Big Pharma: The case for corporate climate responsibility
Today, Climate Counts is releasing our review of the pharmaceutical industry, and they’ve made for an interesting case: they are both extraordinarily profitable and have received the highest scores yet of any of the 14 industries on our Climate Counts Company Scorecard. But in spite of good scores on measurement and reporting, they’ve been weak on reducing their emissions and have, for the most part, failed to use their formidable collective lobbying muscle to help pass strong climate legislation.
That’s quite a mixed bag–what does it all mean?
Profits and climate action are (of course) compatible
Fourteen of 16 pharmaceutical companies we scored fell into our “striding” class—the highest level in the Climate Counts ranking system (typically at least 50 points out of a possible 100)—and two companies (AstraZeneca and Johnson & Johnson) scored over 75 points. These are all companies from an industry (pending mergers notwithstanding) that is one of the most profitable in the world. So the good news is we have yet more proof that climate action is compatible with good business.
Why not do more?
We evaluate climate performance in terms of impact measurement; reductions achieved (including management accountability for reductions); public policy engagement; and openness and transparency in reporting. Pharmaceutical companies are proving to be consistently good at getting their houses in order; greenhouse-emissions tracking is a sector strength, as is acknowledging and showing public support for a collective societal approach to addressing climate change.
The majority of companies in the sector, however, have not set aggressive or specific goals to reduce their emissions. They are also falling short at taking real steps to cut emissions. Many pharmaceutical companies rely on lengthy and antiquated supply chains, so logistical efficiency improvements could be a priority that would result in reductions (some, like GlaxoSmithKline, seem to recognize this opportunity). Additionally, those big pharma companies that don’t actually manufacture their products could play a market-leading role in encouraging climate action and climate leadership throughout the value chain.
Invest in climate
The prescription drug business is overflowing with profits. Despite a widely held perception that companies sacrifice much profit to drug research and development costs, the margin they enjoy on most drugs is on the order of 91-95%. The industry has the added economic benefit of having a locked-in market (the government represents the three largest purchasers of pharmaceuticals: Medicare, the VA, and Medicaid) and limited competition between companies since most are highly specialized. The upshot? The industry can afford to be — and by many accounts, is — notoriously inefficient at manufacturing.
The pharmaceutical giants could be investing significant amounts of money in the kinds of renewable energy and energy-efficiency technology that most companies and sectors can only dream about right now. In other words, the kind of ROI evidence that less profitable, less successful companies say they need in order to truly prioritize climate protection? Big pharma could really be the test case.
Speak up in Congress
Notably, the pharmaceutical sector — which pays big dollars for lobbying support in Washington, D.C., on issues related to healthcare — is conspicuously absent (or obscured) when it comes to advocating for strong legislation to fight climate change. Johnson & Johnson, a member of the U.S. Climate Action Partnership, is an exception, but what if the sector presented a coordinated voice to lawmakers? It’s time to move behind a small and select group of companies willing to speak out on climate change. It’s time for entire sectors to step forward, armed with a compelling narrative about how climate action and energy-efficiency investments have changed their businesses in extraordinarily positive ways.
Actually, the overarching question really is, why isn’t the sector demonstrating explicitly that strong, voluntary corporate climate action is consistent with good business? That’s the message the marketplace needs, now more than ever with a possible climate law on the horizon that many have argued wouldn’t in its current form go far enough to address the scientific realities of climate change.
Regardless of their high scores, there is much more that the pharma industry could and should be doing on climate, and that’s true of every company and every major company we’ve scored so far. To be perfectly clear, though, big pharma is better than most industry sectors in embracing corporate climate responsibility. Better, though, is not good enough. If money is what’s needed to address climate change with the kind of technology and logistical improvements worthy of 21st-century, future-friendly companies, then the pharmaceutical companies certainly have it to spend. Whether they will show they’re serious about being climate innovators depends on whether we hold them to a standard worthy of the profits they’ve earned in the name of innovating for our health.