Greening Pharmaceutical Supply Chains, Mitigating Pharmaceutical Pollution Risks and Leveraging Private Investment for Environmental Protection Through Improved Risk Accountability and Insurance Risk Transfer

TY - ABST

T1 - Greening Pharmaceutical Supply Chains, Mitigating Pharmaceutical Pollution Risks and Leveraging Private Investment for Environmental Protection Through Improved Risk Accountability and Insurance Risk Transfer

AU - le Gal, Elodie Jeanine Odette

PY - 2018

Y1 - 2018

N2 - With the environmental, social and economic impacts of climate change and biodiversity loss triggered by anthropogenic activities, including commercial operations, industries and corporations in all sectors throughout the world have to rethink their business models and production systems to change their relation to the environment and contribute to building stronger socio-ecological systems that can adapt to environmental shocks. Economic globalization, which is supported by international free trade arrangements, has enabled high-tech industries initially located in developed countries, to offshore and outsource many of their economic activities in developing countries to lower their production and manufacturing costs. Some of these activities, which are carried out in emerging countries which apply sustainability, environmental and labour standards that are perceived as less stringent than those applicable in developed countries, can generate significant environmental pollution and public health risks for local populations and threaten food security. This is illustrated in the high-tech pharmaceutical sector where developed economies, such as the European Union and the United States of America (USA), have increasingly delocalised over the past decades key aspects of their activities from drug discovery and development, clinical research trials and the production of generic medicines and pharmaceutical active ingredients in India and China.In these two countries, an increasing number of environmental pollution cases from pharmaceutical manufacturing have been reported in the scientific literature. These cases highlight how offshoring production activities can adversely impact upon quality risk. They illustrate how the transfer of the resulting costs of pollution from developed countries to jurisdictions less equipped to support the financial and organizational burden of pollution control and prevention measures can raise significant environmental justice issues affecting basic human rights such as the right to live in a safe, clean and healthy environment. Beyond social justice issues, economic globalization has also contributed to complexifying supply chain management by involving a wider number of suppliers located in different jurisdictions that are subject to different domestic legal frameworks. The increasing complexity and fragmentation of globalized supply chains, including in the pharmaceutical sector, has contributed to expanding and diversifying the potential sources of environmental pollution in different geographical locations, thus making it very challenging to trace the specific individual legal liabilities to hold potential polluters accountable for the environmental and social risks that can result from their economic operations.With a focus on the pharmaceutical sector, the goal of this paper intends to discuss relatively new methodological and regulatory strategies forward to strengthen pharmaceutical supply chains, mitigate pharmaceutical pollution risks and finance environmental protection. It aims at focusing on how to use the concept of risk to design a stronger corporate environmental accountability approach to improve the management of pharmaceutical pollution. It also intends to discuss the role of insurance risk transfer mechanisms, and more specifically the liability aspect of insurance, to enhance corporate sustainable behavioural change in the pharmaceutical sector and harness financial investment for environmental protection both in developed and developing countries. The structure of this paper is as follows: the first part provides a brief historical analysis of how the concept of risk has been materialized over time through certain risk management techniques, such as insurance, to address a wider range of activities and events, including environmental disasters. The second part explains how a pollution pathway approach can contribute to identifying possible focii for risk management interventions along the pharmaceutical supply chain to design stronger corporate risk accountability approaches. It also provides a snapshot on how insurance risk transfer mechanisms can contribute to better controlling pharmaceutical pollution risks. The last section outlines key research findings and concludes with a set of suggestions for further research and policy directions.

AB - With the environmental, social and economic impacts of climate change and biodiversity loss triggered by anthropogenic activities, including commercial operations, industries and corporations in all sectors throughout the world have to rethink their business models and production systems to change their relation to the environment and contribute to building stronger socio-ecological systems that can adapt to environmental shocks. Economic globalization, which is supported by international free trade arrangements, has enabled high-tech industries initially located in developed countries, to offshore and outsource many of their economic activities in developing countries to lower their production and manufacturing costs. Some of these activities, which are carried out in emerging countries which apply sustainability, environmental and labour standards that are perceived as less stringent than those applicable in developed countries, can generate significant environmental pollution and public health risks for local populations and threaten food security. This is illustrated in the high-tech pharmaceutical sector where developed economies, such as the European Union and the United States of America (USA), have increasingly delocalised over the past decades key aspects of their activities from drug discovery and development, clinical research trials and the production of generic medicines and pharmaceutical active ingredients in India and China.In these two countries, an increasing number of environmental pollution cases from pharmaceutical manufacturing have been reported in the scientific literature. These cases highlight how offshoring production activities can adversely impact upon quality risk. They illustrate how the transfer of the resulting costs of pollution from developed countries to jurisdictions less equipped to support the financial and organizational burden of pollution control and prevention measures can raise significant environmental justice issues affecting basic human rights such as the right to live in a safe, clean and healthy environment. Beyond social justice issues, economic globalization has also contributed to complexifying supply chain management by involving a wider number of suppliers located in different jurisdictions that are subject to different domestic legal frameworks. The increasing complexity and fragmentation of globalized supply chains, including in the pharmaceutical sector, has contributed to expanding and diversifying the potential sources of environmental pollution in different geographical locations, thus making it very challenging to trace the specific individual legal liabilities to hold potential polluters accountable for the environmental and social risks that can result from their economic operations.With a focus on the pharmaceutical sector, the goal of this paper intends to discuss relatively new methodological and regulatory strategies forward to strengthen pharmaceutical supply chains, mitigate pharmaceutical pollution risks and finance environmental protection. It aims at focusing on how to use the concept of risk to design a stronger corporate environmental accountability approach to improve the management of pharmaceutical pollution. It also intends to discuss the role of insurance risk transfer mechanisms, and more specifically the liability aspect of insurance, to enhance corporate sustainable behavioural change in the pharmaceutical sector and harness financial investment for environmental protection both in developed and developing countries. The structure of this paper is as follows: the first part provides a brief historical analysis of how the concept of risk has been materialized over time through certain risk management techniques, such as insurance, to address a wider range of activities and events, including environmental disasters. The second part explains how a pollution pathway approach can contribute to identifying possible focii for risk management interventions along the pharmaceutical supply chain to design stronger corporate risk accountability approaches. It also provides a snapshot on how insurance risk transfer mechanisms can contribute to better controlling pharmaceutical pollution risks. The last section outlines key research findings and concludes with a set of suggestions for further research and policy directions.

KW - Green pharmaceutical supply chains

KW - risk transfer

KW - insurance

KW - pollution pathway

M3 - Conference abstract for conference

T2 - Law and sustainability in global value chains: Due diligence and contracts in focus

Y2 - 25 April 2018 through 26 April 2018

ER -