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McKesson: Placebo

By William D Alessandro on March 27, 2012 at 09:56am.

Content:

McKesson Corp. started in 1833 as a single drug store in New York City.  After a spicy history at the turn of the century, middle decades of life as a conglomerate, and a spate of divestitures ending 20 years ago, McKesson survives and prospers as the largest health care services outfit in the US.  The publicly traded company booked $112.1 billion (€85.6 billion) in  revenues in 2011.  That is enough to rank number 15 on the Fortune 500. 

Even so, most folks have no idea what McKesson is.  The company makes practically nothing.  It has virtually no public profile.

Based in San Francisco, the pharmaceutical wholesaler ships through its distribution pipelines one-third of all the medicine people consume every day in the country.  McKesson delivers prescription and generic drugs, health and beauty care products, and surgical supplies to doctor’s offices.

The other side of McKesson’s business is computer software and health information systems.  More than 70% of all the hospitals in the US with at least 200 beds use the company’s digital prescription technology and computerised patient record systems.

McKesson employs relatively few people given its size.  The workforce of this Goliath, which comes just behind Citigroup bank on Fortune’s list, is 36,400.  Citigroup employs around 260,000.

McKesson’s online corporate citizenship report for fiscal year 2011 covers several topics.  Employee stories with motivational themes gobble up no less than 25% of the space. 

Other chapters are thrown in for good measure.  They cover employee information, the environment, community affairs, customers, and a bit about the company.

Taken together, the information McKesson metes out is too weak to alleviate any but the mildest stakeholder concerns about the corporation’s social and environmental affairs.

Turn to the “customers” section.  You find a write-up about McKesson’s effort to assemble cholera emergency relief kits for Haiti at the request of the US government.  A few more paragraphs follow describing some other business collaborations with federal and state agencies.

The report says nothing whatsoever about the broad (or the narrow) social expectations of any of McKesson’s customers.  During 2011, the drug store chains CVS Caremark Corp., Wal-Mart Stores, and Rite Aid Corp. accounted for approximately 13%, 10%, and 9% of total accounts receivable.  That is never mentioned.  Nothing is said about McKesson’s growth in recent years, which stems from commerce with a limited number of retailers.

Open to the section on “environment”.   It is less than 1,300 words long.  Fully half of them address the company’s efforts to reduce the consumption of paper — as if that were the most pressing environmental concern.   (On top of that canard, the information is strictly about specific achievements made in certain programs.  Statements are of this nature: “saving over 50,000 reams of paper, the equivalent of 125 tons of paper”.  No baseline data or total consumption figures are given to put the results in any sensible context.) 

The company operates distribution centers across the country.  They have customers in all 50 states.   However, here is everything of substance that the report has to say under the heading “Reducing Greenhouse Gas Emissions”:

“Our company does not engage in heavy manufacturing or extractives and there is no on-site stationary combustion.  In addition, a substantial number of our 36,400 employees work from home: 16% have eliminated their need to commute or work in a commercial building.”

No need to ask whether McKesson discusses the environmental, social, and — dare we say — political challenges facing the health-care industry in the US.  Forget about learning anything regarding the proliferation of counterfeit drugs on the marketplace, or about policing suspicious orders of controlled substances, or about protecting patients’ privacy online. 

McKesson is mum, too, on product stewardship, on drug residues in US water supplies, on distribution outside the US (McKesson has operations in Canada and Mexico), on accountability for drug storage and handling, on disaster preparedness, on costs and affordability, or, heaven knows, on what else.

Communication:

The entire report can be downloaded in one lump or by selected sections, but finding where to do that is tricky.  Here is how:  Go to http://www.mckesson.com/citizenshipreport and click on the section “Our Company”. Then point again to “Our Company” on the index tab; underneath you will find the entry “Build Your Own Report”.   Or you can retrieve the full report by heading straightaway to http://mckessoncorporatecitizenship.com/our-company/build-your-own-report.

The ability to download the whole report is consoling.  Individually the sections are so lean on facts and figures one imagines vital content must be located somewhere else.  It isn’t. 

In all fairness, the main web page presenting the 2011 corporate citizenship report leaves no doubt about the company’s true intentions: “See what McKesson is doing to make things better for our employees, our communities and the planet.”

Credibility:

McKesson says that the Global Reporting Initiative (GRI) G3 guidelines “help frame the information within this report”.  While there is no reason to question the company’s assertion, the reports contain not a shred of evidence to support the bald claim.  

The report presents an index with a column purporting to refer to the section containing various GRI performance indicators.   But the information is nowhere to be found.  The index is vacuous.  Further contradicting GRI recommendations, the company declares no application level for the guideline (A, B, or C)  and offers no assurance statement.

McKesson’s main rivals are Cardinal Health and AmerisourceBergen.  Neither of them bother to publish a sustainability report. 

Normally, the mere act of making triple bottom line disclosures earns an extra dose of respect.   McKesson’s report serves as a reminder of a lesson that seems to be getting lost.   Companies have to cross a threshold of introspection and analysis to gain any advantage.

Recommendations:

1.  Consider whether you are giving sustainability reporting a bad name.
2.  Call the best expert you can afford for at least a three-month consultation.  Then get a second opinion.
3.  In the meantime, the chief executives really should open the sustainability reporting guidelines from GRI and read them.

 William D’Alessandro is president of Victor House News Co., an independent agency reporting on law and the environment for trade publications and executive newsletters.  He also edits Crosslands Bulletin http://www.crosslandsbulletin.com covering strategic corporate environmental management and sustainability issues.