Due to the imminent threat of climate change and expected legal measures, companies across different sectors are increasingly driven to set and actively pursue sustainability objectives.
The pharmaceutical sector, faced with rising stakeholder expectations and tightening regulations, is accelerating efforts to reduce its environmental impact. Several major players in the industry have committed to achieving net-zero emissions as their climate sustainability target. These leading pioneers are blazing the trail by implementing policies and undertaking initiatives, including the purchase of carbon credits, to accomplish this ambitious objective.
The pharmaceutical industry’s carbon footprint
The pharmaceutical sector is a significant contributor to global emissions. If it were a country, its carbon footprint would rank 9th in the world. Energy-intensive manufacturing processes, extensive distribution networks, and greenhouse gas-emitting propellants in inhalers drive up the industry’s climate impacts. Experts urge pharmaceutical companies to act, as unmitigated warming could strain global health systems and hinder access to vital medications.
While daunting, the mission is not impossible. Industries like tech and retail are demonstrating that reaching net-zero is within grasp. Google aims to run entirely on carbon-free energy by 2030. IKEA plans to become climate positive by 2030 by reducing more greenhouse gas emissions than its value chain emits. These commitments raise the bar for pharmaceutical companies to take equally bold climate action.
Major industry players are stepping up. AstraZeneca, Novartis, and Takeda have set ambitious net-zero targets, while investing in renewable energy, green chemistry innovation, and carbon removal. Their efforts are having ripple effects as peers follow suit. With collaboration and persistence, the pharmaceutical industry can curb its emissions in line with climate science.
AstraZeneca’s U$1BN of climate commitments
With over $26 billion in annual revenue, British-Swedish firm AstraZeneca is one of the world’s largest pharmaceutical companies. It manufactures blockbuster treatments ranging from diabetes to oncology medications.
In 2020, AstraZeneca announced its Ambition Zero Carbon strategy, aiming to achieve carbon neutrality across its entire value chain by 2030. This bold pledge puts AstraZeneca at the vanguard of climate action in pharma.
To meet its goal, AstraZeneca is transitioning to 100% renewable electricity at its sites by 2025. It is also optimizing manufacturing to curb emissions, while partnering with suppliers to reduce their carbon footprints. Further, AstraZeneca plans to eliminate fossil fuel vehicles from its fleet by 2030.
Beyond its operations, AstraZeneca is developing a portfolio of over $1 billion in green investments. These include carbon removal and storage solutions expected to offset about 2.5 million tonnes of CO2 annually by 2025.
AstraZeneca’s commitment is spurring the industry to accelerate sustainability initiatives. Being the pioneer in the pharmaceutical industry to establish a bold net-zero objective that encompasses its entire value chain, AstraZeneca is setting a remarkable example that its competitors will have to strive to emulate.
Novartis to use 100% renewable energy within 2023
Headquartered in Switzerland, Novartis is a leading global medicines company with over $48 billion in 2021 revenue. Its therapeutic areas span eye care, immunology, and cardiovascular treatments.
In 2021, Novartis announced its aim to achieve carbon neutrality across Scopes 1, 2, and 3 by 2040. Scope 1 and 2 cover direct emissions from Novartis’ operations, while Scope 3 includes indirect emissions across its supply chain.
Novartis’ environmental policies are publicly available on the internet. The company has made meeting its net-zero ambition a top priority, with a strong and focused approach in four crucial areas: sourcing renewable electricity, enhancing energy efficiency, promoting innovative green chemistry, and investing in carbon removal offsets.
Already, Novartis sources 80% of its electricity from renewables. It is also optimizing production processes, deploying automation, and modifying fleet vehicles to curb emissions. The company is on track to source 100% of its power from renewables by years’ end of 2023.
Additionally, Novartis is pioneering molecular design techniques to develop medicines with lower environmental impacts. Furthermore, the company is actively investing in projects that focus on nature-based carbon removal, such as collaborating with Carbon Direct to expand the implementation of carbon forestry offsets.
By setting and working toward net-zero science-based targets, Novartis is positioning itself as a leader in green pharmaceutical manufacturing. Its multipronged approach can serve as a model for other companies.
Takeda Pharmaceuticals shows the way for Asia
Japan’s largest pharmaceutical company, Takeda Pharmaceutical generates over $30 billion in annual revenue from medicines treating conditions from cancer to rare diseases.
In 2021, Takeda announced its commitment to achieving net-zero greenhouse gas emissions by 2040. It is working to reduce and offset its entire carbon footprint, including Scope 3 emissions from its supply chain.
Takeda is achieving its goal by increasing renewable electricity usage, improving energy efficiency at its sites, electrifying its vehicle fleet, and reducing emissions from business travel. It aims to cut Scopes 1 and 2 emissions 46% by 2030.
Takeda is also collaborating with pharmaceutical industry partners and suppliers to curb emissions across its value chain under the Pharmaceutical Supply Chain Initiative. And it plans to utilize carbon removal offsets for hard-to-abate emissions.
Takeda’s pledge to achieve net-zero marks a groundbreaking moment for the pharmaceutical industry in Asia and beyond, as they lead the charge towards comprehensive decarbonization. Its 2040 target and interim science-based milestones demonstrate meaningful leadership.
Pharma’s challenges in reaching net-zero
Despite strong commitments from sustainability front-runners, achieving net-zero emissions poses complex challenges for pharmaceutical companies. Many production processes inherently rely on fossil fuels as heat sources and for transporting materials. Companies need major capital investments to transition these operations to clean energy alternatives.
Pharmaceutical distribution and long, complex supply chains also make emissions reductions difficult. Cold chain storage and last-mile delivery result in substantial greenhouse gas outputs. Meanwhile, developing green chemistry solutions requires years of research and development, along with new manufacturing infrastructure. These costs can be prohibitive. Further, credibly offsetting all residual emissions will necessitate scaled up, verifiable carbon removal markets. Technical and economic hurdles remain for many offset types.
Overcoming Challenges
While obstacles exist, experts emphasize they can be solved through collaboration, innovation, and policy action.
Companies can join forces and share their knowledge and resources through initiatives like the Pharmaceutical Supply Chain Initiative. This collaboration enables them to not only expand their renewable energy procurement, but also boost their efficiency and make strides in green chemistry.
Governments can help by offering incentives for clean technology investments and funding research into pharmaceutical process improvements.
International cooperation can accelerate decarbonization of global supply chains. And standardized offset methodologies will ensure carbon removal credits have integrity.
Ultimately, reaching net-zero will depend on persistence, investment, and cross-industry partnership. But the health and environmental benefits make it imperative for pharmaceutical companies to see it through.
Opportunities from net-zero efforts
Pursuing net-zero also opens up opportunities for pharmaceutical companies to add business value, beyond environmental benefits. Optimizing processes for energy efficiency provides cost savings from reduced power consumption and heating needs. Streamlining supply chains also cuts costs over the long-term.
First movers on net-zero can boost their reputations with consumers and investors, who increasingly prioritize sustainability. These companies may have better talent recruitment and retention.
Developing and marketing lower carbon medicines can become a competitive advantage. Doctors and health systems are paying more attention to the climate footprint of drugs.
AstraZeneca’s partnerships have the potential to unlock opportunities for companies to venture into the burgeoning green investment markets. Through these collaborations, businesses can not only contribute to the sustainability of our planet but also reap financial benefits by investing in carbon removal and renewable energy projects.
Finally, building climate resilience helps ensure business continuity as physical impacts of climate change accelerate.
Government policy propels climate action
Governments are ramping up policies aimed at decarbonizing pharmaceutical value chains through incentives and requirements.
The Inflation Reduction Act of 2022 in the United States presents an extraordinary opportunity, providing over $60 billion in incentives dedicated to fostering energy efficiency, electrification, and groundbreaking advancements in green chemistry. This can offset costs for companies pursuing these strategies.
The EU’s pharmaceutical strategy aims to make drug manufacturing and distribution more sustainable by implementing green product design and procurement requirements. This will help reduce emissions.
India released a roadmap in 2022 pushing pharmaceutical companies to adopt renewable energy and assess Scope 3 climate impacts. It aims to help India meet its national climate targets.
Such policies encourage pharmaceutical companies to take ownership of their emissions and are likely to expand as more governments declare net-zero commitments.
The Road Ahead
While the 2030s and 2040s may seem like distant milestones, reaching net-zero requires immediate action across pharmaceutical supply chains. Industry leaders have provided a blueprint – including renewable energy procurement, distribution optimization, green chemistry, and carbon removal.
New technologies and nature-based solutions are expanding decarbonization opportunities. With collective willpower, strategic investment, and transparent reporting, net-zero is within the pharmaceutical industry’s reach. All stakeholders must maintain pressure and hold firms accountable to their pledges for a sustainable future.
Photo credit
Photo by Myriam Zilles on Unsplash
Most businesses that decide to act on their net-zero targets reach the same point of friction. Buying carbon credits has meant tracking down brokers, sitting through sales calls, and requesting a quote just to learn a price, sometimes with limited proof of what you are buying.
The earnings calls that quietly reframed climate from sustainability question to operating risk.
Three earnings calls in the last 18 months tell the story without any help from a press release.
Hershey, May 2024: cocoa price exposure compresses margin, and the company attributes part of the cost shock to West African weather. Olam, July 2024: coffee climate exposure quantified in the annual report. JBS, January 2025: supply chain climate disclosures expanded materially in response to investor pressure and regulatory expectation. None of these companies issued the announcement as climate news. They issued it as financial news. The climate-linked supply chain risk did not arrive with a sustainability framing; it arrived as a P&L line.
You are probably reading this article because you suspect the same thing is happening to your business. This piece walks through what is showing up on which earnings calls, how procurement and finance leaders are quantifying the exposure, and what serious corporates are doing about it before the regulator asks.
Where climate risk has already appeared in earnings
The pattern is consistent across resource-intensive sectors. A weather event compresses supply, the price spikes, the cost flows through the income statement, and the analyst on the call asks whether the event is anomalous or structural. Increasingly, the honest answer is the second one.
Cocoa is the cleanest example. The 2023 to 2024 West African harvest fell sharply on the back of erratic rainfall and disease. Cocoa futures more than tripled. Companies with concentrated West African sourcing absorbed the cost; companies with diversified sourcing absorbed less. The exposure was not climate as ESG topic. It was climate as cost of goods.
Coffee follows the same pattern. Brazilian and Vietnamese harvests have moved on weather more sharply across the last several seasons. Roasters with long-tenor supplier relationships and origin diversification have managed the volatility; roasters with spot-market exposure have not. Wheat, sugar, palm oil, beef: the same dynamic in different commodities, a pattern the IPCC AR6 Working Group II report projects will intensify across agricultural systems through mid-century.
What this means: climate risk is no longer a footnote in the 10-K. It is a line item the CFO has to explain on the call.
The three commodity exposures that hit margin first
For most companies with material Scope 3 exposure, three exposures dominate the near-term P&L risk.
- Concentrated single-origin sourcing in a climate-vulnerable region. If your tier-one supply for any material commodity sits in one geography, you have a concentration risk that climate amplifies. Diversification across origins is the obvious hedge, but it takes years to build and requires relationships you cannot acquire by tender.
- Supplier financial fragility under climate stress. Smallholder farmers, who supply a large share of the global cocoa, coffee, and palm oil market, do not carry the balance sheets to absorb yield shocks. When yields collapse, they exit. When they exit, your supply base shrinks, and the surviving suppliers raise prices. The risk is structural, not cyclical.
- Logistics and storage exposure to extreme weather. Hurricane disruptions to Gulf shipping, drought-driven Panama Canal restrictions, flooding in European inland waterways: each of these has moved input costs in the last three years, a pattern documented in Munich Re’s natural catastrophe data. The exposure shows up as a one-quarter event in the financial press but accumulates over time on the cost line.
TCFD and ISSB disclosure changes
The disclosure architecture has now caught up with the risk. The Task Force on Climate-related Financial Disclosures, whose recommendations are now embedded in the ISSB’s IFRS S2 climate standard, requires companies to disclose climate-related risks across physical and transition categories, with quantification where possible.
For physical risk specifically (the climate-linked supply chain risk you are reading about), the disclosure must address both acute exposures (extreme weather events) and chronic exposures (gradual changes in temperature, precipitation, and growing seasons). The disclosure must address the time horizon over which the risk is material, the parts of the value chain exposed, and the financial impact under different scenarios.
The CSRD imposes similar requirements under European law, with double materiality (both financial and impact materiality) embedded in the assessment. The practical effect: your auditors and your investor relations team now need a defensible answer to the climate-linked supply chain risk question, and the answer needs to be quantified.
What procurement and finance can do now
Three actions matter near-term.
Map your exposure. Most companies do not have a clear view of which tier-one and tier-two suppliers sit in which climate-vulnerable geographies. Without the map, you cannot quantify the risk, and without the quantification, you cannot disclose it credibly. The map is the foundation, and World Resources Institute climate risk research provides useful public tooling to start.
Diversify and deepen, in that order. Diversification across origins reduces concentration risk, but the deeper move is to invest in the resilience of the suppliers you already have. Regenerative practices, agroforestry, soil health interventions: these reduce yield volatility under climate stress and protect your input cost trajectory.
Embed the climate spend inside procurement, not outside it. Treating climate risk as a sustainability cost line subordinates it to the ESG budget. Treating it as a procurement and resilience investment puts it in the budget that matters, which is the cost-of-goods budget that the CFO defends quarterly.
Nature-based supply chain investments are the asset class designed for exactly this purpose. They sit inside the value chain, they reduce climate-linked supply risk, they generate verifiable Scope 3 reductions, and they produce the documentation an auditor and a regulator can both test.
If you are quantifying climate-linked supply chain risk in advance of the next earnings cycle or the next disclosure period, the carbon and sustainability experts at Carbon Credit Capital can help you map your exposure and structure a Dual-Value Model response that addresses reduction, resilience, and disclosure-readiness in a single program. Schedule a consultation.
More and more small and medium-sized businesses are hearing the same question from their larger customers: What is your carbon footprint? That question now travels down entire supply chains, and it arrives next to tender requirements, certification criteria, and rising customer expectations.
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