Health care on track to triple carbon emissions – but pharma has an opportunity to drive sector-wide transformation

Was COP26 a missed opportunity for biopharma companies?

By Barend van Bergen and Matthew Bell

In the eyes of the public, health care companies aren’t viewed as big polluters. So, health care’s heavy environmental footprint may come as a shock.

According to scientists at the?Potsdam Institute for Climate Impact Research, the global health care sector emits between 4% and 5% of all greenhouse gases (GHG). If it were a country, it would be the fifth-largest emitter on Earth, accounting for about twice the climate impact from aviation.

?Many of these emissions arise from inefficient, older hospital buildings and, in some countries, creaking public health systems. But biopharma also bears responsibility: a 2019 analysis of the global pharmaceutical industry’s top-15 companies revealed they emitted 55% more GHG emissions per million dollars of revenue than the automotive sector.

For a sector whose mission centers on well-being, COP26 was a perfect opportunity for biopharmas to demonstrate their commitment to improving the health of the planet and its people. Business sectors from banking and insurance to steel, cement and shipping were busy in Glasgow announcing coalitions and roadmaps to decarbonize. Mark Carney seized the headlines with his GFANZ coalition of over 450 financial institutions aligning $130 trillion of assets with net zero.

Biopharmas’ biggest commitment at COP26 came when a dozen health care leaders, including seven large companies, responded to an invitation from His Royal Highness The Prince of Wales to form a Health Systems Taskforce as part of the Prince’s Sustainable Markets Initiative (SMI). Members of the taskforce committed to accelerate the delivery of a net zero, sustainable health system by focusing on three priority areas: digital health care, supply chains and patient care pathways. A laudable aim, but the taskforce’s letter of intent is short on targets, dates and details.

Health care has fallen behind other sectors that have been quicker to understand the climate crisis and more decisive in acting to reduce the risks. This is unfortunate, given how abundantly clear it is that the climate crisis is a health crisis. As the 2021 Lancet Countdown report bluntly states: “On the current trajectory, climate change will become the defining narrative of human health.”

Net zero is not zero – action on Scope 3 is vital

At COP26, 50 countries committed to develop climate-resilient and low-carbon health systems – but just 14 felt ready to set an actual target for their health systems to reach net zero carbon emissions by 2050. Although most countries now include health in their national climate plans under the Paris Agreement, those plans “still lack detailed health actions or support mechanisms”, said WHO.

England’s National Health Service (NHS) is probably the exception. After reviewing nearly 600 pieces of evidence, the NHS’s expert panel on net zero framed two targets:

• For the emissions it controls directly (NHS Carbon Footprint – Scope 1, 2 and some of Scope 3), it will reach net zero by 2040, with an ambition to reduce emissions by 80% by 2028-2032
• For the emissions it can influence (NHS Carbon Footprint Plus – remainder of Scope 3), it will reach net zero by 2045, with an ambition to reduce emissions by 80% by 2036-2039

The key part of the NHS’s targets above is not the “net zero” pledge but the “ambition to reduce emissions by 80%”. In the past year, companies, cities, institutions and governments have pledged to become “net zero” or “carbon neutral” by 2050. But these commitments risk being seen as greenwashing if they rely on carbon offsets and fail to embrace firm commitments to cut emissions within the next 10-15 years.

Bare minimum, the UN’s Intergovernmental Panel on Climate Change (IPCC) estimates that global net CO2 emissions need to be reduced by 45% from 2010 levels by 2030 to limit warming to 1.5°C. The Science Based Targets initiative (SBTi), regarded as one of the most credible guardians of climate action, estimates that “long-term deep emissions cuts of 90-95% before 2050 are crucial for net zero targets to align with science.” Their new corporate net zero standard makes clear that only the final 5-10% of emissions that companies cannot cut may be neutralized through carbon removals.

The challenge facing health care – as with many sectors – is three-fold. First, to decarbonize operational emissions, both direct (Scope 1) and indirect (Scope 2), as rapidly as possible. Second, to minimize and counteract any “residual emissions” that are difficult or impossible to remove, through high-integrity offsets. Third, to help supply chain partners decarbonize (Scope 3). Net zero pledges are important but require detailed pathways to demonstrate enough is being done to reduce emissions in line with science-based targets.

Signs of progress

It’s not all bad news. By September, 28% of the sector by revenue had joined the UN’s Race to Zero commitment to reach net zero by 2050, according to S&P Global. Out of the world’s 20 largest pharmaceutical companies, all but seven have Scope 1 and 2 targets confirmed by SBTi as “consistent with reductions required to keep warming to 1.5°C”.

But it is imperative that biopharma companies also drive decarbonization across their entire value chains. These Scope 3 emissions, which account for more than 70% of health care’s total climate footprint, are more challenging to curtail. They arise primarily from the supply chain, during the production, packaging, transport, use and disposal of health care products.

Some companies are beginning to set measurable goals when it comes to Scope 3 emissions. AstraZeneca, for example, has pledged to reduce absolute Scope 3 GHG emissions 50% by 2030 and 90% by 2045, from a 2019 base year.

The complexity of the solutions needed to tackle climate change demands system-level change and the creation of what UN climate champion Nigel Topping calls an “ambition loop.” According to Topping, business, government and non-state group partners need to push each other to be bolder.

As successes are demonstrated in the marketplace, scaling them then becomes a critical priority. Biopharma companies should also consider adopting the global decarbonization roadmap developed by Health Care Without Harm. The organization’s plan focuses on seven high-impact actions that could cut 44 gigatons of CO2e by 2050 – equivalent to the entire world economy’s GHG emissions in 2017:

• Power healthcare with 100% clean, renewable electricity
• Invest in zero emissions buildings and infrastructure
• Transition to zero emissions, sustainable travel & transport
• Provide healthy, sustainably grown food
• Incentivize and produce low-carbon pharmaceuticals
• Implement circular healthcare and sustainable waste management
• Establish greater health system effectiveness

Achieving this level of decarbonization requires the entire sector to transform itself. It is long overdue for biopharmas to take a leadership role in greater climate ambition and action. Not just net zero, but meaningful decarbonization of all possible emissions. Not just switching electricity supplies to renewables, but helping suppliers in their low-carbon transitions, too. And not just addressing direct operational emissions, but also advocating for climate-positive change among customers and working with governments to help health systems decarbonize and prepare for the growing case load of climate-related health effects to come.

The views in this post represent those of the authors and not necessarily EY or its member firms. The authors wish to acknowledge the support of Jonathan Walter in the creation of this point of view.

EYG no. 000474-22Gbl