As the health impacts of climate change become harder to ignore, biotechnology and pharmaceutical companies are facing increasing pressure from investors, employees, and government regulators to reduce their carbon emissions, and to make environmental sustainability a core part of their business.
Globally, large public biotech and pharmaceutical companies are responsible for more than 200 million metric tons of carbon dioxide and equivalent emissions, according to estimates from one 2022 report. The bulk of those emissions are tied to companies’ products and supply chains, which can be hard to measure. In the U.S., about 8.5% of the national carbon footprint can be attributed to the health care industry at large.
While other sectors, such as the financial industry, have been developing environmental standards for years, often in response to pressure from shareholders, this work is just getting started for biotech and pharma companies. But venture capital firms that invest in health-related biotech, employees and other stakeholders are starting to demand that companies take climate action, and that they provide data showing they are making progress toward emissions reduction goals.
Younger employees in particular, “want to work in an organization where they know they’re doing something about sustainability,” said James Connelly, CEO of My Green Lab, a nonprofit focused on sustainability in science. Incorporating environmental programs, Connelly said, can help companies with recruiting and retention.
Pam Cheng, executive vice president global operations, IT and chief sustainability officer at AstraZeneca, said she has also noticed this generational trend. A worker recently asked her about the company’s climate action at a manufacturing site town hall, she said. And some of AstraZeneca’s climate initiatives, such as removing single-use plastics from packaging and developing metrics to track sustainability across a product’s lifestyle, have been informed by employees’ ideas, according to a spokeswoman for the company.
A 2022 report from the biotech law firm Fenwick, which surveyed 100 executives and investors, found that 78% of investors said they expected that environmental, social, and governance (ESG) disclosures would become “significantly” or “moderately” more important in the next year. Among the investors who said they expected more ESG disclosures, more than half said they faced increasing pressure from their clients to “include ESG-focused companies in portfolios” and that they expected standards in this area to “become more uniform.”
Improving environmental resource use can help companies save money at a time when they are facing financial challenges, Connelly said. And the Biden administration’s active stance toward addressing climate change has provided an additional push for companies to make climate action a priority, providing incentives for the health care industry to decarbonize through its Health Sector Climate pledge, first announced in April 2022 and recently reopened for additional companies to join.
But for companies whose major focus is health, the core reason to cut back on emissions is often that they have a scientific understanding of climate change and are fully aware of its ramifications. “This is an industry that knows the science,” Connelly said. He added that most scientists and health care practitioners don’t question “that we’re undergoing significant impact from human caused climate change, or that single use plastics and toxic chemicals and pollution are having a significant impact on human and environmental health.”
Stakeholders converge on sustainability
Some large pharmaceutical companies have been leaders in the environmental space, setting ambitious net-zero emissions targets and taking steps to reach them. About 50 biotech and pharmaceutical companies worldwide — including Amgen, Pfizer, Johnson & Johnson, and others — have set targets verified by the Science-Based Targets initiative, an organization that evaluates company goals based on the 2015 Paris Agreement. Another 40 companies have committed to setting emissions targets in the next two years.
My Green Lab offers a certification program, professional development courses, and other types of training for research companies and academic labs that are seeking to get started with efforts to reduce their emissions.
Certification and tracking efforts are important because companies may “greenwash” their efforts, making claims they don’t follow through on or taking actions that have minimal impact.
Sonia Roschnik, executive director at the International Hospital Federation’s Geneva Sustainability Center, said that for company leaders, sustainability can lead to “wins” in multiple areas: Climate initiatives may simultaneously save the planet, save money, improve equity, and improve health outcomes. There are a lot of “easy win measures that will tick all those boxes,” Roschnik said. For example, shutting off lights or machinery in labs when spaces aren’t in use can reduce emissions and cut costs at the same time. At the center, Roschnik said, she aims to help executives shift their mindsets and incorporate sustainability into all facets of their businesses.
From an investor’s perspective, environmental efforts can make a company more resilient and more economically efficient, while providing opportunities for new technological innovation, said Joško Bobanović, a partner at the biotech venture capital firm Sofinnova Partners.The firm has invested in sustainability-focused companies since 2010, Bobanović said. At the time, the move was a natural extension of Sofinnova’s focus on innovative startups; thirteen years later, the firm has raised three funds that are focused on environmental impact, the latest totaling 150 million Euros.
“For the first seven or eight years, we were one of the lonely pioneers” in this space, Bobanović said. But interest in environmental impact has grown substantially since then, he said, “driven by the realization that the climate problem cannot wait anymore.” Bobanović’s pool of potential investors is correspondingly much larger than it was a decade ago. The Fenwick report points to similar trends, with investors and executives anticipating more ESG reporting by companies in the coming years.
Another venture capital firm with an “ESG-aligned” focus, the European Circular Bioeconomy Fund (ECBF), has received direct support from the European Commission, the European Union’s top governing body. The commission raised $100 million Euros for the fund, while partners selected by the commission raised an additional $200 million, said Cornelia Frentz, ECBF’s manager of corporate governance. The bioeconomy fund aligns with an EU regulation requiring companies to disclose ESG metrics, which came into effect in 2021. To receive funding from ECBF, companies must meet strict disclosure requirements on greenhouse gas emissions and other environmental impacts, Frentz said.
While Europe is ahead of the U.S. in government regulations regarding ESG, a rule under consideration at the Securities and Exchange Commission would require public companies to regularly share climate-related information. This rule and other ESG efforts have faced opposition from Republicans, including a recent resolution that would have stopped retirement fund managers from incorporating ESG in their investment decisions. The resolution passed Congress, but President Biden blocked it in the first veto of his term.
The Inflation Reduction Act, with its incentives for clean energy, may also lead more companies to take action. And the incentives provided by the Health Sector Climate Pledge are specifically aimed at hospitals and other health-related companies. To sign on, companies must commit to reducing their greenhouse gas emissions 50% by 2030.
But the biggest push may come from inside the companies, as young scientists who are interested in sustainability look for ways to take action at work. “I noticed when I first started working in biotech that there’s a lot of plastics that accumulate,” said Claudia Boutin, a scientist at the research and development company Giner. When Boutin started at Giner last fall, she found that the company didn’t have a recycling program for pipet tip boxes, one of the most common waste items in labs. She encouraged Giner to set up a recycling program with GreenLabs Recycling, which collects and repurposes these boxes. There are many other lab items that could be reused or repurposed, Boutin said, but pipet tip boxes are an easy place to start.
Another young scientist, Oshoname Olorife, similarly reached out to GreenLabs after looking for ways for her company, Sanegene Bio, to reduce plastic waste. The company, she said, was excited to get onboard with this recycling effort. Olorife, who is now working at Verve Therapeutics, added, “I definitely feel like biotech is open to taking part, when it comes to being more sustainable.” But companies might not know how to get started, unless employees suggest new policies, she said.
The measurement challenge
For companies getting involved with environmental sustainability, one major challenge is how to measure greenhouse gas emissions. The majority of emissions in the health and biotech sectors tend to be scope 3 emissions, or those from products and supply chains. These are the hardest to track, since they occur outside of company facilities. To measure these emissions, companies must collect data from their suppliers or estimate emissions based on other factors, like cost.
Some models for measuring emissions and other climate impacts have been developed in other industries, and by financial firms that evaluate companies’ ESG metrics. But these models aren’t necessarily the best fit for biotech and health, Roschnik said: “We could get better at measuring the health care benefits” of different initiatives, as those benefits might be more applicable for a health company than other results.
As a result, company leaders are calling for industry-specific standards. Jonathan Perlin, president and CEO of the Joint Commission, a nonprofit that accredits health care companies, noted that health care defined broadly is a rare case in which individuals and organizations are asking for more standards.The Joint Commission is currently developing a set of climate standards, which will be incorporated into regular accreditation requirements for all 23,000 hospitals and health care systems. Perlin anticipates that the new standards will be announced in January 2024.
The Fenwick report similarly found that biotech investors and executives want to see more consistent standards for the health sector. Among the company leaders that responded to Fenwick’s survey, only 24% said they have implemented and are currently reporting ESG metrics. The majority of investors and executives said they agreed that ESG reporting should be mandatory for biotech companies, with investors particularly interested in comparing different companies’ efforts and executives interested in year-over-year tracking.
Smaller companies in the early stages of development might need more support to measure and report their climate impacts, Frentz said, adding, “Some companies, even though they’re sustainable, they have problems with collecting data.” Estimating impacts and reporting them in a comprehensive manner could take a lot of resources, at a time when the companies have other, competing priorities. Frentz and her colleagues at ECBF provide calculation tools and other support in doing this reporting, but it’s “a lot of work,” she said. Bobanović at Sofinnova Partners suggested that the biotech industry might even need a different set of standards for early-stage companies compared to older, larger institutions.
Larger companies like AstraZeneca can devote resources to measurement, while simultaneously pushing for climate action among the smaller companies that contribute to their supply chain emissions, said Cheng.
“We want 95% of our key suppliers and partners to have Science-Based Targets by 2025,” she added, referring to the verification initiative. The U.K.’s National Health Service has made a similar commitment: By 2030, all suppliers to the agency will need to have clear emissions reduction targets and to have demonstrated progress toward those goals.
Along with the challenges of tracking emissions, biotech companies may face regulatory challenges as they pursue new products that offer reduced climate impacts. For example, AstraZeneca and its device partner Honeywell are currently developing an inhaler that doesn’t emit greenhouse gases, Cheng said, adding that the process has taken “a few years” and “hundreds of millions of dollars.” Scientists had to develop a new mechanism for pushing medicine out of the inhaler, and the new product must now go through clinical trials to receive FDA approval. But Cheng said she believes this investment will be worthwhile in the long run, as consumers and government agencies begin to prioritize more sustainable medical devices.
Monica Nakielski, vice president for sustainability at the Illinois-based Advocate Health Care and Aurora Health Care, said that “the awareness and appetite is present” for reducing climate impacts in her health system and in the industry more generally. The Hippocratic oath, she noted, says “first do no harm,” and, she said, in health care, that should include working toward environmental sustainability.
This story is part of ongoing coverage of climate change and health, supported by a grant from The Commonwealth Fund.