“We are in the business of helping people become healthy. But without a healthy planet, it’s a moot point.”
Climate leadership in the pharmaceutical supply chain has come under sharp focus in recent years. From reducing plastic packaging waste to sourcing palm oil sustainably, pharma companies are being pressed to minimize their environmental footprint. The industry’s vast global supply chains – spanning raw material extraction to drug delivery – contribute significantly to plastic pollution and deforestation-linked emissions. In response, major pharmaceutical players have set ambitious sustainability targets since 2022, signaling a transformative shift.
This article explores how pharma companies are curbing plastic usage in packaging and ensuring responsible palm oil sourcing, the strategies and progress achieved in the last three years, and what lies ahead. Investor expectations and new regulations are accelerating these changes, pushing pharma to innovate for a greener, more circular economy. The result is an emerging climate leadership in pharma’s supply chain that is delivering measurable results and reshaping industry norms.
The Plastic Problem: Packaging Innovations and Reductions
Pharmaceutical packaging – from blister packs and pill bottles to syringes and vials – has traditionally relied on single-use plastics for safety and sterility. Unfortunately, much of this plastic ends up as waste, often not easily recyclable due to complex multi-layer materials (https://www.4ocean.com/blogs/pharmaceuticals/eco-friendly-packaging-reducing-plastic-in-pharmaceutical-products) . In 2022, the sustainable pharmaceutical packaging market was valued around $71.6 billion, and it is projected to more than double to $146.3 billion by 2027 (https://stampedwithlovexoxo.com/blogs/love-letters/sustainable-packaging-statistics). This rapid growth reflects a surge in eco-friendly packaging innovations and investments across the industry.
Rethinking Pharma Packaging: Bioplastics, Reusables, and Smarter Design
Leading companies are rethinking packaging design to reduce plastic use without compromising drug safety. Many firms are developing biodegradable or bio-based plastics – such as polylactic acid (PLA) and polyhydroxyalkanoates (PHA) – as alternatives to petroleum-based polymers (https://www.4ocean.com/blogs/pharmaceuticals/sustainable-pharma-innovations-in-reducing-plastic-waste). These plant-derived materials can maintain the necessary durability and barrier properties but with a smaller carbon footprint and better end-of-life options. Pharmaceutical companies are also exploring refillable and reusable containers, moving away from single-use blister packs when possible. For instance, some are piloting compostable blister packaging and pill bottles made from biodegradable materials. While ensuring drug stability remains a challenge, progress in material science is enabling these innovations in niche products. Additionally, firms are working on reducing packaging weight and material volume – an approach endorsed by the EU’s new Packaging and Packaging Waste Directive, which will require all packaging to be recyclable by 2030 (https://ispe.org/pharmaceutical-engineering/march-april-2023/sustainability-design-pharmaceutical-products). Roche, for example, has committed to redesign packaging to use 40% fewer raw materials and reduce weight, as part of its sustainable delivery goals https://xtalks.com/top-10-most-environmentally-sustainable-pharma-companies-in-2023-2024-3778). GlaxoSmithKline (GSK) similarly set a target to cut the environmental impact of its products and packaging by 25% by 2030, including using more recycled content and eliminating unnecessary plastics (https://www.gsk.com/en-gb/responsibility/environment/materials-and-waste).
Closing the Loop: Circular Solutions in Pharma Packaging
Progress is evident in industry-wide initiatives. Circular economy principles are gaining traction, with companies incorporating recycled plastics into manufacturing and designing packaging for recyclability.
The Pharmaceutical Supply Chain Initiative (PSCI), a global industry consortium, promotes sharing best practices in waste reduction and sustainable packaging.
At the logistics end, some pharma firms have introduced take-back programs for used packaging. In Australia, the Pharmacycle program exemplifies this trend: it set up over 870 drop-off points for used blister packs and, since launching in 2022, has recycled 50 million blister packs by the start of 2025, diverting tons of plastic from landfills. The collected material is repurposed into products like composite decking, closing the loop by turning medical waste into useful materials. These efforts not only shrink pharma’s plastic footprint but also raise public awareness, with consumers increasingly participating in recycling programs (https://www.packagingnews.com.au/sustainability/pharmacycle-hits-50-million-blister-packs-recycled).
Regulatory Momentum and the Rise of Eco-Friendly Pharma Packaging
Regulatory pressures reinforce these changes. The European Union’s directive on single-use plastics is pushing to phase out certain disposable plastic items common in pharma packaging. Likewise, many countries (from Japan to Canada) have introduced strict rules to cut plastic use and boost recycling in healthcare. Companies must now balance Good Manufacturing Practice (GMP) packaging standards with sustainability, prompting investment in R&D for materials that are both safe and eco-friendly. The trend toward electronic patient information leaflets, adopted by firms like AstraZeneca, also reduces paper and plastic packaging components, yielding both carbon and material savings (https://www.healthcaremea.com/pharma-companies-astrazeneca-pfizer-reiterate-focus-on-sustainability). With these innovations and policies, the pharma sector is slowly shedding its reliance on single-use plastics. The past three years have shown that climate-conscious packaging – once a niche idea – is becoming mainstream, driven by both environmental necessity and business logic.
Palm Oil in Pharma: Toward Sustainable Sourcing
Palm oil and its derivatives are ubiquitous in pharmaceuticals, serving as excipients, lubricants, coating agents, and emulsifiers in countless formulations. This versatile vegetable oil is found in capsules, tablets (as hydrogenated palm oil for coating), creams (as emulsifying agents), and more (https://whatispalmoil.com/blog/palm-oil-a-crucial-part-of-pharmaceutical-manufacturing). However, palm oil cultivation has long been associated with tropical deforestation and significant carbon emissions. As such, ensuring sustainable palm oil sourcing has become a priority for climate leadership in pharma supply chains. In the last few years, pharmaceutical companies have stepped up commitments to eliminate deforestation and unethical practices from their palm oil supply.
Pharma’s Palm Oil Pledge: Johnson & Johnson’s Role in Protecting Forests
Several leading pharma manufacturers now use only certified sustainable palm oil. Johnson & Johnson (J&J), for instance, relies on palm oil derivatives in various medications and personal care products, and it has maintained 100% RSPO certification for all the palm oil, palm kernel oil, and palm-based derivatives it purchases since 2020 (https://document.rspo.org/2021/Johnson_&_Johnson_ACOP2021.pdf). This means every ton of palm-based ingredient in J&J’s products is covered by the Roundtable on Sustainable Palm Oil (RSPO) standards, which aim to protect forests and human rights. J&J was an early mover – as far back as 2014 it pledged zero deforestation in its palm supply and started mapping its complex oleochemical supply chains to achieve full traceability (https://news.mongabay.com/2014/05/johnson-johnson-commits-to-zero-deforestation-for-palm-oil). “Although our usage is small on the global scale, we are committed to using our buying position to drive responsible palm oil practices worldwide” J&J stated in its pledge. This stance set an example that has echoed through the industry.
Sustainable by Design: BASF’s Push for Certified Palm Ingredients in Medicine
Suppliers to pharma have also facilitated this shift. Chemical giant BASF, which produces many excipients derived from palm kernel oil, announced that it became the first major supplier to offer 100% RSPO-certified lipid-based excipients for the pharmaceutical industry (https://care360.basf.com/docs/default-source/sustainable-palm-oil/6th-basf_palm-progress-report_2021.pdf?sfvrsn=f298b9c4_1/6th-BASF_Palm-Progress-Report_2021.pdf). By 2021, BASF achieved full traceability for its palm kernel oil supply, covering hundreds of mills. Its certified excipient product lines (e.g. Kolliphor, Kolliwax, etc.) enable drug makers to formulate medicines with sustainable palm-derived ingredients. This kind of upstream commitment is crucial, since the pharma sector often uses palm oil in derivative form (oleochemicals) where tracing origin is challenging. As BASF and others provide segregated or mass-balance certified palm ingredients, it lowers barriers for all pharma companies to source responsibly. Indeed, today many pharma companies are RSPO members or have policies mirroring RSPO criteria (no deforestation of high conservation value forests, no peatland conversion, fair labor, etc.), even if their total palm volumes are relatively small. The emphasis is on ensuring that every capsule shell, tablet coating, or cream base that comes from palm supports sustainable practices.
Deforestation, Disclosure, and the EU: Why Pharma Can’t Ignore Palm Oil
Investor and NGO pressure has played a role. Activist campaigns over the past decade targeted consumer-facing sectors first, but now scrutinize pharma’s palm oil use. Being a “laggard” on deforestation can tarnish a company’s reputation. Conversely, pharma firms that demonstrate ethical sourcing can score better on ESG ratings and avoid the risks of supply disruptions. The EU Deforestation Regulation (EUDR), adopted in 2023, adds regulatory teeth to these expectations. By end of 2024, companies placing products with palm oil (or soy, beef, etc.) on the EU market must prove the commodities are deforestation-free (https://www.acre.com/blog/the-eu-deforestation-regulation-the-talent-challenge-for-european-natural-resource-businesses). This law explicitly impacts healthcare: palm oil is listed as an essential component in medicine capsules, ointments, and excipients, all requiring traceability to sustainable sources. Complex global supply chains make this a challenge for pharma, but failure to comply will mean losing access to the EU market (https://www.fgvw.de/en/news/compliance-update-on-the-eu-deforestation-regulation-eudr-in-the-healthcare-sector). As a result, the next few years will likely see even tighter collaboration with initiatives like RSPO and accelerated efforts to map and clean up palm oil supply lines. The sustainability trend for palm oil in pharma, evident since 2022, has shifted from voluntary leadership by companies like J&J to an industry-wide movement driven equally by conscience and compliance.
Conclusion
These are exciting times as we are witnessing the pharmaceutical supply chain undergoing a green transformation at a global scale. What was once viewed as ancillary – reducing plastic waste, sourcing sustainable palm oil, cutting carbon – is now central to pharma’s mission of improving health in a responsible way. The climate leadership shown in the past few years by pioneering companies will become the norm as pressures and opportunities converge. But continued progress is not automatic; it requires expertise, investment, and often, collaboration with external partners. For organizations in the pharma industry looking to accelerate their sustainability journey – from designing carbon-neutral supply chains to investing in verified carbon credits – working with experienced partners is key. This is where consultancies like CarbonCreditCapital.com come in, contact us today to explore sustainability consulting, carbon credit purchases, and collaboration opportunities. Together with your stakeholders, we can ensure that the pharma supply chain of the future heals the planet as much as it heals patients.
The accounting differences that decide whether your nature investment shows up in inventory, in BVCM, or nowhere at all.
The question reaches a procurement team about three weeks before the next sustainability committee meeting. Someone has read about insetting. Someone else has just signed off on an offset purchase. The CSO wants to know if the two are interchangeable. The answer is no, and the GHG Protocol Land Sector and Removals Standard is the reason why.
This article walks through what each term means at audit-grade specificity, what the standards actually say about how each gets counted, and how to decide which tool fits which target. The insetting vs offsetting question is one of the most-searched in corporate climate strategy, and one of the most poorly answered. By the end of this piece, you should be able to brief a committee on the difference without notes.
The two definitions, in plain English
Offsetting means buying carbon credits generated outside your value chain and retiring them against your residual emissions. The reduction happens somewhere else, financed by you, and the credit is the receipt.
Insetting means investing in emission reductions or removals inside your own value chain, typically with suppliers, where the reduction is directly linked to the products and services you buy. The reduction happens inside the boundary of your Scope 3 inventory, and the accounting treatment is fundamentally different.
The shorthand from the University of Oxford’s Nature-based Insetting Initiative is useful: insetting is what you do with the supply chain you have; offsetting is what you do with the supply chain you do not have.
What the GHG Protocol Land Sector Standard actually says
The GHG Protocol Land Sector and Removals Standard, finalised in 2024 after a multi-year pilot, sets the rules for how land-based emission reductions and removals enter corporate inventories. The Standard distinguishes between inventory accounting (Scope 1, 2, and 3) and project or intervention accounting (a separate methodology for crediting).
For insetting, the practical implication is that supplier-level interventions, when properly measured and attributed, can reduce your Scope 3 category 1 (purchased goods and services) emissions in your inventory. The reduction is not a credit retired against the inventory; it is a lower inventory number, period.
For offsetting, the credit is retired separately. It can be reported as a contribution toward a net-zero claim under the SBTi Beyond Value Chain Mitigation framework or as part of a VCMI Carbon Integrity claim, but it does not lower the inventory number.
A practical consequence: if your Science Based Target requires a 50% absolute reduction in Scope 3 emissions by 2030, insetting moves you toward the target. Offsetting does not. This single point of difference reshapes the procurement decision.
When insetting counts toward Scope 3 (and when it does not)
Insetting counts toward Scope 3 only when several conditions are met:
- The intervention must occur with an entity in your value chain.
- The emissions reduction or removal must be measured against a defensible baseline.
- The reduction must be attributed to your share of that supplier’s output, not double-counted with other buyers.
- It must follow the inventory accounting rules in the GHG Protocol Land Sector Standard, not the project accounting rules used to generate credits.
The most common failure mode is double counting. If your supplier sells the same reduction as a credit on the voluntary market and also reports it to you as a Scope 3 reduction, the math breaks. The Standard requires you to address this risk, typically by purchasing and retiring the supplier-issued credit as part of your inventory or by contractual provisions that prevent the supplier from selling the reduction twice.
When insetting does not count toward Scope 3: when the intervention sits with a supplier you do not buy from, when the baseline is not defensible, when the attribution is unclear, or when the documentation does not survive audit. Those cases default to Beyond Value Chain Mitigation, which is still useful but operates on a different ledger.
The procurement and supplier engagement question
Insetting is harder than offsetting. That is the unfashionable truth most buyers eventually confront. Offsetting is a transaction; insetting is a relationship.
To run an insetting program, you need supplier mapping precise enough to know which farms or facilities sit at which Scope 3 boundary. You need an engagement model that gets suppliers to participate, which usually requires multi-year commitments and shared economics. You need an MRV architecture that measures the right things and produces audit-ready documentation. And you need a contractual structure that prevents double counting and protects both sides.
The trade-off you receive in return is significant. Reductions count against your inventory rather than your residual. Supplier relationships deepen, which protects sourcing continuity. Yield and quality improvements often follow regenerative interventions, which reduces your input cost over time. And the regulatory file, under CSRD, CSDDD, EUDR, and the SBTi FLAG Guidance, is materially stronger.
Choosing the right tool for the right target
A practical decision rule. If your target is a science-based Scope 3 reduction and you operate in a FLAG sector or source FLAG commodities, insetting is the structurally correct tool. If your target is a net-zero claim that includes neutralising hard-to-abate residual emissions outside your value chain, BVCM via high-integrity offsets is the structurally correct tool. Most companies with material Scope 3 exposure need both, in different proportions, sequenced over time.
The sequencing matters. Insetting takes longer to stand up but produces a permanent reduction in the inventory. Offsetting can be transacted faster but does not change the inventory and now sits under tighter claim restrictions. Treat them as complementary tools with different jobs, not as substitutes. The Accountability Framework Initiative and the IUCN Global Standard for Nature-based Solutions both provide useful guardrails for the insetting side, with biodiversity, human rights, and benefit-sharing requirements that go beyond carbon math.
If you are mapping a Scope 3 reduction roadmap and need to scope which interventions count toward your inventory versus which sit in Beyond Value Chain Mitigation, the carbon and sustainability experts at Carbon Credit Capital can help you structure a nature-based supply chain investment program that fits your FLAG exposure, your target architecture, and your audit horizon. Schedule a consultation.
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