By Giles Dean, Sustainability Manager, and James Gregson, Partner, UK Life Sciences and Healthcare leader
The research evidence is unequivocal, public, planetary and economic health are inextricably linked and no continent, country or community is immune from the impacts of climate change. The race to net zero is also a race to a healthier, cleaner and more resilient future. We hope that the undeniable link between improving the health outcomes of society and a successful net-zero transition will be central to COP26. This blog outlines a discussion between Giles Dean, Sustainability Manager at Deloitte UK, and James Gregson, Partner and UK Life Sciences and Healthcare leader, on their hopes for COP26 and the implications for healthcare and, specifically the pharmaceutical (pharma) industry, across not just environmental, but also social and governance (ESG) indicators.1
Giles Dean (GD): Its clear from the activities and publicity surrounding COP 26 that reducing the carbon footprint of healthcare will require a sector-wide system change, including full participation of pharma and the wider life sciences industry. It will also require extensive cross industry collaborations and access to finance to invest in areas such as transport and alternative green energy sources.2 Healthcare is responsible for 4.4 per cent of global greenhouse gas emissions,equivalent.3 In the UK, the manufacture and supply of medicines is responsible for 20 per cent of the NHS carbon footprint. 4 The challenge for both pharma and healthcare in achieving net-zero is consequently huge and many organisations have acknowledged this and accepted the need to reduce their carbon footprint. At the same time, they want to improve the quality and delivery of accessible health care across the world. James, why is COP26 so important to this agenda?
James Gregson (JG): The timeliness of COP26 feels like a bit of a doomsday clock, in previous meetings there was less urgency than there is this time around – that urgency is appropriate and should drive action. The pandemic has taught us, more than ever, about the importance of collaboration between governments, society, and industry, and the benefits of co-investing in the transformation that will be needed. Many of the issues that pharma face are pervasive, such as the waste and disposal of unused medicines, unnecessary packaging and leafleting in medicine provision, and the carbon footprint of largescale medicines manufacturing. From a healthcare delivery standpoint these are structurally and regulatory bound so it will require governmental policy change and dialogue between governments, corporates, and representatives of patient groups to rethink care delivery and how to overcome the barriers in an intelligent way. Moreover, pharma will need to consider the resilience of healthcare. The pandemic has exposed healthcare’s vulnerabilities and any ESG driven change needs to be considered in tandem with how it might affect resilience.
GD: If we focus on decarbonisation, we know that Scope 3, which is the associated carbon footprint of an organisation’s external supply chain, is the biggest challenge affecting all industries. Yet we know pharma already has an extremely complex and extended supply chain. What is going to make a difference in the context of scope three and the enormous complexity of how the ecosystem operates?
JG: The pharma supply chain, in comparison to most other industries, is enormously extended and very fragile, complex, and slow with a lot of infrastructures. To bring change and more agility to supply chains, we need careful thought from both government and corporates about the incentives for localisation. This collaboration is the only way in which things will be driven at pace. For example, localisation of pharma manufacturing and supply may become an increasingly (nationalistic) policy of government, improving incentives for local production, skills development and access, and in turn having a significant impact on the associated carbon footprint, and also cost of reimbursement.
This is a complex equation, and therefore must be assessed collaboratively between policy makers, regulators, distributers as well as pharma to fully understand the cost benefit in terms of resilience, financial cost, carbon cost and patient access. There is also a need for more consistent messaging on expectations for second- and third-tier suppliers and attention on the regulatory changes required to speed things up.
GD: What can leadership do to expedite the changes needed and have you seen any examples where the ambition is being turned into measurable action on the ground?
JG: There is a clear need for all organisations to progress from ambition to action. We should applaud the vision underpinning the ‘race to net zero’ and welcome the ambition to set demanding goals in public health, for example, the NHS’s stated intention to become the world’s first net zero national health service and its ambitious ‘Net Zero target’. There is also Sweden’s consideration of a new environmental price premium for its national reimbursement system, a concept that is likely to be studied by other countries. And in the wake of calls for better environmental and social standards in pharma production, Germany's parliament recently passed a new law that aims to curtail human rights and environmental abuses within large company's global supply chains. We know that 85 per cent of large global pharma companies are reporting their ESG disclosures and committing to carbon zero ambitions, but what we’re also hoping to see, in terms of leadership in pharma, is an increasing willingness to tackle system wide change.
GD: What is your view on the importance of data and technology in enabling a more sustainable health ecosystem? Given that this sector has traditionally been slow to adopt digital technologies, is there a case for something more radical?
JG: Technology is crucial for generating, collecting, and measuring data on impact and outcomes but the extent of adoption is one of the biggest gaps in the arsenal today. We can break down the technology discussion into three different areas:
Data needs to be accessible and based on agreed standards and guidelines. We’re only now creating measurable standards on carbon foot-printing and its application to specific ecosystems like healthcare. There is a need to agree these standards quickly and adopt a common language system that all stakeholders can buy into. One example that has resonated widely across industries is the Science Based Targets initiative (SBTi) launched in September last year to develop the first science-based global standard for corporate net-zero target-setting, consistent with achieving a net-zero world by no later than 2050.5
Decision-making support systems are needed that look into analytics and scenario planning to help organisations understand the decision making that they need to make. Digital twins and similar technologies need to be implemented effectively to look at the scenarios and design solutions.
Enterprise software providers need to take ownership of designing their solutions with sustainability in mind and create a proper measuring, evaluating, and reporting infrastructure to build sustainability into a core value driver in every enterprise.
GD: We know that the pharma supply chain has a massive carbon impact, but we also know that there's the wider ESG agenda is important. What are the biggest challenges and the commitments that the pharma industry needs to make when thinking about the connectedness of planetary health and human health?
JG: This is an exciting step in the journey because you can't talk about waste and sustainability in pharma, without considering the opportunities in terms of health equity around the world. Imagine if we stopped throwing away millions and millions of drugs, and instead redistributed them in a way that would be beneficial to the two billion people on this planet that still don't have access to rudimentary medicines. This overlap between environmental and societal health resonates strongly with pharma. Moreover, the governance point, of ESG, is also essential because the pandemic has changed society and patients’ expectations about equity of access and treatment and patients engaging more actively in their health than ever before.
Patient groups are increasingly interested and want to know about the source, efficacy and effects of their medicines and ESG. Patients are increasingly interested in what they’re taking, potential side effects, and trial results. People are also become much more interested in the role and purpose of pharma organisations, what they stand for, represent, how they deliver their products and what their footprint looks like, binding together the social and governance imperatives. This also links to the imperative for pharma to be able to build people’s trust in the industry which is not a one-off activity but the result of cumulative actions and of behaviours of pharma companies across the complex ecosystem. Given the fairly unique set of factors at play in healthcare and life sciences it’s important, and exciting, to look at a connected strategy that's driven by a shared purpose and a transparent commitment to society so that people can build trust and engage.
GD: Having a strategy that puts health, happiness, resilience and sustainability at the core of a set of ESG guiding principles is critical to success in the future. So, James, do you have any final thoughts or takeaway messages on what a company or an individual should go and do to start enabling some of this change?
JG: My closing thoughts are that COP26 provides the platform for bringing together all of the above issues and actions and as a result there has never been a better time or clearer direction on the action needed. As much as I want to encourage people to take action, it needs to be taken in open collaboration because there is a steep learning curve and open collaboration will drive better solutions and ultimately, better outcome for society.
1 Environmental, social and governance (ESG) criteria have been used for years to assess a company’s wider performance, challenging executives to measure the ethical value their businesses create. For healthcare organizations, an ESG framework calls for sustainable energy and waste management systems, prods investment in community health, and requires leaders to embrace diversity and inclusion as essential duties. esg_roundtable.pdf (bofa.com)