Large pharmaceutical companies are making plans to comply with sustainability and carbon net zero targets. Hear from AstraZeneca and Merck KGaA’s MilliporeSigma about their strategies.
Jeffrey Whitford/Courtesy MilliporeSigma
Corporations’ plans to pursue carbon net zero goals were reinforced with the post-election publication of the United Nations’ latest pronouncement – and most larger pharmaceutical companies are already on board with sustainability plans.
The Integrity Matters: Net Zero Commitments by Businesses, Financial Institutions, Cities and Regions report calls out greenwashing and calls for alignment between companies’ advocacy and their business strategies and climate commitments, including “meaningfully linking executive compensation to achievement of climate action and demonstrated results.”
Notably, disagreements will not be tolerated: “Non-state actors cannot lobby to undermine ambitious government climate policies either directly or through trade associations or other bodies,” according to the report.
It’s an ambitious and complex undertaking.
Right now, “Companies should focus on their own operations to try to reduce their emissions as much as possible, but not bet on things over which they really have little control, like offsets in the supply chain,” Jonathan Deason, Ph.D., director of the Environmental and Energy Management Institute at The George Washington University, told BioSpace.
“A lot of companies are claiming huge credits for offsets that are speculative in some cases (in effect, greenwashing)…while other companies are doing really well.”
One challenge, he said, has been a lack of transparency and accountability that allows people to see whether the actions match the rhetoric. “There are a lot of things corporations can do, though,” Deason noted. He advocates a systemic approach of timelines, reports and education, and a focus on things companies can directly affect, such as fleets and buildings.
A comparison of strategies of ten multinational pharmaceutical companies that appears in a just-released report from the UK’s Office of Health Economics (OHE) shows those companies are doing just that.
AstraZeneca’s $1 Billion Plan
AstraZeneca, for example, launched a $1 billion “Ambition Zero Carbon” program that engages its entire value chain. In-house, shifting to renewable energy sources is a big part of that plan.
It calls for “decoupling energy consumption from business growth and substituting 100% of site energy consumption with renewables.” This includes installing solar panels on sites and transitioning heating and cooling to renewable energy sources.
“For example, we are partnering to build a renewable energy plant to provide clean heat and power across our company’s U.K. operations,” Juliette White, VP, global SHE and sustainability at AstraZeneca told BioSpace.
The company’s goal is to achieve net zero by 2045 and to use 100% renewable energy by the end of 2025. “At the end of 2021, 43% of our total energy consumption and 88% of our electricity were generated from a renewable energy source,” White said.
The company is also transitioning its approximately 17,000-vehicle fleet to fully electric to meet its goal of reducing emissions from its operations and fleet by 98% by 2026. Currently, about half the fleet is electric or hybrid.
“The greatest challenge we face with our transition to electric vehicles is accessing the infrastructure required, particularly in some developing markets,” White said. “Adjustments for the widespread uptake of electric vehicles will be needed to ensure the electric grids are able to handle the increased electrification of the transport sector and accommodate fluctuations in energy supply and demand.”
As Deason pointed out, “Electric vehicles are (highly) efficient.” All-electric vehicles convert more than 77 % of electrical energy from the grid to power at the wheels, whereas gasoline vehicles convert 12 to 30% of the energy in gasoline to power at the wheels, according to the U.S. Department of Energy. The disadvantage is that full recharging can take 3 to 12 hours. “Even if you’re getting power from the grid, it’s still better than burning gasoline or diesel,” he asserted.
AstraZeneca is “on track to reduce greenhouse gas emissions from [its] global operations and fleet by 98% by 2026,” for Scope 1 and 2 – the direct and indirect emissions that result from the organization’s activities and those associated with purchased steam, heat, electricity or cooling, the company reported.
Addressing Scope 3, working with its suppliers, will be more difficult. This Scope accounts for more than 90% of an organization’s total carbon footprint, according to the OHE report.
To ensure transparency, AstraZeneca also discloses climate impacts to the task force on climate-related financial disclosures (TCFD).
“A TCFD steering group with cross-functional membership has oversight of the physical and transitional risks and opportunities posed to AstraZeneca by climate change,” White said. “We have integrated climate risks into our overall risk management process, recognizing climate risk as a stand-alone risk…since 2021.”
In terms of action, that has entailed “incorporating climate resilience throughout our operations and value chain, mitigating risks and exploring opportunities that transition to a low-carbon economy presents to the healthcare sector,” she continued.
Merck & Millipore Sigma Tackle Scopes 1, 2 & 3
Merck, for its part, takes an enterprise-wide approach and is implementing green chemistry into its processes and reducing the raw materials, energy and water used not only in manufacturing but also in packaging. It calls this “Design for Environment.”
Its most recent Environmental, Social and Governance (ESG) Progress Report recounts progress in four areas: access to health, employees, environmental sustainability and ethics and values. Notably, Merck sources 41% of its purchased electricity from renewable sources in 2021 and says it expects to achieve carbon neutrality by 2025.
MilliporeSigma, the U.S. and Canadian life sciences business of Merck KGaA, Darmstadt, Germany, is taking a holistic approach, considering Scope 3 early on.
“We’re focusing on everything in the product lifecycle,” Jeffrey Whitford, head of sustainability and social business innovation told BioSpace. “That’s important because, as you think about sustainability, you realize there are more and more issues, and you can just snowball. There are a lot of different touchpoints.”
Scope 3 – the carbon footprint of suppliers and distributors – is where the overwhelming majority of emissions occur and will be the most challenging. As Whitford said, “We have tens of thousands of suppliers. How do we look at those suppliers strategically and encourage them to use renewable resources?”
The first step is to get suppliers and customers thinking about sustainability before they can take action to improve their footprints, he said. MilliporeSigma is developing a toolkit that explains Scope 1, 2 and 3 and identifies actions it can take to reduce its environmental impacts.
“Let’s think about solvents,” Whitford said, by way of example. “Can you move to renewable or bio-renewable starting materials?” He cited an agriculturally-based solvent that has the same chemical structure as its fossil-fuel-based counterpart but has a 60% lower CO2 footprint.
In addressing environmental sustainability holistically, “You have to prioritize your focus to areas that will have the greatest impact,” Whitford said, particularly when considering Scope 3 goals. “There are two approaches. The first is to get data directly from suppliers. The second, where primary data isn’t possible, is to use publicly available data to close the gaps with estimates.” The goal is to gather that data by 2030.
Achieving a carbon net zero level of sustainability requires new technology.
“Using just what we have available today, there’s not enough scale or volume,” Whitford said. Therefore, while those technologies are being developed, “we need to think about how to deal with the here and now, addressing things we know we can address while understanding that as technology matures and becomes more economical, we will be able to tap into it.”
Investors Reward Sustainability
Corporate interest in sustainability isn’t entirely altruistic. Investors are increasingly interested in companies that reflect their own social sensibilities, according to Morningstar’s Voice of the Asset Owner, a recent global survey of 500 institutional asset owners from 11 nations.
Some 85% of institutional investors responding to the survey said environmental, social and governance (ESG) factors are material to investment policy. As the oil and gas industry can attest, investors are willing to penalize those they consider less socially conscious.
Morningstar Direct reports ESG funds attracted nearly $22.5 billion net new money during Q3 2022, down from $33.9 billion in Q2. The drop was attributed to investor concerns of a global recession, inflation, rising interest rates and Russia’s war against Ukraine.
“Sustainable funds still held up better than the broader market,” Morningstar reported. Notably, 82% of that activity was in Europe, with the U.S. comprising only 12% of the sustainable fund assets.
That activity is the result not only of Europe’s green policies but optimism that environmental sustainability is attainable by mid-century. “The notion of corporate net zero emissions has become mainstream,” Deason said.
