Climate Risk is a Multifaceted Challenge That Continues to Grow
The biotech and pharmaceutical industries are intimately connected to the global climate risk challenge. In addition to facing supply chain disruption risks due to more frequent and severe weather events, the industry is also at the forefront of responding to the multifaceted health challenges posed by climate change, such as infectious disease spread.
We have seen an increasing number of natural catastrophe events resulting in large losses in the life sciences industry in recent years. Using mid-to-long-term climate models to assess risk exposures along the entire value chain enables risk managers to make informed decisions.
At the same time, the sector is a significant contributor to global emissions, emitting five percent of total annual global emissions, 55 percent more than the automotive sector.9 Against this reality, life sciences firms must continue to address their environmental and social impacts across production, distribution and supply chains, and navigate the challenges of the carbon marketplace, including carbon offset transactions.
Like all sectors, life sciences faces increased regulation regarding sustainability in an effort to make meaningful strides toward global climate goals. This drives the imperative for organizations to rethink their global reporting capabilities. Capturing data across the entire value chain is central to optimizing climate performance, helping organizations comply with regulatory requirements, mitigate climate risks and strengthen vital stakeholder relationships.
In the face of this global challenge, organizations must channel resources into technological improvements that optimize operations — from supply chains to waste and recycling practices. In Denmark, the life sciences industry has reduced its CO2 emissions by 55 percent,10 highlighting the significant strides to be realized through increased partnerships and knowledge sharing within the global industry.
Evolving Disruptors: The Rise of Retail Giants
Non-traditional players in the life sciences space, such as large retail organizations, are making moves to enter the healthcare market. PBMs have proven to be a significant disruptor of the industry, particularly in the U.S., where the three largest businesses wield significant power over pricing and dispensing strategies. By 2029, their market share is anticipated to be worth $775 billion.11 PBMs act as an intermediary in the prescription medicine and medical devices market between healthcare insurers, pharmaceutical manufacturers and patients. However, PBMs and other members of the prescription drug supply chain face increased scrutiny by Congress, regulators and the media due to rising overall drug and health care costs to employers and consumers.
Legislators are monitoring any moves that could alter the competitive dynamics of the drug marketplace and could threaten to increase consumer prices. Against this backdrop, life sciences organizations must regularly assess potential threats from shifting pricing pressures, new competitors and regulatory changes. Enhancing regulatory monitoring practices to track the regulatory landscape and proactively building relationships with policymakers and legislators will help life sciences organizations better understand and prepare for future risks.
GLP-1 Drugs Offer a Generational Industry Opportunity
Obesity pharmacotherapy is a rapidly moving field with the potential to generate significant and sustainable revenue streams for the pharmaceutical industry. Prescription numbers globally have risen rapidly; in the U.S. alone, there has been a 700 percent increase in patients starting treatment over the last four years.12 While some life sciences companies will be reaping the rewards of this once-in-a-generation opportunity, other organizations are left navigating what future product development could do to their bottom line. Exploration of these medications to treat other unrelated conditions is currently underway, as research evaluates their impact on liver disease, Parkinson’s and addiction, among others.13
With market expansion comes increased competition, driving the industry's imperative to maintain robust investment in R&D and continually assess the evolving risks of this shifting landscape. Additionally, with the current and future development of GLP-1 drugs predicted to reduce the patient pool for other medications and medical products, competitive pressure within the sector is only anticipated to intensify.
Innovation and Organizational Resilience Hinges on Talent Evolution
As digitalization increases at a rapid pace, the sector faces stronger competition for talent from other industries. Many companies report critical shortages and difficulty filling open positions, especially for digital professionals in AI, machine learning and data science. A shortage of physicians, as well as data scientists and engineers with specialized knowledge of cell and gene therapies, are also notable challenges.
Amid financial uncertainty, there has additionally been a decline in hiring rates in the life sciences industry. This downward shift follows a significant decrease in aggressive recruitment practices; today, only 11 percent of the industry is actively planning or recruiting for workforce growth, compared to 44 percent in the first half of 2022.14
When combined with an upswing in restructuring activity, it becomes clear why retaining critical talent has become an increasing priority for HR leaders and risk managers relying on dynamic employees to fuel innovation and drive emerging business models. Undertaking skills assessments, identifying skills gaps and upskilling talent from within the industry can help organizations strengthen their talent profile where they cannot compete on pay.
Life sciences organizations should also capitalize on their unique status to strengthen their appeal to new hires and retain existing talent. Organizations must leverage the fact that a career in life sciences offers employees the opportunity to be part of an industry at the forefront of groundbreaking medical solutions and innovations, working on cutting-edge projects and learning from world-class experts.
The value life sciences organizations place on their company mission has the potential to create a powerful and attractive employee value proposition (EVP). Combining a compelling narrative with the prioritization of personalized employee benefits can also help organizations appeal to the differing expectations of different demographics. With intelligent data deployment, organizations can offer a level of personalization that not only meets unique employee needs, but also delivers an efficient and sustainable return on investment for the business. A data-driven approach to an inclusive workplace can also strengthen talent strategies, broadening the talent pool and supporting every employee to achieve their full potential.
Staying Ahead of the Pay Transparency Curve
Current and upcoming global regulations will force companies to disclose their pay practices — promoting fairness and equity in the workplace. While the life sciences industry as a collective is slightly ahead of other sectors when it comes to being prepared for these regulatory changes, one in five life sciences organizations still have no set plans in place.15 There is a considerable cost component to meeting upcoming regulations. As the impacts of pay transparency legislation become more pressing in 2025, organizations must continue to maintain momentum on this issue to avoid the reputational damage, litigation risk and financial penalties that could result from non-compliance.
Pay transparency also plays into EVPs, and being ahead of the curve can give businesses a competitive advantage at a time when the talent battle is fierce, helping to build employee trust and attract top talent. Yet, the industry currently lags behind others when it comes to both communicating and publishing salary ranges.16 To gain ground, organizations must begin championing pay equity and transparency, offering training to managers, which leads to more effective pay conversations and education around pay decisions and career pathways. However, to be most effective, these discussions must be in conjunction with raising awareness around total rewards, including base, bonus, equity and other perks. These conversations help employees understand the true value of their total rewards package beyond just salary.
The Evolving Role of Human Resources
Where once the role of HR leaders was primarily operational, in an environment of rapidly evolving risks, it has become an increasingly strategic function within organizations. There is growing recognition that people are a company’s biggest asset, heightening the importance of attracting, developing and retaining talented, engaged and productive employees.
Human capital challenges have risen to the level of the C-suite as new issues, such as pay transparency, a focus on inclusive workplaces and future skills requirements, have created new risks. The evolution of AI, in particular, will create new challenges that require a coordinated and collaborative approach from across life sciences organizations.
As well as readying their workforces for AI's transformational impact, HR leaders must also consider how it impacts them at a department level. Research suggests that 24 percent of roles and 58 percent of headcount are at risk of significant disruption due to AI integration.17 People analytics, talent acquisition, and learning and development are just some of the areas that will be most impacted by AI deployment.
Conclusion
To capitalize on emerging opportunities, life sciences organizations must prepare themselves for success. In an increasingly uncertain world, preparedness is the best defense. Whether preparing for pay transparency regulations, exploring the advantages of AI or assessing the risk of new competitors in the market, life sciences organizations must be agile, adaptable and proactive to thrive in this dynamic landscape.
Recognizing the value of increased collaboration between risk managers and HR leaders has never been more critical. Broader oversight across organizational risks can lead to the creation of more holistic strategies that will help organizations mitigate evolving risks and capitalize on emerging opportunities in a rapidly changing life sciences landscape.
