ESG in Life Sciences

ESG, a well-known acronym for environmental, social and corporate governance (“ESG”), is a timely topic for the life sciences industry. At EisnerAmper’s May Life Sciences CFO Roundtable “The New CFO Imperative -- ESG,” Michael Hadjiloucas, the firm’s national pharmaceutical and medical devices sector leader, moderated a chat with EisnerAmper managing director of ESG & Sustainability Solutions. The roundtable focused on some of the challenges the industry is facing and why ESG is now requiring the close attention of CFOs.

Some of the key takeaways and questions that were discussed include:

• ESG crosses all business lines and topics. Be aware of the impact on your company’s bottom line and proactively manage environmental and social risks.
• Consider the concept of “double materiality;” sustainability opportunities stand to benefit the environment and your business.
• Proactively discuss ESG with executives and your board.
• It’s the beginning of ESG’s evolution; ESG is what stakeholders and investors are looking for.

What are your policies and strategies for talent recruitment, promotion, and retention? 

• Retention is key; more cost-effective versus hiring.
• During the recruiting process, remove names to eliminate bias.
• Build diversity, equity and inclusion (DEI) metrics into human resources (HR) policies.

Do you have an existing policy that explicitly considers human rights issues (e.g., U.N. Guiding Principles on Business and Human Rights) relating to internal operations and supply chain? 

• Have this written down and included in a firm-wide policy.
• Be aware that complaints could lead to sanctions impacting your bottom line.

What is the oversight mechanism for data security, cybersecurity, data protection standards, and internal controls?

• We have seen this area having the most impact and material risks from an ESG perspective.
• What occurs in this area could really hurt a company’s reputation; incidents may impact fundraising.
• Consider social media as part of your overall strategy.
• Any external tests and assertions should be publicly available.
• Insurance companies have targets to meet for sustainability, i.e., concessions for companies that meet certain standards.

After integrating ESG and improving sustainability, your company will be better positioned to:

• Manage resources in a more efficient and cost-effective way.
• Reduce the cost of capital and widen access to finance and attract investors.
• Manage operational risks; reduce the risk of fines, penalties, and other regulatory issues.
• Create opportunities to develop new markets and new products.

When you integrate ESG and sustainability in your business, you can increase long-term profitability while doing good for the environment and society. This just scratches the surface of why ESG is becoming an increasingly important topic in the life sciences industry.