Integrating ESG considerations into core pharma operations
India, known as the “Pharmacy of the World,” produces over 20 per cent of the global supply of generic medicines and plays a vital role in vaccine production, as per the Investindia.gov.in website. It meets the healthcare needs of over 1.4 billion people domestically while providing affordable medicines to over 200 countries, significantly contributing to global public health.
As sustainability gains global focus, India’s pharma sector should integrate ESG considerations into its core operations. Only about 20 per cent of companies in the life science and healthcare sector are well-prepared to handle ESG requirements, with around 30 per cent moderately prepared and another 30 per cent somewhat prepared. This indicates that, despite some progress, a significant portion of the sector still needs to elevate its ESG practices, as per an October 2023 report from Deloitte, titled, ‘Embedding environmental sustainability into pharma’s DNA’.
Embedding sustainability into the core business strategy is essential for long-term success. This includes reducing environmental footprints, ensuring ethical supply chains, fostering inclusive workplaces, and maintaining transparent governance. One key aspect is value-chain sustainability, where initiatives such as the Pharmaceutical Supply Chain Initiative (PSCI) and the Sustainable Medicines Partnership (SMP) play a pivotal role. These initiatives help standardise best practices across the industry, ensuring that sustainability efforts extend beyond the company’s operations to include suppliers, manufacturers, and other key stakeholders in the value chain.
Collaboration across the industry to share best practices and reduce costs is crucial, as is investing in innovation to develop more sustainable manufacturing processes. Leveraging digital technologies to optimise resource use, minimise waste and educate stakeholders on the business case for sustainability will ensure broad support. Additionally, setting science-based targets aligned with global climate goals and maintaining transparency through rigorous sustainability reporting will build trust and drive long-term value for both business and society.
Key focus areas in sustainable manufacturing practices
From drug discovery and manufacturing to packaging and patient engagement, sustainability should be embedded in every facet of pharma operations. In a sector focused on saving lives, ESG considerations are not just a regulatory requirement but a core component of our commitment to public health, particularly as we confront the challenges posed by climate change. This responsibility extends beyond patient care to how we manage the environmental and social impacts of our business operations. Early wins in sustainability are crucial for driving long-term investments and proving the viability and profitability of sustainable practices.
As companies see returns, they are more likely to expand these efforts, leading to a more resilient and profitable sector. Key focus areas include energy efficiency, where audits and management systems can quickly identify savings. Upgrading to LED lighting, optimising HVAC systems, and using energy-efficient equipment can reduce costs and energy use. Innovative mechanisms to reduce post-consumer waste, such as drug take-back programs, can also play a significant role in reducing the environmental impact of pharmaceuticals, as these programs provide a secure and environmentally sound way to dispose of leftover and expired medicine. Wherever feasible, returning products to the manufacturer should be the first choice, as they are likely to have effective disposal methods that allow for the recycling of components wherever possible.
Supply chain improvements are also vital; collaborating with suppliers on sustainable practices and optimising transport routes can make supply chains more efficient. Lastly, fostering a culture of environmental responsibility through employee training is essential, as informed employees can significantly contribute to reducing waste and improving resource efficiency across the organisation.
Policy push for going green
The revised Schedule M, introduced in January 2024, ensures that India’s pharmaceutical manufacturing aligns with international standards for safety and quality. To support MSME pharma companies in meeting these new standards, the government could implement several targeted incentives.
First, tax breaks for investments in sustainable technologies would encourage MSMEs to adopt eco-friendly practices. Additionally, subsidies for renewable energy and low-interest green loans could reduce operational costs, making it easier for smaller companies to upgrade their facilities. Incentives for eco-design-based pharma manufacturing could further drive the adoption of sustainable design principles, such as using biodegradable materials and optimising production processes to minimise waste and energy use, thereby reducing the environmental impact from the outset. A fasttrack approval process for facilities that meet sustainability criteria would also expedite compliance and reduce associated costs. Grants for sustainability-focused R&D could further drive innovation, helping MSMEs adhere to the new standards. Recognition programs could highlight leaders in sustainability, encouraging broader adoption. Technical assistance programs would ensure that MSMEs have the knowledge and resources to implement these measures effectively.
Finally, preferential treatment in government procurement for sustainable products would provide a strong financial incentive, and participation in carbon trading schemes, and implementing Internal Carbon pricing could offer an additional revenue stream by monetising emissions reductions. If these incentives are implemented, India’s MSME pharma sector could rapidly modernise, further accelerating its transformation into a sustainable, globally competitive industry that sets new standards in quality, innovation, and environmental stewardship.
Evolution of the sustainability journey
Over the years, in my experience of working with pharma companies, I have seen a significant evolution in their approach to sustainability. The focus has shifted towards embedding sustainability throughout the product value chain—from R&D to manufacturing, packaging, and logistics.
A key best practice is the creation of specialised ESG committees at the board level, ensuring that sustainability is integrated into decision-making processes. This governance structure is vital for driving impactful sustainability initiatives. In waste management, many companies have set ambitious targets, such as achieving zero operational waste and reducing single-use plastics. These goals are supported by robust recycling programs and continuous improvement efforts that enhance both environmental impact and operational efficiency. Energy efficiency has also seen considerable progress, with companies moving from diesel to cleaner fuels, investing in renewable energy, and optimising energy use. For instance, the use of bio-based boilers for API manufacturing plants and the deployment of large captive renewable assets are significant advancements. These efforts are backed by energy audits and technologies that boost fuel efficiency and reduce emissions.
Supply chain sustainability has advanced significantly as well, with companies launching Sustainable Procurement Programs and setting targets like achieving net-zero supply chains by mid-century. Innovations such as the use of recyclable insulin syringes further exemplify the commitment to minimising environmental impact across the supply chain. To encapsulate, adopting strong governance, efficient waste management, energy optimisation, and sustainable supply chains will enable MSMEs to accelerate their sustainability efforts and meet industry standards.
Best sustainability practices from other industries
Pharma companies have a unique opportunity to draw inspiration from best practices in other industries to accelerate their sustainability efforts. For instance, they can significantly reduce emissions by investing in energy-efficient equipment and adopting renewable energy sources like solar and wind— mirroring the tech industry’s shift to 100 per cent renewable energy. Adopting green chemistry principles from the chemical industry allows them to minimise hazardous chemicals, optimise processes, and reduce waste, thereby improving safety and cutting disposal costs. In terms of packaging, the FMCG sector offers valuable insights; pharma companies can reduce packaging waste by using recyclable, biodegradable materials and eliminating unnecessary layers, making packaging more functional and sustainable.
Additionally, by embracing circular economy practices from the agriculture industry, pharma companies can turn waste into resources through waste-to-energy programs and recycling initiatives, significantly lowering their environmental footprint. Inspired by the beverage industry’s approach to water conservation, pharma companies can implement advanced water recycling and treatment systems to reduce freshwater usage and minimise wastewater discharge, particularly in waterscarce regions. Lastly, by following the lead of retail and FMCG sectors in enforcing sustainability standards among suppliers, pharma companies can ensure ethical sourcing and enhance sustainability across the entire supply chain.
References
1.https://www.investindia.gov.in /sector/pharmaceuticals
2.https://www2.deloitte.com/content/dam/Deloitte/uk/Documents/life-sciences-healthcare/deloitte-uk-embedding-environmental-sustainability-into-ph arma-dna.pdf