Benchmarking and Transparency: Incentives for the Pharmaceutical Industry’s Corporate Social Responsibility.

Journal of Business Ethics. By Lee, M., & Kohler, J. (2010). Published online: February 16, 2010.

In the Journal of Business Ethics, a relevant article (Lee, 2010) was recently published, pertaining to the Access to Medicine Index, as it presses on the need of including the pharmaceutical industry in the access to medicine issue. The article has analysed several reactions of pharmaceutical companies on benchmarking reports from different NGOs. It also identifies the extent to which benchmarking and transparency might be a useful instrument for stimulating the pharmaceutical industry to increase access to medicines efforts. Because of its relevance, underneath you find a summary of this article (published online with the permission of the author).

Benchmarking and Transparency: Incentives for the Pharmaceutical Industry's Corporate Social Responsibility.

With over 2 billion people lacking medicines for treatable diseases and 14 million people dying annually from infectious disease, there is undeniable need for increased access to medicines. To stimulate the pharmaceutical industry to take and fulfil a role in the access to medicine issue, there has been an increasing trend to benchmark the pharmaceutical industry on their corporate social responsibility (CSR) performance. It seems that benchmarking creates a competitive inter-business environment and can act as an incentive for improving CSR. One conclusion reached is that increasing transparency through benchmarking is a powerful tool which reveals the industry's shortfalls to the public and can affect the decisions of social responsible investors.

Despite the positive effects benchmarking creates, there are some aspects that still need to be taken into account. Several organisations, mainly NGOs, have developed benchmarking criteria and measured different companies. From the reactions of the pharmaceutical companies on their reports, it was obvious that the pharmaceutical sector itself was not positive about the conclusions drawn by the NGOs. As one company stated: " The (..) paper is unbalanced, unsubstantiated, and conclusory, representing a tract that exalts political rhetoric over scientific rigour and analysis". One may say that reactions from the pharmaceutical industry are negative because they don't want to be measured, but this conclusion is short sighted. The industry is willing to be involved in the access to medicine issue and wants to further their responsibility, as many examples confirm. An important question, is that if there is no partnership between pharmaceutical companies and the organizations who are benchmarking, under what accord should companies then be under their influence? According to this article, it is essential that if benchmarks are intended to provide ratings for companies, they need to be in agreement with the measuring standards, otherwise their meaning is lost.

In this article the Access to Medicine Index is described as an instrument to which the pharmaceutical industry agrees, resulting in the fact that they can use the standards developed by the Index as benchmarks for their own performance. The main reason for this is the fact that the benchmarks measured in the Index, are developed in cooperation with all stakeholders, including the pharmaceutical industry. The multi-stakeholder approach is unique and provides a broader approach to benchmarking, allowing for real discussion, rather then from the point of view of a single organization. Another conclusion is that investors who value the ATM Index believe that access to medicine issues are linked to long-term shareholder value creation. If pressure from public increases, socially responsible investors may increasingly choose to invest in companies ranked high on the ATM Index. The creation of a financial incentive for companies to improve CSR, might lead to the potential of saving millions of lives from people who currently lack medicines.