Overall Decline in ESG Ratings in the Pharmaceutical Industry...Samba, SK바사, Dong-A Socio, and Others Receive A Grade

Korea ESG Standards Institute A Grade Decreases from 9 to 5
Top Companies Praised for ESG Management Efforts
Daewoong Pharmaceutical Upgraded Two Steps from C to B+
Celltrion Group Downgraded for 'Accounting Standards Violation'

2022 Domestic Pharmaceutical and Bio Companies ESG Evaluation Results.

[Asia Economy Reporter Lee Gwan-joo] The ESG (Environmental, Social, and Governance) evaluation results of domestic pharmaceutical and bio companies have generally declined. As global standards are gradually being strengthened, there are calls for industry-wide efforts to secure competitiveness in line with these changes.

According to the pharmaceutical and bio industry on the 29th, in the recently released '2022 ESG Ratings' by the Korea ESG Standards Institute, no pharmaceutical and bio companies received the highest S (Excellent) or A+ (Very Good) ratings. Only five companies?Dong-A Socio Holdings, Dong-A ST, Samsung Biologics, SK Bioscience, and SK Biopharm?received the A rating (Good), which can be considered upper-tier. This is about half the number compared to last year, when nine companies received an A rating. The Korea ESG Standards Institute completely revamped the evaluation criteria this year to align with global standards, which increased the difficulty level and is believed to have led to fewer companies receiving top ratings.

Despite the increased difficulty, the ESG management efforts of top-tier companies were highly evaluated. Samsung Biologics earned praise for presenting greenhouse gas reduction achievements, systematic management of environmental data, mitigation of supplier risks, advanced board composition, and proactive management of potential risks, securing an A rating for the second consecutive year. SK Bioscience, which received an ESG evaluation for the first time this year, was well-regarded for strict compliance with rigorous global regulations during vaccine development, various regional social contribution activities, and establishing a sustainable management system through board-centered governance. Dong-A Socio Holdings, recognized as a representative ESG management company in the pharmaceutical industry, also received high scores through greenhouse gas emission verification and anti-corruption management.

2021 Domestic Pharmaceutical and Bio Companies ESG Evaluation Results.

The number of pharmaceutical and bio companies that received a B+ rating (Fair) increased significantly to 18 from 8 last year, largely due to companies that previously held A ratings being downgraded to B+. Companies such as ST Pharm, Ildong Pharmaceutical, Ildong Holdings, Chong Kun Dang, Handok, and Hanmi Pharmaceutical were adjusted to B+. Kyungbo Pharmaceutical, GC Green Cross, Boryung, Youngjin Pharm, and Chong Kun Dang Bio maintained their B+ ratings.

One of the companies showing the most notable improvement was Daewoong Pharmaceutical. Daewoong Pharmaceutical rose two grades from a C rating last year to a B+ rating this year. In particular, its environmental rating improved from D to B, and its social rating rose from B to A. Daewoong Pharmaceutical has continuously strengthened its ESG management by carrying out various social contribution activities, including 'Chamjimayo,' the first educational program for people with developmental disabilities in the domestic pharmaceutical industry.

Conversely, Celltrion and Celltrion Healthcare, which received B+ ratings last year, were downgraded to B. This reflected the Financial Services Commission's imposition of a total fine of approximately 15.4 billion KRW in March for violations of accounting standards in preparing financial statements. Celltrion was fined 6 billion KRW, and Celltrion Healthcare was fined 6.04 billion KRW. At the time, the Celltrion Group stated, "We respect the financial authorities' decision regarding the accounting treatment of major affiliates and will focus on our business in our rightful place."

As ESG becomes a global standard, advanced efforts by domestic pharmaceutical and bio companies are essential to expand overseas. An industry insider said, "With international regulations tightening and ESG guidelines becoming a mandatory element worldwide, it is a time when companies aiming to enter the global market need to prepare more thoroughly."