PSCI partners with Energize to promote industry decarbonisation
The latest in a quarterly series of articles about responsible supply chain management from the PSCI, this time covering environmental concerns and the programmes in place to address them.
The business case for decarbonisation is well established and key to achieving the aims of the Paris Agreement. Whilst pharmaceutical companies are well on their way to reducing their direct Scope 1 and 2 emissions, the largest challenge and opportunity remains in the indirect (Scope 3) emissions found in their supply chains.
Supporting supply chain decarbonisation within the pharmaceutical industry requires partnership and collaboration, all of which can be found in the new partnership between the Pharmaceutical Supply Chain Initiative (PSCI) and the Energize Programme.
For many companies, reducing their Scope 1 and 2 emissions are within their control and relatively achievable by switching to renewable energy sources and increasing operational efficiency. However, a company’s largest source of emissions is found in their indirect (Scope 3) emissions, which are those produced by the organisations within their supply chain. These emissions are estimated to be more than 10 times higher than the previous categories combined. In order for companies to meet their Net Zero and decarbonisation goals, they need to work with their suppliers to help them decarbonise.
In 2021, 10 pharmaceutical companies that are all members of the PSCI launched a game-changing collaboration to increase access to renewable energy for pharmaceutical suppliers: Energize. Energize is a collective initiative to engage pharmaceutical industry suppliers in climate action. The program is designed to provide suppliers with information about renewable energy purchases and provides the opportunity to participate in an aggregated approach to contract for renewable energy.
This first-of-its-kind industry program will enable suppliers – who may not otherwise have the internal resources or expertise available – to both learn more about and participate in the market for power purchase agreements (PPAs). A power purchase agreement (PPA) for renewable energy is generally a long-term contract (typically 10–20 years) between a renewable energy developer and a creditworthy buyer(s). PPAs enable renewable energy developers to secure financing for new wind or solar projects and generally allow buyers to purchase renewable energy in a cost-competitive manner.
The program will help pharmaceutical and healthcare suppliers to address their own operational Scope 2 emissions through green power procurement, which in turn will reduce the participating companies’ Scope 3 emissions. Participating suppliers will learn about the renewable energy market, receive guidance on PPAs, and have the opportunity to access and contract for renewable energy on their own or as part of a collaborative buyers’ cohort.
Renewable energy procurement can be challenging for companies of all sizes for a variety of reasons. The Energize programme is designed to overcome typical market barriers such as inadequate knowledge about renewable energy transactions, load size, lack of credit, and the need for guidance throughout a complex and protracted contracting process. One of the objectives of Energize is to "aggregate" participating supplier electricity demand into appropriately sized and diversified groups (cohorts), that will go-to-market together to procure energy from new renewable energy projects. This renewable energy aggregation approach aims to create more buying opportunities for more companies while reducing costs by leveraging collective buying power.
Decarbonising the pharma supply chain is a huge undertaking that requires partnership and collaboration. By raising awareness about the world of renewable energy and providing a platform and solution for the pharma companies and their suppliers to decarbonise, we are making the transition to net zero a reality for the sector.
You can learn more about Energize here.
The Energize program is a supply chain renewables initiative designed and delivered by Schneider Electric Sustainability Business in partnership with the PSCI. Current sponsor companies include Amgen, AstraZeneca, Biogen, Boehringer Ingelheim, Bristol Myers Squibb, Charles River Laboratories, Chiesi Group, GSK, Johnson & Johnson, Merck (known as MSD outside the United States and Canada), Merck KGaA, Darmstadt, Germany, Novartis, Novo Nordisk, Pfizer, Roche, Sanofi, Takeda, Teva, and UCB.
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A quarterly series of articles about responsible supply chain management from the PSCI.
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