Chiesi: Putting purpose at its heart
Italian pharma company Chiesi has embedded environmental and social purpose into its very corporate fabric
Every pharma company will be watching the policy announcements coming out of COP26 and engaging with the growing need to address its climate impacts.
While many are making progress here, few have made environmental and social impacts central to their mission.
Privately-owned Italian pharma company Chiesi is an outlier in this respect.
With more than 6,000 employees around the world, Chiesi became a benefit corporation company in 2018. This creates a corporate structure that requires it to shape its strategy around social and environmental issues, making them a part of its mission along with profitability. It is legally required to consider the impact of its decisions on its workers, customers, suppliers, community, and the environment.
It recently also became the world's largest pharma company to achieve B-corp status, a kind of extension of benefit corporation status that entails additional reporting and transparency on its environmental and social mission. Earlier this year, it also committed to becoming completely carbon neutral, including all indirect emissions, by 2035, which also happens to be the centenary of the company’s foundation.
The move to B-corp status has created the impetus for the company to measure a range of things beyond financial metrics. In fact the company now applies around 100 metrics by which it judges its performance and impact, says Maria Paola Chiesi, the company’s Shared Value and Sustainability Head.
“Because of our ethical nature we wanted to be sure we were doing everything right in every area, not just developing medicines for patients. As a company with a scientific background we measured many things but we realised we lacked a declared strategy on social and environmental impact and we also lacked the measurement system for that at the time. Five to six years ago we did not have the set of non-financial data we have now.
“We started thinking about becoming a B-corp when we wanted to assess our impact and we started to become intrigued by the rigour of the impact-assessment tool used for B-corporation certification on all of the areas that matter.
“We realised that we were probably very strong in terms of impacts on people - our patients and our own people. We also had a plan for community support in our territory but we did not have a strategy for our environment impact even though we had a lot of environmental certifications.”
The aim is the creation of broad benefits beyond those of shareholders, she says. “This is a cultural journey taking our company towards creating shared value. We always ask our people to measure what is good for patients, the environment and the community as well as financial performance.
A lower footprint
A good example of its approach here is its €350 million investment in developing the first ‘carbon-minimal' pressurised Metered Dose Inhaler (pMDI) for Asthma and COPD, due to launch by the end of 2025. The aim is to reduce the carbon footprint of pMDI inhalers by 90%, comparable with dry-powder inhalers (which don’t suit all patients).
It’s a significant issue. Conventional asthma inhalers contain potent greenhouse gases hydrofluoroalkane, tetrafluoroethane and heptafluoropropane. A UK study estimates that metered-dose inhalers represent 3% of NHS greenhouse emissions.
“It could be perceived as a huge investment where there are alternatives in the market,” says Chiesi “but with this inhaler we can demonstrate something with double value - for patients and physicians to have the best treatment. We think the development of this new inhaler is a good example of the generation of shared value.”
Such an approach may been seen by some as ‘back to front’. The argument has been advanced many times before that any business should pursue profits first and only then seek to do good with those profits (or famously in the case of Nobel laureate Economist Milton Friedman, profit should in fact be a business’s only purpose).
Purpose leads to profits
But the profit-first approach is less axiomatic than it may seem and embedding social and environmental sustainability as core values is in fact a more time-honoured idea, says Chiesi’s CEO Ugo di Francesco. “From a traditional perspective, improving the life of people has always been at the heart of the development of new therapies.”
And it is an approach that has both a commercial logic and is one that Chiesi’s shareholders are behind, says di Francesco. “If you solve societal issues, you generate competitive advantage at the same time. This has been the case for the entire 85 years of the business.”
Another way to look at this is to see profit as a by product of clarity of purpose, in Chiesi's case a focus on creating value for patients (and an echo of the concept of ‘obliquity’ coined by British economist and writer John Kay).
Making the transition to becoming a B-Corporation did have costs, but the company is seeing payback already, says Chiesi. “We did invest a lot but the payback of those investments was very short.”
Being a privately-owned business has helped in this respect, she concedes. “We had the fortune that we are a private company and so our shareholders could be patient. We could wait and decide whether to grow and at what pace and we can decide the degree of profitability needed, how much stays in the company to finance further development. We are in a privileged position to combine business growth with innovation.”
“I am convinced we will be awarded for taking strong action. We know what we are doing is increasing our competitive advantage. People now are really giving a lot of attention to the product and how it is made.”
Ultimately protecting patient health and the environment are closely entwined and it is up to the industry to improve both, says di Francesco. “Patients should not have to shoulder the burden of environmental responsibility when considering treatment options that affect their health. In the face of a global climate crisis we must all share the burden of action. I can only encourage other industry players to join us.”
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