Improving third world health: to display social responsibility, CEOs must respond to urgent needs.

Corporate responsibility is a complex issue, especially when Wall Street focuses on short-term profit growth. Delivering excellent performance on a regular basis is indeed an imperative, but it is no longer sufficient. Society expects corporations to behave in ethical and socially responsible ways. Today, more than ever, corporate social responsibility has an impact not only on a company's reputation. More importantly, when it is driven by common values, it can also help a company stay on track.

For a company to place a true emphasis on social responsibility, its leaders have to care enough about other people that they engage in necessary, and often costly, projects that have no direct, visible return to the company or its investors. Compassion for the needs of others, as well as an awareness of our own potential to help, is the foundation of any engagement. One has to acknowledge the plight of many people in developing countries and those who face economic hardship in the first world. Without external help, many of these people would be in situations even more dire.

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In the case of the pharmaceutical industry, lack of access to medicines in the developing world often means misery and, all too often, death. Responding to this, we at Novartis recently created the Novartis Research Institute for Tropical Diseases in Singapore. The institute is unique because it is a not-for-profit organization focusing on the discovery of new drugs for the treatment of neglected diseases, initially focusing on dengue fever and tuberculosis. Alleviating human suffering is very motivating for our scientists, prompting several of them to join the new institute. They are proven experts and have decided to attack the challenge of treating dengue fever and to find better therapies for tuberculosis, two diseases which increasingly ravage the developing world. Indeed, every new person infected by tuberculosis, on average, infects 10 to 15 additional people. Today, a third of the world's population carries the TB germ, or bacilli, according to the World Health Organization.

When the institute was created, we at Novartis decided that all newly discovered therapies destined for the developing world would be sold at cost and any profits generated in other countries would be reinvested into further R & D.

There can be no doubt that there is an urgent medical need to discover innovative treatments for diseases that affect the developing world. It is also a fact that, due to the very high costs of drug discovery and development--reaching today about $1 billion per drug--it is impossible to make a profit with a drug that is exclusively destined for patients in the developing world, where billions of people subsist on a daily income of less than $2. Therefore, it is not surprising that one can find almost no projects for these diseases in pharmaceutical companies' new drug pipelines. Companies have to live up to the expectations of investors, and they have to be able to deliver competitive results and performance. Why then should management and the board of directors of a company opt to spend a substantial sum to help the needy? Why not simply leave it up to shareholders to donate money to charities? In a capitalistic and market-oriented system, these are justified questions we have to ask ourselves.

In our case, the answer is that no individual or charitable organization has the innovation capabilities, experience and people to launch such an undertaking as our Singapore-based institute, which also benefits from the infrastructure of our research institutes and many of our academic relationships. That's what led us to move in this direction.

For corporations to fulfill our responsibilities, it is important that we achieve a high level of social responsibility. For example, the pharmaceutical industry's products help cure disease, relieve pain and shorten hospital stays, producing economic and social benefits. Like many of its industry peers, Novartis has a quiet tradition of implementing patient-assistance programs, which donate life-saving drugs to those who can't afford them. At Novartis, we have taken this idea further, specifically with our Gleevec International Patient Assistance Program, which is aimed at patients with leukemia or malignant gastrointestinal tumors. This program coordinates with regional Novartis business units worldwide to make sure that innovative medicine reaches patients even if they cannot afford it. To date, it has reached more than 9,500 patients worldwide. In India alone, 90 percent of patients taking Gleevec receive assistance.

However, it is imperative that companies across industries strive to go beyond the legal or expected requirements by making, voluntarily, corporate-citizenship commitments. One project that has made a large impact is the United Nations Global Compact, a voluntary initiative launched by Secretary-General Kofi Annan in July 2000. Since then, numerous companies have come together with U.N. agencies, trade unions and civil society to support nine principles in the areas of human rights, labor standards and the environment.

The Global Compact is not a regulatory instrument. It does not measure or enforce specific behavior; rather, it relies on the enlightened self-interest of its participants.

Hundreds of companies from all over the world signed the Global Compact to demonstrate, both internally as well as to the outside world, their belief in fundamental human rights and our determination to respect them. Novartis was one of the first companies to respond to Mr. Annan's appeal. As a consequence, we adapted our worldwide policies to the Global Compact's principles.

The business community's commitment to follow the principles of the Global Compact regarding corporate citizenship in the world economy, human rights, labor, environment and anti-corruption was evidenced at the recent U.N. Global Compact Leaders Summit, attended by a broad spectrum of companies ranging from BP and Credit Suisse to Daimler-Chrysler and Hewlett-Packard.

Corporations can sometimes disagree on the limits to which corporate responsibility should extend. Obviously, we cannot be responsible for everything. No company, however open-minded or profitable it may be, can take on the obligations of government. However, we can and should support the government in this task.

We also agree that, as leaders, we are responsible for setting an example through our actions. But it is crucial to remember that a prerequisite for this kind of investment is, of course, a successful and profitable business. If we were not a profitable business, we would not be able to commit to any of these contributions.

Reputation is important and, in many cases, may be the driving factor behind the commitment to corporate social responsibility. This is legitimate as long as it leads to improved behavior.

To be sustainable, corporate social responsibility has to become part of the genetic code of a company, which requires employee education and consistent behavior across the entire organization. Employees must understand their responsibilities and respect the boundaries expressed through laws, regulations and the internal code of conduct, all reflecting inherent and explicit expectations of society.

There is always more to be done. As the German author Erich Kastner stated: "Responsibility for every injustice that occurs is borne not only by the person who commits it but, also, by those who fail to prevent it."

Daniel Vasella, MD, is chairman and CEO of Novartis, based in Basel, Switzerland.