Sustainability and Progress Continue to Make Headlines in 2024

Geralyn Ritter
Head of corporate affairs,
sustainability, and ESG
Organon

This year is off to a curious start, embodied in a Wall Street Journal article headline, touting ESG as “the latest dirty word in corporate America.”1 It describes how the polarization of ESG is leading many companies to stay their course—but just say less.

That may work across other topic areas, but won’t cut it when it comes to climate action—high on the priority list of pharma’s stakeholders. And with good reason. COP 28, the UN Climate Change Conference, provided a stark reality check: 2023 was the hottest year on record and we’re not progressing on 41 of 42 global indicators of climate progress.2

So, what does this mean for our industry? Amid all the negative news, there are some key takeaways—and even some bright spots— for healthcare.

PUTTING A BURNING PLATFORM TO USE

Progress on climate action—albeit slow—is being made in the corporate sector. “Businesses are far, far ahead of where they were three, five, or 10 years ago,” said Aron Cramer, president and CEO of BSR, a nonprofit consultancy.

And many factors are likely to intensify the pressure to accelerate action. Most fundamentally, the impact of climate events is forecasted to increase. Companies need strategies to improve their resilience and deal with real threats from floods, storms, droughts, and other disasters. Regulatory pressures are also increasing, leading the largest companies to reckon with the implementation of the European Union’s Corporate Sustainability Reporting Directive (CSRD) in 2025, as well as the US Securities and Exchange Commission’s upcoming climate disclosure rule.

What’s more is a noticeable uptick in major customers, particularly in Europe, requiring ESG commitments and environmental disclosures as part of tender processes. For example, the UK’s National Health Service recently implemented a tender requirement for companies that required a net-zero commitment in the UK.

So how do we put this burning platform to use? New mandates are nerve-wracking, but the silver lining is they make us plan and act. That’s reflected in data from the Capgemini Research Institute, which found that 57% of executives say their company is in the process of redesigning its business to be more sustainable, up from 37% in 2022.

DOES PROGRESS EQUAL ADDED COST?

Now, it’s not surprising that in an industry down year, there could be an immediate knee-jerk reaction to avoid sustainability initiatives because of the belief they are too costly and don’t offer enough ROI.

But it’s important to examine those assumptions. Sustainability does not necessarily equal added cost—especially for our industry, which has more “low-hanging fruit.” A recent report by McKinsey and Company suggested approximately ~60% of emissions for pharma companies can be abated at near-zero cost by 2040.

Still, even when increased costs are required, more executives are seeing it as a driver of value. The percentage of C-suite executives who claim that the cost of sustainability initiatives outweighs the benefits dropped more than half this year, from 53% to 24%, according to Capgemini.

WHAT’S NEXT?

All these complexities and pressures are nothing new for a highly regulated and socially sensitive industry like biopharmaceuticals, which also requires high levels of investment and long development timelines. A long-term sustainability mindset will always be a driver of shareholder value.

During an election year in the US, I imagine the term “ESG” is likely to become more embattled and tainted by politics. Let’s use the current debate to reset and reground our efforts on actions that are truly material to our business and to the communities in which we operate. It really doesn’t matter what we call our efforts to advance sustainable business practices, it matters that we do it.

On a personal note, thank you for allowing me to deliver this column and share my perspective over the past two years, especially as Organon formed as a new purpose-driven company. This is my last column for now as I enter my next professional chapter—but I hope you all will continue to engage with me and share your thoughts.

References

1. Cutter, C.; Glazer, E. The Latest Dirty Word in Corporate America: ESG. WSJ. January 9, 2024. https://www.wsj.com/business/the-latest-dirty-word-in-corporate-america-esg-9c776003
2. Boehm, S.; Jeffery, L; Hecke, J.; et al. State of Climate Action 2023. doi.org/10.46830/wrirpt.23.00010