Environmental, social and governance (ESG) metrics are now ubiquitous in the reporting of public companies in the US and UK. Investors are paying close attention to companies’ ESG credentials, and this trend is also starting to be felt in the private sector. Even if there are no formal requirements for private companies to do so, more and more investors are requiring companies to report or disclose varying ESG metrics.
Initially ESG metrics were used as a way to encourage companies to act responsibly, allowing businesses to track their impact on society and the environment over time. These metrics are useful as a way to measure “success” – with the old mantra of “what you can’t measure, you can’t improve”. Given the increased investor interest and our own sense of societal duty, over the last year OMass has started its own ESG journey, focusing on how we can best make an impact as a small biotech company.
Several ESG metrics align with our company values (Ambitious, Responsible, Innovative, Focused, Caring and Collaborative) and our company mission of improving the lives of patients with rare diseases and immunological conditions. So, as we see it, working on ESG is not mutually exclusive to our day job as ‘drug hunters’. Despite that, making a commitment to ESG does bring about some tough questions for a company with limited resources.
As a small R&D organisation, we work every day on our goal to bring new medicines to patients. As such, working on ESG has an opportunity cost. This is further exacerbated by the fact that no-one in the company has ESG related expertise – a common trend of working at a small biotech where employees tend to wear many hats. This means that whoever is leading the company’s ESG efforts is likely to need to spend time learning about the field and trying to answer questions they may not know much about (e.g., what is the difference between net zero and carbon neutral, what are scope 1-3 emissions). So the first question is, how much time should we really be spending on ESG and will this be an a distraction to the company mission? Focusing on ESG can also lead to higher costs in the short-term (e.g., reducing plastic waste by buying more glassware or buying solar panels for your office building), even if these may be offset by longer term cost savings. Given the limited funding of private biotechs and the uncertain nature of our business, is this something we can justify?
The answer to the questions varies from company to company and also requires further discussions at the executive and board level. For OMass, ESG is part of our mission and our values, so we knew it was something we wanted to embed within our company. A year into our own ESG journey, we wanted to share some learnings in the hope they are useful for other biotechs or small businesses that are also on or about to embark on this journey.
It is never too early to start: It is easy to fall into the trap of thinking that you should not think about ESG at all. Maybe you think your company is too small, you have too few employees or it requires too much work. It is all rather complicated anyway, and what can a single small company do? At OMass, we found that initiating the conversation on ESG, even without the specific tracking of metrics, has helped embed awareness of ESG specific considerations across the company. This included thinking about small changes we can do within our labs (e.g., increasing our ultra-low freezer temperatures), working with some of our CROs to reduce packaging waste for deliveries, creating a travel policy that favours more environmentally friendly options for work related travel and making our recruitment efforts more inclusive. If ESG is considered important to the company, it can then be added as a consideration to everything a company does (even is other criteria are weighed more heavily). Starting early helps make good ESG practices an integral part of the company culture.
Define what the appropriate goals and metrics are for your company stage and acknowledge that it is ok to start small: There are hundreds of potential metrics one could measure with regards to ESG. You need to be realistic on what you think you will be able to achieve with the resources you have available. Remember that it is ok to start small – and that it is better to start small than not starting at all. As an example, before we even started tracking any metrics, we made a long-list of potential ideas to make our office more sustainable and particularly focused on ‘quick wins’. We then also highlighted longer terms goals and specific metrics we wanted to track over time (e.g., gender split across different levels of the company, scope 1 and 2 emissions, amongst others) that we felt were important. With regards to goals and objectives, we have kept these fairly broad for now (achieving a combined score with one of our investors ESG frameworks and committing to measure and offset our scope 1 and 2 emissions) but tracking our identified ‘important metrics’ can allow us to identify potential points of improvement earlier than we otherwise would have.
Ask for help from your investors and broader biotech community: This topic is hard and at times can be overwhelming, given the variety and quantity of different parameters included in a full ESG evaluation. However, sharing our experience with our investors and other biotech companies has helped streamline our thinking and share best practices across certain topics (in both directions). Our investors have also provided support in some of the more onerous ESG tasks e.g., emission calculations and internal policy development. Do not be afraid to ask for help – a lot of investors / other companies are going through or have gone through a similar exercise and likely can share their experience or help with specific questions you may have.
Build an internal ESG team: Employees care about ESG more now than ever [link], especially in younger generations. We built an ESG team sub-team to share ideas amongst different employees across functions; cultivating a sense of ownership within the company. Employees should not feel these decisions as a top-down burden, rather they should feel empowered to help the company on their ESG journey.
Hold yourself accountable: Part of our journey in developing our ESG strategy has been to set specific goals. These have been incorporated into our company objectives at the board level, so we signal to our employees this is an important aspect for us as a company and also provide an incentive to continue to think about ESG throughout the year.
As we continue our ESG journey, we recognise that this is just the beginning. Part of what makes our industry unique are the long lead times in drug discovery, making it easy to dismiss the discussion on ESG which can feel like it is too early for our company stage. However, we believe this will set us up for future success and provides us with an opportunity to shape what the company will look like as we continue to expand.
Written by Miguel Silva. Thanks to Maria Musgaard, Hsin Loke and Ros Deegan for providing feedback on earlier drafts of this blog post.
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