ESG in Pharma: Building a Healthier, Greener, and More Responsible Future

July 18, 2025

Author - NSB&Co

ESG in Pharma: Building a Healthier, Greener, and More Responsible Future

 

image1

1. Executive Summary

Environmental, Social, and Governance (ESG) considerations have become indispensable in the pharmaceutical sector. As the industry is closely linked to human health, ethics, and long-term planetary well-being, the alignment of business strategies with ESG frameworks is no longer optional, it is expected by regulators, investors, patients, and global institutions.

This article provides an extensive examination of how ESG factors are shaping pharmaceutical companies worldwide. It covers sustainability in drug manufacturing, inclusive access to medicines, responsible clinical trials, energy use in labs and logistics, and corporate governance mechanisms that ensure transparency and ethical conduct.

Key insights from the report suggest that companies that embed ESG in their business model are not only more resilient and better prepared for regulatory compliance but also capable of unlocking operational efficiencies and reputational trust. The article concludes with actionable recommendations and a roadmap for integrating ESG into the pharmaceutical value chain, from R&D to distribution.

2. Introduction

 

image2

Environmental, Social, and Governance (ESG) criteria are frameworks that evaluate how businesses perform in areas beyond financial returns. In today’s complex business environment, ESG has emerged as a global benchmark for responsible corporate behavior.

For the pharmaceutical industry, ESG is more than an ethical obligation, it is intertwined with the industry’s core purpose of safeguarding life. Environmental risks from chemical waste, social inequities in medicine access, and governance failures such as unethical trials or price-fixing scandals can severely harm not only public trust but also long-term business viability.

This article seeks to provide a holistic view of how ESG is transforming pharmaceutical operation. It outlines global ESG standards, real-world best practices, evolving regulations, and emerging risks and opportunities. The content is tailored to guide pharma companies in aligning with ESG expectations while achieving cost savings, innovation, and sustainable growth.

3. ESG Landscape in the Pharmaceutical Industry

Industry Trends Influencing ESG Adoption

  • Increasing global concern about the environmental footprint of pharmaceutical production, including high water use, energy consumption, and toxic chemical disposal.
  • Acceleration of health equity and access-focused programs post-COVID-19, driven by public awareness and the need to close gaps in vaccine and medicine access.
  • A shift toward transparent reporting and the adoption of ESG-linked financing, such as green bonds and sustainability-linked loans.

Stakeholder Expectations

  • Patients demand affordability and fair access to life-saving medicines.
  • Regulators expect compliance with ethics in trials, drug approval transparency, and reduced environmental impact.
  • Investors use ESG metrics to assess long-term stability and reputational risks.
  • Employees increasingly prefer to work for companies with strong ESG commitments.

Regulatory Frameworks

  • EU’s Corporate Sustainability Reporting Directive (CSRD) and Taxonomy Regulation now cover large pharmaceutical entities.
  • U.S. SEC climate disclosure rules mandate reporting of material Scope 1–3 emissions.
  • India’s BRSR Core mandates sustainability disclosures for top listed pharmaceutical companies.
  • WHO, FDA, and EMA guidelines are incorporating sustainability and ethical supply chain considerations.

4. Environmental Practices

Sustainable Manufacturing & Green Chemistry
Pharma manufacturing is resource-intensive and chemically complex. Companies are adopting green chemistry techniques to reduce toxic solvent use, promote biodegradable excipients, and eliminate hazardous by-products. GlaxoSmithKline, for instance, has redesigned processes to use water-based systems, drastically reducing VOCs (volatile organic compounds).

Energy Efficiency in Facilities
Cleanrooms, cold chains, and controlled environments require 24x7 HVAC systems. Pharmaceutical firms are investing in renewable energy, solar rooftops, and high-efficiency systems. Johnson & Johnson’s Cork facility, for instance, runs entirely on wind energy.

Waste Management
Pharmaceutical waste includes active pharmaceutical ingredients (APIs), packaging waste, and expired or unused drugs. Many companies are implementing take-back programs and collaborating with reverse logistics providers for safe disposal. Circular economy strategies include reusing solvents and minimizing packaging.

Climate Risk Management
Companies are integrating climate risk assessments into site selection, raw material sourcing, and global supply chain decisions. Floods or temperature spikes may disrupt critical manufacturing or storage conditions. Novartis conducts stress testing on facilities for climate resilience.

5. Social Practices

Equitable Access to Medicines
ESG-compliant pharma companies are redesigning access strategies, licensing to generics, participating in patent pools, or setting tiered pricing models. AstraZeneca, for example, offered its COVID-19 vaccine on a not-for-profit basis during the pandemic.

Workforce Health and Safety
Pharma employees face exposure to chemicals and pathogens. Best practices include closed-system operations, protective equipment, air quality monitoring, and mental health support programs.

Diversity, Equity & Inclusion (DEI)
DEI is a growing area of focus, especially in leadership, R&D, and board representation. Pfizer reports annual DEI statistics and ties executive bonuses to diversity targets.

Clinical Trial Ethics
Unethical trials have long-term reputational risks. Today, leading firms conduct community-based trials, ensure informed consent in native languages, and include underrepresented populations. Sanofi has enhanced patient inclusion across demographics.

Patient Data Privacy
With the rise of digital health, AI-powered diagnostics, and e-prescriptions, maintaining secure, ethical data handling is key. Firms must comply with HIPAA, GDPR, and local data privacy laws.

6. Governance Practices

Transparent ESG Oversight
Pharma boards are creating ESG-specific committees and integrating sustainability KPIs into executive compensation. Annual sustainability or impact reports are now standard for major firms.

Anti-Corruption Measures
The industry is vulnerable to corruption in regulatory approvals, pricing, and marketing. Strong internal controls, third-party audits, and whistleblower channels are critical.

Supply Chain Due Diligence
The globalized pharma supply chain includes raw materials from high-risk regions. Companies are now using tools like block-chain and AI to track compliance with environmental and labor standards.

Integrated Risk Management
ESG risks are mapped across procurement, operations, R&D, and external partnerships. Companies embed ESG into their enterprise risk management (ERM) systems, conduct horizon scans, and regularly review ESG metrics.

7. Challenges in Implementing ESG Practices

Complex Global Supply Chains
Pharmaceutical supply chains often span multiple continents, from raw material extraction to final packaging. Ensuring consistent ESG compliance across diverse geographies, suppliers, and regulatory regimes is one of the biggest operational challenges. Third-party vendors in regions with weak environmental and labor enforcement can introduce risks related to water contamination, unethical labor, or API pollution.

High Compliance Costs vs. ROI
Adopting ESG-friendly technologies like solar energy systems, waste treatment plants, or biodegradable packaging may lead to increased short-term capital expenditures. Many mid-sized pharma companies struggle to justify these costs without clear regulatory mandates or investor pressure.

Data Collection and ESG Reporting
Data silos, lack of real-time tracking systems, and manual disclosures make it difficult to compile credible ESG reports. Especially for Scope 3 emissions and social indicators like supplier wages or DEI ratios, data is fragmented and often unverified.

Evolving and Conflicting Standards
Navigating a landscape filled with multiple ESG frameworks such as GRI, SASB, TCFD, CDP, BRSR, etc. each with different terminology and metrics, is confusing and resource-intensive. Global pharma players must comply with regional standards while maintaining global consistency.

Ethical Dilemmas in Access and Pricing
There are reputational risks when essential medicines are priced beyond affordability in low-income countries, even if justified by R&D costs. Balancing innovation, shareholder expectations, and public health responsibilities is a delicate task.

8. Best Practices & Case Studies

Case Study 1: GlaxoSmithKline (GSK) – ESG Driving Access and Operational Efficiency

Overview: GSK has embedded ESG deeply into its corporate strategy through its Access to Medicines program and its 2030 environmental goals (net zero impact on climate and net positive impact on nature).

ESG Actions Taken:

  • Adopted tiered pricing and voluntary licensing agreements to expand access to vaccines and essential medicines in low- and middle-income countries.
  • Implemented green chemistry practices in manufacturing to reduce the use of hazardous solvents and improve process efficiency.
  • Committed to 100% renewable electricity by 2025 and zero operational waste to landfill.

Benefits Realized:

  • Social Impact: In 2022 alone, GSK’s access initiatives reached over 1.3 billion doses distributed in underserved markets, enhancing health outcomes globally.
  • Cost Efficiency: Green chemistry improvements led to a 30% reduction in solvent use, lowering production costs and hazardous waste disposal expenses.
  • Investor Confidence: GSK's ESG transparency helped maintain a top-tier MSCI ESG rating (AA), attracting long-term ESG-focused investors and reducing cost of capital.

Case Study 2: Novartis – ESG-Driven Resource Optimization and Climate Resilience

Overview: Novartis has built a comprehensive ESG framework with measurable climate targets, a global health equity strategy, and robust governance around responsible innovation.

ESG Actions Taken:

  • Committed to carbon neutrality across Scope 1 and 2 emissions by 2025, and net zero across the entire value chain by 2040.
  • Installed closed-loop water systems and solvent recycling processes in manufacturing plants.
  • Issued a USD 2.3 billion sustainability-linked bond tied to access-to-medicine targets and carbon reduction.

Benefits Realized:

  • Environmental Gains: Achieved a 42% reduction in water consumption at key manufacturing sites between 2016–2023, helping mitigate climate risk and operational downtime in water-stressed areas.
  • Financial Impact: Solvent recovery and energy efficiency projects yielded over $20 million in operational savings over three years.
  • Access Improvement: Bond-linked targets increased treatment access for 24+ underserved diseases across 40 countries, boosting Novartis' social license to operate.

Case Study 3: Johnson & Johnson – ESG Enhancing Supply Chain Resilience and Brand Equity

Overview: Johnson & Johnson has consistently integrated ESG into its long-term value creation plan, with a strong emphasis on supply chain sustainability, health equity, and ethical governance.

ESG Actions Taken:

  • Implemented an ESG risk-scoring system for 85% of its critical suppliers, leading to targeted improvements in energy use, labor practices, and emissions.
  • Launched the Health for Humanity Goals, including a commitment to 100% renewable electricity by 2025 and reaching 1 billion people with health equity programs.
  • Introduced inclusive clinical trial standards to improve diversity in research and product efficacy.

Benefits Realized:

  • Supply Chain Continuity: ESG-screened suppliers showed 22% fewer disruptions during global crises (e.g., COVID-19), demonstrating the value of a resilient and ethical vendor base.
  • Cost Avoidance: Through circular packaging redesigns and energy efficiency, the company saved an estimated $18 million in manufacturing and logistics costs from 2020–2023.
  • Reputational Trust: J&J has consistently ranked in the top 5 of Fortune’s “Most Admired Companies” list and maintains strong brand equity due to its transparent ESG commitments.

9. ESG Reporting & Metrics

Key ESG KPIs for Pharma:

  • Environmental: Total GHG emissions (Scopes 1–3), % renewable energy use, water consumption per production unit, API waste treated.
  • Social: Number of patients reached through access programs, percentage of diverse hires, employee injury rate, ethical trial compliance score.
  • Governance: Number of supplier ESG audits, board-level ESG oversight, anti-corruption policy effectiveness, frequency of ESG risk reviews.

Global Reporting Standards:

  • GRI Standards: GRI 302 (Energy), GRI 403 (Occupational Health & Safety), GRI 416 (Customer Health & Safety)
  • SASB Standards for Biotech & Pharmaceuticals: Cover drug safety, access, affordability, and environmental compliance.
  • TCFD: Disclosure of climate-related risks, scenario analysis, and governance accountability.
  • CDP: Voluntary disclosure platform used by investors for climate benchmarking.

Technology for ESG Reporting:

  • Pharma leaders are integrating ERP, sustainability software (like Sphera or Enablon), and AI to automate ESG data capture, validation, and analytics.
  • Block-chain solutions are being piloted for end-to-end traceability in supply chains to meet compliance expectations and enhance trust.

10. The Future of ESG in the Pharma Industry

Green Innovation Pipelines
Future pharmaceutical R&D will increasingly focus on green chemistry, biodegradable drug delivery systems, and low-carbon manufacturing technologies. Innovations in synthetic biology and precision fermentation are reducing dependency on resource-intensive raw materials.

Health Equity as Strategic Priority
Companies are launching long-term programs to address systemic health inequalities. This includes rural health initiatives, mobile clinics, and partnerships with global health organizations like GAVI and WHO to strengthen healthcare infrastructure.

Regulatory Convergence & Mandatory ESG
Governments and regulatory bodies are moving toward mandatory ESG disclosures, especially around climate risk (EU CSRD, US SEC). Pharma companies must prepare by embedding ESG governance into their DNA, not just reporting externally.

ESG-Linked Financing
Access to capital will increasingly depend on ESG performance. Pharmaceutical firms are issuing green bonds, with proceeds tied to sustainability targets—such as cutting Scope 3 emissions or increasing vaccine access.

ESG Talent and Culture Shift
A new generation of professionals is demanding purpose-driven employment. Companies investing in ethical cultures, inclusive leadership, and transparent ESG commitments will win the war for top biotech and scientific talent.

References –

1. Executive Summary & Introduction

2. ESG Landscape in Pharma

  1. Environmental Practices

4. Social Practices

  1. Governance Practices
  1. Challenges
  1. ESG Reporting & Metrics
  1. Case Studies

9. Future of ESG in Pharma

10. References & Frameworks

Blog Posts

More Posts

Read More