How I think about it is, what is the risk to the company that may not show up on the traditional financial analysis and think about risks to investors, and what company is doing to manage those.”

There are a number of departments within pharma where ESG can live, for example, legal, compliance, corporate affairs or a combination. Mason noted that Amgen puts ESG under corporate affairs, “but it’s embedded in the company and the culture.”

To Liston, ESG resembles compliance because of the following similar features:

• Starts at top, needs full leadership; board buy-in
• Involves right and wrong

• Requires risk assessment, gap analysis and priority setting
• Clear goals make it a part of everyday culture
• Problems need remediation.
• Need to report, monitor, measure, improve over time

And, she said, the two functions can learn from each other. ESG can learn from compliance, which has a lot of experience socializing and communicating values internally. And compliance can learn from ESG about speaking to people’s concerns.

Amgen’s ESG framework is embedded into cross-functional working teams, with the following four-pillar approach: Healthy Lives (involves pricing, access, patient support, health equity, ethical research); Healthy Society (DE&I, responsible sourcing, charitable works); Healthy Planet (environmental, sustainability, responsible sourcing) and a Healthy Amgen, where the corporate culture and its products reflects the values of the company. “Safety is a big deal here,” said Mason. “We need to make sure we are up on product safety, as well as cybersecurity.” She says the pillars really help them think through ESG as a company.

Mason sits on the Healthy Society committee, where she had a supplier-side a-ha moment. “It’s not just about the raw materials or the environment, but also, is the supplier engaged in forced labor or is it a minority-owned business…all of the facets around who you are doing business with. That’s why I love ESG because it makes you think about your business from a different angle vs. the finances.”

The supplier-side discussion ranged on how far can companies go to get ESG data from those third-party suppliers. Should it be built into the contracting process? It is easier to get into information into a contract that is required by a law or regulatory body, but there may be limitations about getting ESG-related data. Liston said, “Every company can decide how far they can go with suppliers during procurement and contracts.”

There is a lack of agreed-upon ESG standards globally, and many measures are not helpful for pharma. Metrics for other industries, banking for example, don’t have value in pharma. Mason noted that ESG metrics in pharma, would be determined by the size of company, its products, and so on, so it will look very different for each company. Mason said, “We look at what everyone else is doing, not to compare, but focus on best practices.”

Liston said that communicating ESG strategy, similar to communicating compliance, to employees requires multi-level engagement. “Communicating right and wrong to employees, you need to market your values internally, connect with people’s emotions, earn trust through authenticity, get to know your audience, and back it up with actions,” she said. A note on authenticity. “To show up as authentic, requires being honest about where you are at. Speak authentically about where you are and where you want to go. Then back it up with actions, if you are going to put it into words, be authentic and act on it.”

Reference: Pharmaceutical Compliance Conference (PCC) 2023; PCC 2023, Creating a Compliance Guide to Environmental, Social and Governance (ESG) Involvements, April 26, 2023.