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A Certain Shade of Green

The pharmaceutical sector is not typically seen as a highly polluting “heavy industry,” but it is far from green. In its 2021 report Delivering a “Net Zero” National Health Service (1), the UK’s National Health Service attributed as much as a quarter of its carbon footprint to the manufacture of medicines. A deep carbon footprint is a common hallmark of energy-intensive manufacturing processes – and the manufacture of pharmaceuticals is no exception. However, companies can reduce emissions levels by adopting a more sustainable approach to process efficiency, energy generation, and energy procurement.

As an industry comprising some of the world’s most trusted brands, pharma bears a corporate social responsibility to “do the right thing.

In addition to the environmental benefits of reducing carbon emissions, a sustainable energy strategy has financial implications, too. Increasingly volatile energy costs and punitive carbon taxes have a tangible impact on profitability. On January 1, 2021, a UK Emissions Trading Scheme (UK ETS) replaced the UK’s participation in the EU ETS. The UK’s four national governments (the devolved Scottish, Welsh, and Northern Irish authorities, plus the UK-wide parliament in Westminster) established the scheme to increase the environmental ambitions of the UK’s carbon pricing policy while simultaneously protecting the competitiveness of British businesses. As a result, large carbon emitters in Britain are now experiencing dramatic increases in their compliance costs.

There is also a reputational imperative to act on carbon emissions. As an industry comprising some of the world’s most trusted brands, pharma bears a corporate social responsibility to “do the right thing.” Key stakeholders, including investors, want to see positive action on carbon emissions as part of a comprehensive environmental and social governance policy. For many pharmaceutical companies with complex, multinational operations, the challenge here is formulating a net-zero roadmap that is both effective and sustainable.

To ensure a robust sustainability strategy, companies need to track data associated with the purchase, consumption and generation of energy

Formulating a sustainable energy strategy
 

Figuring out where to start on the road to sustainability can be daunting. Considering energy strategy alongside corporate sustainability goals is key to delivering a comprehensive, strategic, and impactful roadmap.

The first step is to gather and analyze data that can be used to build a strategy, and then set a benchmark with which to measure action. With the right software and systems in place, calculating the emissions inventory – including operational and indirect emissions – is possible. Carbon reporting should be an integral part of any software solution geared towards capturing the environmental benefits of sustainability programs. Carbon reporting also allows organizations to track data associated with the purchase, consumption, and generation of energy – including its impact on sustainability goals and environmental benefits – using market and location-based emission calculations. With a more detailed picture of energy use, you’ll be able to identify areas that should be prioritized to improve efficiency and reduce emissions. 

Independently run workshops can greatly support the development of a decarbonization roadmap by improving levels of understanding about energy efficiency, generation, and procurement. 

Actions within your strategy could include optimizing behind-the-meter assets, procuring renewable energy through power purchase agreements (PPAs), and participating in capacity, ancillary, and energy market programs to optimize energy use and support the electricity grid to manage increasing levels of renewable energy. 

Voluntarily reporting emissions through a globally recognized framework demonstrates a commitment to sustainability. A carbon disclosure rating or “CDP score” is a measurement of the environmental sustainability of a corporation. CDP scores are visible through several investor platforms and, alongside other initiatives, such as RE100 for businesses committing to use 100 percent renewable energy (2), they can help to drive change across an organization, while also signaling intent to shareholders.

While the pharmaceutical sector is not typically seen as a highly polluting, it is far from green

Resiliency and renewables
 

Going green is not without challenges. As the global demand for energy increases, industrial and commercial energy users are increasingly concerned with security of supply and the reliability of outdated grid infrastructure. As we reduce our dependence on fossil fuels for energy generation and shift to renewables, such as solar and wind, the intermittent nature of these sources of power could disrupt the balance of supply and demand needed to maintain grid stability. Large energy users, including pharmaceutical manufacturers, can play an important role in protecting grid stability while enabling more renewable generation; for example, participation in energy flexibility programs, such as demand response (DR), helps electricity grid operators handle increasing amounts of energy from renewable sources. At times of peak electricity demand – or reduced levels of production from renewable sources – an energy intensive facility that can temporarily adjust its overall consumption can receive significant payments without impacting on business operations. Additionally, DR can act as an early warning of grid problems and provides realistic opportunities to test standby power systems. Companies can also look towards low-carbon energy. 

Like other energy-intensive businesses, some pharmaceutical companies are choosing to become off-takers, using PPAs to buy renewable energy and to complement the use of on-site generation. This increases the percentage of renewable energy used, thus reducing emissions. This approach guarantees supply, allows companies to reliably predict future costs, and signals a long-term commitment to zero carbon. Negotiating PPAs can be technically complex and requires depth of knowledge and experience, but – done right – it results in a bespoke agreement that suits both generator or supplier and off-taker. 

Ultimately, with a comprehensive energy strategy, pharmaceutical businesses can reduce carbon emissions, maintain resilience, predict future energy costs, and enhance environmental, social, and corporate governance performance. An effective strategy must include optimizing energy use, planning and implementing a procurement strategy, and exploring ways to cooperate with energy companies and grid operators. By adopting a sustainable energy strategy, pharmaceutical manufacturers can also help maintain the stability of the grid, while creating valuable new sources of income.

The UK’s NHS attributes as much as a quarter of its carbon footprint to medicines

All Image Credits: Shutterstock

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  1. Greener NHS, “Delivering a ‘Net Zero’ National Health Service”, NHS (2020). Available at: https://bit.ly/net0-NHS.
     
  2. The RE100, “Homepage”, RE100 Climate Group. Available at: https://www.there100.org/
About the Author
Andrew Toher

Andrew Toher is Head of Customer Insights at Enel X

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