For a few years now sustainability has become one of the most widely heard, read, used and abused words not only in political, business and financial cenacles but also among the general public.

In its broadest possible sense, the term sustainability refers to the ability of a system to maintain or sustain itself over time.¹

The sustainability concept is not new. Its roots can be traced back more than three hundred years ago when it was associated with forest and other agricultural management practices aiming to maintain soil fertility.² Sustainability has won its spurs and acquired new dimensions thanks to “Our Common Future” report—also referred to as the Brundtland report—issued in 1987 by the United Nations World Commission and the Environment and Development.³

Our Common Future introduces the idea of sustainable development—defined as “meeting the needs of the present without compromising the ability of future generations to meet their own needs.” It recognizes and stresses that sustainability revolves around three irrefragably interlinked and interdependent pillars: the environment, society and the economy.

Society as a whole, including most industries and companies around the world, are increasingly embracing and adopting sustainable business practices and integrating ecological concerns with societal and economic considerations. These days, sustainability is becoming a cornerstone of corporate strategies. The metrics applied by organizations for measuring their performance more and more go beyond just financial indicators by taking into account societal and environmental quantitative scores—embracing what is often referred to as “triple bottom line” performance metrics seeking to achieve an optimal balance between “Profit, People and Planet.”⁴

The attention given to sustainability seeks to ensure alignment between socio-political developments and the concern and objectives of its various stakeholders. This includes not only the general public and customers but also financial investors—recent surveys indicate that sustainability is considered by more than 50% of these as a fundamental element in their investment decisions.⁵ It also aims to ensure that companies are effectively positioned for grabbing the new opportunities expected to be created by the drive towards sustainability—examples include savings associated with waste reduction or the introduction of new products or technologies.

This drive towards sustainability has received a new impulse by the pledge of various countries, including the European Union and the United States to reduce by 2030 their greenhouse gases (GHG) emissions by 55% compared to their 1990 levels and become carbon neutral by 2050 in order to meet the objectives set in the Paris Climate Accord. The Accord was signed in 2015 by 196 countries and aims to “lower global warming well below 2° C—preferably 1.5° C—compared to pre-industrial levels.” These commitments were renewed at the Glasgow COP26 held at the end of 2021.

As a result of these initiatives, all industrial sectors are under pressure to reduce their GHG emissions and eventually bring these to net zero levels—the “towards zero” target.

The pharmaceutical industry is no exception

According to a recent publication,⁶ the pharmaceutical industry accounts for yearly GHG emissions of around 55 million tons, corresponding to approximatively 0.1% and 2% respectively of the world total and industrial GHG emissions. To use a more tangible yardstick, this is equivalent to the carbon dioxide emitted by twenty million cars. 

The magnitude of its emissions makes pharma a greater contributor to global warming compared to other industries. For example, car manufacturing is generally considered and intuitively viewed as a heavy polluter, but surprisingly when compared to pharma, its GHG footprint is actually lower—estimated to produce around 80% of the emissions generated by pharma.

Not surprisingly a number of pharmaceutical companies are actively jockeying for position to reduce their GHG emissions. Several players including AbbVie, Bayer, Biogen, Daichi Sankyo, Eisai, Gilead, J&J, Merck & Co., Merck KGaA, Novo-Nordisk, Sanofi, Takeda and Teva have set near term reduction and/or net zero GHG targets.

Among these Big Pharma players, AstraZeneca appears to stand out in terms of its commitment to sustainability—the word appeared 188 times in their 2021 annual report. AstraZeneca announced in January 2020 its “Ambition Zero Carbon” strategy involving investments of $1 billion. The objective is to achieve by 2025 zero-carbon emissions from its global operations and ensure that by 2030 its entire supply chain becomes carbon negative. The company has committed to have these initiatives checked through the Net-Zero standards set by the Science Based Target initiative (SBTi).

AstraZeneca’s high-profile initiatives to move towards zero emissions and more broadly its emphasis on sustainability are probably at least partly prompted by the commitments taken by the UK NHS (National Health Service)—most likely by far its single most important direct customer.

The NHS is the first health service pledging to reach zero net carbon emissions. To this end, it has launched in 2022 the sustainable supplier framework requesting all its new suppliers to publish by 2024 a reduction plan for their GHG direct emissions—by 2030 only those able to demonstrate progress in line with these preset carbon emission reduction plans will qualify for NHS contracts.

The elaboration of any GHG emission reduction strategy invariably starts by the systematic analysis of the various emission sources and of their impact. This provides the foundation to identify potential abatement options and ultimately formulate tangible practical implementation action plans. To facilitate the analysis, the various sources of emissions are subdivided in three distinct categories—referred to as “Scope”—based on their origins, position on the activity chain/product life cycle and degree of control played by the entity covered in the analysis. 

As illustrated in Figure 1, Scope 1 emissions—also defined as “direct” emissions—relate to the entity’s own operations and assets. These cover, for example, the GHG emissions resulting from the combustion of fossil fuels for raising steam in the company’s boilers or for heating/cooling buildings. Scope 2 comprises indirect emissions associated with the various forms of secondary energy purchased from third parties and used in the entity’s own premises—examples include electricity purchased from the grid or steam supplied across the fence by other companies.


All other indirect emissions related to upstream and downstream activities are referred to as Scope 3. Examples of upstream Scope 3 emissions include those associated with the production and transport to the factory gates of purchased goods—be these consumables or machinery—services provided by third parties or business travel. Downstream Scope 3 emissions cover those resulting from the distribution of the company products, their use by customers and their end-of-life disposal.

According to a recent article6  more than 70% of the GHG emissions of the pharmaceutical industry are Scope 3—Scope 1 and 2 account almost equally for the remaining 30%.

These estimates are supported by other calculations indicating that the operations directly performed by pharmaceutical companies including production, R&D and administration are responsible for just 20% of total emissions compared with the 32% deriving from the distribution, use and disposal by customers of pharmaceutical products—a set of activities referred to as “post factory/company gate”—the remaining 48% are associated with raw materials and other inputs used.

While the accuracy of these estimates can be debated—it clearly appears that an “average” pharmaceutical company’s operations account for just a minor share of its total emissions—a situation at least partly reflecting the extensive outsourcing of several activities embraced by the pharmaceutical industry.

As a consequence, to achieve their GHG emission abatement objectives and eventually reach the zero-carbon target, pharmaceutical companies have no choice but to apply a truly holistic view of their structure and the carbon footprint of the entire supply chain. Such an approach is critical to avoid net zero-sum results where rather than being abated emissions are simply moved and shifted to another entity.

CDMO partnerships

An increasing number of pharmaceutical companies are therefore moving for position to ensure that suppliers are effectively aligned with their own GHG abatement strategies and objectives. Within this framework, the procedures for qualifying and selecting suppliers are being extended to include elements such as the vendor’s current GHG footprint, commitment towards its reduction, strategies envisaged/applied to achieve these reductions and the ability to eventually move towards zero emissions or reach selected targets. These may, for example, include pledging to reduce or even eliminate Scope 2 emissions by fully switching to renewable electricity sources.

Obviously, this implies the supplier must be able to answer a number of questions about how the organization stands in terms of GHG emissions, metrics applied, steps undertaken to date for reducing these emissions and procedures applied for checking the GHG footprint of inputs sourced from third party vendors. In addition, suppliers must be ready to submit a roadmap indicating the decarbonization path envisaged and an associated implementation action plan that also provides tangible milestones for measuring progress.

Conceptually, these requirements simply represent a logical extension stressing the E dimension of the due diligence process exerted by customers to ensure that their suppliers effectively stick to sound ESG (Environmental, Social and Governance) practices in order to prevent reputational damages. Most pharmaceutical companies these days are accustomed to being scrutinized because it’s been several years that the policies and procedures applied by their vendors on issues such as compliance against bribery, equal employment opportunities, proper handling of waste and other widely accepted sound ESG principles have been implemented.

However, for many suppliers to the pharmaceutical industry, including most small- to medium-sized CDMOs, the requests associated with their GHG footprint, path to decarbonization or more broadly sustainability are creating an additional element of complexity. At least initially, these increase the cost of being in the business. Barring large companies like Catalent, Evonik or Thermo-Fisher Scientific, many players are ill prepared and equipped, with few even knowing how to calculate their own Scope 1 and 2 carbon emissions.

This creates a potential source of major vulnerability as the decarbonization and more broadly the sustainability themes correspond to structural developments having an increasingly important impact on all operations and activities. Sooner or later governmental authorities in most Western countries are likely to require all businesses to publish their carbon footprint and report their environmental performance. Indicators such as carbon emissions and amount of waste generated will most probably be increasingly used by governments for taxation purposes. For example, this can be done by imposing a levy per ton of GHG emitted as reflected in the carbon taxes implemented or being considered in various parts of the world.

Therefore, there is no choice for companies but to adapt to these new requirements by equipping themselves accordingly and being proactive in exploiting the opportunities that these developments are creating rather than just viewing them as threats and eventually being forced to submit to them anyway.

This is particularly important for CDMOs focusing on the drug substance part of the supply chain. Pharmaceutical fine chemicals in general, and API synthesis more particularly, are notoriously characterized by having a substantial environmental footprint.

Various metrics are applied for measuring this footprint. Probably the simplest indicator is Ef (E-factor), which measures the amount of waste obtained per unit of final product. In its most basic form this is calculated according to the formula Ef = (A – B) / B) where (A) is the total mass of all input materials used in the synthesis and (B) is the resulting end product mass.  As reported in⁷ and illustrated in Figure 2. The E-factor in API synthesis is generally estimated between 25 and more than 100.


In reality this factor is probably even higher as it is often calculated assuming that 90% of solvents used are recovered and recycled while in practice this is rarely the case.

Irrespective of this, the E-factor observed in API synthesis dwarfs those observed for other types of chemicals. Obviously, this bodes poorly for the overall environmental burden of API synthesis activities in general and more particularly for their carbon footprint. As a first approximation carbon emissions are directly linked to the amount of inputs used—these having to be produced often starting from non-renewable fossil feedstock—and the volumes of waste generated that have to be disposed, eventually resulting in the release in the atmosphere of their carbon content as GHG.

The high E-factor of API synthesis derives from a number of factors. These include the complexity intrinsic to most of these molecules, the number of processing steps involved in their synthesis and relatively inefficient synthesis processes applied. The latter are at least partly caused by tight timelines preventing the fine tuning and optimization of synthesis processes.

The ample profit margins and limited impact of cost-of-goods-sold characterizing the pharmaceutical industry also play a role. Combined with regulatory hurdles associated with changing processes for registered products—the limited incentives to optimize costs have often discouraged introducing new and more efficient processes. This is a far cry from what is observed in the petrochemical or base chemical industry where every fraction of percent yield improvement and elimination of wastage has been systematically pursued for many years as epitomized by the Dow Chemical Company in its WRAP motto—Waste Reduction Always Pays—coined in the late 90s.

Conclusion

Rather than being cynically viewed as “greenwashing” and a fad, the increasing commitment of pharmaceutical companies to decarbonization, or more generally sustainability, has to be considered by the API CDMO sector as an opportunity to reassess how it operates and ensure alignment with the customer’s objectives and grab associated benefits.

This requires careful alignment of strategy with business processes, resources and organization. Sustainability and decarbonization considerations must be built in the CDMO strategy. All business processes applied have to be effectively in line with the strategy while adequate resources—whether relating to soft or hardware—have to be on hand for performing these processes and organized accordingly.

In such a thrust the CDMO owners and senior management must take the lead in demonstrating their genuine commitment to sustainability by setting clear objectives at all levels within the organization and establishing transparent monitoring systems for measuring progress towards these while ensuring adequate alignment of incentives.

Within this frame, one of the most critical steps is to appoint a person with the required experience, credibility and authority—entrusting he or she with the responsibility to systematically assess the entire company carbon footprint taking into account all three emission scopes (see Figure 1).

Based on the inventory of the various emission sources and their respective impact—emission reduction options can be identified and analyzed in terms of cost benefits setting the ground for formulating a suitable emission reduction plan.

This may include steps such as electing to rely only on renewable/green electricity, converting boilers from natural gas to bio-mass, investing in co-generation capacity, increasing shares of solvent recycled, electing to purchase bio-based raw inputs rather than their petrochemical derived counterparts, giving the preference to suppliers located near-by and showing an equal commitment to decarbonization.

Obviously, the designated person can only succeed if he or she is able to trigger action at the various levels of the organization and make things happen—all company functions have a role to play in the path towards decarbonization and sustainability.

For example, procurement can identify input sources that have a lower carbon footprint. Marketing and sales can engage in a dialogue with customers while negotiating contractual terms that reflect in prices possible surcharges associated with the use of greener inputs or delivery terms that avoid air freight. Lastly, R&D together with quality assurance can identify opportunities to make processes more efficient while avoiding introducing changes that would create regulatory hurdles. 


References

1. Sustainability – Shiji Liu – Bioprocess Engineering (2nd Edition) 2017
2. Sustainable development – Lees’ Loss prevention in the process industry (4th Edition) 2012
3. Report of the World Commission on Environment & Development – United Nations 1987
4. John Elkington – Harvard Business Review June 25, 2018
5. Sustainability goes mainstream – Blackrock November 2021
6. Marc Daigneault and David Quinn – A red pill for green medicines – Chemistry World 26 November 2021
7. Frank Roschangar & al. – Overcoming barriers to green chemistry – Green Chemistry – 24 October 2014

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Dr. Michele Jermini is the Managing Director of Alfa Chemicals (Suisse) SA. He can be reached at mjermini@alfachemicalsint.com

Dr. Enrico Polastro is a Vice-President of Arthur D. Little. He can be reached at polastro.enrico@adlittle.com