The life sciences industry is at a pivotal moment in sustainability. New regulatory frameworks that demand detailed reports on emissions are propelling companies towards net zero goals. It’s a heavy administrative burden, but those that build robust reporting and analytical capabilities will reap rewards in procurement and ESG leadership.
The Compliance Imperative
An immediate priority, however, is complying with a raft of new regulations, such as the UK and EU’s Carbon Border Adjustment Mechanisms (CBAM). The EU's CBAM began its transition phase in October 2023 and comes into full effect in 2026, and the UK CBAM starts in 2027.
Importers of high-carbon goods must account for the price difference between carbon in the producing country and their own region. This combats “carbon leakage”, where businesses shift manufacturing to cheaper or less regulated markets to get around legislation.
The initial targets of CBAM are aluminium, hydrogen, steel, fertilizers and cement (and electricity in the EU). Life sciences companies need to assess their use in packaging, manufacturing, and infrastructure - from aluminium in blister packs to steel containers and hydrogen used to make APIs.
Pharmaceutical companies and contract manufacturing organisations must:
- Establish ESG hubs for centralized compliance, reporting, and strategy.
- Build robust reporting systems that measure direct and indirect emissions.
- Work with suppliers on accurate emissions data.
- Understand the dynamics of Emissions Trading Schemes (ETS) and identify high-emission areas.
- Deploy analytics software like a carbon copilot for real-time reporting and optimizing emissions.
- Account for the differences between the EU and UK CBAM schemes and keep on top of changes. From the start, UK CBAM will include both direct and indirect emissions, while the EU is phasing this in later.
The EU’s Corporate Sustainability Reporting Directive (CSRD) already requires detailed disclosures on sustainability impacts, incorporating double materiality— how companies affect the environment and how environmental risks affect business performance. Again, this demands systems for granular, auditable data collection and analysis.
Beyond Compliance: ESG a Data Opportunity
The need for ESG compliance is generating a huge amount of data, creating an opportunity to use analytics for strategic advantage. By integrating this data into centralized systems, companies can:
- Gain enterprise-wide visibility.
- Optimize supply chains.
- Minimize waste and emissions. improve supply chain and cut waste.
A compelling example comes from outside pharma: Wienerberger, the world’s largest brick producer, uses SAS on Azure to enable employees to deploy AI driven analytics. By linking hundreds of factors, such as weather and raw material quality, Wienerberger has been able to make many improvements to cut natural gas usage.
Another example is Italian banking group Intesa Sanpaolo, which uses SAS to simulate portfolio strategies and assess their effects on emissio... in order to make the best decisions.
Life sciences companies can empower their workforce and supply partners, from senior management to floor level, with AI-driven tools that complement human expertise.
Pharma and Scope 3
Most pharmaceutical industry emissions are Scope 3—indirect emissions from the supply chain and product use. Tackling these requires targeted strategies:
Small suppliers to pharma may lack the infrastructure or resources to meet the reporting needs. Supporting them will be key and is the focus of collaborations such as the Scope 3 Peer Group and the Energize renewable energy program .
Providing suppliers with decision-support systems will help them become more efficient, reduce emissions and create high-quality, verifiable data.
The challenge is significant, but by putting in place the right tools and partnerships, life sciences companies can turn sustainability from a compliance necessity into a competitive advantage.
