ESG is Reshaping the Supply Chain

Every morning I get my breakfast sandwich and a cup of hot latte at the café on the first floor of my office building. It’s a morning ritual that I’ve been doing for the last six months. Four months ago, I started bringing my tumbler for my morning cup of coffee. It is a small change of routine that I hope will make a small impact on the environment.

Our daily routines have a small impact on the environment, where business practices have a much more considerable one. Currently, environmental, social, and governance (ESG) values and goals are center stage in business. ESG activities are being used to paint a holistic picture of a company’s supply chain management and sustainability in the long term. Investors are reprioritizing their asset management goals and focusing more on sustainable business models.

Many people assume that establishing environmental, social, and governance ideas are the main blocks of ESG. This is true to some extent, but the key to ESG is sustainability. The sustainable supply chain allows an organization to optimize processes, increase productivity, and conserve resources, which, in turn, allows them to identify opportunities to reduce costs and innovate products. The supply chain has always played a pivotal role within the pharmaceutical industry, especially when it comes to meeting patient needs. Its importance is seismic, not only within the pharma industry but across all industries, and that has been more evident in recent years due to COVID-19 challenges.

Supply chain sustainability can be achieved by:

1. Understanding or updating: Companies must first map out their current supply chain processes and identify all the connections they have with their clients and vendors. This includes mapping out suppliers of suppliers, and suppliers of suppliers of suppliers, and identifying raw material sources, as they can have a sequential impact on the supply chain.
2. Identify risks: Based on the identified supply chain connections, companies then need to highlight potential risks to their supply chain. For example, capacity constraints within certain contract manufacturing organizations (CMOs) or lack of transparencies with their customers or vendors may provide inaccurate demands or projections.
3. Build partnerships with vendors and clients to mitigate against potential risks: As a biosimilar company, we work with carefully selected CMOs and supplier evaluations are conducted on a regular basis to minimize risks in these relationships, while boosting competitiveness. Ongoing communication channels are established to maintain supply chain sustainability, and risks are identified via roundtable business review meetings, partnership decision meetings, and health check surveys.¹ These communication channel activities reinforce our supplier and partner communication, and ensure that we and our partners are aligned to ensure supply chain sustainability.
4. Ensure evaluation of the risk mitigation plans and activities identified on a regular basis to confirm sustainability: Devise plans to ensure those risk mitigation actions are executed via business review processes. These processes also ensure that ongoing day-to-day activities are completed without impacting additional actions to mitigate against risks identified between clients and vendors. For example, grouping of deliveries to certain destinations and ordering enough inventory so there won’t be remaining products that would go unused. This, in turn, would minimize potential wasted resources and lessen additional carbon footprint due to unnecessary transportation of drugs.
5. Include innovative ideas and process improvements identified: When the existing supply chain is sustainable, new ideas can be implemented and enhancements applied. Since day-to-day operations are optimized, innovative ideas can be developed and implemented on top of existing processes without constraints, such as package size-reduction projects, or implementation of new raw materials or new raw material vendors.
6. This entire cycle repeats on regular basis.

Mutual trust

Companies that have resources and processes assuring supply chain resilience and sustainability show to their investors and stakeholders an ability to navigate within the complex maze of the global supply chain. Sustainable supply chain management starts with increasing transparency and accountability, and the setting of clear guidelines and standards, particularly for companies that work with suppliers and vendors. A pharma company usually works with a diverse group of partners, including raw material suppliers, contract research organizations (CROs), CMOs, and logistics companies. For a business to operate a sustainable supply chain, it is necessary that the company, as well as its partners, adhere to the codes of conduct and ethical standards to ensure the health and well-being of patients, employees, and local communities. It is also about keeping the communication channel open with suppliers and vendors, identifying potential risks, redundancies, and unmet needs that would benefit both sides, and addressing operational inefficiencies. This requires investment and efforts in building trust and mutual respect for each other.

Redesigning the future

Like any other industry, pharma has an impact on the environment. Drug production inevitably results in emission of greenhouse gas and excretion of wastes and ingredient residuals that can have an impact on air, soil, and water resources.² However, what differentiates a pharma organization from others is the ability to redesign its business strategies and approaches in a way that can create shared value for both the individual company and the society. This could involve using highly efficient equipment that requires less energy consumption or developing eco-friendly packaging and shipping materials that are recyclable or less wasteful. It is also about ensuring safety of the workers, including those working in partner companies, and the health and well-being of patients, through rigorous quality management of medicines, from cell line production to delivery of final drug products (FDPs).

Biosimilars play a significant role in sustainability, not just environmentally, but also in terms of social sustainability. One of the major promises of biosimilars is an affordable option to existing treatments, which widen patients’ access to medicines. Increasing the accessibility of medicines, as well as being the pressure valve for ever-rising healthcare costs and alleviating the financial burden for more innovation, is one of the ultimate aims of ESG.

About the Author

Kris Soyoung Lee is Vice President and Commercial Team Leader, Samsung Bioepis.

References

1. Samsung Bioepis 2021 Sustainability Report.

2. Lotfi Belkhir, Ahmed Elmeligi. “Carbon footprint of the global pharmaceutical industry and relative impact of its major players.” Journal of Cleaner Production, Vol. 214, 2019, 185-194.