CUSTOMER STORY

How Organon is building its strategy on a foundation of ESG

This pharma company has used insights from Datamaran to establish a robust strategy rooted in ESG.

Investors, regulators and consumers are demanding consistency in the way companies disclose their material risks. They want to see that companies are aware of external issues, including environmental, social and corporate governance (ESG) factors, and that they’re monitoring them consistently.

How can a company design its strategy in a way that incorporates material ESG issues and builds consistency across Executive decision-making, reporting, and investor engagement?

In the first Datamaran Client Forum of 2022, the startup-at-scale pharma company Organon shared their path to authenticity with ESG materiality as a starting point. Byron Austin, Head of Corporate Responsibility & ESG Management at Organon spoke about what it means to ride the waves of a continuously changing risk landscape with a dynamic approach to materiality. In this article, we look at Organon’s approach.

Data-driven materiality as the foundation

Organon is a global healthcare company formed as a spinoff from pharma giant Merck (known as MSD outside of the U.S. and Canada). Organon has a mission “to deliver impactful medicines and solutions for a healthier every day.” Despite being relatively new – the company started in 2021 – as a startup-at-scale, it already employs 9,000 people across 140 markets.

Companies in the healthcare space face external risks specific to the pharma industry, such as changing medical regulation, as well as broader external risks like climate change. Organon’s business model is rooted in ESG principles with a focus on critical material issues, particularly related to women.

How Organon is building its strategy on a foundation of ESG materiality
How Organon is building its strategy on a foundation of ESG materiality

With ESG at its heart, Organon seized an opportunity to build a strong foundation with a data-driven and dynamic approach to ESG materiality.

“I reached out to Datamaran because we had promised our board that we were going to develop an ESG strategy by the end of the year,” Byron said. “I knew that Datamaran could help us out. Quickly and efficiently, we were able to do materiality in a very short amount of time. And Datamaran continues to be incredibly useful as we finetune this strategy, which we are happy to report got approved by our executive leadership team and our Board of Directors by the end of the year. This was no small feat.”

Disclosure consistency

Organon uses Datamaran to not only determine its material issues, but also to achieve an end-to-end process for issues monitoring that strengthens executive and board decision-making, ensures a cohesive strategy, and supports consistency in disclosures.

How Organon is building its strategy on a foundation of ESG materiality

In 2022, Organon is set to release its first 10k and ESG report. “As a new company, we're about to kick off the report development process, including the 10k,” explained Byron. “I'm working lockstep with our securities lawyers and our governance lawyers to make sure that there is alignment of the disclosure of risk across all our filings.”

Because they are setting a baseline, Organon has used proxy information from Datamaran’s benchmarking insights. Organon looked at what its peers are doing in terms of disclosing material risks and to find opportunities for differentiation. 

ESG materiality and risk management

This type of evidence, complemented by regulatory, policy making, and public opinion insights, enabled Byron and the ESG team to work with the enterprise risk management team and align material issues and risks across the company.

“It is a lot to assess, especially for folks who don't ‘live’ in ESG or sustainability day to day,” Byron said. “It was really helpful to do this matching exercise. The nomenclature was different, but there was some alignment among what we found in the materiality and what we found in the enterprise risk management process. I think going forward, when we do it again, there's going to be a lot more integration.”

How Organon is building its strategy on a foundation of ESG materiality

The matching exercise helped bring some ESG issues to light in a new way for the risk management team. For example, they could see environmental risk at a more granular level, incorporating issues like climate change, GHG emissions and natural capital.

And it’s not just about the data. It’s also about the systematic process that Datamaran provides throughout the year to monitor changes and ensure strategic foresight

Bringing unexpected issues to the fore

By monitoring external issues that are important to the company’s stakeholders, Byron also had the opportunity to visualize and draw meaning from the dynamic ESG landscape for Organon’s executives. “I remember doing this exercise around the COP26 meeting. There was a lot of media coverage, and it was interesting to see how those issues moved in importance,” Byron said. “It was really great for engaging our senior executives in that conversation.”

Organon’s ESG strategy was under development at the time of the event, so it was a great example to highlight that, even for a pharmaceutical company, climate change is an important reputational risk that stakeholders care about. “There's an expectation from stakeholders that we are committed to the climate transition and to a lower carbon economy, so it was another data point for an argument I was making internally – it was very helpful to do that.”

How Organon is building its strategy on a foundation of ESG materiality

Byron added: “When I joined the organization, there was a draft ESG framework. As you can imagine, there were what I call the ‘big ticket items’ around access to medicines. The Datamaran materiality map and exercise really showed the breadth of material issues that are relevant to our company and to our stakeholders.”

Putting ESG in front of the board

Byron and the team used Datamaran initially for the external view. They purposely didn’t involve the executive leadership team in this stage. Instead, they presented the analysis to senior leaders across different functions when they gathered their feedback for the internal view.

Senior leaders approached the analysis with curiosity and were surprised by some of the issues Organon’s stakeholders are most concerned about. For example, while topics like product safety can be expected for a pharmaceutical company, some executives were surprised to see less visible topics like ethics in research and development rank high as topics the external world cares about.

ESG is at the core of Organon’s business; Organon’s board has an ESG committee, and ESG runs through the work of several other committees. Byron commented: “As we start looking at risk and materiality in a very broad set, that's involving the audit committee of the board. This materiality exercise has allowed us to not only develop our strategy and formulate goals and KPIs, but also to involve the whole entire board and their oversight of ESG.

Now, as they work towards Organon’s first 10k filing and ESG report, the team is using Datamaran to monitor material issues and keep the board updated on a quarterly basis. Datamaran tracks how the likelihood of Organon’s material issues in terms of risk and opportunity changes over time, based on the parameters they have selected. As well as providing essential information for reporting, this also supports leadership in their decision making – and gives them the data to back up those decisions.

Read about Organon’s approach to ESG.

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