Why Corporate Social Responsibility Makes Sense

May 1, 2006
Faiz Kermani, Ph.D
Applied Clinical Trials

Volume 0, Issue 0

CSR is in the best interest of the public at large...and the pharmaceutical company itself.

Like other major business sectors, the pharmaceutical industry is under constant scrutiny regarding the way it operates. Since there is an ever-continuing rise in interest by the media and public in the type of health care service being offered, pharmaceutical companies cannot avoid being caught up in the discussion of such issues. Medicines produced by the pharmaceutical industry are a key part of the delivery of an effective health service. Media coverage of the pharmaceutical industry's activities has often been negative, and whether they like it or not companies have to pay greater attention to their public image.1

Faiz Kermani, PhD

Public perception cannot be ignored, particularly since health care is a major election issue and voter opinion will have an impact on a government's policies. For example, in 2002 the U.S. seniors group AARP accused some pharmaceutical companies of using "front" groups that purported to represent the elderly and released messages that favored the industry's point of view on issues such as pricing.2 These types of claims often result in major press coverage and can be highly damaging to the pharma industry. This is particularly unfortunate, since such publicity overshadows the pharmaceutical industry's vital role in researching and developing medicines.1

As the pharmaceutical industry runs clinical trials to develop its products, it must engage the public and show them that it is working in their best interests. Otherwise, they will not volunteer to participate in trials, which will effectively hamper the development of new medicines.3

Corporate social responsibility

In recent years, the concept of corporate social responsibility (CSR) has grown in importance. CSR is often discussed at the highest levels within companies, but there are a variety of interpretations as to what it means.4

Issues such as respect for employees, environmental responsibilities, relationships with local communities, and fair trade with developing nations often feature as part of CSR.4 In truth, it is probably impossible to find a strict definition that suits all companies and their activities. CSR can be subjective, relying on interpretations of how commercial activities are perceived in terms of integrity, fairness, and respect for individuals.4

As a business operates to generate profit, those advocating CSR are essentially asking companies to look beyond how their decision-making impacts on commercial activities and examine the effect on the society around them. This is no easy task, since an activity that generates money for the company could actually be perceived negatively in the strict context of CSR.

Interestingly, the economist Milton Friedman believed that CSR was misguided, as the only responsibility of a business was to generate profit.4 However, this point of view is easily countered, since businesses depend on the society that surrounds them and their staff is influenced by what takes place outside their company's boundaries. Company staff members are also consumers who, like other patients, seek affordable medicines for themselves and their families. Furthermore, they will have concern for global issues such as improving health care in the developing world.5

Recently, health care charities, pharmaceutical companies, and international not-for-profit organizations jointly signed an open letter to the G8 leaders calling for them to address health care issues affecting developing countries and provide incentives for the private and public sectors to work together in resolving the situation.5 Thus, those working in pharmaceutical companies should not have great problems identifying issues that are considered important by the public.

Valuing staff

Staff turnover in the pharmaceutical industry can be high, and if a company wants to retain talented people it must pay greater attention to the conditions in which they work. Replacing an experienced staff member is no easy task, and one company's loss can be another's gain. For example, when large pharmaceutical companies have down-sized, smaller biotech companies have often benefited from taking on the experienced people who suddenly found themselves in the job market. In many cases these individuals have thrived, as they have been able to apply their knowledge in an atmosphere free from bureaucracy.

The term "human capital" has often been used as a means to assign value to staff within an organization, but although many senior managers can discuss such a concept, few are able to demonstrate to their staff that their work is truly appreciated. In fact, paying greater attention to staff value can be a huge asset to companies, as the best candidates in the job market will be attracted to work for a dynamic organization that takes care of its employees. Staff turnover can also be reduced because people feel as if they're part of a cohesive team.

This process can be enhanced if a company has recognized CSR credentials, as staff members and job-seekers alike will view a company with credentials as standing out from competitors because of how it views its role in society. After all, they are themselves drawn from society and will be concerned about the same global issues as the general public.

For example, the U.S. biotech company Genentech has won several corporate awards, which are undoubtedly an attraction for those seeking to work in the health care sector. Many of these awards are based on employee responses to independent surveys that focus on work conditions and external analyses of the corporate culture. In 2005, for the seventh consecutive year FORTUNE magazine named Genentech one of the "100 Best Companies to Work For," and in 2004 it was named No. 1 Employer by Science magazine.6 The company's image is enhanced even further by the fact that in spring 2005 Genentech was voted Top Corporate Citizen by Business Ethics magazine and in 2004 The San Francisco Business Times included it in their third annual list of corporate philanthropists in the Bay Area.6

Facing up to responsibility

CSR is unavoidable in the modern business world, and the concept should be embraced rather than feared. The pharmaceutical industry has nothing to gain from the public taking a negative view of its activities, but everything to gain from demonstrating to them that companies are an essential part of health care. Without the pharmaceutical industry and the commercial forces that it harnesses in R&D, many drugs would not reach the market—but this is rarely discussed by the media. Equally, companies must look beyond commercial decisions and openly address the issue of affordability, as governments are increasingly shifting health care costs to patients. They must also demonstrate their commitment to staff if they wish to harness their talents over the long period required to develop new drugs.

Faiz Kermani budgets, proposals and marketing executive, Chiltern International, faiz.kermani@chiltern.com

References

1. F. Kermani, "Is Image Everything?" Inpharm, 30 November 2004, http://www.inpharm.com/External/InpH/1,2580,1-3-0-0-inp_intelligence_art-0-287636,00.html.

2. R. Moynihan, "US Seniors Group Attacks Pharmaceutical Industry 'Fronts,'" British Medical Journal 326, (351) (2003), http://bmj.bmjjournals.com/cgi/content/full/326/7385/351.

3. F. Kermani and P. Bonacossa, "New Ways to Recruit Trial Subjects," Applied Clinical Trials, February 2003, http://www.actmagazine.com/appliedclinicaltrials/article/articleDetail.jsp?id=80333.

4. T. Donaldson, "Defining the Value of Doing Good Business," Financial Times (2 June 2005), http://news.ft.com/cms/s/748f21be-d377-11d9-ad4b-00000e2511c8,dwp_uuid=1d0ff528-c86c-11d9-87c9-00000e2511c8.html.

5. Open Letter to the Leaders of the G-8 Nations, The Global Alliance for Vaccines and Immunization, 17 June 2005, http://www.vaccinealliance.org/resources/PPPletter_17Jun2005.pdf.

6. Awards & Recognition, Genentech, 2005, http://www.genentech.com/gene/about/corporate/awards/index.jsp.