Features

Greening the Supply Chain: A CDMO Perspective

Exploring sustainable practices and innovations in pharmaceutical manufacturing through a CDMO’s lens.

By: Niall Harkin

Executive Director, Almac Group

The pharmaceutical sector represents one of the most significant global supply chains. From raw materials, active pharmaceutical ingredients (APIs), to finished products, the industry relies on a vast network of suppliers to make crucial medicines for patients.

This global nature is undoubtably positive—the wide network of raw materials ensures supply chain resiliency of crucial medicines, drugmakers can leverage specialist services and expertise from all around the world, and most importantly it enables patients to receive vital medicines no matter their geographic location.

When it comes to the growing call for climate action, the extensive pharmaceutical supply chain faces a massive challenge that has been met with action. A significant portion of the largest pharmaceutical and biotech companies have published measurable commitments, such as signing up to the United Nation’s Race to Net Zero campaign, which aims to halve emissions by 2030 and reach net zero by 2050.

In an encouraging recent survey* by third party research agency Life Sciences strategy group, 80% of pharma and biotech companies feel that the industry is making progress on sustainability.

Clearly, the world’s largest pharmaceutical companies are taking sustainability seriously, but they can’t reach their goals alone. Contract development and manufacturing organizations (CDMOs), as significant third-party suppliers to the industry, are seeing firsthand the significant amount of focus and pressure pharma and biotech clients are under to deliver on their net zero ambitions.

In fact, a McKinsey analysis of approximately 40 pharmaceutical companies shows that about 75 percent of emissions across the value chain come from suppliers. This is where a CDMO’s commitment to sustainability has become a business imperative.

Like the pharmaceutical industry, CDMOs have complex supply chains of their own, from early phase chemical production through to commercial logistics. This poses a twofold challenge for leading companies who must take necessary steps to reduce their own emissions and provide complete data to their pharmaceutical clients, while also accurately measuring and reducing third party emissions from their own suppliers. 

In the Life Sciences strategy group survey, over half of respondents indicated that their CDMO employed either an “intermediate” or “robust” strategy for sustainability. 

So, what are CDMOs seen to be getting right?

Setting up sustainability as a business priority—governance and action

First, a company must acknowledge the impact of the industry and employ structural changes within their organization to make a measured impact. This is something that the CDMO industry has done well—the overwhelming majority of CDMOs have embraced sustainability as a strategic business priority. 

Of the ten largest CDMOs by revenue, 100% have published sustainability reports—many including sustainability commitments such as reducing owned emissions by over 30%, transitioning to renewable energy, and setting net-zero targets before the pharma industry’s committed 2050.

From a governance perspective, there are several key models a company might consider when looking to further their wider corporate social responsibility (CSR) impact. One widely known framework from Deloitte stresses the need for board leadership in approving a CSR policy, spend, ensuring initiatives are deployed, and forming a CSR committee of directors for day-to-day management. Another framework from McKinsey recommends an approach more focused on individual sustainability issues, with a large central team at the apex and tiered committees responsible for key operational issues.

At Almac, we’ve employed a blend of these management approaches with a gold, silver, and bronze framework for managing our CSR initiatives. Our overarching strategy is set, driven overseen, and sponsored by our board of directors to ensure it plays an integral part in all company operations. The gold committee, comprised of our board, managing directors, and group leadership, sets strategic priorities. Our silver committee of business unit vice presidents and other representatives from group central service areas ensures operational imperatives are carried out at the site level, and our bronze committees of specific focus areas set and achieve tactical goals. We’ve coupled this with key appointments including the hiring of our dedicated global energy manager, Ramees Raja.

Embracing CSR as a business imperative and structural facet at Almac is what has enabled us to make an impact on our sustainability goals, particularly in the past 24 months. This includes a shift to power from renewable energy at our headquarters in Craigavon, Northern Ireland—which will reduce our global indirect (scope 2) emissions by 46% and various energy efficiency projects aimed at reducing our owned emissions by 50% by 2030.

Measurement, transparency, and communication

The second piece that CDMOs must adopt is measurement, transparency and communication across the supply chain. As stressed above, no company can reach their net zero goals alone. This is an area where significant strides have been made, but there is much room for improvement.

Managing supplier emissions both as a supplier, and with your suppliers, is undoubtedly difficult, and requires significant collaboration to be successful. This requires:
  • Measurement: Particularly in terms of supplier emissions, crucial data is often scattered across multiple divisions and players depending on the company. Therefore, it is crucial for a CDMO to adopt a standardized estimation system that is validated and trusted by the industry, so pharma partners can in turn trust the data received from their CDMO.
  • Transparency: This requires setting targets that are accountable to key validation bodies, such as the Carbon Disclosure Project (CDP) and the Science Based Target Initiative (SBTi). This ensures that strategies employed are well-positioned to make a measurable impact.
  • Communication: Sustainability questionnaires have become the new standard in data collection between companies and their supply chains. Due to the complexity of the requests, these are often accompanied by conversations that lead to essential data exchange and knowledge sharing. It is crucial that any company which is serious about making an impact on their sustainability goals participate in this valuable exercise across the supply chain.
At Almac, we have already seen the benefits of embracing this level of measurement, transparency, and collaboration. Our engagement with CDP and SBTi has been welcomed by our clients and has led to significant lessons learned and efficiencies in our own operations. Moreover, data sharing with our clients and suppliers across our own supply chain has further shaped and advanced our approach.

Moving forward

Despite these successes, the industry still has a long way to go. Pharma and biotech companies and their CDMOs, must continue to keep sustainability at the forefront of their operations to reach net zero by the required 2050. This level of commitment is what will drive how far a company is willing to go to reach their goals. It’s imperative to ask the tough questions such as, how far are you willing to disrupt your status quo to make an impact? How far are you willing to challenge a valuable and cost-effective supplier that’s negatively impacting your third-party emissions to reach your goals?

From my position on the board, I have been encouraged by the progress that we are making on our climate journey and remain confident that our commitment to working with our clients and suppliers is what will get us to our own goal of reaching net zero by 2045.

Moving forward, across the pharma supply chain, we all have a lot to learn from each other. Working together, we can make significant strides towards a more sustainable future. 

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