CLINUVEL’s ESG Practices

CLINUVEL is committed to an annual statement of its Environmental, Social, and Governance (ESG) practices. In order to provide all stakeholders insights as to the Company’s approach to and management of ESG issues, this feature, drawn from the 2023 Annual Report, covers:

• the Company’s ESG framework;
• performance against a range of ESG measures, particularly in the social and governance fields; and
• a new initiative to assess the ESG practices of key suppliers.

CLINUVEL is a responsible adherent to the United Nations (UN) tenets on ESG practices. The UN’s ten universal principles guide our approach to ESG in the areas of human rights, labour standards, environmental responsibility, and anti-corruption¹. CLINUVEL’s ESG framework is detailed above, noting the key focus in each of the ESG fields are underpinned by CLINUVEL’s values.

CLINUVEL’s ESG Framework

Environment

CLINUVEL is conscious of the impact of the activities of humanity on the environment and takes a responsible approach to managing its impact on the environment. CLINUVEL embraces the UN definition of sustainability to meet the needs of the present without compromising the ability of future generations to meet their own needs.

Currently, CLINUVEL’s activities are conducted by a workforce of less than 100 and does not manufacture its products. The direct impact of CLINUVEL’s activities on the environment is therefore assessed as low. Reflecting this, CLINUVEL’s focus is on qualitative initiatives to manage its impact on the environment. Management is accountable to ensure environmental responsibility across all activities and specifically:

• handling and storage of materials and products;
• sourcing of key inputs and products from contract manufacturers who adhere to World Health Organization (WHO) Good Laboratory Practice (GLP) and the principles of current Good Manufacturing Practice (cGMP), and responsible ESG practices in general;
• conservation of resource and energy use in each of our offices;
• minimisation and management of waste, particularly in our Singapore based Research, Development & Innovation Centre; and
• responsible product packaging.

With regard to product packaging, CLINUVEL adheres to the environmental standards expected of cosmetic products in the European countries of initial distribution of CYACÊLLE. In France, for example, CLINUVEL is a member of CITEO which adheres to the principle of Extended Producer Responsibility for household paper and packaging to minimise the waste products produce. A positive start has been made as the primary and secondary product packaging of CYACÊLLE is glass and carton, respectively, and only the cap is made of plastic.

In addition to these initiatives, a split home / office working week in most locations serves to minimise the carbon footprint of employees. Whilst we are now travelling more frequently to see stakeholders in person, responsibility is vested in senior management to review and approve travel within countries of operation and internationally, to ensure sufficient tangible benefits are realised.

Quantitative measures or metricated targets are not set at this time but will be assessed and introduced as the scale and size of the business increases in the future. Given its low environmental impact, CLINUVEL has received support for this approach from a range of investors, including those institutions with an ESG focus. We are aware of plans for mandatory climate-related financial disclosure requirements by companies in Australia. If implemented, they would be phased-in from 2024/25 to 2027/28 based on three groupings of companies meeting different reporting thresholds (two out of three measures of size of employees, assets and revenues)².

Employee tenure (% of total employees)

United Nations Global compact and ESG

The United Nations (UN) Global Compact (Global Compact) was established in 2000 by then UN Secretary-General, Kofi Annan to implement universal principles in business that advance responsible corporate citizenship, better aligned to the UN’s global development objectives. In January 2004, Annan wrote to 55 of the world’s leading financial institutions to invite them to develop guidelines and recommendations to better integrate ESG criteria in the operation of financial markets. Twenty financial institutions participated and endorsed the resulting report, “Who Cares Wins”, in December 2004. The report was completed under the auspices of the Global Compact and contained a “call to action” to stakeholders in the financial and business world: companies were asked to lead the implementation of ESG principles and policies by providing information and reporting on related performance and to identify and communicate the key challenges and value drivers associated with ESG issues.

Since then, ESG has gained prominence throughout the global investment community, playing a key role in the analytical assessment of companies and investment decisions. (ESG based investing is often referred to as sustainable investing, responsible investing, impact investing or socially responsible investing). Large and influential institutional investors have aligned prudent management of ESG criteria with sustainable long-term growth and have integrated ESG criteria into their due diligence of investments. An online search for the term “ESG and company performance” reveals a multitude of studies that support a positive correlation between responsible ESG management and enhanced financial performance, efficiency, and firm value. A review by Friede, Busch and Bassen (2015) of around 2,200 individual studies since the 1970s concluded that roughly 90% of studies found a non-negative correlation between ESG criteria and corporate financial performance, with a stable link evident over time. The Global Compact is a call to action to companies around the world to align their strategies and operations with five defining characteristics of corporate sustainability and ten universal principles in the areas of human rights, labour, environment, and anti-corruption. The UN vision is that appropriate action in these areas will support their broader sustainable development goals. The Global Compact is the world’s largest global voluntary corporate sustainability initiative with over 8,000 companies and 4,000 non-business participants in over 160 countries. The five defining features of corporate sustainability and ten universal principles promoted by the Global Compact are outlined below:

Diversity (% female/male)

Governance

The Board endorses the Company’s ESG framework and plays a key governance role to ensure ongoing compliance with ESG standards. Monthly reporting of ESG issues by management to the Board was formalised in 2022. This complemented the already heightened appreciation of ESG issues at Board level.

As mentioned above, the Group’s values underpin the practices of the Company and its employees and align to key ESG tenets. CLINUVEL has several formal policies which support its adherence to responsible ESG practices. The Corporate Governance Protocol and the annual Corporate Governance Statement set out the code of conduct and ethics and other policies to ensure conflicts of interest are avoided and a culture of honesty and integrity is maintained which concords with the expectation of responsible management of ESG issues.

To extend this point, CLINUVEL adheres to a policy of adequate and correct communication within the Group, stipulating earnest and direct interaction with its staff and management. Human Resource policies provide guidance on conflict resolution and communication strategies to be deployed. CLINUVEL adheres to communication guidelines which promote open dialogue with those who seek to interact with CLINUVEL on relevant matters of business, and those who act fairly and openly. However, to protect the interest of CLINUVEL and the wellbeing of its staff and management, the Group reserves its rights to prosecute to the fullest extent permitted by law those who intend harm and disseminate falsified and untrue statements about the Company and its officers.

A Bribery and Corruption Policy prohibits illicit behaviour, and a Whistleblower Policy protects employees who (and who are encouraged to) report behaviours not aligned with the high standard of ethics and honesty embodied in CLINUVEL’s values and culture. There were no breaches in the Company’s Code of Conduct or Whistleblower reports submitted in FY2023 and up to the date of this Annual Report. CLINUVEL adheres to Disclosure UK, a searchable database which records annual payments and benefits in kind made by pharmaceutical companies to doctors, nurses, and other health professionals, as part of a Europe-wide initiative to increase transparency in the pharmaceutical-health sector.

Assessment of Key Suppliers

Supplier standards have relevance across each ESG area. This is explicit in CLINUVEL’s ESG framework. CLINUVEL accepts the responsibility to understand the ESG practices of its suppliers and to use its relationship with them to influence changes to any behaviours and activities considered necessary to avoid underperformance against minimum ESG standards.

CLINUVEL’s suppliers are considered responsible and active in their practice of ESG. CLINUVEL’s practice has been to assess this on an ongoing basis from regular interactions and reviews of relationships. During the past financial year, CLINUVEL initiated a project to develop a new formal process to assess the adherence of our key suppliers to responsible ESG practices. The initial focus is on the largest 25 suppliers based on their ranking in CLINUVEL’s annual expenses budget. The process has been finalised and involves scheduled annual reviews by date by management with senior executive sign-off and provision of regular briefings of issues to the Board, in line with the monthly reporting practice formalised in 2022. If the assessment finds areas to rectify or improve, actions are undertaken to discuss them with the supplier and resolve, with formal sign-off by senior executives. This process is effective from 1 July 2023.

Summary

The Company’s ESG practices are responsible and sound. Performance in ESG management, particularly against key social and governance measures, has been maintained in FY2023. The new initiative to assess the adherence of key suppliers to ESG practices is a significant step forward to encourage and support wider responsibility in each of the ESG fields. The Company’s commitment is to continue to evolve and improve ESG practices as an integral part of its focus on continuous improvement and in line with the Company’s growth and expansion.

Focus on the environment

1. For details on the UN’s ten principles and approach to ESG and sustainability, access to the United Nations website and particularly refer to United Nations Global Compact (2017), Progress Report: Business Solutions to Sustainable Development, and United Nations Global Compact (2014), Guide to Corporate Sustainable Development.
2. Per the Australian Government – Treasury – Government ESG Consultation Paper, June 2023, reporting would commence from 2024/25 for large companies meeting two of three thresholds (over 500 employees, gross assets of at least A$1 billion or revenue of at least A$500 million); from 2026/27 for a second group of companies (meeting two of three thresholds – over 250 employees, gross assets of at least A$500 million or revenue of at least A$200 million); and from 2027/28 for a third group of companies (meeting two of three thresholds – over 100 employees, gross assets of at least A$25 million or revenue of at least A$50 million).