 Home > Active Ingredient News > Drugs Articles > On the second anniversary of the "dual carbon" goal, how can Chinese pharmaceutical companies move towards carbon neutrality?

On the second anniversary of the "dual carbon" goal, how can Chinese pharmaceutical companies move towards carbon neutrality?

 Last Update: 2023-01-06
 Source: Internet
 Author: User

Tags

2006 quarter value

long ritalin system

Search more information of high quality chemicals, good prices and reliable suppliers, visit www.echemi.com

Chinese pharmaceutical companies still need a "carbon neutrality path"
.

It has been more than
two years since China announced its dual carbon goals of "achieving carbon peak before 2030 and carbon neutrality before 2060".
During this period, with the continuous construction and improvement of the "1+N" dual carbon policy system, policies related to carbon reduction in the pharmaceutical industry have been introduced one after another, such as the Guiding Opinions on Promoting the Green Development of the API Industry, the Implementation Plan for Deepening Green and Low-carbon Leading Actions of Public Institutions to Promote Carbon Peaking, and the 14th Five-Year Plan for the Development of the Pharmaceutical Industry
.
Chinese pharmaceutical companies are facing stricter pressure and challenges
to reduce emissions.
Looking back at the specific performance of Chinese pharmaceutical companies in the past two years, many enterprises have also launched relevant response actions to help the implementation
of the dual carbon goals.
The purpose of this article is to examine its performance and provide a framework and recommendations
for its further progress towards carbon neutrality.

01 International pharmaceutical companies take active action

International pharmaceutical companies are taking active action

It has become a trend for large international pharmaceutical companies to carry out carbon neutrality planning, and many enterprises (especially pharmaceutical companies) have taken the lead in formulating and disclosing their carbon neutrality targets, and their emphasis on value chain emissions has also brought more pressure
on Chinese enterprises in the value chain to set and disclose targets.
The following trends are presented by large international pharmaceutical companies in the planning of carbon neutrality targets:

Set carbon neutrality targets and long-term net-zero targets, and report regularly on progress towards carbon reduction;

In terms of carbon reduction measures, most enterprises attach importance to the replacement of renewable energy and set targets for the proportion of renewable energy;

Some enterprises have put forward higher requirements for value chain emission reduction, and set carbon reduction targets
for raw material suppliers, logistics suppliers and even the entire value chain according to their business characteristics.

Table 1 – Information on carbon neutrality of sample enterprises

Notes:1.
The sample was selected from pharmaceutical companies rated A in CDP's 2022 climate questionnaire;

2
.
The reduction rate data in the "Value Chain Carbon Reduction Requirements" are all for enterprises' Scope 3 emissions, and the emission categories included vary from enterprise to enterprise.
3.
"Progress towards carbon neutrality" contains data as of 2021; (Source: SynTao Consulting)

01 Chinese pharmaceutical companies are in the stage of cognitive improvement

Chinese pharmaceutical companies are in the stage of cognitive improvement

Based on the best practices of global pharmaceutical companies, we have refined the four stages of the "dual carbon" action of enterprises, namely "awareness improvement - target commitment - management strengthening - continuous optimization"
.
The study found that most Chinese pharmaceutical companies are still in the initial stage of the "dual carbon" action, that is, the transition stage from "cognitive improvement" to "target commitment"
.
At this stage, enterprises' understanding of the "dual carbon" issue is changing from "energy conservation and emission reduction" to "climate change", although carbon reduction actions are being carried out, there is still a lot of room for improvement in target disclosure and tracking of carbon management progress, and there is a big gap
with international leading enterprises.

Illustration of the "dual carbon" action stage of the enterprise

The study selected the "Top 20 Most ESG Competitiveness" Chinese pharmaceutical listed companies to carry out the performance analysis of "dual carbon" and found that:

"Top 20 Most ESG Competitiveness"

Most of the sample enterprises carried out carbon reduction actions and disclosed relevant emission information;

However, none of the sample companies have set specific carbon neutrality targets, and there is little direct board involvement at the management level.

The sample enterprises still lack
the completeness of carbon information disclosure and tracking feedback on the progress of actions.

We believe that the disclosure of "energy conservation and emission reduction" by enterprises is insufficient to reflect the understanding and management level
of enterprises on the "dual carbon" goal.
The lack of carbon management targets is a major constraint for Chinese pharmaceutical companies to better respond to the national "dual carbon" goals and grasp the related risks and opportunities.
Enterprises urgently need to establish or improve carbon neutrality paths from both scientific and targeted aspects, from "dual control" of energy consumption to "dual control" of carbon emission intensity and total amount, and then move towards carbon neutrality
.

Source: SynTao Consulting

03 SynTao Viewpoint: Suggestions for actions for China's pharmaceutical industry towards carbon neutrality

SynTao: Recommendations for action towards carbon neutrality in China's pharmaceutical industry

We propose the following "four-step" action proposals for Chinese pharmaceutical companies to move towards carbon neutrality, providing practical action plans
for enterprises that want to demonstrate their climate ambition and achieve carbon neutrality.

Schematic diagram of the "four-step" action proposal for Chinese pharmaceutical companies to move towards carbon neutrality

Establish a governance structure

For enterprises, a good top-level governance structure is a necessary prerequisite
for enterprises to steadily promote carbon neutrality in the changing situation.
Achieving carbon neutrality requires long-term investment, and for China's pharmaceutical industry, which is growing rapidly and receiving increasing policy attention, it depends on a sound governance and management structure
。 Companies can rely on existing ESG management systems to carry out their work: enterprises that have not yet established an ESG governance and management structure should consider establishing an ESG management committee/working group at the board or management level and incorporating carbon-related issues into their management scope; Enterprises that have established relevant structures and regard "climate change mitigation and adaptation" as a substantive ESG issue can establish a separate carbon management working group under the corresponding organization to be responsible for the promotion of specific actions and performance tracking
.
In addition, companies need to consider the recommendations of stakeholders such as policymakers, independent experts, and consider the establishment of external expert groups to support carbon management efforts
.

Improve your data foundation

Carbon data is the cornerstone
for companies to identify emission reduction priorities, estimate emission reduction potential, and set targets and action measures.
Carbon neutrality related organizations and target initiatives such as CDP and SBTi have put forward increasingly stringent requirements
for the accounting, reporting and analysis of enterprises' carbon data, especially indirect (Scope 3) emissions related to the value chain.
Chinese pharmaceutical companies need to start improving their carbon emission data base and data quality, so as to achieve complete, reliable and consistent
carbon emission data.
The integrated data accounting and management system is conducive to the whole process management of enterprises from data collection, calculation to analysis and reporting, enabling Chinese pharmaceutical enterprises to grasp their own emission status more accurately and efficiently and formulate substantive emission reduction strategies
。 The "HiESG-Carbon Accounting and Reporting Application" independently developed by SynTao Consulting combines the above characteristics, and can realize the functions of standard accounting report generation, integrated management of data performance, data comparison, analysis and backtracking, especially for specific emission links such as upstream raw materials, logistics and transportation, and medical waste disposal, so as to help enterprises form a data foundation towards carbon neutrality (see HiESG for details).
|The application of carbon accounting report is online, the starting point and base point of enterprise carbon neutrality planning).

Set carbon reduction targets and identify carbon reduction pathways

Quantified carbon reduction targets are guidelines that drive companies to take practical actions
.
For Chinese pharmaceutical companies that are starting up, it is more important
to set a reasonable, practicable, fully disclosed, quantitative target than to directly commit to a medium- and long-term carbon neutrality or even net zero target.
Enterprises should first refer to the background of the national "dual carbon" goal, combine their own historical emission data, the target setting status of the industry and the suggestions of external experts, and formulate a short-term emission reduction target that includes the base year, target year, target scope, and reduction ratio.
Carbon neutrality targets
are established after further risk, cost and feasibility assessments.
Setting a goal means more than just determining the size of
a value.
Enterprises need to "forward" trace back to the management status of emission sources and their responsible departments, the reliability of historical emission data, the development status of specific emission reduction technologies, etc.
, and "backward" further consider how to achieve progress communication and management after the implementation of targets, monitoring, verification and disclosure of emission performance, and the impact
of various uncertainties on enterprises.
The carbon reduction actions of pharmaceutical companies can refer to the "3R Action Model" proposed by SynTao Consulting (see SynTao Viewpoint: 3R Action Model Study on the Carbon Neutrality Path of Chinese Enterprises | ESG Special).

The model combines the national "dual carbon" goal and the characteristics of Chinese market economy, and is based on domestic and foreign standards, which is suitable for pharmaceutical enterprises to evaluate and formulate the basic framework
of their carbon reduction pathways.

Judge and respond to the impact of climate change on our business and industry chains

In the 2022 Annual Report on China's Policies and Actions to Address Climate Change recently released by the Ministry of Ecology and Environment, "active climate change mitigation" and "active adaptation to climate change" are juxtaposed as two major issues, which shows that "adaptation" and "mitigation" are indispensable and complementary parts
in the process of achieving the "dual carbon" goal.
For Chinese pharmaceutical companies, judging and adapting to the specific impacts of climate change on their business and industrial chains, and promoting the sustainability of carbon reduction measures by improving resilience and resilience, is an important starting point
for them to achieve their long-term carbon neutrality goals.
In terms of industry-specific impacts of climate change, regional climate disasters such as heavy rainfall, floods, and droughts not only bring direct physical impacts to sub-industries such as hospitals, aggravate their operation and service pressure, but also may affect the stability
of raw material supply chains in sub-industries such as traditional Chinese medicine.
Ecosystem instability due to climate change, such as biodiversity loss, will affect the development of
medicines in the biomedical sector, which is naturally dependent.
In the long run, the impact of climate change on the incidence of chronic diseases and the spread of parasitic diseases may also indirectly affect the business planning
of pharmaceutical companies.
Pharmaceutical enterprises should carry out further value-chain climate risk identification (such as using scenario analysis) based on their geographical location and business characteristics, identify key impacts, and consolidate their climate resilience
with risk monitoring and early warning.
In developing mitigation and response measures, since most of the carbon emissions from the healthcare sector come from fossil fuel generation, power transmission and related upstream activities, "renewable energy replacement" is one of
the first effective actions pharmaceutical companies can take.
On this basis, different segments of the pharmaceutical industry should also carry out targeted actions according to their exposure to specific climate impacts and their own capabilities:

For the pharmaceutical industry, biotechnology and CMOs/ For CDMO enterprises, carbon reduction in production and operation is an important part of Scope 1 and 2 carbon reduction, and achieving carbon reduction of raw materials and sustainable supply chain are important measures
to reduce their Scope 3 emissions.
Since the number and density of suppliers of pharmaceutical companies is often large, and it is difficult to manage Scope 3 emissions, enterprises need to reasonably set carbon reduction targets and plans for suppliers, and if necessary, they can provide help and guidance
to suppliers through their own resources.

For sub-industries such as pharmaceutical retailers, the operation of infrastructure and services is one of the core of
their carbon footprint.
These companies can start with green building and green factory measures to reduce carbon emissions from their operations and share their experience across the value chain
.

For hospitals, medical cosmetology and other enterprises involved in the provision of medical services, medical waste disposal is not only the focus of waste reduction, but also one of the important sources of
value chain emissions.
Relevant enterprises need to reduce and harmless waste in their own operations, and can also work from the value chain to carry out sustainability assessment of third-party disposal enterprises and invest in low-carbon waste treatment technologies
.

04 Mission + Opportunity: Chinese pharmaceutical companies urgently need to further move towards carbon neutrality

Mission + Opportunity: Chinese pharmaceutical companies urgently need to move towards carbon neutrality

For pharmaceutical companies that are engaged in "eliminating pain", it is also their unshirkable responsibility
to reduce the harm of climate and environmental change to human health by formulating emission reduction strategies and moving towards carbon neutrality.
Under the background of the "dual carbon" policy and the attention of the overall public opinion, China's pharmaceutical companies need to achieve carbon reduction achievements
commensurate with external attention and their own development needs.
It is recommended that enterprises review their overall strategies based on the action paths proposed in this article and relevant industry experience, and promote carbon emission reduction
from top to bottom.
Under the specific background of high industry intensity and high external attention, we believe that pharmaceutical companies that take the lead in proposing and achieving carbon neutrality goals are bound to turn pressure into new opportunities, establish their industry leadership benchmark image, and even achieve new growth
.

This article is an English version of an article which is originally in the Chinese language on echemi.com and is provided for information purposes only. This website makes no representation or warranty of any kind, either expressed or implied, as to the accuracy, completeness ownership or reliability of the article or any translations thereof. If you have any concerns or complaints relating to the article, please send an email, providing a detailed description of the concern or complaint, to service@echemi.com. A staff member will contact you within 5 working days. Once verified, infringing content will be removed immediately.