Making sustainability sustainable

Prime Minister Narendra Modi’s mention of ‘green jobs’ in his Independence Day speech this year re-emphasised his commitment to achieving the Net Zero emissions target by 2070. The question is how will India, arguably the world’s third-largest greenhouse gas emitter, achieve this target, with even the goal of limiting global warming to an increase of no more than 1.5 degrees Celsius (1.5°C) above pre-industrial levels, looking like a steep challenge?

As the market regulator, the Securities and Exchange Board of India (SEBI) has added heft to the net zero target, by expanding the disclosures that listed entities need to make related to Environmental, Social and Governance (ESG) factors. A SEBI circular dated July 12, 2023 mandates that the top 150 listed entities (by market cap) had to undertake reasonable assurance of Business Responsibility and Sustainability Reporting (BRSR) Core from FY23-24, and this will extend to the top 1000 listed entities by FY26-27. The circular also requires the top 250 listed companies by market cap to disclose BRSR Core information for their value chain in their Annual Reports for FY24-25 on a comply-or-explain basis.

As Ramesh Swaminathan, Executive Director, Global CFO and Head of Corporate Affairs, Lupin points out, the pharma industry’s contribution to the climate crisis comes from its 4.4 per cent share of global CO2 emissions. Although this percentage is lower than that of other industries, without action, emissions are expected to rise. Thus, he points out that the pharma industry has a unique responsibility to take action and promote sustainability. While it needs to reduce its greenhouse gas (GHG) emissions through net-zero strategies, it also needs to address the adverse health effects of the climate crisis by providing affordable medicines. Listed pharma companies in India have been reporting on their ESG initiatives for the past few years.

Quoting from the EY-CII 2024 report ‘How can Sustainability and ESG be the microscope and telescope in the Indian healthcare sector? Nitesh Mehrotra, Partner, ESG & Sustainability, EY India highlights increasing allocations towards environmental and social initiatives within research and development (R&D) and capital expenditure (capex). 21 per cent of spending is dedicated to environmental and social activities in R&D, showcasing a commitment to innovation and sustainable practices. Equally noteworthy is the allocation of 13 per cent of spending towards environmental and social initiatives within capex, affirming a strategic commitment to infrastructure and operational enhancements for bolstering sustainability performance.

Toeing the green line 

Larger pharma companies are toeing the SEBI line and are also prominent on global ESG ratings. In December 2023, Dr Reddy’s Laboratories became the first Indian pharma company to earn a place in the Standard & Poor Dow Jones Sustainability World Index (DJSI World) for 2023. Alongside its debut in DJSI World, the company retained its place in the Dow Jones Sustainability Index for Emerging Markets (DJSI EM) for the eighth year in a row. Dr Reddy’s scored 77/100 in the 2023 S&P Global CSA, achieving full scores in Innovation Management, Impact on Access to Healthcare, Climate Risk Management, and Resource Efficiency and Circularity. The company ranked in the top decile percentile and achieved the sixth-highest score out of 347 companies assessed in the pharma industry in the S&P Global

CSA. Dr Reddy’s S&P Global ESG score, measuring the company’s performance on and management of material ESG risks, opportunities and impact, is 78/ 100. Dr Reddy’s has been awarded ‘Gold Medal’ status by EcoVadis, the global sustainability ratings agency, for its score of 70/100 in its 2023 scorecard.

A Dr Reddy’s spokesperson’s statement also informed that in 2022, the company’s largest formulations manufacturing facility in Bachupally joined the Global Lighthouse Network (GLN) of the World Economic Forum – a community of over 100 manufacturers that are showing leadership in applying Fourth Industrial Revolution (Industry 4.0 or 4IR) technologies to drive impact in productivity, workforce engagement, sustainability and supply chain resilience. In addition, five of the company’s manufacturing facilities are certified under the Indian Green Building Council (IGBC). In FY2024, the company evaluated 26 products through chemistry gate clearance. Through the implementation of 17 cost-improvement projects leveraging green chemistry principles, Dr Reddy’s successfully reduced nearly 22 per cent hazardous waste generation in the manufacturing of those products.

Lupin embarked on their sustainability journey four years ago, and made an entry in the S&P Global Sustainability Yearbook 2024, with a notable Corporate Sustainability Assessment (CSA) score of 65/100, and an S&P Global ESG Score of 69. Sun Pharma’s CSA and ESG scores were both 68, Cipla’s CSA was 67, ESG 70, and Neuland Laboratories had a CSA score of 60 and ESG score of 64. Similarly, Biocon’s S&P Global CSA score was 61, and ESG score was 63, placing it among the Top 10 global biotech companies.

Sudarshan Jain, Secretary General, Indian Pharmaceutical Alliance, which represents large Indian pharma companies, summed up this evolution, saying, “Sustainability is a strategic priority for pharma companies as the sector involves a significant environmental footprint. IPA members are advancing green practices including sustainable supply chains, efficient technologies, carbon neutrality, waste management, and energy and water conservation practices. Financial sustainability, achieved by integrating ESG principles, ensures long-term stability and growth.” 

Anil Matai, Director General, Organisation of Pharmaceutical Producers of India (OPPI), which represents India subsidiaries of MNC pharma companies, believes that true sustainability involves adopting a long-term perspective that prioritises the well-being of both the people and the planet. This entails a dedication to social, environmental, and civic responsibilities that go well beyond immediate gains. OPPI’s publication titled, Putting the Country First Taking the Country Far, lists the efforts of OPPI member companies. 

As an ESG consultant, Sunil Kumar, Director, SIPL also concurs that the pharma sector is increasingly making investments in sustainability, driven by a combination of regulatory pressures (for instance, regulations like the European Union’s Green Deal and the US Securities and Exchange Commission’s ESG disclosure requirements are becoming more stringent), investor expectations, consumer demand, and operational considerations. 

With +20 clients in the pharma and related intermediate sectors, SIPL has conducted life cycle Assessments (LCAs), and provided ESG solutions and SimaPro software to pharma majors like Novartis, Sun Pharma, Biocon, Ajanta Pharma, Dorf Ketal, Gharda Chemicals, Cardolite Specialty Chemicals, Anupam Rasayan India, SRF, etc. 

Giving the equipment manufacturer’s point of view, Shivshankar SR, CEO, ACG Packaging Materials, reiterates that it is important for organisations to proactively set targets and focus on long-term initiatives that will provide value realisation and business transformation towards creating a more sustainable and resilient future. He mentions that within ACG’s business, their adherence to the Science Based Targets initiative (SBTi) through their recently announced strategic partnership with EY Parthenon, underscores their commitment to conscientious corporate stewardship.

Summing up, Shivshankar of ACG Packaging reminds us that the mission to reduce the overall carbon footprint remains a driving principle for the pharma sector, with a focus on making manufacturing ‘contained, continuous and connected’ – optimising raw material use and reducing waste. Shivshankar singles out large-scale manufacturers who must expedite net zero objectives, thereby effectuating a meaningful reduction in their carbon emissions. While he concedes that embarking on the journey towards decarbonising entire processes will undoubtedly prove overwhelming for many, he reminds us that “ultimately it’s about looking towards the future and trying to understand wide-ranging stakeholder needs to create long-term and effective solutions.”

MSME pharma sustainability path 

But MSME pharma companies are also a huge part of India Pharma Inc. According to the Confederation of Indian Industries (CII), there are around 8,000 small and medium enterpri