ESG Readiness in Life Sciences and Health Care

Consumer Oil and Gas Financial Services Technology, Media, and Telecommunications Life Sciences and Health Care

LSHC ESG reporting: Progress, challenges, and regulations

Many companies in the LSHC industry have incorporated ESG goals into their operations, recognizing its importance to both the public and their stakeholders—recognition that underscores the importance of formal ESG and climate reporting. <a href="https://dart.deloitte.com/USDART/home/publications/deloitte/heads-up/2024/sec-climate-disclosure-requirements-ghg-emissions-executive-summary#SL885025642-681495" target="_blank">The U.S. Securities and Exchange Commission's (SEC) March 6, 2024, rule</a>1; the Corporate Sustainability Reporting Directive (CSRD); California’s climate laws; and other similar regulations require that companies review and understand how they are affected by the regulations and what they are required to disclose as a result, and understand the importance of implementation of controls around ESG reporting and effective dates of the various standards. In January 2024, we surveyed 250 company LSHC executives about the progress they’ve made in achieving their ESG goals and implementing the various regulations. This was a part of a larger, multi-industry Deloitte ESG survey, which probed across a variety of topics, including data challenges, assurance readiness, leadership, and more. We found specific differences in how the LSHC industry is progressing in those areas. Explore detailed insights into the current state of ESG readiness in the LSHC industry.

On a four-point scale from “no progress” to “significant progress,” nearly a third (32%) of LSHC respondents reported having made “significant progress” toward their ESG goals compared to 25% of general company respondents in the 2024 Sustainability Action Report.

Significant progress made towards their ESG goals by LSHC respondents

Significant progress made towards their goals by all other respondents

Figure 1. Meaningful ESG progress made by LSHC company respondents

Rather than waiting and postponing important ESG-related decisions, most respondents (94%) are actively working toward identifying a comprehensive path forward and making meaningful, calculated progress concerning budget, resources, and planning using the existing rules like CSRD.

Compliance with regulations is not a future concern looming over most respondents' heads—it's a present reality that suggests a timely response. Despite industry progress, many respondents cite room for growth in their progress toward meeting their ESG goals. However, consistent progress might be replacing sharp growth as ESG strategies adjust and are implemented, signifying a shift in approaches to sustainability.

Nearly a fourth (21%) of LSHC company executives said that “talent attraction and retention” is the top business outcome expected to benefit from enhanced ESG reporting, followed by “brand/reputation enhancement” (18%), and “reduced risk” and “increased efficiencies and ROI” (both tied at 16%). These findings are consistent with results from last year’s survey, in which respondents expected “talent attraction and retention” to be one of the business outcomes most likely to benefit from enhanced ESG reporting.

Talent attraction and retention
Brand/reputation enhancement
Reduced risk
Increased efficiences and ROI
Enhanced trust with stakeholders
Premium pricing of products

Figure 2. Business outcomes most affected by enhanced ESG reporting

Many larger public companies with more developed ESG frameworks might recognize the potential business advantages of integrating an ESG strategy into the heart of their core business practices. However, many smaller companies may still hold the view that ESG is a check-the-box compliance issue only, rather than a holistic business philosophy that can lead to a variety of benefits including reduced risk, brand/reputation enhancement, and of course, talent attraction and retention. When all companies—regardless of size—embrace a more comprehensive, culturally rooted approach to ESG, they can begin to see the expected results outlined in this data.

More than three in five LSHC executives (62%) assign management responsibility over ESG disclosure to a chief sustainability officer (CSO); another 40% rely on their executive leadership team for this, while 39% rely on their general counsel.

Chief sustainability officier

Chief strategy officer

Executive leadership team

General counsel/ legal

Chief financial officer

Supply chain executive

Investor relations

Marketing/ Public relations

Chief human resources officer

Chief sustainability officier: 62%
Chief strategy officer: 40%
Executive leadership team: 39%
General counsel/ legal: 38%
Chief financial officer: 32%
Supply chain executive: 28%
Investor relations: 24%
Marketing/ Public relations: 22%
Chief human resources officer: 19%

Figure 3. ESG management roles and responsibilities

Leadership can play an integral role in the ESG journey, with CSOs and chief financial officers (CFOs) working closely together to help LSHC companies move toward a future that is focused on transparent and consistent disclosures in compliance with the regulations concerning sustainability, equity, and access.

But, regardless of where ESG management responsibilities lie, success should not be the sole responsibility of leadership. Achieving ESG goals typically requires engagement from everyone within the organization, fostering a culture that integrates these principles from the top down and permeates every level of the organization with a comprehensive and enduring commitment.

LSHC companies ranked data quality as the biggest challenge and data accessibility as the second greatest challenge.

Quality (accuracy/completeness)
Availaibilty (access)
Review (documentations/sign-off)
Consistency (methodology and standards application)
Aggregation (consolidation)

Figure 4. Biggest ESG data challenge for LSHC

Deloitte's Sustainability Action Report finds that data challenges are consistent across industries. Some LSHC companies find themselves starting from square one, having to compile ESG data for the very first time. This collection process raises a variety of questions:

What data are we gathering?
What process do we have in place to ensure its quality?
What technology can we utilize to gather it?

An optimized internal audit strategy can help answer these questions, illuminating the data gaps that should be filled on the way to total ESG reporting regulation compliance.

Just under half (49%) of LSHC respondents said they lack confidence in data received from vendors, compared to 64% of respondents from our main survey respondents.

LSHC respondents that lack confidence in data received from vendors

Overall respondents that lack confidence in data received from vendors

Figure 5. LSHC companies' confidence in data

From pharmaceutical manufacturers to health care providers, it's becoming clear that vendor data plays an important role in a company's operating structure, extending even beyond ESG considerations. Accurate, reliable data is important in shaping the industry's strategies and operations.

Trust in leadership is one central consideration to the success of the LSHC industry's approach to ESG-related matters and the expectations set by a company's various stakeholders. This demand for accountability has triggered a heightened focus on ESG disclosures, typically leading to more rigorous scrutiny from both stakeholders and regulators on how companies are tackling ESG challenges internally and externally.

Regardless of your company's current state, it's important to consider being proactive about tackling these challenges. Where can you start?

According to the results of our survey, LSHC companies are working toward achieving their ESG goals despite the data challenges they face and the differences they share regarding ESG disclosure oversight responsibilities and progress toward ESG goals. If your company is faced with the task of understanding and effectively implementing evolving ESG disclosure requirements, the good news is you're likely not starting from zero. The groundwork you've laid for ESG can be applied in a comprehensive manner to meet disclosure requirements, thereby helping to foster efficiency and manage risk.

Delaying action might hinder progress and could leave you scrambling for resources when you decide to act. Reach out to one of our experienced advisers to assess if you're equipped with the breadth and depth of knowledge that may be necessary to exceed what stakeholders and regulators expect of you.

Explore the life sciences and heath care industry report

ESG reporting readiness, challenges, the impacts of sustainability reporting regulations, and more. Discover what life sciences and health care companies said in Deloitte's 2024 Sustainability Action Report.

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ESG SelfAssess™

For both public and private companies, ESG readiness is a unique and fast-evolving journey. Our ESG SelfAssess™ tool is here to advise you as you navigate yours. Explore how to open the door for a more defined and enhanced reporting process.

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Methodology

The Deloitte ESG Survey was conducted by Wakefield Research (www.wakefieldresearch.com) among 300 Executives at publicly owned companies with a minimum annual revenue requirement of $500 million or more. Executives are defined as Senior Finance, Accounting, Sustainability, and Legal Executives with a minimum seniority of director, or Chief Risk Officers, General Counsels, Chief Legal Officers or Chief Sustainability Officer. Oversample interviews were conducted to increase the total sample size to 250 public and private companies in each of the following industries: Life Science and Healthcare; Financial Services; Consumer Products; Technology, Media & Telecommunications; Energy & Utilities. The survey was fielded between January 4th and January 18th, 2024, using an email invitation and an online survey.

Data rounding

Percentages throughout survey may not sum to 100% due to rounding.

Endnote

¹ On April 4, 2024, the SEC voluntarily stayed the effective date of the final rule pending judicial review of petitions challenging it, which have been consolidated for review by the US District Court of Appeals for the Eighth Circuit. The SEC stated that it “will continue vigorously defending the [climate rule's] validity in court” but issued the stay to “facilitate the orderly judicial resolution of” challenges presented against the climate rule and to avoid “potential regulatory uncertainty if registrants were to become subject to the [climate rule's] requirements” before the legal challenges were settled. The stay does not reverse or change any of the final rule's requirements nor does it affect the SEC's existing 2010 interpretive release on climate change disclosures. For additional details, read Deloitte's “Comprehensive Analysis of the SEC's Landmark Climate Disclosure Rule.”

ⁱAmanda K. Beggs, Promoting human rights and environmental sustainability: Integrating ethics into the supply chain,” National Law Review, March 26, 2024.

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ESG reporting in life sciences and health care (LSHC): Progress despite data challenges

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