Sustainable growth: pharma goes green1 February 2012
World Pharmaceutical Frontiers examines the key findings from the latest ICD Research survey, which focuses on attitudes to sustainability in pharma and projected spending on sustainable products.
An online ICD Research survey has revealed that buyer sustainability management budgets in the global pharmaceutical industry are expected to rise by 7% between 2011 and 2012.
Moreover, a total of 40% of respondents from the global pharmaceutical industry stated that they anticipated an increase in sustainability budgets, of which 17% expected budgets to rise by more than 10%.
This is believed to reflect the increasing need to adopt sustainability, comply with legislation and meet client demand. Over the same period, global respondents from supplier companies are expected to record an average increase of 6% in their sustainability budgets, which can be attributed to increasing client demand, cost saving and the need to adopt green technologies.
The ICD Research survey was carried out among C-level execs, directors, managers and technical and professional staff working within pharma or as an industry supplier, and is supported by third-party data such as government statistics, industry associations, company filings and other sources.
It also showed that companies across the global pharmaceutical industry expect an increase in profitability following the adoption of sustainability practices. Of respondents from pharmaceutical manufacturer companies, 38% expect an increase, while the same is true of 37% of respondents from CRO and CMO companies. Similarly, 40% of respondents from drug manufacturing industry suppliers also anticipate an increase in profitability. Respondents expected this increase in profitability to be supported by cost savings, optimal resource utilisation, increasing energy efficiency and a focus on waste reduction. Moreover, companies are reducing their overheads and production costs through the optimal utilisation of resources in production processes, which reduces the cost of goods and enables firms to contribute a larger proportion of expenditure towards R&D activities, the upgrading and retrofitting of equipment, and capital improvements.
Europe and North America
Overall, countries such as Germany, the UK, the US, Canada and France are anticipated to offer the most positive growth opportunities for sustainable products and services in the global pharmaceutical industry over 2011-12.
Stringent procurement and environmental guidelines in the European Union (EU), such as mandates by the German Advisory Council on the Environment, coupled with strict guiding principles outlined by the Environmental Protection Agency in the US, mean that the market for sustainable pharmaceutical products and related services is expected to register substantial growth in Germany and the US. Moreover, the UK Companies Act 2006 plays a key role in directing firms to adhere to sustainability in UK.
'Cost savings and operational efficiency', 'managing corporate reputation' and 'strengthening competitive position' rank as highly important for respondents both from buyer and supplier companies with regard to influencing the sustainability efforts of their organisations. As a general perception, sustainability is considered as a cost in itself, although in reality 'cost savings' act as a key driver of implementation for many companies within the global pharmaceutical industry. Indeed, companies that manage and plan their operations to reduce their environmental impact can identify significant savings in capital and operational costs. However, the 'high cost of drug development' and a 'lack of metrics to measure effectiveness' are considered primary barriers to the effective implementation of sustainable practices.
Buyer preferences - global pharma
Within the global pharmaceutical industry, buyer companies prefer suppliers with programmes that demonstrate an 'effective health and safety management system', the 'effective minimisation of waste', 'certification and compliance with ISO 14001' and the 'reduction of energy consumption'. In particular, efficient waste-reduction programmes can benefit companies by enabling them to utilise the same resource for an output that decreases both operational and production costs. Although credible sustainability reporting is crucial as it directly reflects the performance of suppliers in terms of reducing carbon and GHG emissions, factors such as the 'reporting of carbon emissions' are yet to be considered a priority by the global pharmaceutical manufacturer industry as a whole.
On average, buyer companies operating in the global pharmaceutical industry are planning to allocate 18% of their total procurement budget on sustainable products and services over 2011-12. A total of 24% of buyer companies allocate less than 10% of their procurement budgets on green procurement, while 16% of companies' expenditure comprises 10-20%, and 8% of companies are expecting to allocate more than 30%. Consequently, there is expected to be an increased procurement of products or services related to 'R&D, clinical trials and development services', 'contract manufacturing' and 'anti-counterfeiting and tamper-evident packaging', as globally these are considered the most important sustainable procurement areas across the pharmaceutical buyer industry.
'Email and newsletters', 'corporate and brand websites' and 'conferences and events' are expected to record the strongest investment over 2011-12. Conversely, 'television and video' and 'webcasting' are expected to demonstrate the least investment gain. Finally, social networks and interactive blogs are considered by green marketers as key channels for communicating with customers. The use of social networks as promotional channels is gaining not only importance but prominence among supplier category companies. Marketing strategies such as giving 'informal presentations', sending 'educational marketing messages' and 'white papers and reports' to potential clientele are considered important by supplier companies in order to market their green credentials to clients.