First Sustainable Supply Chain Benchmark

Breakline

6 Lessons for life sciences companies

Do better, that’s what was on the agenda for leaders from leading life sciences companies. Together with Impact Stewards Tim van Rees and Patrick Filius they discussed the outcomes of the first Sustainable Supply Chain Benchmark. The six participating companies are cutting-edge biotech companies, pharmaceutical multinationals, and specialised start-ups*. What are the key challenges they face in reducing their (scope 3) impact? Can we find ways to tackle those? We are happy to share (some of) their lessons learned with you.

1: the pharmaceutical industry’s impact is significant

Did you know the pharmaceutical industry is responsible for 4.4% of global CO2 emissions? Nowadays, every 1 million dollars in the industry’s turnover results in 48.55 tons of CO2. 80% of these emissions are so-called Scope 3 emissions, stemming from activities outside the company.

While 95% of the life sciences companies have already made efforts in scope 1 and 2 emissions, such as reducing energy use, and switching to sustainable energy sources, less than 50% have made efforts in their supply chain to reduce emissions. This means the sector needs to work on those Scope 3 emissions, which are notoriously challenging to change.

Our tip? Start considering sustainability beyond your own company

2: regulations drive sustainability throughout the value chain

One of the major drivers of sustainability is compliance, with EU rules and regulations seen as a significant driving force. The EU’s Corporate Sustainability Reporting Directive (CSRD) is already in effect, requiring all sizeable life sciences companies to measure and report on their environmental and social impact as of 2024. In addition, the EU’s Corporate Sustainability Due Diligence Directive (CSDD) is underway, requiring companies to do more to prevent malpractices in their supply chain.

Pressure to comply also comes from customers, the buyers of the companies’ products. Healthcare providers want to reduce their Scope 3 emissions too and will adjust their procurement process accordingly, as they have signalled to the participants. And it’s not just the EU; the UK’s National Health Service (NHS) is taking a similar approach; it has imposed (stricter) sustainability criteria in its tenders, as participants have already experienced.

Our tip? Be proactive and ask your suppliers for more transparency.

3: clients need help to change too

Stricter criteria and regulations aren’t always reflected in day-to-day operations yet. In the participants’ experience, clients still go for the Amazon experience (online fast delivery, ed.) despite its detrimental environmental effects. One pharmaceutical company introduced a (small) charge for delivering more than x times per week. The effect was immediate: hospitals placed fewer and bigger, orders. With small changes, life sciences companies could nudge clients in the right direction.

However, this may not apply to all situations. For example, personalised medicines, made with patients’ blood or DNA, are meant to circle between patient, producer, and hospital. Also, expensive products are often too costly to order in large amounts. In many situations, changing day-to-day operations may require more than a nudge.

Our tip? Talk to customers about sustainability and consider incentivising carbon and waste reductions in the downstream supply chain.

“Sustainability is just one of many priorities life sciences companies need to juggle. The participants all aim to strike a good balance.”

Tim van Rees, Impact Steward

4: work from a baseline measurement

The key to making any change is to understand your sustainability performance across the value chain. Where does your (new) responsibility start and where does it end? Where does the most environmental (and social) impact occur? This is where the Sustainable Supply Chain Benchmark comes into play. It measures the social and environmental impact that can be attributed to your business.

For many participants, the benchmark offered a first baseline measurement. Helping them understand what scope 3 entails for their business. The next step is to gather more information from suppliers (and clients), which is often not (yet) in the scope of their contracts. But let’s be smart, all participants agreed. It’s best to tackle the so-called ‘carbon hotspots’ first; those areas where most impact occurs.

Our tip? Identify your carbon hotspots and work on those first.

5: supply leaders cannot do it alone

Supply chain leaders do not only require help from suppliers and clients but – first and foremost – from within their own company. Sustainability needs to become integrated with other goals, KPIs, and targets of the company. Currently, responsibilities for sustainability are mostly distributed across organisation functions and geographical areas. Even though sustainability is on the agenda of the participants’ organisations, there is not much central steering and guidance in place, yet. This is (also) due to a lack of industry standards, in contrast to other topics, such as clinical research, patient communication, and good production and distribution practices.

Participants agree that waiting is not an option. Supply chain management is a key impact area for any life sciences company, or as Impact Steward Tim van Rees put it: “the ultimate backstage pass to sustainability”. Therefore, we need to start working the best way we see fit. It makes sense to adopt a scrum-style approach. Focus on those carbon-hotpots you can impact the most, improve, and learn from there.

Our tip: don’t wait for others and come into action.

6: sustainability competes with many other business issues

Sustainability is just one of many priorities life sciences companies need to juggle. Participants aim to strike a good balance. This Supply Chain Value Map serves as a valuable tool for this purpose. It helps to define short-term (‘do what we do better’) and long-term (‘change what we do’) improvements. Moreover, it doesn’t just focus on environmental value but also on social and business value. How can we reduce carbon, waste, and environmental risks? Additionally, how can we reduce OPEX and CAPEX, and ensure transparency? And how can we ensure fair labour practices, improve worker wellbeing, and retain employees?

Often, these aspects are interconnected. For example, cutting down the number of flights not only reduces CO2 emissions but also saves costs. Offering opportunities for involvement in sustainability initiatives attracts a new generation of employees. Engaging the supply chain in product design can help save packaging costs and reduce waste. This approach will help participants advocate for sustainability within their organisations.

Our tip: use the Supply Chain Value Map to put sustainability in perspective.

During the round table, the group went to work, using the Supply Chain Value Map to brainstorm improvements for their companies. The exercise not only facilitated idea generation but also practised this way of thinking. Undoubtedly, there’s much work ahead, but the supply chain leaders committed to ‘The Green Path’ and have found a peer group to share ideas and insights.

If you want to learn more about the Sustainable Supply Chain Benchmark, reach out to Tim van Rees via tim.vanrees@impactstewards.com.

*Please note that the focus of the benchmark is on Europe, the Middle East, and Asia (EMEA).

Curious what we can do for you?

Tim van Rees

tim.vanrees@impactstewards.com