ESG In 2024: Stakeholder Views From ‘Strategic Imperative’ To ‘Largely A Nonsense’

The continued focus on environmental, social and governance (ESG) measures is moving Boston Scientific and the industry forward because our impact as a health care company extends to how we operate our business and care for the world around us. A healthier planet leads to healthier people.

Standardized reporting requirements from governing bodies like the Corporate Sustainability Reporting Directive (CSRD) from the European Commission are driving companies to create processes and have the infrastructure and update capabilities to report on ESG-related measures. Going forward, through CSRD, companies operating in Europe will need to report on applicable material topics, regardless of progress or setbacks.

We know we can only improve what we measure. More transparency within ESG will foster a better understanding of the collective industry impact to our people and our planet. When companies are accountable, together we can advance equity in our health care systems, empower people to make the best health choices and ultimately create a healthier planet.

Fundamentally, Sofinnova invests in life sciences. People (the entrepreneurs, the healthcare practitioners, and patients) are the focus of our companies and the products and services they are developing. We launched one of the first-ever investment strategies dedicated to Industrial Biotechnology over 15 years ago; it evolved into what is now a formal impact fund.

ESG may have taken center stage in recent years; however Sofinnova has long considered questions of environmental, social, and governance fundamental pillars of 'good business.' In healthcare, stakeholder relationships can be extremely complex: the buyer, prescriber, distributor, user and benefiter can all be different people in healthcare, meaning that taking into account all stakeholders and how they are affected is important. As such, it’s not a burdensome process for us to adopt ESG best practices when considering new investments, or support our companies’ development, rather an extension of that key principle of healthcare investing: understand all the stakeholders, their relationships, and how you can minimize the negative impact/maximize the positive impacts in each case.

Given we operate across the board from company creation to listed companies, it is important to think of ESG as a positive and accept that everything can’t be done immediately as companies need certain size and scale. As investors, we feel we have an important role to provide sufficient support so companies can continuously improve their ESG policies and practices as they mature. Our thesis there has been, and remains, that a robust ESG approach makes for a robust company.

ESG is a disaster. It distorts everything anyone does. Mostly, indeed, for all the wrong reasons (labels, subsidies...). It is stupidly expensive when done well; hence the various shortcuts taken. ‘We will be carbon neutral in 2050’ and the like. It is also something that doesn't actually help much with anything (we're still digging up more oil and gas and even coal). For all the worldwide efforts to date, what have we actually achieved and at what cost? How much would it have cost to solve cancer instead? Or world hunger? I hate ESG as it is being abused by governments and associates to steer business just for their own benefit. It is largely a nonsense, at best a bit of marketing towards influenceable non-scientific people. I'm talking mainly about the E bit. S and G are a bit better and more relevant. 

One of the most significant shifts has been the focus on authenticity. Brands are hyper-focused on targeting social issues, how their customers feel about the sustainability of the materials they use, or why their 'influencers' connect with consumers. As the head of the Natural Products Association, I’m inspired by the responsibility our brands feel toward their consumers and we’ve worked hand-in-glove with our membership to ensure we are meeting the needs of our members.

Consumers are looking for a deeper meaning from the brands they support. Though it can't be seen as disingenuous. Additionally, brand management books tend to be written by management consultants and 'thought leaders' who study successful companies during peace. While it may be an uncomfortable reality to digest, the reality is special interest groups have gaslighted the industry with claims the products NPA memberships sell are equivalent to tobacco and alcohol. Our industry can not make the mistake of believing that external forces can be turned from foe to friend in the same way internal alliances can be formed. Peacetime techniques encourage broad-based creativity and contribution across a diverse set of possible objectives. The natural products industry’s survival depends upon strict adherence and alignment to the mission at all costs. The reaction by many in business is avoidance, as the resultant chaos is not without casualties. However, avoiding the problem doesn't make it go away. The 30th anniversary of DSHEA [Dietary Supplement Health and Education Act] serves as a reminder of such; while there was a great deal of emotion involved, what won the day was a strategy that stood united.

Cybersecurity and data privacy are key elements of any ESG framework. TRIMEDX has already taken the initiative to make ESG a priority, regardless of any future government requirements. TRIMEDX recently received recertification with the highly regarded International Organization for Standardization’s Information Management Security certification ISO/IEC 27001:2013. This verifies that TRIMEDX meets the latest information security industry standards and reaffirms our commitment to protecting providers’ and patients’ confidential data. Because this has long been a TRIMEDX priority, we are ready for whatever ESG rulemaking may arise in 2024, and we are ready to help our clients prepare for any upcoming changes.

We believe driving the best clinical results should go hand in hand with products that don't harm the environment more than required. In the pump industry, there is a clear distinction between disposable pumps you throw away after use, and rechargeable pumps. With Kaleido, we proved that one of the smallest patch-pumps can be rechargeable which is highly beneficial for the environment.

ESG is a catalyst for positive change and a framework to managing impacts, risks and opportunities; creating value for business, brands and for society; and diversifying supply chains.

The emerging nonfinancial, ESG-related regulatory disclosure requirements provide additional incentive for large, multinational publicly traded companies to advance their sustainability approach and accelerate progress. These requirements will help move the cosmetics and personal-care products industry forward by encouraging alignment and collaboration to create impact at scale and improve recycling systems across the country and globally. Creating alignment and consistency of measurement and disclosures between countries and regions is critical to create a common understanding of the material topics, interlinking with investors’ data needs, GHG reporting and human rights due diligence.

While new disclosure requirements and meeting new ESG reporting standards are not without challenges, PCPC member companies view the new regulations as opportunities for promoting innovation, building a foundation for a more sustainable future, and accelerating the trajectory of ESG in 2024.

Fragrance Creators recognizes the importance of responsible growth of the fragrance industry, emphasizing the need for a healthy planet and respect for communities. As a convenor of the industry, the association has been a platform for collective pre- and pro-competitive action, and we are wholly focused on operationalizing our commitment as stewards of the industry at large.

My one ask is that when efforts are undertaken to address one sustainability-related concern, we take a comprehensive review and consider the overall impact to people and the plant. Sometimes, by minimizing one narrow concern, we can inadvertently create an overall greater burden to people or the planet – unintended consequences can be avoided. This is where we believe industry can and should use credible science and data-driven scenarios to educate stakeholders towards real, results-producing solutions.

In 2023, I shared with HBW that it would be the year for responsible industry stewardship, following the launch of our Responsible Industry Stewardship Program in 2022. This program, endorsed by a growing number of our members through a voluntary pledge, focuses on ten key priorities. Fragrance Creators will continue to advocate for a holistic approach to sustainability, using credible science and data to avoid unintended consequences and promote effective solutions for the benefit of people, perfume, and the planet.

Kantar’s latest global sustainability attitudes study found that the number of consumers who are most engaged with sustainability (we dub them ‘Eco-Actives’) is on the rise again after a brief dip amid the uncertainty of the past couple of years. They are now at an all-time high, with this consumer group making up an incredible 33% of the British population. But while the demand for greener options is higher than ever, there are still huge pressures on household spend putting a cap on their ability to put their good intentions into action.

In terms of inflation, prices in health and beauty categories have generally been rising more slowly than food inflation over the past year. However, while the latter is now showing signs of slowing down, this is not yet the case across the health and beauty sector. In fact, price inflation in toiletries recently overtook the rate in the wider grocery market – with prices growing 10.4% year on year.

In this context, it’s not difficult to see why the cost-of-living crisis is affecting shoppers’ ability to pick the sustainable choice in store. Not every shopper who values sustainable credentials can afford or is willing to pay a price premium. We looked at how many Eco-Actives consider themselves to be struggling to make ends meet each month, and a quarter said this was the case in their households. So a significant number of people who are really engaged with sustainability simply cannot afford to pay more to make the better choice. In 2024, the industry needs to get to grips with the challenge of bringing products to market which appeal to these shoppers who want to make choices that are better for the planet – but without demanding premium price tags.