The Pharmaceutical and Bio Industry Accelerates ESG Management Efforts

3 out of 10 Places Have Introduced Management
40% "Preparing for Introduction"
Complex Evaluation Criteria and Staff Shortage Challenges

[Asia Economy Reporter Lee Gwan-ju] The ESG (Environmental, Social, and Governance) management trend is sweeping through the pharmaceutical and bio industries as well. Already, 3 out of 10 major domestic pharmaceutical companies have adopted ESG management, and many others are preparing to implement it. However, complex evaluation criteria and a shortage of specialized personnel were cited as challenges in preparing for ESG management.

According to the ‘2022 KPBMA Pharmaceutical and Bio Industry Ethical Management Report’ published by the Korea Pharmaceutical and Bio-Pharma Manufacturers Association on the 23rd, a survey of 35 member companies showed that 34.3% responded that they have adopted ESG management. Those preparing to adopt it accounted for 40%. Pharmaceutical companies operating dedicated departments for ESG management made up 20%, while those preparing such departments accounted for 34.3%. Ten companies were found to publish sustainability reports or related reports.

ESG activity certifications are also actively ongoing. Among certifications received by pharmaceutical companies from external organizations, ‘GMP (Good Manufacturing Practice) certification’ for drug manufacturing was the most common, with 28 companies holding it. Twenty-six companies obtained the international standard ISO 37001 (Anti-Bribery Management System) certification, which is promoted to spread ethical management. Additionally, the number of companies receiving external certifications such as family-friendly company certification (13 companies), environmental management system certification (12 companies), and occupational health and safety management system certification (8 companies) is increasing.

The ESG management trend is expected to expand further in the pharmaceutical and bio industries. The COVID-19 pandemic has demanded greater social responsibility from these industries, and changes in consumer awareness and the expansion of shareholder activism are factors accelerating ESG management in the sector. However, preparing for ESG management is not an easy task. Companies most frequently cited ‘complex evaluation criteria of ESG rating agencies’ (25 companies) as a major challenge. This was followed by a shortage of specialized personnel (22 companies), cost burdens for ESG management (14 companies), lack of guidelines (11 companies), and lack of incentives and uncertainty about ESG adoption (10 companies each).

Despite these difficulties, the level of ESG management in the pharmaceutical and bio industries has improved. In the ‘ESG rating evaluation’ announced last year by the Korea Corporate Governance Service, 10 companies received an ‘A’ grade. Excluding holding companies, these included Dong-A ST, Samsung Biologics, ST Pharm, Ildong Pharmaceutical, Chong Kun Dang, Handok, and Hanmi Pharmaceutical?showing a remarkable improvement compared to the previous year when only Hanmi Pharmaceutical and Ildong Pharmaceutical received the grade.

The report pointed out areas for improvement in the environmental sector, such as carbon dioxide emissions, water pollution, excessive packaging of pharmaceuticals, and disposal of waste pharmaceuticals. In the social sector, issues such as rebates, quality control, and personal information leaks were highlighted as major concerns. To advance ESG management in the pharmaceutical industry, the report recommended establishing a mid- to long-term roadmap, practicing sustainable eco-friendly management, and preparing measures to expand corporate social responsibility (CSR) management. The report emphasized, “The pharmaceutical industry is a public-interest industry directly related to the health of the people,” and added, “As the importance of ESG emerges, ethical management is becoming a crucial value for companies.”

This content was produced with the assistance of AI translation services.