From 2022 to 2023, the proportion of ESG reports will continue to grow, increasing to 49.3% and 54.0% respectively, surpassing the proportion of social responsibility reports and becoming the main form of disclosure.
ESG includes three dimensions: Environmental, Social and Governance. Nowadays, ESG reporting has become an important carrier for compliance information disclosure, strengthening sustainability management, and strengthening stakeholder communication.
On April 22, 2024, Baicheng Pharma released its 2023 annual report, along with the annual report, along with Baicheng Pharmaceutical's 2023 Environmental, Social and Governance (ESG) Report (hereinafter referred to as the "ESG Report"). This is also the company's first ESG report released after going public in 2021.
As China's economy enters a new stage of high-quality development, especially in the context of increasingly prominent national strategies such as the "dual carbon" goal, the practice of ESG has become a global consensus and general trend.
This report sets out the management objectives, practices and implementation performance of Baicheng Pharma in the fields related to environmental, social and corporate governance in 2023, and further demonstrates the company's achievements in product innovation and R&D, product safety and quality, product service quality, compliance and risk management, safety production and operation, data security and privacy protection, business ethics and anti-corruption, climate change and carbon emission reduction, responsible supply chain, healthcare accessibility and digital construction to various stakeholders.
After 12 years of development, Baicheng Pharmaceutical's business covers the whole chain of generic drug R&D and production such as drug discovery, pharmaceutical research, clinical research, customized R&D and production, registration application, etc., and has provided more than 700 pharmaceutical research, clinical trials or integrated R&D services for more than 500 customers in China.
During the reporting period, the company developed steadily in its business areas, achieving revenue of 1.017 billion yuan in 2023, a year-on-year increase of 67.51%, and a net profit of 272 million yuan, a year-on-year increase of 40.18%.
The first ESG report covering material issues
In addition to the relevant guidelines of the China Securities Regulatory Commission, the Hong Kong Stock Exchange and the Shenzhen Stock Exchange, the ESG report of Baicheng Pharma also refers to the GRI Sustainability Reporting Standards and other rating indicators of the Global Sustainability Standards Council. The report is relatively complete and provides a reference for stakeholders, including investors, to make decisions.
The report adopts more than 130 data indicators, including 25 substantive issues, involving 6 types of stakeholders, including 6 governance issues, 4 environmental issues and 15 social issues. From the four aspects of innovative quality, honesty first, green and low-carbon, and common development, the company's ESG action results are displayed from all angles. In terms of the priority of important issues, Baicheng Pharma regards service quality and safety, safe production and operation, information security and privacy protection as the highest priority topics.
The company has made quantitative and qualitative disclosures on substantive issues in the CRO industry, such as innovation and R&D, construction of scientific research talent team, intellectual property protection, medical and health accessibility, and animal welfare, which is conducive to external rating and asset management institutions to accurately grasp the company's ESG dynamics.
(Image source: Baicheng Pharma ESG Report)
Environmental protection: practice green and low-carbon, and protect the ecological environment
The risks brought about by climate change have become a common issue faced by all mankind and urgent need to take action on this issue, and the mainland's carbon neutrality goal and the proposal of the "dual carbon" policy are the "catalysts" to promote the rapid development of ESG investment in the mainland.
Baicheng Pharmaceutical's ESG report adopts the form of a combination of figures, texts and numbers, and discloses more relevant information. For example, it lists seven major energy types including purchased electricity, as well as details of energy consumption, greenhouse gas emissions, wastewater emissions, exhaust emissions, hazardous waste, non-hazardous waste, and water resources. In addition to the above data details such as resource use and waste discharge, the report also includes details such as "during the reporting period, Thermo Pharmaceuticals invested in the construction of 16,000 square meters of distributed photovoltaic power generation facilities, with an installed photovoltaic capacity of 2 megawatts and a photovoltaic power generation capacity of about 1,700 kilowatt hours".
As a R&D and production service enterprise covering the whole chain of drug R&D and production, such as drug discovery, pharmaceutical research, clinical research, customized R&D and production, and registration application, pharmaceutical production has become an important energy consumption field due to the layout of the CDMO field of its subsidiary Thermo Pharmaceuticals.
Promoting energy conservation and emission reduction, and achieving "carbon peak" and "carbon neutrality" is a systematic project, which requires the joint efforts of the whole society. We know that if we want to reduce the amount of carbon oxides in the atmosphere, on the one hand, we must "control the increase" and reduce the emission of carbon oxides, and on the other hand, we must "suppress the stock" and absorb the carbon oxides in the atmosphere.
In the ESG report, Baicheng Pharma demonstrated the role of energy digitalization in energy conservation and carbon reduction, and disclosed in detail the scenario diagram of Thermo CDMO Pharma's smart factory and how to "make economic activities more efficient and reduce energy consumption per unit of output through technological means".
The protection of water resources is an important part of sustainable economic and social development. As a generic drug R&D platform, biopharmaceutical companies have a certain dependence on water resources, so it is necessary to manage water resources.
The treatment of "three wastes" is the top priority of the biomedical industry to take the road of sustainable development. Baicheng Pharmaceutical has a good sense of sustainable development, and has made substantial work in the establishment of environmental management system and structure and environmental risk management and control, and has disclosed in detail the company's continuous efforts to deal with the "three wastes" problem, including the update of equipment, the use of new technologies, the upgrading of green processes and the specific treatment results.
For example, in the treatment of wastewater, the Thermo Pharmaceutical Wastewater Station has introduced an MVR (Mechanical Vapor Recompression) device to reduce the salt and COD in high-salt wastewater through evaporation crystallization technology, and specifically pre-treat high-salt wastewater.
In addition, actively implementing green office practices to effectively improve resource utilization and reduce resource consumption and waste in production, office and other operations is also an important part of environmental issues. Baicheng Pharmaceutical's ESG report also discloses this topic in detail, involving the green office of employees, the company's green operation and other related content.
Social responsibility: research and development of reassuring drugs for the masses and promote inclusive health
1. Research and manufacture reassuring drugs for the masses. Product quality is the "foundation" of pharmaceutical enterprises, and biomedical enterprises need to regard product quality as the lifeline of enterprise operation and adhere to the bottom line of product quality and safety.
As a pharmaceutical empowerment platform, Baicheng Pharma emphasized the core issue of product safety and quality in its ESG report. In strict accordance with national laws and regulations and industry standards, and actively benchmarking international advanced standards, the company has established a quality management system throughout the whole life cycle of material source, experiment, research and development, clinical, registration, production, recall, etc., and has presented its own full-cycle drug quality assurance system and drawn the corresponding flow chart.
In terms of ensuring the effective operation of the quality system, Baicheng Pharma regularly conducts internal supervision and review for all business lines, accepts customer audits and inspections by drug regulatory agencies, carries out timely rectification of non-conforming information found in audits and inspections, and tracks the implementation of corrective and preventive measures to prevent the recurrence of similar incidents.
The company has established the Drug Safety Committee, which is the company's highest-level pharmacovigilance management organization, and the chairman of the company, as the person in charge of pharmacovigilance, is composed of heads of 10 related departments and subsidiaries, including the Pharmaceutical Research Center, the New Drug R&D Center, and the Pharmacovigilance Department. The Drug Safety Committee holds regular meetings to discuss, make decisions and take measures on drug safety issues within the company.
In terms of promoting the construction of quality culture, Baicheng Pharma actively carries out quality management training, covering new employee training, quality management system training, special training, legal and regulatory training, etc., to improve employees' awareness and ability of quality management. In 2023, we conducted 55 quality training sessions with a total of 2,335 participants.
2. Access to health care services. Biopharmaceutical enterprises should actively assume social responsibility, continue to promote the industrialization of scientific research results, provide consumers with more diversified and accessible treatment options, and promote social progress, which is a unique feature of the biopharmaceutical industry in the ESG evaluation system.
In terms of social responsibility, Baicheng Pharma is committed to realizing unmet clinical needs, continuously improving the accessibility and affordability of products, and benefiting more patients.
In the ESG report, Baicheng Pharma showed its contribution to inclusive health. Adhering to the original intention and mission of "scientific and technological innovation to serve health", guided by urgent clinical needs and supply shortages, we will increase investment in the research and development of generic drugs and innovative drugs, expand the development of traditional Chinese medicine and functional foods, and develop products with controllable quality, safety and effectiveness, so as to benefit more people and serve health more accessibly.
It is worth mentioning that the company's investment in the design and development of AI drug discovery models will accelerate the research and development of organoids and biochips, strengthen the development of mass spectrometry application technology, provide cutting-edge R&D services for the industry, and promote scientific and technological innovation in the field of medicine.
3. R&D innovation and the development of scientific research human resources. R&D and intellectual property protection are not unique issues for pharmaceutical companies, but are an important issue for all high-tech enterprises. However, medicine is a high-tech and high-barrier industry that integrates many disciplines, and innovation is still the main variable in the complex function of the comprehensive strength of pharmaceutical enterprises.
Since its establishment, Baicheng Pharma has always attached great importance to the construction and improvement of pharmaceutical R&D platforms, and has a variety of R&D technology platforms and facilities such as innovation centers, API research centers, pharmaceutical R&D centers, and clinical R&D centers, and has gradually established a high-level R&D platform system. In 2023, the company will add 4 provincial-level innovation platforms and 6 company-level R&D platforms, and accelerate the construction of innovation R&D centers, which will strongly support the output of R&D results.
Talent is the foundation and core element of innovation, and the essence of innovation-driven in the CRO industry is talent-driven, and retaining talents means retaining core technology, innovation ability, and core competitiveness.
In terms of the construction of scientific research talent team, Baicheng Pharmaceutical said that the company has created a good scientific research atmosphere, attracted and retained innovative R&D personnel, and provided basic technical support for the expansion of R&D and innovation pipelines. By the end of 2023, the company has a total of 1,249 technical R&D personnel, a year-on-year increase of 33.44%, of which 32.90% are master's and doctoral personnel, and 81.02% are bachelor's degree or above.
On the one hand, the company has improved the salary and welfare system, established an equity incentive mechanism, paid attention to the health and safety of employees, and built an equal and inclusive workplace atmosphere. The two-pronged measures not only retain the original core technical backbone, but also take precautions to cultivate reserve talents for the company. By the end of 2023, there were 63 courses in the online training system, with 1,487 learners, and 58 trainings before the assignment document took effect, with 8,315 trainees, with a pass rate of 92%. Offline, according to different job ranks, sequence classifications and business types, precise training is carried out to realize the construction of enterprise talents supported by professional skills.
Since its establishment, Baicheng Pharma has always kept in mind the social responsibility of "corporate citizenship", and strives to benefit people's livelihood and give back to the society with its development results. In 2023, the company will invest 2.4 million yuan in public welfare donations.
Corporate Governance: Enhance the quality of development with sound governance
Environmental and social sensitivities are an important part of good governance, and ensuring good governance is a necessary goal of corporate governance.
Through good governance, it is possible to meet the general socio-economic concerns of the environment and supply chains, resulting in steady growth. This growth does not stem from its sensitivity to the environment and the socio-economic aspects of global supply chains, but from good corporate governance that leads to growth and good management.
1. Standardize governance. A sound corporate governance system is essential for the sustainable development of an enterprise. Baicheng Pharma actively improves the corporate governance structure, improves the standardization and effectiveness of corporate governance, further optimizes information disclosure and investor communication, helps the company operate steadily for a long time, and better meets the expectations of shareholders, employees, partners and other stakeholders.
The Board of Directors of Baicheng Pharma is responsible for supervising the management to establish a company-wide anti-fraud cultural environment, establishing and improving the internal control system including fraud prevention, acceptance of reports, investigation and handling, and the Audit Committee is the main responsible body for the Company's anti-fraud work, responsible for guiding the internal audit department to carry out anti-fraud work and continuously supervising the anti-fraud work. The internal audit department focuses on potential business ethics violations in its audit work, and conducts special business ethics audits as needed.
At the same time, the company has adopted a number of management measures to enhance the compliance awareness of all employees and suppliers, and further standardize the behavior of employees and suppliers in terms of business ethics, anti-corruption, clinical confidentiality obligations, and anti-unfair competition.
It is worth mentioning that in the ESG report, Baicheng Pharma also emphasized the role of party building as a pilot.
2. Animal welfare. As the state increases its support for the research and development of innovative drugs, the number of domestic biological innovative drug research and development projects has increased significantly, accompanied by an increase in market demand for laboratory animals. Among the experimental animals, cynomolgus monkeys, whose prices have soared due to tight supply and demand, have caused heated discussions before.
For some CXO companies that focus more on front-end drug discovery and new drug development, laboratory animals can be described as an important "strategic reserve", which is reflected in the company's attention to animal welfare.
At present, it has become the consensus of the CXO industry to design animal experiment protocols based on the principle of "3R" (i.e., Replace, Reduce, and Refine). This requires the use of non-animal in vitro methods as much as possible, or the replacement of live animals with unconscious experimental materials, and the replacement of higher animals with lower animals;
In the ESG report, Baicheng Pharma pointed out that the company follows the 3R principles and other internationally accepted animal welfare and ethical guidelines. The report shows a flow chart of the management of the company's laboratory animal welfare and ethics committee, and some examples of safeguards in place for animal welfare.
3. Protect information security and privacy data. With the intensive introduction of laws and rules on data security in mainland China in recent years, a system of data security rules has taken shape. For pharmaceutical companies, data security and privacy protection are one of the substantive issues that cannot be ignored.
In order to better respond to the ever-evolving information security threat environment, Baicheng Pharma adopts a variety of information security protection measures to provide comprehensive protection for the company's information assets and further maintain and improve customer trust.
Drucker said in "Management: Mission, Responsibility and Practice", "To judge whether an enterprise is a good enterprise, in addition to the economic dimension, it also needs to have a social dimension." The social dimension is an important dimension related to the survival of enterprises", as an industry related to the life and health safety of the public, its social responsibility is greater, and it is easy to attract the attention of the society and regulatory authorities.
ESG is no longer a concept, behind an ESG report is an enterprise's ESG governance system. Seeking the optimal balance between environmental, social and corporate governance, so that pharmaceutical innovation can flow in the long run, is becoming an important proposition for pharmaceutical companies to think deeply and continue to practice.
Baicheng Pharmaceutical said that it will continue to uphold the development direction of integrity-based and innovation-oriented, continuously strengthen internal management, optimize resource allocation, improve product quality, promote scientific and technological innovation, strive to build a first-class pharmaceutical enterprise in China, and contribute to the development of the pharmaceutical industry.