Root and branch25 May 2021
Pharmaceutical companies were setting ambitious deadlines for improving supply chain sustainability prior to Covid-19. The pandemic has since laid bare their reliance on complex chains – many of them cold – that are significant contributors to climate change. Lyn Eyb asks Kelley Hinds, head of sustainability and risk for Roche Global Procurement, Toby Peters, professor in cold economy, engineering and physical sciences at the University of Birmingham, and Ying Xie, head of economics, finance and law at Anglia Ruskin University, how pharma can shrink its footprint while increasing the supply of medicines.
All industries need to address environmental degradation, but complex supply chains and tight regulation make climate policy particularly challenging for the pharmaceutical sector.
Toby Peters, professor in cold economy, engineering and physical sciences at the University of Birmingham, is clear about the enormity of the challenge. “Cooling is the fastest growing driver of greenhouse gas emissions,” he says. “And, as we’ve seen with Covid-19, it underpins vaccine cold chains. With the world well off-track to limit warming to the 1.5°C objective of the Paris Agreement, Peters says small fixes won’t work – a radical approach is needed. He proposes a system of centralised “pack houses” or “cooling hubs” that would integrate the cold chains of all goods coming into a geographical area, including pharmaceuticals, agricultural and food products. It would work in a similar way to a shopping centre that has multiple outlets operating from a single, shared power supply.
This combined cooling demand would improve efficiencies, and allow for secondary systems and energy storage. At scale, waste heat could be reused and thermal energy harnessed. “It’s all about moving to cooling as a service,” says Peters. “You can fund [it] out of the operational running costs rather than the capital costs up front.”
Dr Ying Xie, head of economics, finance and law at Anglia Ruskin University, is a sustainability expert who specialises in supply chains. She agrees local depots would cut costs, emissions and waste. “It would mean sharing resources and improving efficiency, but also enhancing visibility,” she says. “Visibility is key – data can improve pharmaceutical efficiency, especially in a cold chain, and all of this data should provide better visibility in terms of inventory, demand and supply shortages. We can then develop more advanced procurement strategies to mitigate problems.” Xie also sees an increasing role for automation in packing and distribution, as well as opportunities for augmented reality to improve warehouse sustainability.
Peters believes cooling requires as much focus as plastics, electric vehicles and green energy, with the onus on government agencies, academics and the research community to drive solutions. He says pharmaceutical companies do not necessarily need to design systems, but they do need to “join the table”.
“Cooling has inherently been the blind spot in the climate debate, but companies are not going to resolve their pathway to net zero without solving their cooling – it’s a significant part of their footprint and it’s energy consumption that’s the big problem,” he says.
One industry player that understands the need for sustainability is Roche, which has a corporate governance policy that places the environment on the same level as profit. Kelley Hinds, head of sustainability and risk for Roche Global Procurement, says the company’s green values are embedded in everything from employee goals and manufacturing to supplier contracts. It’s no accident that Roche has topped the Dow Jones Sustainability Indices for more than a decade.
It’s a complicated – and expensive – business. Hinds’ team oversees more than 60,000 suppliers in more than 100 countries and spends SFr18.5bn a year on that supplier base. “That gives us the power to influence the things we’d like to change,” she says. “Roche is large, we have power, we have resources and if we want to really make a big change in the world, if we want to tackle these environmental issues, we have to do it collaboratively.”
Supplier contracts focus on human rights and business ethics in addition to environmental records. And it’s not just a box-ticking exercise. “It’s not enough just to enforce a contract. When a supplier doesn’t even know how to measure their scope one or scope two emissions, it means as a company we can’t properly measure ours,” says Hinds. “We go in and do an audit, and we look for opportunities – what can we help the supplier do better?”
Roche has partnered with the Manufacture 2030 tracking platform to not only measure emissions, but to also connect suppliers with companies that can help address issues like CFCs and HCFCs. “Most suppliers want to work on these things, but they may not have the budget or resources,” says Hinds.
Hinds won’t be drawn on broader industry efforts to meet carbon targets, but she says companies like Roche have a duty to lead. “Ultimately, we need our peers to be working with us,” she explains. “You can’t just sit at the top of a big hierarchy and tell people, ‘you have to do this’. That’s what’s been happening for years… big companies telling suppliers what to do and threatening them with audits – that doesn’t actually help.”
The urgency to adapt is only increasing, as Hinds says environmental problems now present a business risk. She cites power grid problems, wildfires and water shortages in California, where Roche bases its Genentech R&D and manufacturing, as threats. “It’s self-evident that business cannot delay implementing these things. We are living with the consequences right now.”
Vaccines lost in low and middle-income countries because of broken cold chains.
“You can’t just sit at the top of a big hierarchy and tell people, ‘you have to do this’. That’s what’s been happening for years [and it] doesn’t actually help.”
Make it local
Xie, meanwhile, has her eyes fixed on end users, who she believes are having a negligible impact on forcing change further up the chain. “I don’t think environmental protection is ever considered by patients,” she says, contrasting pharmaceuticals with consumer electronics. A customer looking for a new electrical appliance might consider its energy rating, but patients usually want to address their own health problems before the planet’s. Likewise, GPs are focused on immediate outcomes. There needs to be more awareness at the local level about the impact of environmental negligence on public health.
“Medical waste and medical devices waste are a big concern because they cause a lot of carbon emissions,” says Xie. “It’s not only a waste for the environment, but it’s about a reduction in the financial investment in the healthcare system.” She points to one estimate that valued waste in the NHS in England alone at ?300m a year. “That is a massive amount that could be reinvested in frontline treatments and services.”
Xie says much of that waste is caused by poor procurement and a lack of communication between the patient, GP and pharmacy. Rarely, if ever, do pharmacies have visibility of each other’s stock, which makes for a lot of redundancy. “If they ordered together, they could achieve a certain amount of economic scale,” Xie says. Emissions from transportation could also be minimised if multiple pharmacies had their stock delivered together.
A more advanced system for forecasting and planning would reduce waste, Xie continues. “Downstream of the supply chain, GPs, hospitals and pharmacies need to share information, especially about demand.” She cites GPs discontinuing repeat prescriptions without informing pharmacies as a common cause of unused medicines.
Xie also returns to her electrical appliance analogy in this context. “Manufacturers have a responsibility to take back and recycle your washing machine,” she explains. “You can return medication to pharmacies, but this is at an additional cost to pharmacies, so they participate passively not actively. If the main players don’t have an environmental mindset, how are they going to influence local government? We need to do more campaigning at the grassroots level to influence behaviours.”
“We should be shipping knowledge and skills around the world, not fridges.”
Hinds agrees there’s a need to localise some environmental problems, but says communities outside Europe and North America are already keenly aware of the link between the environment and health. “They have always had to worry about safe and clean water, and about safe waste disposal and recycling,” she notes. “The challenge may be to convince the more industrialised powers to take accountability for the full cost of doing business.”
But what about China and India, where industrialisation has grown largely at the expense of the environment? “You need to make the case relevant to that country and their culture,” she points out. “There’s no one-size-fits-all answer.”
Hinds, Xie and Peters all agree on the need for a return to local manufacturing, which would reduce supply chain risk, cut carbon emissions and boost local economies. “It’s not just about the environmental footprint,” says Peters. “It’s also about the wider economic footprint – we should be shipping knowledge and skills around the world, not fridges.”
Bits, bytes and bites
Hinds says a stepwise approach is needed. “We’re looking at the data and we’re creating tangible solutions. It’s not just ‘how do you eat an elephant’, but how to simplify it: you eat it one bite at a time.” In that sense, sustainability is well-suited to the procurement and supply chain division, which structures the connections between a company’s different functions and with its external partners.
Both Xie and Hinds stress the importance of data along the entire chain, but some flexibility is required. “If you look at emissions for things like lawyers and consultants, these don’t have the same scientific rigour as for plastics, gas and electricity – we know those are scientifically accurate, so we can work on tangible solutions,” says Hinds. “When you have data that is inaccurate, it’s harder to move anything forward. But do we really want to go and measure the emissions of an individual doctor? How is that going to help? So, you have to be willing to say, ‘OK, we’re not 100%, but we have enough to move forward’.”
It takes creativity, too. At one Roche site in Germany, data showed that methane was the largest source of greenhouse gas. Hinds’ team identified that a solution was to add a seaweed called Asparagopsis to cattle feed to reduce flatulence.
Hinds admits research and solutions aren’t “easy fixes” – and they come at a cost – however, by finding solutions, companies have the power to influence not only the chain but also to set examples for governments. Hinds cites an initiative at a diagnostics manufacturing facility in China where there were no strict government standards for medical waste recycling. A newspaper reported untreated waste going into children’s toys via local plastics recycling processes. The facility created a plan to take back used Roche diagnostic instruments and partnered with a local supplier to sustainably treat waste from Roche products. “It’s efforts like that, where we collaborate, that change something,” Hinds says.
The devil and the warming sea
Peters says prior to Covid-19, communities didn’t appreciate what goes on in the pharmaceutical supply chain. “People didn’t know that, according to WHO, 25% of vaccines in low and middle-income countries can be lost because of broken cold chains.” Likewise, there is a lack of knowledge about how food is moved around the world – he says the third biggest emitter of CO2 is food that goes to waste. “We’re simply fixated on electric vehicles and green electricity for offices.”
Covid-19, he stresses, should be used to deliver a legacy of supply chain sustainability that guarantees resilience during the next crisis. “This is our one chance to say, let’s put this under the spotlight and see where we want to be in ten years or 15 years’ time, and use this to get there.”
“Covid has created a unique moment in human history,” agrees Hinds, “and I hope that the collaboration sticks. My hope is that we seize this moment, as a society, to address the much bigger issues, but the devil is always in the details.”