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Interest in the environmental and social performance of organisations has been an issue for many years. Until recently, many organisations addressed these ‘non-financial’ aspects of their activities on an ad hoc basis or through a section in their Annual Report.
However, the introduction of legislation - such as the NFRD (EU Non-Financial Reporting Directive, which came into force in 2017) – fundamentally reshaped non-financial reporting demands. Organisations were now obliged to provide increasingly detailed and quantifiable information on the Environmental, Social and Governance (ESG) aspects of their operations.
The CSRD (the Corporate Sustainability Reporting Directive - which was voted on at the end of 2022) updates and replaces the NFRD. This will significantly increase the obligations on organisations and is likely to directly impact an estimated 50,000+ companies in the European Union, the majority of whom are currently ill-prepared for the change.
‘Double materiality’ – shaping the future for CSRD
The concept of ‘double materiality’ will be definitive for the healthcare industry and CSRD. Double materiality means that non-financial reporting will have to reflect both the financial impact of their operations and how these are impacting the outside world. The CSRD will apply to all companies:
With more than 250 employees
Annual revenues greater than €40 million
Total assets greater than €20 million
- Listed SMEs (i.e. publicly traded companies with more than 10 employees or €20 million in revenue)
- Non-EU companies exceeding €150 million in annual revenue within the EU, and with at least one subsidiary or branch in the EU exceeding certain thresholds.
ESG reporting preparedness
Although listed companies may have some limited experience in non-financial reporting as part of annual reports, it will be insufficient to prepare them for the demands of the CSRD. For smaller companies, meeting the requirements of ESG reporting will take them into uncharted territory. Irrespective of size, ensuring your organisation is properly prepared will be a major undertaking and will mean radical change for all companies.
Detailed ESG reporting, will require the introduction of new systems and processes on a scale that – in an ideal world – would be undertaken as part of business transformation. In addition, it will demand a radical change in mindset – the recognition that future business operations will need to fit the demands of ESG, not the other way around. Furthermore, it will mean that every aspect of the business will have to embrace ESG to become more sustainable.
However, with the CSRD expected to enter into force by the end of 2023, taking action now is a priority if companies are to meet their reporting obligations regarding fiscal year 2024. To ensure that this becomes a reality, the capacity to collect the data that will measure and quantify this change will need to be put in place.
Ensuring your current and future ESG-readiness
PwC will ensure that your organisation is ESG-ready in time for the introduction of the CSRD, following a logical, stepwise approach.
We begin by thoroughly assessing where your company currently stands, to identify both the gaps and the existing capabilities. Which aspects of double materiality do you need to address in your reporting? Are the required processes in place to capture the relevant information, and can you meet the reporting quality demands now and in the future?
Armed with the insights from this assessment, PwC will design a roadmap to ensure you are equipped to capture the required parameters. We then help you implement the necessary processes and develop the appropriate KPIs that allow you to gather interoperable data from all relevant sites. Perhaps most importantly, we will create a central team that will take the information collected and transform it into the desired end product. Digital data and tagging will be key; this is the only way to process the level of data required for ESG reporting within such a short timeframe.
A responsible healthcare sector
PwC will assist you in managing many aspects of responsible growth in healthcare, through an integrated sustainable approach that captures, but is not limited to, key ESG elements including:
Affordability of, and equitable access to, medicines, through innovative manufacturing that optimises raw material and energy use, lowering costs.
Circular, end-to-end redesign of manufacturing and (hazardous) waste management, helping recuperate water, heat and molecules of API.
Diversity and inclusion, in order to build the workforce of the future
Sustainable procurement strategies, to help eliminate carbon emissions upstream and downstream in the supply chain, to deliver net zero.
Linking corporate sustainability targets to executive pay
The healthcare supply chain and CO2 emissions
Healthcare companies, with their global and often-complex supply chains, can particularly benefit from PwC’s expertise in finding solutions for reducing their carbon footprints. Indeed, without a clear, end-to-end focus on the supply chain, measuring and managing emissions becomes virtually impossible.
PwC can not only help you identify the ‘where and what’ to measure, but we can also identify opportunities to make improvements. For example, we can assist your company in reducing emissions - without creating inventory issues – by helping you manage the shift from air freight to ocean freight, by improving planning visibility or by working in combination with postponement.
PwC’s deep insights in the pharmaceutical industry will guide you through these processes and identify other low-hanging fruit that can bring about rapid improvements.
Why PwC
While all companies will be required to meet ESG reporting requirements, it’s important to be aware that all reporting will be subject to audit. Audit lies at the heart of PwC and shapes all our approaches and solutions. So you can be assured that we bring our audit mindset to everything we do, ensuring all processes are compliant from the outset.
By leveraging PwC’s internal expertise in your areas of operation, we ensure that the process of making yourself ESG-ready adds value throughout your business.
Future Trends: PwC Thought Leadership
If you want to know more about PwC and how we view the future of healthcare, read our thought leadership contributions.
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