In this article, Andrew Toher, Head of Customer Insights Europe at Enel X, looks at the potential benefits and key considerations of a sustainable energy strategy.
The pharmaceutical sector is not generally considered a very polluting “heavy industry”, but it is far from being green. In its 2021 Delivering a ‘Net Zero’ National Health Service report, the UK’s NHS attributes up to a quarter of its carbon footprint to medicines. A deep carbon footprint is a common feature of energy-intensive manufacturing processes – and pharmaceutical manufacturing is no exception. However, emission levels can be reduced by adopting a sustainable approach to process efficiency, energy production and energy supply.
In addition to the environmental benefits of reducing carbon emissions, a sustainable energy strategy also has financial implications. Increasingly volatile energy costs and punitive carbon taxes are having a tangible impact on profitability. On 1 January 2021, a UK Emissions Trading Scheme (UK ETS) replaced the UK’s participation in the European Union (EU) ETS. The four UK governments have set the agenda to increase the climate ambition of UK carbon pricing policy, while protecting the competitiveness of UK businesses. As a result, large carbon emitters have seen dramatic increases in compliance costs in recent times.
There is also a reputational imperative to act on carbon emissions. As an industry comprising some of the most trusted brands in the world, it has a corporate social responsibility to “do the right thing”. Key stakeholders, including investors, want to see affirmative action on carbon emissions as part of an overall environmental and social governance policy. For many pharmaceutical companies, with complex and multinational operations, the challenge is to design a net zero roadmap that is both effective and sustainable.
Development of a sustainable energy strategy
It can be daunting to know where to start on the road to sustainability. Considering energy strategy alongside corporate sustainability goals is key to providing a comprehensive and effective strategic roadmap.
The first step is to gather and analyze data to lay the foundation for strategy and create a benchmark against which to measure action. Calculating the emissions inventory, including operational and indirect emissions, is possible with the right software and systems in place. To capture the environmental benefits of sustainability programs, carbon reporting must be an integral part of any software solution. This allows organizations to track data associated with the purchase, consumption and production of energy, including its impact on sustainability goals and environmental benefits using emissions calculations based on the market and location.
Voluntary reporting of emissions through a globally recognized framework demonstrates a commitment to sustainability. A carbon disclosure rating or “CDP score” is a measure of a company’s environmental sustainability. CDP scores are visible on multiple investor platforms and, alongside other initiatives such as RE100 for companies that commit to using 100% renewable energy, will help drive change in an organization while signaling intention to shareholders.
Independently organized workshops can be a powerful way to support the development of a decarbonization roadmap for any organization, allowing information to be shared and improving levels of understanding of energy efficiency, production and of supply.
The result should be a strategic plan that maps out the energy strategies to support the company’s sustainability goals.
Actions may include optimizing assets behind the meter, sourcing renewable energy through power purchase agreements (PPAs), and participating in capacity, ancillary, and power market programs to optimize energy consumption and help the power grid manage increasing levels of renewable energy. Having a detailed picture of energy consumption will highlight areas to focus on improving efficiency and reducing emissions.
Resilience and renewable energies
With a comprehensive energy strategy, pharmaceutical companies can reduce their carbon emissions, maintain their resilience, predict future energy costs and improve their ESG performance.
Going green is not without its challenges. As global energy demand increases, industrial and commercial energy users are increasingly concerned about the security of supply and reliability of outdated grid infrastructure. As we reduce our reliance on fossil fuels for power generation and shift to renewables such as solar and wind, the intermittent nature of these energy sources can upset the balance between supply and demand needed to maintain grid stability. Large energy users such as pharmaceutical manufacturers can play an important role in protecting grid stability while enabling more renewable generation.
Participation in energy flexibility programs, such as demand response (DR), helps the electric grid operator manage increasing amounts of energy from renewable sources. During periods of peak electricity demand or reduced levels of production from renewable sources, an energy-intensive facility able to temporarily adjust its overall consumption can receive large payments without impacting business operations. Additionally, DR can act as an early warning of network problems and provides realistic opportunities for testing backup power systems.
Obtain low-carbon energy
Successfully securing renewable contracts is a complex task. A typical requirement is to enter into a long-term power purchase agreement (PPA) with a power company that can guarantee to provide enough clean electricity to meet an organization’s growing needs.
Like other energy-intensive businesses, pharmaceutical companies choose to become buyers, using PPAs to buy renewable energy and to supplement use with onsite production. This increases the percentage of renewable energy used, thereby reducing emissions. This approach secures supply, allows companies to reliably forecast future costs, and signals a long-term commitment to zero carbon.
PPA negotiation can be technically complex, requiring in-depth knowledge and experience to deliver a bespoke deal that suits both the producer or supplier and the buyer.
With a comprehensive energy strategy, pharmaceutical companies can reduce carbon emissions, maintain resilience, predict future energy costs, and improve environmental, social, and corporate governance (ESG) performance. An effective strategy should include optimizing energy use, planning and implementing a supply strategy, and exploring ways to cooperate with energy companies and grid operators. By adopting a sustainable energy strategy, pharmaceutical manufacturers can reduce carbon emissions, help maintain grid stability and create valuable sources of new revenue.
About the Author
André Toher is Head of Customer Insights Europe at Enel X.