Sustainability in Pharma– Leapfrogging into a Carbon Neutral World

As an important stakeholder of global health security, the pharma sector must embrace sustainability as one of its tenets. Yet, it has faced allegations in the past of not shouldering its responsibility towards the environment. For instance, a report titled, ‘Carbon footprint of the global pharmaceutical industry and relative impact of its major players,’ reveals that the pharma industry is 55 per cent more emission-intensive than the automotive industry.

So, whether it is implementing efficient processes through optimal utilisation of resources, ensuring regulatory compliance, developing tailored programmes to eliminate inefficiencies in their supply chain, better waste disposal systems, implementing measures to conserve energy and water, reducing carbon footprint or constructing greener buildings and facilities, there is a lot of scope for the pharma sector to ramp up its efforts towards being more environment-friendly. And, this calls for a change in vision, strategies, management practices, and operations in pharma organisations.

Therefore, as part of the Industry Knowledge Exchange Series, Express Pharma, in association with SAP, recently organised a panel discussion on Sustainability in Pharma Industry – Leapfrogging into a Carbon Neutral World.

Held on September 22, 2021, in this session, leaders and experts came together to examine initiatives taken by India Pharma Inc on sustainability so far and discuss its readiness and roadmap to comply with existing and upcoming regulations. For instance, SEBI’s new mandate to the top 1,000 listed companies by market cap to provide details of their material environmental, social, governance risks opportunities and strategies to alleviate or adapt to the risks along with financial implications under a new business responsibility and sustainability report (BRSR) format by 2023.

It also examined the role of technology in enabling pharma organisations to comply with such regulations as well as monitor and maximise their sustainability footprint.

The introductory addresses, given by Viveka Roychowdhury, Editor, Express Pharma and Express Healthcare; and Rajesh Kuppuswamy, Life Sciences and Health Care Industry Advisor, SAP set the context for a very insightful discussion which addressed key questions such as:

• How are pharma companies in India preparing for a transition into more sustainable organisations?
• What are the low hanging fruits to meet their ESG targets?
• Are pharma companies in India making substantial investments in sustainability, beyond a ‘greenwash’?
• And what role does technology play in helping pharma companies achieve and exceed their ESG targets?

Highlighting the importance of the issue slated for discussion, Roychowdhury said, “Globally, pharma has historically scored poorly in ESG ratings but with a reputation boost from the sector’s speedy response to the COVID-19 pandemic, there are signs that action on the ESG side are now being seen with an urgency … as COVID-19 underlined the link between climate change and health…”

She added that certain pharma companies in India have already made initial forays on the Environment, Social and Governance (ESG) front over the past few years. And their tribe was set to increase as newer regulations, like the SEBI mandate, come into existence.

Next, Rajesh Kuppuswamy, Life Sciences and Health Care Industry Advisor, SAP gave a brief introduction to the knowledge exchange forum, its purpose and the rationale behind the topics chosen for the sessions. He said that the aim was to understand how specific functions within the industry were able to perform in the light of not just the pandemic, but also multiple forces which were impacting the industry. He said that the forum sought to bring the industry together to discuss topics of interest, understand the latest challenges, and find ways to overcome them.

Speaking on sustainability, he informed that be it investors, shareholders, regulators or consumers, are all demanding responsibly-derived products and services with a smaller environmental footprint. So, businesses have to become sustainably profitable and profitably sustainable.

Pointing out that sustainability is a journey and not a destination; he said that there are three big milestones in this journey: Compliance with regulations, making processes sustainable, and eventually, the highest level of maturity, i.e. creating sustainable products, services and business models. Kuppuswamy also said that optimising the use of the technology can help derive the best insights to take appropriate actions across different processes.

The panel discussion that followed also had some great takeaways for the attendees of the event. ESG veterans from the pharma industry like Rajan Sharma, Vice President & Head Corporate EHS, Glenmark Pharmaceuticals; Thakur Pherwani, Global Head SHE & Sustainability, Dr Reddy’s Laboratories and Bhavesh Trivedi, Head EHS, Zydus Cadila, and industry consultants and tech experts, Avinaw Prasad, Associate Director, Deloitte, and Amar Jadhav, Senior Solution Architect, SAP India, who have seen various sectors put in place sustainability agendas, shared their experiences and insights.

Some of the major learnings were as follows:

Sustainability is gaining prominence: A poll posed at the beginning of this discussion asked attendees to vote whether pharma leaders believed that sustainability initiatives can deliver financial value. And, an overwhelming 89 per cent answered in the affirmative. The result clearly showed that gone are the days when environmental sustainability and business growth were considered as opposite ends of the spectrum.

The leaders and experts on the panel also reiterated these findings.

Prasad from Deloitte said that in the short term there could be a certain degree of investment required. But, in the journey towards becoming more sustainable businesses and mitigating the risks, a lot of value can be generated because the technologies were becoming cleaner and a lot of jobs will be created through the adoption of new technologies. Thus, the investment would create new businesses across the value chain.

Pherwani from Dr Reddy’s gave some good examples of sustainability initiatives that have been implemented in his organisation. He informed that his company was looking at a ‘sustainability by design’ approach in operations wherein all aspects of a business with respect to people safety, quality, availability, environment, engineering excellence, productivity, continuous improvement, and community were considered to create shared value for all the stakeholders.

He said that while Dr Reddy’s sustainability strategy was divided into the verticals of environment, social and governance, the primary focus was on the environmental dimensions of wastewater management, energy neutrality, circularity etc. The company has set key goals for 2030 and was steadily working towards achieving them, he informed.

Pherwani emphasised that pharma businesses need to take sustainability seriously and work it with an upstream strategy. If the industry does not design environment-friendly products or find alternate routes of synthesis for the formulation of products in a very safer or greener manner, the adverse impact will be huge. He also spoke on the initiatives taken by the company on the social and governance fronts and said that the company has tried to align their efforts with 17 Sustainable Development Goals (SDG) and all their projects are mapped around them.

He asserted that his company has always wanted sustainability to be more than a boardroom agenda and tries to ensure that every worker in the organisation has a sustainability code and understands what is his/her contribution to it.

Sharma from Glenmark stressed that his organisation is also looking at sustainability in a big way and has set up a board-level committee called the ESP Committee, chaired by the Chairman and Managing Director, to effectively engage the senior management in the sustainability agenda.

He informed that the committee ensures the end considerations of the sustainability strategy get embedded in each function, whether it is manufacturing, R&D, supply chain or HR. To examine and benchmark the progress made in the journey towards sustainability, the measures undergo a review on a quarterly basis. He also said that the committee, that drives the entire sustainability agenda for the organisation, with inputs from all functions, has taken some important decisions such as becoming water neutral by 2025 and carbon neutral by 2030.

Some of the other measures of the company include participating in the Carbon Disclosure Project (CDP) and sharing carbon emission scores, ESP assessment of supplies of all the vendors, self-assessment, as well assessments through a third party, sustainability reporting since 2013-14 etc.

Thus, major pharma companies have already embarked on the journey towards sustainability.

Sustainability is becoming a business imperative

Newer regulations and the transforming investment climate have also made sustainability very important for businesses. There is a lot of data to back the correlation between corporate performance and ESG parameters.

Speaking on this issue, Prasad emphasised that mitigating ESG risks was crucial since investors prefer to back companies that have a low ESG risk score. He stressed that it was important for companies to analyse, integrate and mitigate ESG risks as investors and partners will seek more specific and standardised ESG disclosures. Therefore, sustainability is key to achieve business goals as well.

But, he also assured that the pharma industry can control their ESG risks and leapfrog into carbon neutrality as the overall greenhouse gas emission in the pharma industry would be about one-tenth of any heavy industry such as steel or cement. He advised that the pharma industry should look at framing and implementing a sound environment management strategy and focus on water conservation, reduction of greenhouse gas emissions as a priority.

On the social and governance fronts, he advised companies to train their focus on accessibility to affordable medicines, understand climate change risks, undertake climate vulnerability assessments and redesign their projects to mitigate the vulnerabilities of the community.

He reiterated that investors also expect ESG to be integrated into the core enterprise risk management system.

Technology can boost sustainability agendas

As the discussion progressed, Jadhav from SAP enlightened how technology can help to bridge the gap between these functional leaders and ESG leaders to achieve the sustainability objectives of the organisations. He pointed out how it can help communicate the criteria that need to be met by functional leaders to realise sustainability goals, be it in R&D and manufacturing processes or sourcing practices.

For instance, if a recyclable material or a biodegradable material proves to be less impactful on the environment, then the sourcing department can take over and adopt it for their use. Similarly, batch sizes in manufacturing are going down since there is a lot of personalisation happening, but this may lead to energy wastage. Technology can help to arrive at a production plan that reduces the changeovers and thus curbs energy consumption, thereby lessening the impact on the environment.

Technology can also help to improve the accessibility and affordability of drugs by making the logistics process more efficient and effective. Thus, technology makes information exchange seamless which makes operations more effective, and there are concerted efforts towards sustainability goals.

Jadhav also assured that SAP can partner pharma companies as they strive to become more sustainable entities and help them to accelerate this journey by streamlining and ushering better efficiencies across business processes, be it the supply chain, manufacturing, finance or HR. He accentuated that embedding business processes or activities with sustainability insights will drive better decisions and create a win-win situation for all. And, this requires help from technological interventions.

The ESG leaders also shared some real-world examples of how they have or can leverage technology to propel their sustainability goals and targets.

Elaborating on Glenmark’s energy digitisation initiative, Sharma said that pharma companies need to maintain a certain level of humidity and temperature control at all manufacturing units, especially the formulation units. So, the company has used a technological intervention (smart sensors) to control the air control units, heaters and chillers installed at these units and maintain the right temperature and humidity at all times in these units. This, in turn, helps to optimise the use of energy, reduce wastage, capture data and gain insights for further process optimisation.

Pherwani notified that similar measures have been implemented as part of the ‘Digital Lighthouse’ initiative at Dr Reddy’s Laboratories as well. Likewise, the company has adopted digitalisation across different activities, be it manufacturing, quality assurance, R&D trials, to enable energy saving, waste reduction, productivity enhancement, equipment efficiency and better visibility in terms of decision making. Dr Reddy’s plans to harness digitalisation across all units and functions by 2025.

Pherwani informed the company was also looking at how to harness carbon capture technology to bring down emissions and convert waste into energy that can be used in different processes, among other measures.

Trivedi from Zydus Cadila also gave an overview of the measures in his organisation and said that water conservation was a key focus area and they have achieved around 10 per cent reduction at their plant in Gujarat. Now the company has implemented different trackers for water and energy consumption, etc to gain actionable insights.

A shared responsibility 

Thus, the industry is leveraging technology to support its strides towards sustainability. However, as Prasad reminded, sustainability is a shared responsibility and requires collective efforts from all stakeholders in the industry. This is important to enable the success of sustainability agendas and create long-term impact.

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