The pharmaceutical industry is vital to human health, but it also has a significant environmental impact.

It contributes up to 19 per cent of Australia’s healthcare sector’s greenhouse gas (GHG) emissions, which equates to around 1.5 per cent of Australia’s total emissions.

Rows of shelves with boxes of drugs — Significant energy and material resources are needed to produce pharmaceuticals. Picture: Getty Images

Climate change is a global crisis and all economic sectors, including healthcare, must urgently reduce their emissions.

To see if Big Pharma is doing its part, three of us (Burch, Brown, Winkel along with colleagues from the University of Melbourne) analysed the public commitments and actions of the ten largest pharmaceutical companies in Australia towards achieving net-zero GHG emissions.

That research and accompanying editorial by the other authors of this piece, Bone and Watts, now published in the Medical Journal of Australia, reported mixed findings.

How sustainable are pharmaceutical companies?

Significant energy and material resources are needed to produce pharmaceuticals.

Given that the Australian government heavily subsidises pharmaceuticals – spending over $AU16.7 billion annually through the Pharmaceutical Benefits Scheme (PBS) – there is both a strong moral and ecological case for holding pharmaceutical companies to account for their environmental impact, of which GHG emissions are an important part.

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We examined public corporate reports from 2015 to 2023, and scored each company for three key domains (based on current international frameworks):

Accountability: are emissions being measured and disclosed?
Ambition: have companies set clear, science-based targets for emission reductions?
Action: what tangible steps are being taken to cut emissions?

Using these criteria, we ranked companies according to their total score out of 32 across each of the three domains.

We then grouped the companies into three categories: ‘leaders’, ‘moderate performers’ and ‘laggards’.

Leaders (scoring 26 or above) included AstraZeneca, Novartis, Johnson & Johnson, Bayer and Merck & Co. These companies have well-defined publicly available net-zero strategies, regularly monitor emissions and publicly report achieving meaningful action.

Moderate performers (20-25) were AbbVie and Roche, who have made net-zero commitments but lack transparency and detailed public reporting.

Viatris, Vertex, and Arrotex (under 20) were the laggards in our study. They lack public commitments to net-zero emissions and do minimal or no public emissions reporting.

Arrotex Pharmaceuticals, the only Australian-owned company in the study, was given zero points because it had no published data online.

But Arrotex is distinct from the other nine ranked companies as it is privately owned, which means it has fewer regulatory requirements to publicly release information about its activities. Our research only analysed data available publicly on the internet and we did not analyse undisclosed activities for any of the companies.

What actions are companies taking?

We found that companies are reporting a variety of measures to reduce emissions, including:

Transitioning to 100 per cent renewable electricity
Improving manufacturing efficiency
Electrifying company vehicle fleets
Setting emission reduction targets for suppliers
Reducing business-related travel

Most companies reported reductions in their scope 1, or direct emissions (from company-owned operations) and scope 2, indirect emissions (transitioning their electricity from fossil fuel supply to renewable electricity).

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However, scope 3 emissions from company supply chains (e.g., raw material sourcing, distribution, product disposal) remain challenging.

Only six companies publicly reported supply chain data, with four of the companies identified as ‘leaders’ reporting increases in supply chain emissions.

Supply chain-related emissions represent the largest share of emissions, so these increases likely outweigh emissions savings in other areas, and addressing these emissions is crucial for genuine leadership.

Holding the pharmaceutical industry to account

The accompanying editorial argues that ultimately, what matters is the absolute volume of greenhouse gases that are released into our atmosphere.

With three companies achieving near-perfect scores based on our criteria, and yet only starting a journey to net-zero, this analysis has perhaps set the bar too low.

Solar panels and a wind farm in a field — Transition to 100 per cent renewable energy is one of the measures companies are taking to get to net zero. Picture: Getty Images

Future assessments must include criteria for achieving emissions reductions across all scopes and give more weight to effective actions, including reducing unnecessary activity, something that is particularly challenging in the current pharmaceutical industry model, wherein manufacturing activity drives profits.

Voluntary corporate commitments have so far been insufficient. Pressure is growing from purchasing organisations and regulators, although much more is needed.

For example, England’s National Health Service (NHS) plans to stop purchasing from suppliers who fail to match their net-zero targets by 2030. While Australia has joined international efforts to align procurement standards, Australia has not yet set a similar policy direction.

Fortunately, new financial disclosure laws under the Australian Corporations Act 2001 are taking effect this year. These mandate that large corporations, including pharmaceutical companies, must disclose climate-related risks and opportunities, metrics and targets, and information about governance, strategy and risk management related to climate.

We hope this increases transparency and pushes these companies towards more substantial decarbonisation.

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To achieve real progress towards net-zero, pharmaceutical companies need to enact four changes:

Achieve absolute emissions reduction: Companies must increase the rate and scale of actions to reduce total GHG emissions
More ambitious scope 3 targets: Companies need to engage their supply chains in reducing emissions
Independent verification: Third-party assessments should verify corporate sustainability claims to prevent ‘greenwashing’
Public procurement policies: The Australian government should establish a supplier roadmap for net-zero health sector emissions, similar to the NHS model.

A critical juncture for the pharmaceutical industry

The pharmaceutical sector is at a sustainability crossroads.

Companies that embrace authentic sustainability practices will not only reduce their environmental impact but also future-proof their operations in an increasingly climate-conscious world.

Stronger policies, greater accountability, and decisive action will determine whether the industry remains part of the problem or becomes a leader in the solution.

This article was first published on Pursuit. Read the original article.

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Hayden Burch

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