72% of companies released ESG reports. H shares are generally better than A shares. There is still room for improvement in ESG reports of high-value pharmaceutical companies!

As the Food and Drug Administration, the State Council and other government agencies continue to promulgate new policies on innovative drug research and development, review, registration, and production, China's pharmaceutical industry continues to accelerate its development

01.

The "Handbook" uses listed companies with high market capitalization in this industry[1] as an analysis sample, and selects the top 47 listed companies in the A-share and H-share market for analysis

The overall ESG report[2] release rate of the industry has increased

02.

The "Handbook" comprehensively analyzes ESG report transparency from the six dimensions of information availability, completeness, balance, materiality, quantitative comparability, and reliability, and 10 scoring indicators

Compared with the overall level of the pharmaceutical industry[3] of the previous year, the transparency index of pharmaceutical companies in the scope of disclosure, key performance and third-party verification and process effectiveness descriptions has improved this year

Figure 1-The scoring rate of the information disclosure transparency scoring indicator of listed companies in the pharmaceutical industry

03.

The "Manual" evaluates and identifies 8 substantive issues in the pharmaceutical industry based on the principles of report materiality proposed in the GRI "Sustainability Reporting Standards" and the "ESG Reporting Guidelines" of the Stock Exchange:

From the perspective of the performance of substantive issues in the pharmaceutical industry, the industry’s ESG performance of Hong Kong-listed companies [4] outperformed A-share listed companies

The performance of A-shares shows a trend of two levels of differentiation

The issue of resource utilization shows great polarization
.
Most of the top scoring companies are Hong Kong stock companies, and there are too many A-share companies with 0 points
.
The reason for the low scores of A-share companies is that there is almost no explanation about energy in the report that was published in conjunction with the annual report
.
However, with the impact of the “carbon neutral” and “carbon peak” policies, resource utilization management and corporate climate change issues have a linkage impact, so companies need to strengthen the management of this issue
.

Figure 2-Quantitative performance distribution of listed companies in the pharmaceutical industry

04.
Issue management recommendations: “Business Ethics and Corruption” issues urgently need to improve quantitative performance disclosure

The medical field is facing a special market environment.
It has both the freedom of market entities under the market economy and the constraints of administrative power intervention.
At the same time, due to the natural monopoly of medical science, the legitimate interests of patent ownership, and exclusive management, it has become the country’s "anti-corruption" Important areas of work
.
Under the background that the country is stepping up efforts to combat medical corruption, "business ethics and anti-corruption" should become an important substantive topic of concern to pharmaceutical companies.
Companies should improve the management and practice of anti-corruption work, and strengthen the disclosure of public information In response to the expectations of investors and the public
.

The current status of disclosure by pharmaceutical companies on this topic is as follows:

Full disclosure of business ethics and anti-corruption issues management systems and action measures
.
The 46 sample companies all scored on this topic, and most companies had no corruption lawsuits during the reporting period
.
Most of the sample companies made more disclosures on system construction and training, especially those listed on Hong Kong stocks
.
Most Hong Kong-listed companies have disclosed business ethics and anti-corruption system construction in "Corporate Governance"
.

The disclosure rate of key performance indicators on business ethics and anti-corruption issues is low
.
The disclosure rate of quantitative indicators under this topic is relatively low, and only a few companies have disclosed; it is recommended that listed companies increase the statistics and disclosure of quantitative performance indicators such as "the average number of hours employees receive anti-corruption-related training"
.

We recommend that pharmaceutical companies carry out anti-corruption and commercial bribery work in the following aspects:

Strengthen the construction of anti-corruption and commercial bribery systems
.
Improve the anti-corruption and commercial bribery management system, and disclose detailed and clear management objectives and policies
.
In addition, it is also necessary to disclose relevant procedures such as anti-corruption and commercial bribery reporting mechanisms, whistle-blower protection systems, and handling methods
.

Carry out anti-corruption and commercial bribery-related training and publicity for the company's board of directors, employees, and suppliers
.
It also discloses quantitative data on anti-corruption-related training introduced by the board of directors, employees, and suppliers, including the number of participants, frequency and hours of training
.

Case

CSPC attaches great importance to the issue of corruption and regards anti-corruption management, clean government construction and clean government supervision as strategic tasks
.
In the "Social Responsibility Report 2020", a series of internal systems and norms on the prevention of corruption (such as: "China CSPC Group Co.
, Ltd.
Accountability Management System for Dereliction of Duty", etc.
) are disclosed, and it is focused on absorbing advanced external supervision Experience, conduct inspections and supervision, promote integrity and self-discipline education, strengthen supplier management, improve the supervision function of bidding and procurement, and improve the reporting mechanism.
The five aspects describe the key work of the company in anti-corruption and internal disciplinary inspection
.

SynTao has released the "Environmental, Social and Corporate Governance Report" Operation Manual and industry ESG manuals every year since 2016
.
In 2021, SynTao and E-pharmaceutical managers jointly released the "Environmental, Social and Corporate Governance Report" Operation Manual for the pharmaceutical industry, including three volumes for the biotechnology industry, the pharmaceutical industry, and the healthcare and service industry
.
To upgrade ESG research in China's pharmaceutical industry, and to guide companies listed in China to achieve high-quality ESG management through the evaluation of ESG report transparency index and the performance analysis of ESG substantive issues