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AstraZeneca’s New Path: AstraZeneca’s New Path: Linking Business Performance Linking Business Performance to to Social Performance Social Performance Cristin Gendron & Gabrielle Scheer Cristin Gendron & Gabrielle Scheer Haas School of Business, UC Berkeley Haas School of Business, UC Berkeley April 25, 2007 April 25, 2007 AZ Liaison: Paul Nichol AZ Liaison: Paul Nichol
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Page 1: AstraZeneca’s New Path: Linking Business Performance to Social Performance Cristin Gendron & Gabrielle Scheer Haas School of Business, UC Berkeley April.

AstraZeneca’s New Path:AstraZeneca’s New Path:

Linking Business Performance Linking Business Performance to to

Social PerformanceSocial Performance

Cristin Gendron & Gabrielle ScheerCristin Gendron & Gabrielle ScheerHaas School of Business, UC BerkeleyHaas School of Business, UC Berkeley

April 25, 2007April 25, 2007

AZ Liaison: Paul NicholAZ Liaison: Paul Nichol

Page 2: AstraZeneca’s New Path: Linking Business Performance to Social Performance Cristin Gendron & Gabrielle Scheer Haas School of Business, UC Berkeley April.

2

Pharma Industry Suffers In ReputationPharma Industry Suffers In Reputation

Issue

Goal

THE GREAT DISCONNECT

The mission of the pharmaceutical industry revolves around patients. The goal is to create medicines that treat and prevent their diseases, ease their

suffering and improve their quality of life.

America’s pharmaceutical companies are not trusted by stakeholders or the general public.

AstraZenecaUS

PharmaceuticalIndustry

ProjectApproach

Recommendations

Page 3: AstraZeneca’s New Path: Linking Business Performance to Social Performance Cristin Gendron & Gabrielle Scheer Haas School of Business, UC Berkeley April.

3

Corporate Reputation DOES MatterCorporate Reputation DOES Matter

- Stakeholders inaccurately believe drugs make up a large % of total healthcare costs

- Pharma execs and stakeholders showed a gap in perceptions on issues affecting corporate reputation

- Need for more transparency in industry

Key Findings

- Low awareness of AZ and generally low favorability score

- Most important thing to stakeholders industry acts responsibly & ethically

- Favorability drivers – safety, pricing and honesty/transparency

Key Findings

PricewaterhouseCoopers Study:‘Recapturing the Vision’

2006

Lombardo Consulting Study:‘AZ Corp. Reputation Research’

2005

AstraZenecaUS

PharmaceuticalIndustry

ProjectApproach

Recommendations

Reputation Has Direct Link to Bottom Line:5% rise in reputation affords 3-5% increase in market capitalization*

*Source: PricewaterhouseCoopers

Page 4: AstraZeneca’s New Path: Linking Business Performance to Social Performance Cristin Gendron & Gabrielle Scheer Haas School of Business, UC Berkeley April.

4

Project Scope Defined & ExpandedProject Scope Defined & Expanded

Overall CSR/Business

Strategy & Measurement

CSR IndexC&E Index

AstraZenecaUS

PharmaceuticalIndustry

ProjectApproach

Recommendations

Intended Scope:

Build C&E Index

Realized Scope:

-Build C&E Index

- Expand to overall CSR index

- Provide strategic recommendations

to match

Intended Scope:

Build C&E Index

Page 5: AstraZeneca’s New Path: Linking Business Performance to Social Performance Cristin Gendron & Gabrielle Scheer Haas School of Business, UC Berkeley April.

5

Competitive Landscape AnalysisCompetitive Landscape Analysis

Merck Novartis Novo Nordisk Pfizer

Compliance Management Strategic Compliance

Strategic Value

Resource Magnitude

Breadth of Activities

Scope of Activities

AstraZenecaUS

PharmaceuticalIndustry

ProjectApproach

Recommendations

Integration

Metrics

CSR Stage

Legend: High Medium Low

Page 6: AstraZeneca’s New Path: Linking Business Performance to Social Performance Cristin Gendron & Gabrielle Scheer Haas School of Business, UC Berkeley April.

6

AstraZeneca SWOT AnalysisAstraZeneca SWOT Analysis

STRENGTHS

• Proactive Approach to CSR – CSR Council– PAP– Scorecard– Stakeholder Engagement (BSR)– Corporate Reputation Survey (Lombardo)

• Leadership support– BI unit creation

• Risk Management– Code of Conduct (IRM)

WEAKNESSES

• Lack of focus in CSR strategy • Lack of ‘bigger picture’• Functional Groups act in silos

– Unaware of what other groups are doing

• Lack of robust metrics• Disconnect between Global and US efforts

THREATS

• Fear of damaging reputation from increased transparency

• It takes time to see movement of business indicators

• Difficult to show link between business indicators and CSR indicators

OPPORTUNITIES

• To be a thought leader in CSR arena• To improve pharma industry reputation• To improve AZ reputation• To bolster sales

AstraZenecaUS

PharmaceuticalIndustry

ProjectApproach

Recommendations

Page 7: AstraZeneca’s New Path: Linking Business Performance to Social Performance Cristin Gendron & Gabrielle Scheer Haas School of Business, UC Berkeley April.

7

Summary of RecommendationsSummary of RecommendationsAstraZeneca

USPharmaceutical

IndustryProject

ApproachRecommendations

• Create actionable links with mission and core competencies

• Collaborate CSR activities within business units and stakeholders

• Focus on value creation – do a few things well rather than all things poorly

• Leverage existing CSR strategies

Strategy Measurement Communication

• Steps to create an index

• C&E Index

• CSR Index

• Not Communicating is NOT an option

• Stories trump numbers 10 times out of 10

Page 8: AstraZeneca’s New Path: Linking Business Performance to Social Performance Cristin Gendron & Gabrielle Scheer Haas School of Business, UC Berkeley April.

8

Link Strategy w/ Mission & CompetenciesLink Strategy w/ Mission & Competencies

Strategic #1Recommendations Measurement Communication

Mission Statement: Discovering, developing, and delivering innovative, meaningful healthcare solutions

Putting the health of patients first - helping to empower and inform Rewarding work environment that inspires our employees

Core Competencies:Research and Development

CommercializationSix Key Therapeutic Areas

CSR Strategy*:Striving to make the right decisions

Being open and honestCreating a healthy workplace

Providing access

*Source:AZUS CSR Summary Report, 2006

Page 9: AstraZeneca’s New Path: Linking Business Performance to Social Performance Cristin Gendron & Gabrielle Scheer Haas School of Business, UC Berkeley April.

9

Link Actionable Items to StrategyLink Actionable Items to Strategy

Strategic #1Recommendations Measurement Communication

Human Resources

EnvironmentalImpact

Pricing Strategy

ProductPipeline

Sales & Marketing

Access to Medicines

Patient Safety

InformationTransparency

Clinical Trials

Animal Rights

Philanthropic

CSR Strategy*:

Striving to make the right decisions

Being open & honest

Creating a healthy workplace

Providing access

*Source:AZUS CSR Summary Report, 2006

Publish ALL Clinical Trial Results

Page 10: AstraZeneca’s New Path: Linking Business Performance to Social Performance Cristin Gendron & Gabrielle Scheer Haas School of Business, UC Berkeley April.

10

Integrate CSR Internally & ExternallyIntegrate CSR Internally & Externally

Strategic #2Recommendations Measurement Communication

Legal

Human Resources

SHE

Patient Assistance

Internal Comm.

Sales & Marketing

Compliance & Ethics

Public Policy

Corporate Comm.

Commercial

IntegratedCSR

Patients

Investors

Activists

Providers

Regulators

Employees

Community

Media

Page 11: AstraZeneca’s New Path: Linking Business Performance to Social Performance Cristin Gendron & Gabrielle Scheer Haas School of Business, UC Berkeley April.

11

Focus on Value CreationFocus on Value Creation

BENEFIT TO CORPORATE REPUTATION

LEVEL OF CSR INVESTMENT

VALUE CREATION

RISK MITIGATION

PRICING

PATIENT SAFETY

ENVIRONMENT

HUMAN CAPITAL

ACCESS TOMEDICINES

PHILANTHROPY

ANIMAL RIGHTS

INFORMATIONTRANSPARENCY

Strategic #3Recommendations Measurement Communication

Page 12: AstraZeneca’s New Path: Linking Business Performance to Social Performance Cristin Gendron & Gabrielle Scheer Haas School of Business, UC Berkeley April.

12

Leveraging Existing CSR StrategiesLeveraging Existing CSR Strategies

Strategic #4Recommendations Measurement Communication

AZ US can leverage established ‘best practices’ from other sources to help inform internal CSR strategies

AstraZeneca (Global)

NovoNordisk

Other PharmaCompanies

OtherCompanies

Page 13: AstraZeneca’s New Path: Linking Business Performance to Social Performance Cristin Gendron & Gabrielle Scheer Haas School of Business, UC Berkeley April.

13

Summary of RecommendationsSummary of RecommendationsAstraZeneca

USPharmaceutical

IndustryProject

ApproachRecommendations

• Create actionable links with mission and core competencies

• Collaborate CSR activities within business units and stakeholders

• Focus on value creation – do a few things well rather than all things poorly

• Leverage existing CSR strategies

Strategy Measurement Communication

• Not Communicating is NOT an option

• Stories trump numbers 10 times out of 10

• Steps to create an index

• C&E Index

• CSR Index

Page 14: AstraZeneca’s New Path: Linking Business Performance to Social Performance Cristin Gendron & Gabrielle Scheer Haas School of Business, UC Berkeley April.

14

StrategicRecommendations Measurement – C&E Communication

Steps in Creating a CSR IndexSteps in Creating a CSR Index

The goal is to put a ‘measure’ on the CSR activities AZ US has undertaken

STEPS*: 1. Select indicators

2. Ensure a common scale among indicators

3. Adjust indicators for favorability

4. Weight indicators appropriately

* Adapted from Jay Alden’s “Measuring the Unmeasurable”

Page 15: AstraZeneca’s New Path: Linking Business Performance to Social Performance Cristin Gendron & Gabrielle Scheer Haas School of Business, UC Berkeley April.

15

Proposed C&E IndexProposed C&E Index

StrategicRecommendations Measurement – C&E Communication

Dimension Key Indicators Scale Favorability Weighting

ERC Ethics Survey Survey ‘Score’ Set max = 100 positive High

Helpline Data # incidents reported Set max = 100 negative Medium

Audits Reports % ‘green’ audits Set max = 100 positive High

Training Metrics % employees trained

Set max = 100 positive Low

Scorecard % of objectives met or exceeded

Set max = 100 positive High

Corporate Board Oversight

Board is actively involved in CSR

Set max = 100 positive Medium

C&E Linked to Individual

Performance

C&E objectives on employee’s

performance plan

Set max = 100 positive High

Page 16: AstraZeneca’s New Path: Linking Business Performance to Social Performance Cristin Gendron & Gabrielle Scheer Haas School of Business, UC Berkeley April.

16

Corporate Sustainability IndexCorporate Sustainability Index

StrategicRecommendations Communication

Dimension Link WeightEconomic

Product Pipeline, R&D Sales, Margin, Investing, Mkt Share Low

Pricing Strategy Sales, Mkt Share High

Clinical Trial Data Retention, Investing, Recruitment, Sales Medium

Code of Conduct / Compliance Sales, Investing Medium

Corporate Governance Sales, Investing, Mkt Share Low

Risk Management Sales, Investing, Mkt Share Medium

Sales & Marketing (overlap)? Sales, Margin, Investing, Mkt Share High

Environment

Animal Rights Sales, Investing Low

Energy Efficiency Margin, Sales, Investing Low

Social

Labor Practice Indicators Sales, Margin, Investing Medium

Human Capital Development Retention, Recruiting, Sales, Margin Medium

Access to Medicines Sales, Margin, Investing, Recruiting, Retention Medium

Patient Safety Sales, Margin, Investing High

Measurement - CSR

Page 17: AstraZeneca’s New Path: Linking Business Performance to Social Performance Cristin Gendron & Gabrielle Scheer Haas School of Business, UC Berkeley April.

17

Summary of RecommendationsSummary of RecommendationsAstraZeneca

USPharmaceutical

IndustryProject

ApproachRecommendations

• Create actionable links with mission and core competencies

• Collaborate CSR activities within business units and stakeholders

• Focus on value creation – do a few things well rather than all things poorly

• Leverage existing CSR strategies

Strategy Measurement Communication

• Not Communicating is NOT an option

• Stories trump numbers 10 times out of 10

• Steps to create an index

• C&E Index

• CSR Index

Page 18: AstraZeneca’s New Path: Linking Business Performance to Social Performance Cristin Gendron & Gabrielle Scheer Haas School of Business, UC Berkeley April.

18

Communication is CriticalCommunication is Critical

Pharmaceutical industry has

an unfavorable reputation

StrategicRecommendations Measurement Communication #1

NOT communicating is NOT an option!NOT communicating is NOT an option!

Use stories to communicate CSR activitiesUse stories to communicate CSR activities

Examples of companies who chose not to communicate and found that it was the wrong strategy:

Nike and McDonalds

Hypothesis:AZ can fly under

the radar

FALSE!!FALSE!!

Within pharma, AstraZeneca is

not very well known by the general public

77%

62%

7%

30%

23%

52%

10% 10%

90%90%

48%

70%

93%

38%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

AstraZeneca Pfizer Eli Lilly GlaxoSmithKline Novartis Bristol-Myers Squibb Merck

Aware Not Aware

Page 19: AstraZeneca’s New Path: Linking Business Performance to Social Performance Cristin Gendron & Gabrielle Scheer Haas School of Business, UC Berkeley April.

19

Tactical Recommendation: ImplementationTactical Recommendation: Implementation

StrategicRecommendations Measurement Communication

Take A Phased Approach to CSR Strategy

Phase I: PRIORITIZE

Phase II: EXECUTE

Phase III: MEASURE

Phase IV: MONITOR

Page 20: AstraZeneca’s New Path: Linking Business Performance to Social Performance Cristin Gendron & Gabrielle Scheer Haas School of Business, UC Berkeley April.

20

Implementation GuidelinesImplementation Guidelines

StrategicRecommendations Measurement Communication

Phase I: PRIORITIZEPRIORITIZE

– Reassess priorities to maximize value creation– Revise CSR strategy to ensure it is appropriate, action oriented and consistent with

objectives– Benchmark and leverage existing CSR leadership

Phase II: EXECUTEEXECUTE

– Begin integrating key focus areas within business units, core operations, communications– Bolster top-down buy-in via consistent and timely communication with executives

Phase III: MEASUREMEASURE

– Validate appropriate indicators for CSR index– Establish baselines and set clear goals

Phase IV: MONITORMONITOR

– Adhere to plan of reevaluating strategy and metrics on a regular basis given changing industry and business operations/needs

Page 21: AstraZeneca’s New Path: Linking Business Performance to Social Performance Cristin Gendron & Gabrielle Scheer Haas School of Business, UC Berkeley April.

21

Project BenefitProject Benefit

This project proved beneficial in both an academic and business environment.

• Internal Value (to class/team: Cristin Gendron & Gabrielle Scheer)– Access to Paul Nichol, a leader in AstraZeneca’s CSR efforts– Informative and friendly interactions with all contacts (AZ and BSR)– Participation in CSR Council Meetings– Educational and professional development experience

• Gained understanding of the critical elements of successful CSR program• Learned about the importance of a robust compliance and ethics program• Developed benchmarking methodology

• External Value (to AstraZeneca)– Provided an independent, outside assessment of AstraZeneca and competitive

landscape within Pharma CSR– Provided some benchmarking metrics as an opportunity for AstraZeneca to learn

from peers– Provided strategic recommendations in addition to measurement suggestions

Page 22: AstraZeneca’s New Path: Linking Business Performance to Social Performance Cristin Gendron & Gabrielle Scheer Haas School of Business, UC Berkeley April.

22

AcknowledgementsAcknowledgements

Lastly, we would like to acknowledge the entire CSR Council for taking the time listen to our recommendations.

Many thanks to Paul Nichol for being our primary resource at AstraZeneca and the CSR company advocate.

Additional thanks to our interviewees for providing insight into AstraZeneca operations and providing additional research/literature:

Sandra Cumpston Marie Martino

Laura Commike Kellie McElhaney

Emily Denney Michael Seiders

Karissa Laur Heidi Thear

&

Page 23: AstraZeneca’s New Path: Linking Business Performance to Social Performance Cristin Gendron & Gabrielle Scheer Haas School of Business, UC Berkeley April.

AppendixAppendix

Page 24: AstraZeneca’s New Path: Linking Business Performance to Social Performance Cristin Gendron & Gabrielle Scheer Haas School of Business, UC Berkeley April.

24

CSR Is So Much MoreCSR Is So Much More

Source: Quantifying the Business Case, Chris Tuppen

Reputation

Retention &

Recruitment

OperationalEfficiency

Increased Sales

building trust in a company is a long uphill climb, but losing it can have dramatic effects on share price and customer loyalty;

employees want to work for responsible companies who care for their workforce and contribute to society;

CSR can improve the bottom line through material efficiency, and energy and waste minimization;

cause-related marketing, eco- and ethical labels and new product innovation can influence the top line.

AstraZenecaUS

PharmaceuticalIndustry

ProjectApproach

Recommendations

Page 25: AstraZeneca’s New Path: Linking Business Performance to Social Performance Cristin Gendron & Gabrielle Scheer Haas School of Business, UC Berkeley April.

25

Reputation is Key to Business OutcomesReputation is Key to Business Outcomes

BusinessGoals

BusinessGoals

BusinessStrategies/Activities

BusinessStrategies/Activities

BusinessOutcomesBusinessOutcomes

Products & Services

Emotional Appeal

Workplace Environment

Vision & Leadership

SOCIAL REPONSIBILITY

Financial Performance

Perceptions ofCompany

Perceptions ofCompany ReputationReputation

Purchase

Invest

Remain Loyal

Boycott

Disparage

Recommend

Behaviors Toward Company

Behaviors Toward Company

Employees

Consumers

Investors

NGO’s

Government Officials

Media

StakeholdersStakeholders

Source: Adapted from Harris Interactive, 2003)

StrategicRecommendations CommunicationMeasurement - CSR

Page 26: AstraZeneca’s New Path: Linking Business Performance to Social Performance Cristin Gendron & Gabrielle Scheer Haas School of Business, UC Berkeley April.

26

CSR Continuum Growth StagesCSR Continuum Growth Stages

Low High

Scope of Activities

Metrics

Integration

Strategic Value

Resource Magnitude

N

N

N

N

Nn

Nn

Nn

Nn

Nn

P

P

P

P

P N

M

M

M

M

M

Legend: M: Merck N: Novartis Nn: NovoNordisk P:Pfizer

AstraZenecaUS

PharmaceuticalIndustry

ProjectApproach

Recommendations

Page 27: AstraZeneca’s New Path: Linking Business Performance to Social Performance Cristin Gendron & Gabrielle Scheer Haas School of Business, UC Berkeley April.

27

Defining the Stages of CSRDefining the Stages of CSR

Source: Simon Zadek, ‘The Path to CR’, 2004)

AstraZenecaUS

PharmaceuticalIndustry

ProjectApproach

Recommendations

Defensive

Compliance

Managerial

Strategic

Civil

The characterization of CSR in various stages

deny practices, outcomes or responsibilities ("It's not our job to fix that")

adopt a policy-based compliance approach as a cost of doing business ("We'll do just as much as we have

to"); Merck, Pfizer

embed the societal issue into core management processes ("It's important to the business"); Novartis

integrate the societal issue into core business processes ("It gives us a competitive edge"); NovoNordisk

promote broad industry participation in CR ("We need to make sure everybody does it")

Page 28: AstraZeneca’s New Path: Linking Business Performance to Social Performance Cristin Gendron & Gabrielle Scheer Haas School of Business, UC Berkeley April.

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Strategic Value

Metrics

Merck

• Separate from CR report

• 2 of 6 board committees related to CSR (corporate governance, public policy/social responsibility) – don’t appear connected to top

• Office of Ethics, Office of Diversity/Work, ESHAC (safety/health)

• Key issues: human rights, political advocacy, S&M, DTC advertising, privacy considerations, worldwide withdrawal of Vioxx

• Doesn’t adequately address pricing/access and patient safety

• $2.1B to $4.2B R&D Expenditures from ’99 to ’04 (12% - 18%)

• $326M to $979M Total Contributions/Donations/PAP (2% - 4%)

•Patient Access Programs (mainly discounts, little free, no capacity)

• Basics in animal rights, quality standards, information transparency, etc

• Depth: Ethics centers, Mectizan (full scope)

• Clear current metrics but lacking in historic, baseline and goals

Integration

Resource Magnitude

Breadth of Activities

Depth of Activities

Source: Merck CR Report, 2006

Benchmarking: MerckBenchmarking: Merck

Page 29: AstraZeneca’s New Path: Linking Business Performance to Social Performance Cristin Gendron & Gabrielle Scheer Haas School of Business, UC Berkeley April.

29

Strategic Value

Metrics

NovoNordisk

• Combined in Annual Report

• Balanced scorecard as company-wide management tool – aligned with employee incentive program

• Operate by the “Triple Bottom Line” Principle included in vision

• “Values led company”: mainly focused on diabetes

• Recognize stakeholders as more than just shareholders

• Pricing/access and patient safety/transparency clearly a focus

• 15.9% to 16.3% R&D as % of sales from 2002 – 2006

• Contributions/Donations not listed in CR report

• Focused set of goals created from 10-year strategic planning process

• Includes education programs, infrastructure, etc

• Difficult metrics such as jobs added in market (including impact on supply chain) and eco-intensity ratios (EIR)

• Historic trends provided; baselines and goals are not (nor growth)

Integration

Resource Magnitude

Breadth of Activities

Depth of Activities

Source: NovoNordisk Annual Report 2006

Benchmarking: NovoNordiskBenchmarking: NovoNordisk

Page 30: AstraZeneca’s New Path: Linking Business Performance to Social Performance Cristin Gendron & Gabrielle Scheer Haas School of Business, UC Berkeley April.

30

Strategic Value

Metrics

Novartis

• Metrics combined w/ Annual Report• Responsibility for implementation lies w/ Exec. Committee– have a Corporate Citizenship Steering Committee (senior execs. from HR, HSE & C&E)• In Board of Directors there is an Audit & Compliance Committee

• Address major industry-specific issues including patient safety/transparency and pricing/access• Believe in link between CSR and business performance

• 2% (% net sales) spent on Access Programs• 19% (% net sales) spent on R&D

• 4 primary focus areas: patients, ethical business conduct, employees & the environment

• Signed UN Global Compact (first pharma company to sign in 2000)•Provide drugs to developing countries, NGOs, the WHO, US patients without insurance• Tries to organize and engage with stakeholders (especially patients)– e.g. diabetes patient groups and access to quality healthcare advocates in Europe• Set up Novartis Foundation for Sustainable Development & Institute for Tropical Diseases

• KPIs clearly monitored and tracked; no baselines or goals

Integration

Resource Magnitude

Breadth of Activities

Depth of Activities

Source: Annual Report 2006, Corporate Citizenship Report

Benchmarking: NovartisBenchmarking: Novartis

Page 31: AstraZeneca’s New Path: Linking Business Performance to Social Performance Cristin Gendron & Gabrielle Scheer Haas School of Business, UC Berkeley April.

31

Strategic Value

Metrics

Pfizer

• Separate from Annual Report, only summary; CSR details only provided online and difficult to navigate

• Recognize stakeholders as more than just shareholders

• Address pricing/access as focus (“top priority”)

• Difficult to focus given pipeline covers wide variety of disease areas - obesity in Ireland?

• $7.4B in R&D (15% of sales)

• >2M patients received 14.7M Rx via Pfizer Helpful Answers in ’05

• Employee Volunteerism through global health fellows program; 90 fellows up to 6 months in over 15 countries

• good governance, ethical research, environmental health, health promotion, stakeholder engagement, clinical trial transparency

• no focus

• Signed Global Compact, 2002

• Little – only ireland example

• hard to find – doesn’t look like they have

Integration

Resource Magnitude

Breadth of Activities

Depth of Activities

Source: Corporate Citizenship Report, 2005

Benchmarking: PfizerBenchmarking: Pfizer

Page 32: AstraZeneca’s New Path: Linking Business Performance to Social Performance Cristin Gendron & Gabrielle Scheer Haas School of Business, UC Berkeley April.

32

Link Strategy w/ Mission & CompetenciesLink Strategy w/ Mission & Competencies

Strategic #1Recommendations Measurement Communication

Mission Statement: Discovering, developing, and delivering innovative, meaningful healthcare solutions

Putting the health of patients first - helping to empower and inform Rewarding work environment that inspires our employees

Core Competencies:Research and Development

CommercializationSix Key Therapeutic Areas

CSR Strategy*:Striving to make the right decisions

Being open and honestCreating a healthy workplace

Providing access

*Source:AZUS CSR Summary Report, 2006

Page 33: AstraZeneca’s New Path: Linking Business Performance to Social Performance Cristin Gendron & Gabrielle Scheer Haas School of Business, UC Berkeley April.

33

Examples of Strategic CSRExamples of Strategic CSR

Strategic #1Recommendations Measurement Communication

EXAMPLE 1:HEWLETT PACKARD

EXAMPLE 2:PEDIGREE

Strategic alignment of business interests and CSR program

• Pedigree Pet Adoption Drive• Provide Food for Adopted Dogs

• Education on Adoption• Front page of main website

CLEAR LINK

Misalignment of competencies and CSR strategy

• $50 of purchase price goes to LiveStrong Foundation – pure

monetary donation• Difficult to find on website

UNCLEAR LINK

?

Page 34: AstraZeneca’s New Path: Linking Business Performance to Social Performance Cristin Gendron & Gabrielle Scheer Haas School of Business, UC Berkeley April.

34

Strategic #3Recommendations Measurement Communication

BENEFIT TO CORPORATE REPUTATION

LEVEL OF CSR INVESTMENT

OFFENSIVE CSR

DEFENSIVE CSR

SOCIETAL EXPECTATIONS

GAINS PLATEAU ONCE COMPANY NEARS SOCIETAL

EXPECTATIONS

GAME CHANGING CSRREQUIRES GREATER INVESTMENT BUT

CAN DRIVE PEER DIFFERENTIATION

SWEET SPOT

Move Towards Game Changing CSRMove Towards Game Changing CSR

Page 35: AstraZeneca’s New Path: Linking Business Performance to Social Performance Cristin Gendron & Gabrielle Scheer Haas School of Business, UC Berkeley April.

35

CSR IndicatorsCSR Indicators

Pricing / Access

Patient Safety

Net Sales Growth

Brand Net Sales Growth

Exp/Net Sales Ratio

Contribution Growth

InformationTransparency

Reputation

Strategic #3Recommendations Measurement Communication

Access to Medicines

HumanCapital

Human Rights

Philanth-ropy

Environ-ment

Page 36: AstraZeneca’s New Path: Linking Business Performance to Social Performance Cristin Gendron & Gabrielle Scheer Haas School of Business, UC Berkeley April.

36

Why Measure?: Measurement GoalsWhy Measure?: Measurement Goals

StrategicRecommendations Measurement Communication

*Source: Kellie McElhaney, 2007

• Align investment with value

• Inform management decisions

• Help you maintain the integrity of your work Let the numbers do the talking

• Contribute to reporting, communication, and branding

Page 37: AstraZeneca’s New Path: Linking Business Performance to Social Performance Cristin Gendron & Gabrielle Scheer Haas School of Business, UC Berkeley April.

37

StrategicRecommendations Measurement – C&E Communication

Defining Compliance in Pharma IndustryDefining Compliance in Pharma Industry

‘Compliance’ in the pharma industry:

Government price reporting

FDA promotional and reporting regulations

Fraud & Abuse regulations

Good Manufacturing

Laboratory or clinical practices

Clinical trial requirements

Employment antitrust and trade laws

Safety, Health & Environment (SH&E) regulations

And the list goes on…

Page 38: AstraZeneca’s New Path: Linking Business Performance to Social Performance Cristin Gendron & Gabrielle Scheer Haas School of Business, UC Berkeley April.

38

StrategicRecommendations Measurement – C&E Communication

Creating a Compliant & Ethical CultureCreating a Compliant & Ethical Culture

Adherence to external laws and regulations

External Laws and Regulations

Compliance&

Ethics Program

Internal Policies and Procedures

Compliant with external regulations & promotes

ethical culture

Communication

Communicate about two sets of rules, why they’re important & consequences for violations

Compliance Vision

To be recognized and respected as a premier

compliance & ethics function that enables AZ to “win the right way” by delivering

innovative & proactive solutions that put patient health first

Compliance Mission

To implement a best-in-class compliance

program that addresses the key

compliance risks facing the business and establishes and

embeds an ethical corporate culture

Page 39: AstraZeneca’s New Path: Linking Business Performance to Social Performance Cristin Gendron & Gabrielle Scheer Haas School of Business, UC Berkeley April.

39

StrategicRecommendations Measurement – C&E Communication

Rationale for Weight AdjustmentsRationale for Weight Adjustments

• High Weighting:– ERC Ethics Survey and Compliance linked to Performance sections

are critical because they directly support the views/beliefs of employees– Scorecard and Audit Reports provide critical objective assessments of

Compliance and Ethics Program performance and outcomes

• Medium Weighting:– Corporate Board Oversight is relatively important as it shows that the

company is serious about having the C&E programs integrated into the company fabric and that there is top leadership buy in

– Helpline Data is important because it comes directly from employees (similar to ethics survey) but has been weighted for mix of negative and positive favorability

• Low Weighting:– Training Metrics are important, however, they should not be given too

much priority because these are presumed a baseline exercise

Page 40: AstraZeneca’s New Path: Linking Business Performance to Social Performance Cristin Gendron & Gabrielle Scheer Haas School of Business, UC Berkeley April.

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Building the C&E Index: ExampleBuilding the C&E Index: ExampleStrategicRecommendations Measurement – C&E Communication

DimensionKey Indicators

(Measure)Weighting Favorability Weighted Score

Ethics Survey Survey ‘Score’ x 10 Positive (add) 700

Helpline Data # incidents reported x 5 Negative (subtract) ---

Audits Reports % ‘green’ audits x 10 Positive (add) ---

Training Metrics

% employees trained

x 1 Positive (add) ---

• Assume ERC Ethics Survey score ranges from 0 to 250• Set Max Value = 100, therefore set 250 = 100• Assume AZ US value came back at 175• Set up a proportion, where 175/250 = x/100• Therefore, x = 70• Set weightings = 10 for ‘high’, 5 for ‘medium’ and 1 for ‘low’• Sum Weighted Scores

C&E Index = Weighted Sum

Building C&E Index: ExampleBuilding C&E Index: Example

Page 41: AstraZeneca’s New Path: Linking Business Performance to Social Performance Cristin Gendron & Gabrielle Scheer Haas School of Business, UC Berkeley April.

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StrategicRecommendations Measurement – C&E Communication

Benchmark: Johnson & JohnsonBenchmark: Johnson & Johnson

• The core value in building out a comprehensive C&E program is integration.

• is a company that has made their internal message simple: follow The Credo

Integrity &

Credo-based Actions

Leaders at J&J live Credo values; build trust; tell the truth;

initiate transparency into problems and demonstrate genuine caring for people

Page 42: AstraZeneca’s New Path: Linking Business Performance to Social Performance Cristin Gendron & Gabrielle Scheer Haas School of Business, UC Berkeley April.

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EconomicEconomic

StrategicRecommendations Measurement - CSR Communication

Dimension CSR Indicators Business

IndicatorsProduct Pipeline, R&D Types of Products, global health

implications

% of net sales invested in R&D

Sales, Margin, Investing, Mkt Share

Clinical Trial Data Information transparency of outcomes (e.g., Novartis communication ALL prelim trials)

Sales, Mkt Share

Code of Conduct / Compliance

Adherence – (% of green audits, ethics survey results, helpline data)

Retention, Investing, Recruitment, Sales

Corporate Governance Active oversight by BIAT Sales, Investing

Risk Management Defensive v. offensive issues and opportunities

Sales, Investing,

Mkt Share

Sales & Marketing Positive v. negative outcomes Sales, Investing, Mkt Share

Red font indicates items overlapping with C&E index

Page 43: AstraZeneca’s New Path: Linking Business Performance to Social Performance Cristin Gendron & Gabrielle Scheer Haas School of Business, UC Berkeley April.

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EnvironmentalEnvironmental

StrategicRecommendations Communication

Dimension CSR Indicators Business

Indicators

Animal Rights Audit results Sales, Investing

Energy Efficiency Energy (million GJ)

Water Use (million m3)

Emissions

Waste

Supply Chain

Margin, Sales, Investing

Measurement - CSR

Red font indicates items overlapping with C&E index

Page 44: AstraZeneca’s New Path: Linking Business Performance to Social Performance Cristin Gendron & Gabrielle Scheer Haas School of Business, UC Berkeley April.

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SocialSocial

StrategicRecommendations Communication

Dimension CSR Indicators Business

Indicators Labor Practice Indicators Driver Rights, International Labor

Layoffs/Managed Attrition

Sales, Margin, Investing

Human Capital Development

Training metrics

Incentive Alignment (Linkage between C&E , CSR & employee performance assessment)

Misconduct reported

Diversity in Workplace

Retention, Recruiting, Sales, Margin

Access to Medicines Breadth/Depth of Program ($ invested, people treated, resources utilized, etc)

Community Partnerships

Sales, Margin, Investing, Recruiting, Retention

Patient Safety Number / Extent of patient risks sited Sales, Margin, Investing

Pricing Strategy Discounts provided to developing nations

Price discrimination strategies

Sales, Margin, Investing

Measurement - CSR

Red font indicates items overlapping with C&E index

Page 45: AstraZeneca’s New Path: Linking Business Performance to Social Performance Cristin Gendron & Gabrielle Scheer Haas School of Business, UC Berkeley April.

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CSR Indicators Link to BusinessCSR Indicators Link to Business

Pricing / Access

Patient Safety

Net Sales Growth

Brand Net Sales Growth

Exp/Net Sales Ratio

Contribution Growth

InformationTransparency

Reputation

Strategic #3Recommendations Measurement Communication

Access to Medicines

HumanCapital

Training Investment

Innovation

Market Share

Employee Recruitment

Employee Retention

Productivity

Page 46: AstraZeneca’s New Path: Linking Business Performance to Social Performance Cristin Gendron & Gabrielle Scheer Haas School of Business, UC Berkeley April.

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Communications Strategy ConsiderationsCommunications Strategy Considerations

Source: Kellie McElhaney, 2007

StrategicRecommendations Measurement Communication

• You cannot not communicate

• If you do not communicate your CSR, you cannot leverage maximum business benefits (consumers, employees, partners, investors, new markets, etc.)

• If you do not manage your CSR communications strategy, someone else will do it for you!

• There are risks, as with every communications strategy, but there are worse things for which to be criticized (than trying to do good)

• Communicate more broadly than to only consumers


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