ESG Trendsetters: AmerisourceBergen's 3 Pillars Driving ESG Initiatives

Over the past several years, environmental, social and governance (ESG) has become more firmly integrated into investment strategies, and global regulators are increasingly scrutinizing corporate ESG disclosures. As the focus on ESG intensifies, Nasdaq’s ESG Trendsetters series looks to highlight the top ESG professionals and teams around the world to discover how they are incorporating ESG factors into their corporate strategy, achieving meaningful impact and communicating with their stakeholders.

At leading global healthcare company AmerisourceBergen, ESG is foundational to its corporate strategy, driven by its purpose to be united in its responsibility to create healthier futures. During a recent interview, Randall Hopkins, Head of ESG SaaS Solutions and Nasdaq's Corporate Platforms division, spoke with AmerisourceBergen’s Jim Cleary, Executive Vice President and Chief Financial Officer, and Susan Lorenz-Fisher, Senior Vice President of Corporate Responsibility and Sustainability, about AmerisourceBergen’s ESG initiatives and the three pillars guiding its journey to becoming a more sustainable company. Cleary and Lorenz-Fisher also shared their advice for issuers looking to establish a more robust ESG framework.

The following is a transcript of their conversation, which has been lightly edited for clarity.

Randall Hopkins: Welcome to ESG Trendsetters. I'm the Head of ESG SaaS Solutions and Nasdaq's Corporate Platforms division. We are joined today by Jim Cleary, Executive Vice President and Chief Financial Officer of AmerisourceBergen, and Susan Lorenz-Fisher, Senior Vice President of Corporate Responsibility and Sustainability. AmerisourceBergen is improving the health and well-being of people, animals and the planet through innovative solutions. It's going to be great to hear today from Jim and Susan on how they and the AmerisourceBergen team are paving the way as an ESG trendsetter.

Jim Cleary: Thank you, Randall. It's great to see you today. And thanks to Nasdaq for inviting us to participate in this series. I'll provide just a brief overview of AmerisourceBergen for those who may not be familiar with our company. AmerisourceBergen is a leading global healthcare company with a foundation in pharmaceutical distribution. And we're differentiated by our value-added solutions for upstream and downstream customers. Through our robust platform of solutions, we're able to support pharmaceutical innovation and access across our global footprint for our customers, big and small. With fiscal year 2021 revenue of $214 billion, we rank number 10 on the Fortune 500, and we're focused on creating long-term sustainable value for all of our stakeholders, which is supported by our investments in our people and culture and our commitment to ESG. And so, thanks again, Randall, for including us in this ESG series.

Randall Hopkins: Why is ESG so important and foundational for AmerisourceBergen?

Jim Cleary: One reason why ESG is important to AmerisourceBergen is ESG is increasingly important to many of our internal and external stakeholders. This includes our employees, our customers, investors, rating agencies, regulators, and also our board of directors. With respect to our employees, they want to work for a company that is aligned with their personal values, ESG encompasses many of those values, including the environment and diversity, equity and inclusion. With respect to our customers, they're managing their supply chains to ensure that their ESG goals are met, and AmerisourceBergen can add significant value by helping upstream and downstream customers with their environmental impact measurement.

Regarding investors, many shareholders, now incorporate ESG into their decision-making and analysis and those that do tend to be long-term-oriented shareholders. In parallel, equity research firms and credit rating agencies are starting to incorporate ESG into their analysis. Regarding regulators, ESG is increasingly important to many regulators globally, which we're watching and tracking, including, for instance, the Securities and Exchange Commission. We're very proud of our progress, which is ahead of regulatory requirements. In the U.S., for example, we're able to measure scope one, two and three emissions.

Overall, ESG is incredibly important to AmerisourceBergen, as we're driven by our purpose to be united in our responsibility to create healthier futures. Also, ESG is important because being a responsible company is one of the key elements to achieving long-term sustainable growth. ESG is deeply ingrained into our business operations, from focusing on operational efficiency to reducing emissions to investing in diversity, equity and inclusion initiatives.

We're at the early stages of quantifying the benefits of ESG, but there could be revenue and operating income benefits from winning customer fees that include an ESG component. Our savings will be measured from being a more efficient business, which then can be used to reinvest and grow our business. There are also indirect benefits from ESG initiatives. Examples include being a more resilient business by being able to adapt to extreme weather events, becoming an employer of choice, winning long-term shareholders and lowering the cost of capital. For all these reasons, ESG is very important to AmerisourceBergen, and we're committed to being a responsible corporate steward and to transparency in our ESG efforts.

Randall Hopkins: What are your top areas of ESG focus and what are the key metrics you focus on in your ESG program?

Susan Lorenz-Fisher: When we talk about environmental, social and governance efforts and commitments at AmerisourceBergen, we look across three key pillars. Our first pillar is purpose-driven team members, and we see this as embodying the aspects of our culture, like our team member engagement, fostering a diverse and inclusive workforce, and rallying around a shared purpose. When we look in particular at the challenges we've seen over the last couple of years from COVID 19, one of the things we like to point out as more of a qualitative metric is the work we've done to support our team members. We've added mental health benefits, looked at backup childcare options, and made sure we had telemedicine and paid time off for our team members. From the talent side of things, human capital management, we introduced a new integrated talent framework, and that includes a number of leadership competencies that are new to our organization as well as an enterprise learning strategy which we're really proud of.

Under the leadership of our Chief Diversity, Equity and Inclusion Officer, we've made a lot of advancements in this space, particularly around our global employee representation and work with our Employee Resource Groups. For example, one of the statistics that we are highlighting from the transparency perspective is that across our U.S. workforce, our commitment to equal opportunity has been achieved through a 99.4% gender pay equity in the U.S. That statistic is in our global ESG report and something that we're looking at from the DEI perspective globally. Another example is the work we do in supplier diversity, making sure that the partnerships we have with organizations large and small are reflective of our organizational commitment to diversity, equity and inclusion as well as those of our customers.

The second pillar we use to talk about our commitment to ESG is what we call our resilient and sustainable operations pillar. In this focus area, we look at the efficiency and responsibility that we have as an organization, as we're delivering life-saving medications every day in healthcare services. We look at the ability of AmerisourceBergen to be committed to efficient operations across our global supply chain, and a lot of that aligns with our carbon commitments. We formally committed to establishing a science-based target about six months ago, and then in May, we submitted our draft target for verification. We're excited about that and looking to see what we can do to reduce our scope one and two emissions and influence across the supply chain when it comes to our scope three emissions. It's an important area for us.

Looking at the customer piece, I think Jim is such a good job talking about how we see ESG as a shared value with our customers. And so, when we talk particularly about the environmental side of things, we want to make sure that we're partnering on initiatives with our customers that are important to both organizations. There are a lot of different topics in this area like reusable packaging looking into technology solutions to optimize how customers order, and much more that are exciting areas for us, and we'll continue focusing on them.

The third pillar of our ESG efforts is healthy communities for all. In this space, we look at equitable access to healthcare services around the world, as well as the patient populations we serve. There are so many examples that we're proud of as an organization that show both how philanthropically and commercially, we're showing this commitment. For example, over the past several months, we've supported the pandemic response with antibody and antiviral treatments in the U.S., as well as around the world in about 30-plus countries, which is a statistic we're proud of as an organization. When we think about how we partner with nonprofit and charitable organizations all around the world, we look at how we are equipping those partners to continue to support the global healthcare supply chain through their own networks of healthcare providers and institutions they support. An example where we stepped up as a company was in light of what's happening in Ukraine, we came together and looked to see how we could make sure some of our nonprofit partners who were doing work on the ground had access to certain healthcare products and supplies. That's how we embody the healthy communities for all pillar. We have so much to be proud of in this area, and it all aligns with our company purpose, but our commitment to ESG remains an area of continuous improvement for us and we will continue to evaluate how we can improve our ESG efforts.

Randall Hopkins: How do you think about the future with regards to ESG and what are your areas of focus?

Susan Lorenz-Fisher: As an organization, we have spent a lot of time thinking about how to continue to advance our ESG efforts. One overall driving force for us the past year or so, has been continuing to globalize our program. Last June, we acquired Alliance Healthcare, which has a very large footprint in Europe. That acquisition has challenged us in the best ways to start thinking about our three key pillars that guide our ESG strategy and how to continue to look at those priorities and make sure they're reflective of our new very global footprint. That's been an exciting step for us and looking at very specific facets of our strategy and talking through how to truly make them global and engaging different countries have been important. One example of this was becoming formal signatories of the United Nations Global Compact. We're excited about that, and it aligns with a lot of the work we do more broadly with the United Nations Foundation on a variety of initiatives, including the United Nations Sustainable Development Goals. Historically, we've matched to the SDGs in our report, but there's so much richness in those goals when we look at the various layers of our ESG commitments, and I think we see a lot of synergies and opportunities in how those efforts can come together and we can deliver more in terms of our ESG commitments.

We talked a little bit already about the science-based target. Once that's approved, hopefully, in early 2023, it will be a very strong focus for us and our continued commitment not only around climate change mitigation, but also to adaptation and resilience. To that point, we recently, we signed on to the U.S. Department of Health and Human Services Health Care Sector Climate Pledge. While that has more of a U.S. focus, we're excited to see opportunities to look across healthcare and find ways to reduce our carbon footprint and thinking about how we can continue to be transparent in our carbon emissions reduction efforts.

In the ESG reporting space, there are so many different standards that are out there. I could probably talk for two or three hours about the different standards and how we navigate those. We try to make sure that as we're reporting out as a company, we're aligned with key standards, showing continuous improvement, and continuing to utilize our commitment to ethics, compliance and transparency as the underpins to how we show up in terms of our ESG reporting. A few examples of this include recently releasing our EEO1 data, and we're also looking at cross-functional collaboration and cross-industry collaboration. We're working with a number of our trade organizations and other nonprofit partners to make sure that we're defining the critical priority topics for ESG in our industry in particular. We have such an interesting position in the supply chain. It's important for us to make sure that we have a seat at the table to define for our broader industry key priorities to help our stakeholders understand and help them see and connect the dots where there might be opportunities for us to partner. We're going to continue to monitor trends and move our efforts forward, and we will do that in a very collaborative way that's absolutely a part of our culture and what's gotten us to this point.

Randall Hopkins: How do you think about cross-functional collaboration when it comes to ESG?

Jim Cleary: In our ESG efforts, it's definitely a team effort at AmerisourceBergen. Our ESG strategy and efforts are overseen by our board and also receive support from the highest levels of our company and throughout our company at many levels. Our board's Governance, Sustainability and Corporate Responsibility Committee, which actually was renamed in 2020, provides oversight of sustainability and corporate responsibility in addition to its oversight of governance, board succession planning, investor relations and political engagement. The committee reviews and guides our ESG strategy and monitors the implementation and performance of ESG objectives. Sustainability and corporate responsibility are also included in our board skills matrix to strengthen the board-level commitment to ESG. The committee receives quarterly updates on all ESG programming across the organization, allowing them to give feedback and guidance on the company's corporate responsibility and sustainability strategy, and in conjunction with our Compensation and Succession Planning Committee, the committees are evaluating ways to thoughtfully integrate an ESG performance metric in determining executive compensation.

At the management level, we have a global ESG Council comprised of a cross-functional group of senior management, which I co-sponsor alongside Gina Clark, our Chief Administration and Communications Officer. The Council's overarching purpose is to ensure the integration and coordination of AmerisourceBergen's ESG strategy and practices with our business strategy and policy. The Council leads AmerisourceBergen’s efforts to embrace a company-wide ESG approach, integrate ESG throughout our business, and ensure high standards of accountability. On a day-to-day level, our business and corporate teams work very closely with Susan's team to support our ESG journey. One example is how closely our investor relations team works with the sustainability team to ensure that our ESG story is told and communicated to all our stakeholders. I'll give one other example, and that's how our commercial teams now bring in our sustainability team to support our RFPs for some of our key accounts.

Randall Hopkins: Do you have any tips or advice for other companies looking to advance their ESG efforts?

Jim Cleary: At AmerisourceBergen, we take transparency and accountability very seriously. Earlier this year, we released our sixth annual Global Sustainability Report and ESG Reporting Index. For companies that are looking at taking the next step in ESG, this is certainly something to take a look at. Our report was prepared in accordance with the Global Reporting Initiative Standards and our ESG Reporting Index is aligned with four globally recognized frameworks including the Sustainability Accounting Standards Board, the Task Force on Climate-Related Financial Disclosures, the World Economic Forum's Stakeholder Capitalism Metrics, and the United Nations Sustainable Development Goals. Our report is presented on its own microsite at sustainability.amerisourcebergen.com and I'd encourage viewers and issuers to take a look at the site. Key metrics of the report are externally assured, and this is the fourth year that we sought an external assurance on the report. We’ve also released our EEO1 data and provided increased disclosure on our human capital in our 10-K. I'd also highlight that we recently released our first ever Diversity, Equity and Inclusion summary report.

I think it's also important to mention just how vital it is to invest in a great team and talent in the sustainability area. I'd point to Susan and her sustainability team, but also, I'd point to all of our 42,000 team members at AmerisourceBergen who do great work daily to move our business forward and truly live our purpose of being united in our responsibility to create healthier futures. I'll just finish up by saying that we're grateful to partners along the way, like Nasdaq, who share our commitment to ESG.