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March 19, 2002
Report Diagnoses Ills in the Pharmaceutical Sector
by William Baue
A German rating agency reports that many pharmaceutical companies are failing to follow the example
of the sector’s leaders in solving environmental and social problems.
SocialFunds.com --
Pharmaceutical companies provide a significant social benefit: medicine for those ailing. However,
socially responsible investors often exclude these companies from their portfolios when ethical or
environmental liabilities, such as genetic testing on embryos or toxic waste production, outweigh
the positive benefits. Munich-based social and environmental rating agency Oekom Research pointed out the irony of this
divide in a recent analysis of publicly-traded pharmaceutical companies.
 The report analyzed the 22 largest
pharmaceutical companies in the world, based on more than 200 social and environmental criteria.
The findings suggest that the sector’s top performers by these criteria are implementing innovative
solutions to environmental and social challenges. These companies may start making their way into
socially responsible investors’ portfolios more often, Oekom suggested. However, the sector’s poor
performers continue to perpetuate the problems that have plagued the industry, such as disregard
for the environment and for those suffering disease in developing countries.
“The leaders
in the pharmaceutical industry are making a serious attempt to reconcile economic expectations with
social and environmental responsibility,” said Dr. Andreas Stefferl, the researcher who oversaw the
analysis. “In addition, many companies have . . . opted out of controversial areas of business.
From the ethical and the environmental points of view, a significant potential risk has been
eliminated as a result.”
Oekom’s report implements a grading system ranging from A+ to
D-. The pharmaceutical sector’s “class” average was a C+. Denmark-based Novo Group and U.S.-based
Bristol-Myers Squibb (ticker: BMY)
led the class with B grades. U.S.-based Pharmacia (PNU) received the lowest
mark, a C-.
The pharmaceutical industry has identified many ways to improve its social
and environmental performance. For example, Novo Group has begun implementing the fermentation
process of chemical synthesis, which improves upon conventional chemical synthesis by employing
renewable raw materials and producing less toxic waste, both qualitatively and quantitatively.
Most pharmaceutical companies have yet to make such a commitment to reducing their environmental
impact, according to the report.
On the social score, pharmaceutical companies treat their
workers very well, largely because they must retain qualified personnel in order to maintain high
product quality. However, the sector’s preoccupation with “lifestyle” drugs, such as virility and
slimming pills popular amongst well-off consumers in the developed world, diverts resources from
drugs for life-threatening diseases such as AIDS. Furthermore, the sector’s obsession with patent
protection escalates the cost of vital drugs far beyond the reach of those suffering in developing
countries. Public pressure may force the sector to confront this social problem more
conscientiously, the report suggested.
The pharmaceutical sector’s overall social and
environmental performance is mediocre, according to Oekom’s rating.
“However, there is a
yawning gap between the leading companies and those at the tail end,” Oekom concluded. “The
leading group has acknowledges the sector’s global responsibility, and now it is up to the
stragglers to catch up.”
©
SRI World Group, Inc. All Rights Reserved.
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