Pharmaceutical companies need to embrace sustainability as a core corporate strategy, in order to achieve the goal of being carbon neutral by 2030.
Upstream carbon footprint
It is estimated that the logistics divisions of pharmaceutical companies produce around 2% of their total CO2 footprint. However, they have long supply chains, as the total CO2 footprint of pharmaceutical companies includes all of the supply base – the majority of CO2 emissions are upstream. Supplier selection therefore needs to have sustainability at its heart and pharmaceutical companies have to drive 3PLs to deliver their own sustainable services.
Ocean freight
Pharmaceutical companies favour ocean freight over air freight. Ocean produces a fraction of the carbon, has less product handoffs and is much more cost effective. It is estimated that sending freight by ocean is, depending on the temperature and the route, between 8-12 times less expensive per kilo than air transportation. Compliance points and speed also need to be taken into consideration, but sustainability does play a big part in overall calculations, as it benefits the bottom line.
The container shortage situation is being exacerbated by the fact that pharmaceutical companies are filling only 10-20% of a container and then shipping them, so they’re driving demand and then only part utilising the assets. If they completely utilised the assets by sharing them across several different organisations, they would lower the overall demand which would lower the price and carbon emissions.
Sustainable aviation fuel
If one company buys for example 800,000 litres of sustainable aviation fuel, this is approaching complete global production capacity as it is in really short supply – and it’s less than 1% of the air fuel that’s used in the aviation industry on an annual basis. This is due to a range of factors, including high production costs and the fact that SAF technology is still in its infancy. As a result, investment in new SAF production capacity remains limited. Many pharmaceutical companies would like to invest in sustainable air fuels or ocean fuels, but they aren’t actually taking the plunge and putting their capital into it. Stronger demand signals are needed if production volume is to be increased. As it becomes more mainstream and more widely available, it will reduce in price.
Learn more in the latest episode of Ti Talks Supply Chains
Rail freight
Rail should be the most obvious way of moving containerized product around Europe, but the percentage of pharmaceutical products moved via rail as opposed to road is minimal. For many companies rail isn’t fast enough or sufficiently robust and it’s often prone to technical issues. Many companies consider it a poor transport mode, in comparison to road, in almost every aspect apart from sustainability. Pharmaceutical companies have been looking at rail in the context of China to Europe and the Chinese government have been strongly promoting this. However, with the current situation in Ukraine, this has been put on hold by many.
Electric vehicles
Pharmaceutical companies are looking into using electric vehicles for last mile delivery within small markets, in countries such as Vietnam. However, the focus will continue to be on biofuels – in the near future, technology is not going to advance fast enough for pharma products to be transported in an electric lorry, from country to country, in a reasonable timeframe.
Author: Julia Swales
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