McKinsey's APIs Healthcare Scope 3 advice to Big Pharma

The life sciences and healthcare sector is crucial for human health, but it's also responsible for around 5% of global carbon emissions. 

Reducing these emissions is essential.

A significant portion of pharmaceutical emissions come from the production of active pharmaceutical ingredients (APIs), which are the key ingredients in medicines. 

About 70% of APIs are made from chemicals derived from fossil fuels, leading to high carbon emissions.

A survey from McKinsey shows that while many API manufacturers have set goals to reduce their emissions, only a few have detailed plans to achieve these goals. 

Maria Cheryl Fernandez, Partner at McKinsey & Co, says: “This is a significant challenge that many companies in the industry face, and we are committed to finding sustainable solutions.”

Pressure to decarbonise APIs 

Many downstream stakeholders in API manufacturing have committed to emissions reductions across Scopes 1, 2 and 3.

To achieve these goals, they must reduce emissions across supply chains, including from API manufacturers. 

Eight of the 10 leading pharmaceutical companies have pledged to reach net zero across their supply chains as soon as 2040 and no later than 2050.

“Sustainability needs collaboration. We must not think in silos or limit ourselves merely to our corporate boundaries,” says Kai Beckmann, Member of the Executive Board of Merck and CEO of Electronics.

“The entire value chain is called upon to explore new, joint paths in order to achieve even more together.” 

Even major healthcare agencies and systems including the UK’s National Health Service (NHS) and US Department of Health and Human Services have committed to net zero.

API decarbonisation targets and challenges

McKinsey’s survey asked more than 20 UK-based API manufacturers about their decarbonisation efforts.

50-70% of manufacturers have set decarbonisation targets, but less than 20% have detailed implementation plans. 

These manufacturers are finding difficulties in a lack of transparency around viable solutions and limited visibility into product carbon footprints. 

API manufacturing generates significant waste including solvents and contaminated materials that release end of life emissions upon disposal. 

McKinsey says its analysis demonstrates that API manufacturers have the potential to reduce around 90% of their total emissions by 2040.

The benefits of decarbonising pharmaceuticals 

Cong Luo, a Consultant at McKinsey’s New Jersey office, says: “Our research reveals that 30-40% of decarbonisation initiatives can simultaneously reduce both carbon emissions and costs.”

ESG ratings continue to gain importance, so decarbonisation efforts from API manufacturers could improve their market position and attract investment. 

Becoming more sustainable could also help the API manufacturing industry to be better positioned for increasing regulatory demands and public expectations.

Collaboration across supply chains to decarbonise could improve supplier relationships, leading to a more resilient supply chain.

McKinsey’s recommendations to decarbonise API manufacturing

McKinsey provides four main recommendations to decarbonise API manufacturing:

• Process efficiency improvements – using heat integration solutions like heat pumps can recycle waste hear and reduce reliance on carbon emitting sources
• Green chemistry principles – process redesign, solvent recovery and transitioning to continuous manufacturing can reduce waste, conserve energy and lower raw material usage
• Renewable energy transition – using renewable power sources can reduce emissions by 5-10% 
• Sustainable feedstock and solvent procurement – collaborating with suppliers to procure sustainable feedstocks and solvents can bring substantial emissions reductions
  ******
  Healthcare Digital Magazine is a BizClik brand.