Decarbonising the life sciences sector: challenges and progress

In 2019, it was reported that if the global healthcare sector were a country, it would be the fifth largest greenhouse gas (GHG) emitter on the planet, annually producing the equivalent of two gigatons of CO₂. Although hospitals make up the largest share of carbon emissions, the largest carbon footprint is in fact from companies further down the supply chain, i.e. those involved in the distribution and supply of medicines, medical devices, hospital equipment etc. (Scope 3 emissions). Given the trends we are seeing both commercially and in the legal landscape in the race to decarbonisation, this presents some challenges for life sciences companies. 

This article provides a brief snapshot of the general progress of decarbonisation in the life sciences sector since the 2015 Paris Agreement, and signposts what life sciences companies can be doing to achieve decarbonisation goals.

Progress on decarbonisation

Over the past few decades, there is a global movement towards reducing the effects of climate change. While the Paris Agreement, ratified in 2015, did not set specific objectives for the pharmaceutical industry, it prompted companies into action towards cost-effective and resource-efficient innovations.  As shown in a survey conducted in 2020 by EFPIA (the European Federation of Pharmaceutical Industries and Associations), a circular economy “is widely prioritised by the industry, e.g. by setting circular economy targets or defining a strategy”. The Circular Economy Action Plan was adopted by the European Commission on 11 March 2020, which stresses that 80% of products’ environmental impacts are determined at the design phase. In line with this, several measures have been implemented by major pharmaceutical companies to reduce their carbon footprint, specifically in the design of their products. Some examples include: 

1. AstraZeneca, in association with a distribution company, developing a new approach to packaging products sent to hospitals and clinics for clinical trials purposes in 30+ countries to reduce packaging waste.
2. Boehringer Ingelheim substantially changing the design of their inhaler stepping from a single use inhaler to a re-usable inhaler. By 2025, this initiative is expected to prevent 776 tons of plastic waste and 14,300 tons of CO2.
3. Several Johnson & Johnson’s affiliates entering into agreements to improve packaging sustainability of their products. For example, Johnson & Johnson’s MedTech company, DePuy Synthes, launched 200+ product items in post-consumer recycled paperboard material. 

Several major pharmaceutical companies announced on their websites a common goal to have a net zero impact on the environment. Most notably this can be achieved by: having 100% renewable electricity (both imported and produced); by implementing an eco-design approach for their products; by taking measures to reduce their greenhouse gas emissions across the supply chain of their products; or by reducing as much as possible the water-related impacts from internal and value chain operations.

In a recent paper on environmental sustainability in pharma, IQVIA has identified five areas as key challenges for pharmaceutical companies in the coming years: 

1. Environmental, social, and corporate governance (an awareness and incentive to engage smaller companies and generic manufacturers should be implemented).
2. Reduction in use of fresh water and scrutiny on toxic and active effluents.
3. Circular economy.
4. Reforming the supply chain.
5. Proactive engagement with regulators to cope with increased environmental regulations.

Increased sustainability reporting requirements 

In a PWC survey commissioned on pharmaceutical and life sciences companies in 2021, only 8% of respondents stated that their organisations planned to disclose a strategy for transition to a net-zero business model. However, companies may not have a choice in the matter, as reporting requirements around the world are becoming mandatory.  By way of example:

• The EU Commission’s Corporate Sustainability Reporting Directive (CRSD) came into force on 5 January 2023, resulting in the first set of European Sustainability Reporting Standards (ESRSs) being released in July 2023.  While the CRSD is still being finalised, its expanded application beyond EU listed companies is noteworthy (i.e. it encompasses EU subsidiaries of non-EU companies in certain circumstances).  
• The US SEC is currently finalising a proposal whereby US-listed companies will be required to include climate-related disclosures in their registration statements and annual reports. For example, climate-related risks that are reasonably likely to have a material impact on their business, including not only ‘Scope 1’ or direct GHG emissions, but also ‘Scope 2’ (indirect GHG emissions e.g. purchased electricity/energy) and ‘Scope 3’ (from upstream and downstream activities in the value chain).
• A substantial finance regulatory framework was recently implemented in the Abu Dhabi Global Market in July 2023, which requires ESG disclosures by listed companies and regulation of carbon offsets.

The key takeaway for life sciences companies is to closely monitor legislative changes, not only in countries where they have a physical presence, but where they may supply goods and services.

Market authorisation and greenwashing risks 

Earlier this year, the EU proposed substantial revisions to member states’ pharmaceutical regime with the objective of reducing the environmental impact of human medicinal products. Some key aspects of the measures included empowering European authorities to refuse marketing authorisation where environmental risks have not been sufficiently addressed, and to impose environment-related conditions on authorised medicines, including the power to suspend, revoke or vary marketing authorisations where medicines present serious risks. Another aspect was requiring companies to include additional information on environmental impact in a medicine’s European public assessment report (EPAR), which will be made available on a public register.

The Green Claims Directive

In addition, the European Commission released the Green Claims Directive on 22 March 2023, which is subject to a joint vote in the first quarter of 2024. Under the EU Green Claims Directive, traders who make environmental claims must comply with minimum requirements to both substantiate their claims, and communicate such claims in a clear and understandable manner. More stringent requirements apply if the trader wishes to make a comparative environmental claim by suggesting that their product/services/activities have lower environmental impacts, or better environmental, performance than that of their competitors.  Finally, the EU Green Claims Directive also provides that green claims will need to be verified and certified by a third party before being used in a commercial communication.

These changes highlight the need for life sciences companies to have scientifically robust data about the environmental impacts of their products and services, to not only support applications for marketing authorisation but also to avoid making misleading claims.

Conclusion

Companies in the life sciences sector have made good progress on decarbonisation efforts.  Environmental sustainability in the life sciences sector is therefore not limited to simply decarbonisation by decreasing energy use and waste; it extends to making better procurement decisions, embracing circularity and careful data management.

We anticipate that environmental disclosures and reporting obligations will only grow more stringent.  It is imperative for companies to ensure that data underpinning ESG reporting requirements, supporting marketing authorisations and which filters down into marketing collateral, is sufficiently robust, carefully collected and managed.  Companies should ensure that they have in place horizon scanning mechanisms to buttress their decarbonisation efforts.