A common goal for drugmakers on both sides of the Atlantic is to reach net-zero or carbon neutrality by 2030.

Source: Monty Rakusen via Getty

European pharmaceutical companies are outpacing their U.S. counterparts when it comes to the scale and creativity of their net-zero goals, enabling greater progress on addressing other environmental challenges.

The EU's move to become the first international market to introduce financial penalties for emissions in 2005 gave the region's drugmakers a head start on many of their U.S. peers. Switzerland's Novartis AG in 2006 vowed to plant 15 million trees in South America, while Denmark's Novo Nordisk A/S struck a 2007 deal with fellow Danish company Ørsted A/S to secure all of its electricity supply from offshore wind by 2014.

By 2025, Novartis is set to achieve its net-zero and carbon-neutral goals, which are needed to bring industries' emissions into alignment with the targets of the Paris Agreement on climate change. That target date is one of the most ambitious among the top 30 largest European and U.S. healthcare companies by market cap.

. This story is part of a series of articles examining the net-zero climate pledges of companies across a range of sectors. Click on the links below to see other stories in the series as they become available. Overview: Stakeholders demand action on ambitions as pledges swell Oil and gas: Oil, gas industry on trajectory to miss 2-degree climate goal Mining: Drive to lower emissions pays in metals, mining sector Utilities: Progress by US utilities 'too slow' Healthcare: EU pharma accelerates pledges while US plays catch-up Technology and media: Plenty of 'E', but less 'S' or 'G' in tech, telecom Banking: Banks' pledges come with reluctance to ditch polluters .

Companies that are further along on carbon reductions are pushing suppliers to reduce emissions and are looking at ways to tackle waste in production and packaging. Progress on these environmental issues may pave the way for further efforts on more salient social issues such as access to medicines.

"Wasting the planet's resources is not wise, either from a financial or an environmental perspective," Katrine DiBona, Novo Nordisk corporate vice president for global public affairs and sustainability, said in an interview. "So many of these initiatives have also just been good business."

The pharmaceutical industry is responsible for over 4.4% of global greenhouse gas emissions. Alongside Novartis, U.S.-based Merck & Co. Inc. and the U.K.'s AstraZeneca PLC — which announced a program in 2019 to plant 50 million trees, primarily in Australia, to offset its emissions — are leading the pack with their own 2025 target dates for reaching carbon neutrality.

Aiming for 2030

A more common goal for healthcare companies on both sides of the Atlantic to reach net-zero or carbon neutrality is 2030; this is being used by U.S. pharmaceutical giants Johnson & Johnson and Pfizer Inc. as well as the U.K.'s GlaxoSmithKline PLC, France's Sanofi and Germany's COVID-19 vaccine-maker BioNTech SE, among others.

At the other end of the scale, Switzerland's Roche Holding AG has penciled in 2050 as a more realistic target for reaching net-zero. In the meantime, Europe's largest drugmaker has pledged to only use sustainable electricity by 2025.

Medical equipment company Medtronic PLC cited the UN Climate Change Conference in Glasgow as a reason they introduced their first carbon-neutral and net-zero targets — of 2030 and 2045, respectively — in November 2021.

Not all of Medtronic's peers have committed to a similar goal yet, with Abbott Laboratories, the largest medical equipment company by market cap, focusing on a 30% reduction in Scope 1 and Scope 2 emissions by 2030. By that year, both Stryker Corp. and Germany's Siemens Healthineers AG have pledged to be carbon-neutral across Scope 1 and Scope 2, with Becton Dickinson and Co. committing to carbon neutrality by 2040.

Novo Nordisk has committed to zero CO2 emissions from its own global operations and transport by 2030, the same year by which the diabetes-focused drugmaker expects all of its direct suppliers to be using renewable energy. The company's overarching strategy for attaining a net-zero environmental footprint includes designing medical products that can be recycled or reused, minimizing consumption and waste across the business, and working with suppliers who share this goal.

Sustainable drug development

Like Novo Nordisk, Basel, Switzerland-based Novartis is looking at ways to cut waste by recycling medical devices such as asthma inhalers. The company's chief sustainability officer, Montse Montaner, pointed to a cross-industry effort to scrap medical leaflets in favor of online versions — a move that has yet to receive the go-ahead from drug regulators — as a sign of European pharma's attempts to make packaging more sustainable.

Before they even reach the market, the laborious process of researching and developing new medicines is energy-intensive. With this in mind, Novartis now incorporates green criteria from the very start of drug development to ensure its next generation of therapies are designed to be both sustainable and effective, Montaner told S&P Global Market Intelligence.

"To develop a medicine takes years, that's why we're starting now ... to be able to bring environmentally sustainable medicines to the market," Montaner said. "But we are also working with the current portfolio [of drugs] because any contribution we can do will help us a lot in this 2030 target."

Heavy consumption of water during the manufacturing of medicines is another area of action for European pharmaceutical companies. Novartis has pledged to be water-neutral by 2030 as part of its goal to reach net-zero across its value chain by 2040, while Novo Nordisk is using recycled water at its production site in Kalundborg, Denmark.

"A certain water consumption in our product supply is inevitable," Novo Nordisk's DiBona said. "Kalundborg is a fantastic example of a symbiosis — you see these huge blue and green pipes transporting somebody's waste [for] somebody's benefit."

Focus on suppliers

Beyond Scope 1 and Scope 2 emissions, which cover a company's own operations, the third scope of their carbon footprint consists of the suppliers and external operations across their supply network.

"We have quite a lot of suppliers — 60,000 — so it's a big endeavor," DiBona said.

Novo Nordisk initially focused on its 80 largest suppliers that together account for 80% of the services used.

"If we start with those, we will be moving the needle," DiBona said.

In November, Novo Nordisk joined nine other large drugmakers — including J&J, Pfizer, Sanofi, GSK, AstraZeneca and Japan's Takeda Pharmaceutical Co. Ltd. — in signing up to French energy-management company Schneider Electric SE's Energize program, which aims to engage hundreds of suppliers in the decarbonization of the pharmaceutical value chain.

US companies gather speed

Many U.S. healthcare companies are picking up the pace of their own net-zero efforts, including Scope 3 targets. J&J, the largest pharmaceutical company globally by market cap, has targeted a 20% reduction of these emissions by 2030. Pfizer has pledged to reduce indirect emissions from the transportation and distribution of its products by 10% and to cut business travel by 25% by 2025.

When it announced in April 2021 its goal of carbon neutrality by 2025 — the most ambitious for any U.S. drugmaker — Merck said it would reach this target by increasing efficiency and offsetting any remaining Scope 1 emissions with a portfolio of high-quality carbon credits.

Amgen Inc. — whose 2027 goal for Scope 1 and Scope 2 carbon neutrality is the second-most ambitious of the largest healthcare companies — and Eli Lilly and Co. both told Market Intelligence in September how they are overhauling their drug manufacturing processes to make them more efficient and reduce their carbon footprint.

In contrast, Zoetis Inc. has yet to produce any emissions goals beyond sourcing 100% of its energy from renewable sources by 2050. The animal drug giant will provide more clarity around its energy goals in early 2022, a spokesperson told Market Intelligence.

Even with the strides taken toward achieving net-zero across the various healthcare sectors, more important drivers of environmental, social and governance policy for pharmaceutical companies are social in nature, such as access to medicines, according to Shai Hill, CEO and co-founder of Integrum Esg Ltd., a London-based company that provides interactive ESG data to investors.

"Environmental issues are not hugely relevant to the pharmaceutical industry — social issues are," Hill told Market Intelligence. "You could argue there are important issues on waste disposal, but it's not really about the key environmental issue, which is the generation of net waste and recycling."

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