Increasing carbon emission transparency through SBTi contributions

In our previous two insights, we have focused on the pharmaceutical industry’s growing focus on contributing to a sustainable future and setting ambitious, long-term objectives to mitigate climate change. To help us achieve our own goals, Recipharm, as a sustainable CDMO, has committed to the Science Based Targets initiative (SBTi). The SBTi has developed methods and criteria for ambitious and transparent climate targets. 

In this insight, we want to reveal more about how we calculated our emissions targets using the Greenhouse Gas (GHG) protocol methodology and set our goals to make a measurable difference. We also want to explore the issues with confusing terminology, which are standing in the way of achieving quantifiable improvements in the industry’s environmental footprint. 

Calculation and submission: the first step to transparency with SBTi

We recently submitted our targets to the SBTi. They were based on calculations of our base year emissions for 2021, using the GHG protocol methodology to work out our full carbon footprint. 

The GHG protocol is the approach most commonly used by industry to calculate emissions. It is also recommended, and sometimes required, by external sustainability reporting frameworks and standards, including SBTi. Using externally recognised calculation methods such as the GHG is vital to achieving transparency and comparability. It allows everyone to easily understand our current emission status, helps our partners understand how far we have to reduce our footprint and how we can work to achieve our goals. 

Under the GHG protocol, a company must calculate its emissions from a base year, categorising them into three different scopes depending on whether they come directly from its own operations, indirectly from energy consumption, or from value chain partners. We explored these scopes in more detail in our earlier insight. 

The methodology doesn’t allow companies to subtract any emissions from their carbon accounting, neither through carbon offsets nor through so-called “avoided emissions” — reductions that occur outside of a product’s life cycle or value chain, but as a result of the use of that product. Calculations including carbon offsets and avoided emissions can of course be part of your annual report and other communications, but they need to be presented separately from the total carbon footprint of an organisation.  

The Recipharm team selected 2021 as our base year to calculate our current footprint. We identified that our emissions come from across all scopes: 

• Scope 1: It accounts for 3.7% of our emissions.
• Scope 2: Emissions contribute 0.5% to our footprint.
• Scope 3: Our value chain is responsible for the remaining 96%.

This calculation has been useful to help us understand where we need to change to have the greatest impact on our emissions, and to demonstrate to other companies that the targets we set and the initiatives we put in place will have the most significant effect. 

The SBTi will assess our submission against its criteria, ensuring that it is in line with the Paris Agreement to limit global warming to 1.5°C. This confirmation will provide evidence to the wider industry of the effectiveness of our efforts. 

Terminology confusion impacting on honesty about carbon emissions

Since embarking on our path to cut carbon emissions and going through the process of calculating our base year and our targets, one thing we’ve become acutely aware of is the different terminologies used throughout our industry when it comes to communications around striving for a greener future. 

For example, we’ve seen businesses adopt terms such as:  

• Carbon neutral: Refers to a specific product or a business and indicates that all CO2 emissions for the reporting period have been compensated for through carbon offsets. This can be done in combination with CO2 reduction targets. 
• Carbon negative: Goes beyond carbon neutral through the purchase of additional carbon offsets, once the full carbon footprint has been compensated for.  
• Net-zero: After reducing emissions as much as possible, a company commits to purchase carbon offsets for the remaining emissions. 

These are very new terms to the industry; as a result, they lack clarity and have no defined standards or rules. It’s no surprise, then, that there is confusion across the sector. For example, all these terms rely on compensating for emissions by purchasing offsets. When these offsets are allocated to a specific product or operation, a carbon-neutral, carbon-negative, or net-zero claim can be made when offsets equal or exceed emissions, respectively. 

These methods are ambiguous and occasionally criticised for allowing companies to buy out of the responsibility for emissions reduction. 
All of this vagueness has ramifications for transparency — if the words we use don’t have clear, commonly understood definitions, how can we understand our partners’ efforts and goals? This can undermine companies’ efforts to identify partners capable of truly supporting their sustainability goals. 

Cross-industry collaboration is key

The SBTi aims to increase transparency not just by providing external verification of sustainability goals, but also by attempting to end this confusion over terminology and aims with firm definitions of key terms. 

One of the initiatives the SBTi has worked on to help end this complexity is the publication of its Net-Zero Standard in 2021, providing a framework for corporate net-zero target setting. This standard provides clear definitions of the “net-zero” term that companies participating in SBTi must sign up to and use in their communications about their efforts, so everyone is operating on a level playing field. 

The SBTi Net-Zero Standard also requires companies adopting it to primarily seek to reduce their carbon footprint through actual reduction activities rather than through offsets. A company that has set a Net-Zero target approved by the SBTi cannot claim to have achieved the target unless they have decreased CO2 emissions by 90-95% by 2050. The emphasis is on rapid emissions reduction, with offsets helping to mitigate the remaining 5-10% of emissions in the target year.  

Our commitment to upholding transparency

At Recipharm, we want to lead in addressing this confusion over language within the pharmaceutical industry and to work with supply chain partners to make tangible, measurable progress to a more sustainable future. That’s why we have signed up to the SBTi. 

We are committed to using SBTi’s definitions when talking about our sustainability goals and initiatives. With this, we intend for our customers and other partners in the value chain to understand exactly what we are doing now, and what we are trying to achieve in the future. 

The more companies sign up to robust standards like those established by SBTi, the easier it will be to communicate meaningfully about carbon emissions reduction and to hold each other to account. As a result, we will be able to achieve measurable and impactful change for the better, together.