Pharmaceutical companies are increasingly asking their key suppliers — including contract service providers — what actions they are taking to reduce their carbon footprints. One of the most direct means for reducing CO2 emissions is to convert the energy sources powering operations from traditional sources to green energy solutions. As a result, the entire biopharma industry is progressing toward the use of green energy. Contract development and manufacturing organization (CDMO) Fareva, a small molecule API manufacturer, has a plan in place to transition to green energy within the next three to five years and is in the process of developing the necessary agreements and contracts with energy providers to ensure that the company reaches its targets.
Green Energy in the Pharma Manufacturing Sector
Biopharma manufacturing plants generally use steam and electricity to power their operations. Traditional energy sources therefore include the burning of fossil fuels in power plants to generate electricity and in boilers (mostly natural gas) to generate steam.
Green alternatives consist largely of biofuel-run boilers (typically using biomass) for steam generation and solar panels for electricity production. Biomass today largely comprises waste wood, including wood harvested from discarded products, such as furniture and waste materials generated by the wood industry. Green electricity can also be generated at hydroelectric dams that harness the power of flowing water and by wind farms.
Customers Driving Implementation of Green Energy Solutions at CDMOs
Big pharma companies are driving the move to green energy sources within the pharmaceutical industry. Most major biopharma firms have committed to the reduction of resource consumption and waste and emissions generation in order to meet goals established by the United Nations Paris Agreement. These goals include reduction of both the direct and indirect contributions to their carbon footprints. For drug companies, indirect contributions come from suppliers of raw materials, equipment, and manufacturing and R&D services, including contract development and manufacturing organizations (CDMOs).
While the main focus has been reduction of direct (Scope 1 and Scope 2) CO2 emissions, pharma companies are now targeting indirect (Scope 3) emissions. Consequently, they are more frequently asking suppliers, including CDMOs, to detail the steps that they are taking to reduce their CO2 emissions. Going forward, CDMOs can expect the pressure — from not just big pharma customers but also medium-sized pharma clients — to pursue decarbonation efforts to increase.
The Energize supplier consortium was recently created by pharma companies to help their suppliers reduce their carbon footprints. The group is looking to define standards, establish assessment methodologies, and identify the best available technologies.
Options for Reducing Carbon Footprints while Avoiding Process Changes
There are many approaches that CDMOs can take to reduce their environmental impact. Corporate-level actions include switching to green energy sources, installing more efficient lighting and refrigeration systems, and using more efficient distribution vehicles and routes. Active pharmaceutical ingredient (API) manufacturers, such as Fareva, can also design greener processes that use less solvents and other hazardous materials, consume fewer starting materials, produce fewer by-products and/or impurities, afford higher product yields, require less energy input (no heating or cooling), and generate less waste and emissions.
Many manufacturers are considering sustainability when developing synthetic routes for new APIs. For existing products that have been approved by regulatory authorities, however, making changes to production processes is difficult and in many cases impractical. It must be demonstrated that the product obtained with the greener process is equivalent to the material obtained using the existing process. For products approved in multiple markets, regulatory refiling must be accomplished with each agency that issued the original marketing authorization. Changing processes therefore requires a considerable expense of time, resources, and money.
On the other hand, given that energy consumption is a significant contributor to carbon footprint, converting to greener sources of energy has a direct and measurable impact and is often one of the easiest steps a company can take. It also does not disrupt the manufacturing process in any way and therefore does not require any update to regulatory filings.
The biggest consideration when selecting a green energy alternative is to ensure that the source is suitable for the specific site location and application. Solar panels, for example, are suitable for facilities located on sites with available empty land for their installation. Green steam is more appropriate for a site located in an industrial park or similar areas that typically have steam generation and other infrastructure established nearby.
Small Manufacturers Leverage Third-Party Suppliers
While there are several green energy alternatives, it is generally not economically feasible or practical for small CDMOs to install green energy sources themselves. For instance, to be cost-competitive, green steam from biomass must be produced on a large scale. Deep knowledge about biomass sourcing is also needed. Solar panels, meanwhile, require specialized technical expertise for their installation, as well as maintenance and management.
Just as electricity and steam are purchased from utility companies, green versions are generally acquired from firms that have the necessary knowledge and expertise and make the investment in green energy production with the goal of supplying it to multiple end users. Biomass-based steam generators are typically located near industrial campuses to reach many customers. A solar energy provider can install panels on a customer’s land and sell the generated electricity back to that and other customers.
In some countries, government subsidies are also available to encourage manufacturers to switch to green energy sources.
Planning for Some Variable Costs
One of the challenges with renewable energy is the variability in its cost relative to fossil fuels. Currently (the second half of 2023), oil and gas prices are quite high, and green steam and solar energy are cheaper. Just three years ago, however, fossil fuel prices were quite low, and green energy was more expensive. Because fossil fuel prices can be influenced by natural disasters and geopolitical maneuverings, it is difficult to predict how green energy costs will compare. Generally, it is thought that green energy prices will ultimately stabilize at a slightly higher price compared with fossil fuels.
Complicating these calculations for biomass are the uncertainties associated with the biomass supply chain. (Solar energy is simpler, as the costs for purchase, installation, and maintenance of solar panels is constant, and the solar industry is fairly mature at this point). The number of projects being implemented is increasing rapidly, and a shortage of biomass for green energy production is anticipated in the future for some areas, which will drive up prices.
Big Green Energy Changes Coming at Fareva
As a family-owned business, Fareva is making the move to green energy based on an internal desire to decarbonate its API production. Projects to reduce energy consumption had already been completed, including changing to more effective cooling technology. We are currently in the process of negotiating contracts for various types of green energy.
Given the long-term uncertainty of biomass availability for green steam generation, Fareva is taking steps today to switch to green steam and become an established member of the green energy supply chain. We are speaking with different specialized companies about the potential to install a biomass steam boiler to supply several of our plants that use large quantities of steam. This project has a five- to seven-year timeline to allow for contract negotiation, land acquisition, permitting, and construction. It is exciting because, in the end, 100% of our steam needs of a site could be met with green steam, resulting in decarbonization of approximately half of the site’s energy consumption.
Separate projects are under discussion regarding the installation of solar panels. One is driven by a new French law that requires industrial manufacturing facilities with parking lots over a certain size to install solar panels on a minimum of half the surface area. Fareva has more than 15 sites in France, and a number of them will be covered by this new law, which will result in the generation of a significant amount of green electricity. Plans are also in place to install additional solar panels on open land associated with one of our sites. The intended solar farm should supply 100% of the electricity for that manufacturing site and the needs of some of our other French sites. All of these projects should be operational between 2026 and 2028.
Reducing Carbon Footprint — a Future Differentiator
For pharma customers purchasing contract development and manufacturing services, price and quality are currently the main drivers for selecting outsourcing partners. Quality will always remain a primary criterion. Price may slowly become less important, however, as pressure mounts for all links in the pharma supply chain to reduce their CO2 emissions and environmental impact. Certainly, if price and quality are similar for different CDMOs, having a lower carbon footprint than competitors can be a deciding selection factor for sponsor firms working to reduce Scope 3 emissions. In five years, it will likely be commonplace for sponsors to pay a little more to work with outsourcing partners that can help them reduce their carbon footprints.