We met with healthcare company Uniphar last month to discuss the company’s sustainability strategy. This Irish domiciled business is active in 3 areas: the Commercial and Clinical division partners with healthcare product providers giving access to an outsourced sales, marketing and distribution network on a pan European basis as well as in the US. Revenues are split 69% medical devices and 31% pharmaceuticals. With over 1 million products sourced annually the Product Access division provides a bridge between manufacturers, healthcare professionals and patients for unlicensed and difficult to source pharmaceuticals. Finally Supply Chain & Retail is responsible for 50% of all wholesale products distributed in Ireland each year as well as a vertically integrated model of over 280 pharmacies including Allcare Pharmacy and Life Pharmacy. In 2021 the group posted €1.9 bn in revenues, a gross profit of €274.5m and an EBITDA of €86.5m1.
Over recent years the group has increasingly expanded into new territories making 19 acquisitions since the company’s IPO in 2019. Such a rapid expansion programme can cast doubt on the effectiveness and compliance with the parent company’s sustainability strategy as well as the application of proper oversight and control across all the operating entities in a uniform manner. Uniphar’s management acknowledge our concerns over this issue but point to certain organisational changes being made to ensure sufficient oversight of ESG matters for all the disparate operating companies. Not least is the newly formed Sustainability Council which reports directly to the supervisory board. There is however, as yet, no supervisory board member with specific responsibility for group wide ESG and we have mooted the idea of such a position being implemented. While such an appointment can provide a focal point within the board across all group specifically for non-financial matters, there is also the argument that such matters should be integral to the decision making of all directors not simply delegated to one individual. While the underlying composition of individual supervisory boards may determine the stance taken on this matter, we are pleased to have raised the issue to stimulate further debate.
Of course, executive management also have a pivotal role to play in the delivery of the company’s sustainability strategy, and here we have also raised our concerns. While the company literature stresses the improvements made in both corporate governance and sustainability, (the annual report for example is titled “Sustainable Growth”), there are indications this is not truly embedded in the mindset of senior management. The key performance indicators serve this point well. Split between financial and non-financial, of the 8 indicators not one has a specific environmental or social focus barring those focussing on the company’s remit as a healthcare provider. Despite this, executives do have an ESG element to their remuneration packages including decarbonisation and an improvement in ESG data collection, but this only represents 5% of bonus potential suggesting a relative lack of strategic importance placed on these important issues. Uniphar are very open to improve on this front and point to the fact that other shareholders voice similar concerns raising the possibility that change is likely in any future remuneration review.
Uniphar has a business model which aligns well with a number of the UN’s Sustainable Development Goals, not least SDG 3, which ensures healthy lives and promotes well-being for all at all ages, which is at the very core of their operating model. Giant strides have been made to embed sustainability into the way in which they deliver their goods and services, and we left the meeting confident that more improvements are to come in the near future.
1 Uniphar Annual Report 2021