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The world’s leading pharmaceutical companies are exposed to risks from their reliance and impact on biodiversity, says a new study launched today.
The study by KPMG and the Natural Value Initiative (NVI), titled Biodiversity and ecosystem services: Risk and opportunity analysis within the pharmaceutical sector, reveals the potential business risks facing the pharmaceutical industry from its reliance and impact on natural resources.
Undertaken on behalf of asset manager Robeco with the view to create greater awareness among the investor community, the study reviews the risk exposure of 10 leading global pharmaceutical companies, based on their impacts and dependencies on biodiversity and ecosystem services (BES). The companies include Astra Zeneca, Bayer, Bristol-Myers Squibb, GlaxoSmithKline, Johnson & Johnson, Novartis, Novo Nordisk, Pfizer, Roche and Sanofi.
Lara Yacob, Senior Engagement Specialist from Robeco notes that “while Biodiversity has been on the agenda for decades, investors are only now starting to take notice of the potential risks of dependency and impact on biodiversity to preserving shareholder value”. “We want our portfolio companies to be aware of the risks throughout their value chain and take appropriate measures to mitigate them. In addition to this capitalizing on opportunities arising from the management of these risks is key to capturing growth potential for a company and therefore good for shareholder value”.
Annelisa Grigg, co-author from the NVI, explains that the pharmaceutical sector dependencies on BES include sourcing of active ingredients for drugs and water use in manufacturing.
“Protecting and maintaining biodiversity is important to the pharmaceutical industry as a significant proportion of the ingredients to activate in medicines, come from our natural environment.
“The impacts include water pollution and use of inert ingredients linked with environmental degradation such as palm oil. These can pose regulatory, operational, reputational, market and financing risks,” says Ms Grigg.
Charlotte Linnebank, co-author from KPMG Climate Change and Sustainability, says that while the risk exposure to biodiversity was already on the radar of most of the companies surveyed, the study shows that overall, the Pharmaceutical sector is yet to adequately escalate the issue to include their supply chains.
“We found that the companies surveyed that undertake natural product discovery, see it as a source of competitive advantage and innovation. However, alongside these opportunities, mismanagement of BES can pose risks. While some organisations have begun to acknowledge these risks, little work has been done to evaluate risks to their supply chains,” says Ms Linnebank.
Ms Grigg recommends companies expand their environmental risk assessments to consider impacts and dependence on BES.
“Such assessments should address the sourcing of inert and active ingredients from nature in drug discovery, development and manufacture as well as the direct operational footprint of manufacturing sites,” concludes Ms Grigg.