Financial opportunity ready to be unlocked from sustainability frameworks

The race to develop cutting-edge medicines has another endpoint measuring success – making innovative therapies with less impact on the planet. In August, pharma companies and manufacturers became accountable for preventing unnecessary packaging and packaging-related waste. The regulation, called PPWR, introduces a broader sustainability framework mandating recyclability, regardless of material or origin across all sectors.

But PPWR is just one of many legislative changes arriving in Europe, and across the world, that is changing the lens through which sustainable is viewed.

The European Federation of Pharmaceutical Industries and Associations (EFPIA) has said it recognises the urgent need to address climate change and safeguard natural resources. The trade association says it wishes to go beyond compliance on targets within EU legislation, ushering in a greener pharmaceutical landscape. The depth of strategy from lawmakers has also raised renewed critique of Environmental, Social, and Governance (ESG), which remains a mix of voluntary and mandated guidelines.

Sharp, a contract development and manufacturing organisation (CDMO), is one of those in the industry playing close attention to ongoing regulatory change. For example, the company has set a medium-term target for virgin plastics in order to strengthen its efforts to reduce the amount of virgin plastics used in its products and packaging. To achieve this target, Sharp has established a subcommittee and is working to use more plastic alternatives, recycled plastics, and bioplastics.

Pharmaceutical Technology spoke with Sharp’s global sustainability manager Hywel Woolf, to ascertain how ESG fits into a harmonisation of sustainability regulation, along with how well the pharma industry is placed to meet ongoing change to a greener future. A benefit for many, it turns out, could be financial opportunity.

This interview has been edited for length and clarity.

Hywel Woolf: ESG has been getting some negative flak, from particularly from the US in recent years, but it’s staying the course in the EU in terms of legislation and how ESG-derived legislation applies to pharma. They’re one and the same thing. Legislation evolves, is issued and then is implemented. One of the most recent ones, and indeed most challenging, not just for pharma but for all sectors is the Packaging and Packaging Waste Regulation (PPWR). PPWR squarely fits in the ‘E’ of ESG but actually has links to the governance side of things too, because ultimately most of the legislation for sustainability that we are seeing emerging revolves around data. Data management and sharing is key for compliance particularly with sustainability focused legislation. The social side of things meanwhile is struggling globally for identity.  In the US, for example, sectors are moving away from DEI and more towards inclusion. The landscape is always evolving.

Hywel Woolf: The content is still there, but maybe the title is changing. ESG is an investment driver, it may be developing and changing, but certainly from our perspective, in terms of the strategic intent and retrospective analysis, that remains constant. Bucketing initiatives into ESG is the same as framing it into sustainability, if you wish. At Sharp, we've distilled it and aligned it to our values. Being focused on environmental stewardship, social impact, and responsible leadership are the bottom-line items. The contents page remains the same, it’s just the title of the ESG manual that is changing.

Hywel Woolf: There are two ways to look at it. One point of view is that it is a challenge and hindrance to change. The other is that there is a huge opportunity, and it's not just sustainability in the green sense, but sustainability from a financial perspective as well. PPWR should be looked at through that lens. Of course, it’s very challenging. There's lots of organisations playing catch up to become compliant. But going forward, there's opportunity. PPWR is all about reducing waste. Reducing the amount of packaging, the weight of packaging, and the size of packaging produces lots of financial opportunities. Obviously, this is driven by a sustainability purpose, but there are lots of direct financial benefits.

Hywel Woolf: Some organisations gain benefits from applying regulation early and getting ahead of the game. On the flip side, there's risk in regulation, and this is common in the EU at the moment. A famous case was the Corporate Sustainability Reporting Directive (CSRD), which landed some time ago. It was it was a huge undertaking all around disclosure and reporting. The EU decided to review that piece of legislation through the omnibus around competitiveness of EU organisations. A lot of organisations ultimately fell out of scope of CSRD. And the result of that in my view is that a lot of companies are now sitting on their hands and waiting to see what happens with new legislation coming up in the EU, wary of extremely late changes. We need leadership from regulation to be applicable at the right time but also be relative and realistic as well.

Hywel Woolf: I've worked across many sectors, but I think the pharma industry has a great opportunity because they are inherently close with suppliers. We all know that change takes time to ensure patient safety. But it's how pharma adapts to that change, and if we can accelerate that change, and maintain high levels of quality. Other sectors tend to move a bit quicker because of fewer regulations. There are also differences within the pharma industry itself. Some organisations will do the bare minimum to meet compliance, whilst others will exceed and reap the benefits through innovation. So, whilst I think pharma is ahead in some respects, it may be behind in others.