SBTi commitments poised to reduce carbon emissions from biopharmaceutical supply chains

Rising global temperatures, if unabated, are projected to cause catastrophic impacts on human health and welfare. With the 2015 Paris Agreement, world governments committed to curbing global temperature rise to well below 2°C above pre-industrial levels and pursuing efforts to limit warming to 1.5°C. Numerous voluntary and mandated decarbonization programs support attainment of the Paris climate goals, including the Science Based Targets initiative (SBTi).

SBTi is a collaboration among the Carbon Disclosure Project (CDP), the United Nations Global Compact, World Resources Institute (WRI) and the World Wide Fund for Nature (WWF). The goal of the SBTi is to help companies lower their GHG emissions in line with the Paris Agreement. Companies that participate in the SBTi make commitments to reduce direct and/or indirect emissions of greenhouse gases.

Direct GHG emissions are from sources owned or controlled by a company and are referred to as Scope 1 emissions. The sources of Scope 1 emissions include combustion of natural gas, heating oil, coal, or other fossil fuels on company properties. Scope 1 emissions also include emissions from company controlled vehicles powered by internal combustion engines. Releases of heat trapping anesthetic or industrial gases like nitrous oxide and sulfur hexafluoride are also Scope 1. Scope 1 emissions are illustrated in the figure below.

Indirect GHG emissions are from sources associated with inputs to a company and outputs from a company. Indirect emissions are divided into what are known as Scope 2 and Scope 3 emissions. The major categories of Scope 2 and Scope 3 emissions are illustrated in Figure 1 above.

Scope 2 includes emissions arising from purchased electricity, heat, steam, or cooling powered by fossil fuel combustion. A common example of Scope 2 is carbon dioxide released to the atmosphere from combustion of coal or natural gas at electric generating stations that supply regional power grids.

Scope 3 refers to GHG emissions from sources upstream and downstream of a company that theoretically would not occur but for operations of the company. Some typical upstream components of Scope 3 emissions are purchased goods and services, capitol goods, and transportation of materials. Common downstream Scope 3 emissions relate to use and disposal of a company’s outputs.

As of January 2023, more than 4,200 organizations are registered for the SBTi program. Of those, eighty-one (81) companies are from the biopharmaceutical sector. In fact, many of the largest biopharmaceutical companies participate in the SBTi.

Scope 1 and Scope 2 SBTi targets for a selection of large biopharmaceutical companies are summarized in Table 1. Most of the reductions shown in the table are equivalent to the minimum annual linear reduction of 4.2% established by SBTi in 2019. Other companies have committed to larger rates of reduction. For example, AstraZeneca committed to lowering its absolute Scope 1 and Scope 2 GHG emissions by 98% by 2026 from a 2015 base year, which is equivalent to a linear rate of 8.9% per year.

Notably, the biopharmaceutical companies shown in Table 1 committed to lowering absolute GHG emissions. An absolute emissions reduction is in contrast to lowering GHG emission intensity such as emissions normalized to number of employees, gross floor area of building space, value of goods and services produced, or other measures of a company’s size. Absolute emission reductions also stand in contrast to carbon offsets, a topic for a separate post. The focus on absolute GHG emissions is in keeping with requirements of the SBTi program.

In addition to lowering Scope 1 and Scope 2 emissions, some of the biopharmaceutical companies that participate in SBTi have pledged to influence GHG emissions of their supply chain, in other words, their Scope 3 emissions. This is an important decarbonization tactic because supply chains account for at least 80% of total GHG emissions for the healthcare sector, which includes the biopharmaceutical industry.

One common Scope 3 tactic of biopharmaceutical companies is to prioritize business relationships with supply chain partners that have SBTi targets. As shown in Table 2, four large companies pledged that by as early as 2025 at least 64% of goods and services in their supply chains will be purchased from suppliers that have science-based targets. For example, Astra Zeneca committed to the SBTi that 95% of its suppliers by spend covering purchased goods and services will have science-based targets by 2025.

In effect, these large corporate consumers of goods and services and other activities upstream of their own operations are requiring organizations in their supply chain to participate in the SBTi. As a result, these suppliers will have to publicly commit to a schedule for lowering absolute Scope 1 and Scope 2 emissions. Assuming that these market-making SBTi participants follow through on their Scope 3 commitments, their pledges will affect a substantial proportion of companies in the biopharmaceutical industry.

My next post on this topic will discuss best practices that organizations in the biopharmaceutical sector supply chain can follow to develop science-based targets through the SBTi.

References

• IPCC Sixth Assessment Report
• United Nations Framework Convention on Climate Change, The Paris Agreement
• Eckelman et al. 2020. Health care pollution and public health damage in the United States: an update. Health Affairs. 39(12):2071-2079
• Foundations of Science-based Target Setting, Science Based Targets Initiative, 2019
• SBTi Target Dashboard, filtered for the Pharmaceuticals, Biotechnology, and Life sector
• Science Based Targets, About Us, Who We Are and What We Do