ESG, short for Environmental, Social and Governance (ESG), is a widely used term these days, and ESG performance – along with commercial results – has become a key metric in annual reports. No longer is success measured by financial numbers alone. It’s about making a difference - for your business, the environment, and society as a whole. Proving that such aspects are reflected in strategic decisions is a must nowadays; for any company in any line of business.
In 2006, then UN Secretary-General Kofi Annan laid the foundation for the ESG principles after consultation with the world´s largest financial institutions to deliberate the cause of sustainable businesses and integrate ESG into capital markets. Today, sustainability reporting is considered best practice. According to the Governance & Accountability Institute, 96% of the S&P 500 and 81% of the Russell 1000 companies publish sustainability reports. Disclosing data that sustainability expectations are met is a must. Or, to put it more bluntly: Regulators, governments, shareholders, customers, suppliers, employees, and the public at large not only want to know what a company does but also how it conducts its business.
Many companies have been voluntarily publishing non-financial reporting for some years, also before the European EU Non-Financial Reporting Directive (NFRD came into force in 2018. The law requires all large public-interest entities to disclose information about environmental, social, and governance KPIs.
The three pillars of sustainability
Environmental criteria assess the impact of activities on the environment. These include resource management, greenhouse gas emissions, energy efficiency, water management, etc.
Social criteria address a company´s relationships with employees, suppliers, customers, and local communities. These include working conditions, operations in conflict regions, employee health, safety, diversity, etc.
Governance criteria address leadership, executive compensation, internal controls, equal pay, bribery, corruption, board diversity, etc.
Chiesi’s certification as B Corp and the change in its legal status into a Benefit Corporation in several jurisdictions testify to the profound transformation of its business and the sincerity of its shared value approach. However, to better understand a company’s impact on society and the environment, it is key to comparably measure ESG performances.
To this end, in 2021 the Chiesi Group applied for an ESG rating from the Italian rating agency Cerved Rating Agency for the first time and obtained an A rating for its capacity to manage ESG risks and opportunities. In 2022, Chiesi received an ESG rating AA with an overall score of 75.1 out of 100, reflecting over-all improvement in performance. With the second-highest rating attainable, Chiesi ranks in the top quintile of the best-performing companies in the 'Health Products’ sector, according to Cerved Rating Agency’s report.
Here are the key findings of the 2022 rating:
Contrary to common assumptions, ESG reports are much more than just highlighting a company's sustainability progress. After all, they not only accentuate strengths but also reveal weaknesses. Or as Maria Paola Chiesi, Shared Value & Sustainability Head of Chiesi Group, puts it: “We are proud about the latest rating and well aware that one can only achieve such a result if everyone works together. But our work is not done yet. ESG reports are much more than just highlighting a company's sustainability progress. They not only accentuate strengths but also uncover weaknesses and room for further improvement. We know we need to involve suppliers to a greater extent and broaden virtuous sustainability processes throughout the value chain. Therefore, a positive ESG rating is both a confirmation and an incentive for us. It is never an end point, but a starting point to identify new opportunities and initiate improvements. Chiesi will continue to strive for using business as a force for good.”
Additionally, Chiesi has been named on CDP’s Climate Change A List for its commitment to climate action and transparency, placing among the 283 companies (out of approximately 15,000 that submitted data for evaluation) in the world that have achieved this recognition.
The A grade is included in the Leadership band (given to those companies which are implementing current best practices). This is higher than Europe regional average of B and higher than the Biotech & Pharma sector average of B.
CDP is the world’s most recognised body for assessing the progress of greenhouse gas emissions reductions, strategies and concrete actions to combat climate change and it holds the largest environmental database in the world.