Life sciences organizations can utilize power purchase agreements (PPAs) to achieve carbon-neutrality goals. These can move businesses closer to achieving carbon-neutrality by lowering scope 2 emissions (emissions from the purchase of energy) and can help with scope 3 (value chain) emissions.12 In 2019, a large multinational organization seeking to accelerate its move toward sourcing 100% electricity needs from renewable sources by 2025, signed four new power purchase agreements totaling over 370,000 megawatt-hours (MWh) per year.13 A multinational organization with revenue greater than US$50 billion signed five virtual PPAs (VPPAs), where no physical exchange of energy takes place, in 2020, collectively adding more than 275 megawatts of clean power. This move makes it the first pharmaceutical organization set to achieve 100% renewable electricity in its domestic operations through VPPAs.14
3. Make use of third-party policy tracking
Third-party policy tools can provide a snapshot of carbon, environmental and sustainability taxes, and incentives and exemptions around the world, including government actions to meet commitments to carbon-neutrality and emissions reduction. Take, for example, the EY Green Tax Tracker, which identifies more than 3,700 sustainability incentives globally, including tax credits, exemptions, grants and loans. These incentives are generally divided into three categories, with many programs a mix of the three:
- Encouraging a reduction in natural resource consumption
- Encouraging a switch to renewable or alternative energy sources
- Encouraging the development of new low-carbon products and manufacturing processes
4. Take an active role in the planning of tax legislation around sustainability
Tax policy and regulation are tools that support the wider sustainability transition and transformation. So it could benefit organizations to play an active role in engaging with wider business and policy context for sustainability goals.
Life sciences organizations are engaging with policymakers at the country, state and local levels to further policy frameworks. A large multinational organization supported the position of various advocacy organizations on the idea of allocating true price to carbon as an effective measure in mitigating climate change. The organization has set and implemented shadow price on carbon of US$100 per ton CO2e, in order to represent the true cost of climate change and to have a relevant influence on energy costs. Recently, a policy institute has been created to promote carbon dividends framework in the US and includes among its founding members many of the country’s largest life sciences organizations.
5. Monitor changes to ESG and sustainability tax policy and their potential impact
Globally, 36 jurisdictions have implemented a carbon tax, including several key markets for life sciences companies, such as Mainland China, Japan, Singapore, portions of the EU (18 jurisdictions have implemented carbon taxes at the national level) and the UK.15 Twenty-nine other jurisdictions are discussing carbon pricing schemes. Governments have also started to levy taxes on plastics used in packaging besides already implemented regulations for single-use plastic (SUP) items or extended producer responsibility-related measures.
For the reasons discussed above, life sciences companies must prepare now for the current and anticipated sustainability impacts facing the entire business, including their tax departments. Organizations must be aware of the environmental or green taxes levied to discourage them from engaging in anti-ecological business practices. The new generation of plastic packaging taxes challenges businesses concerning data and document availability. Alignment among several stakeholders within the business is critical. Additionally, lacking harmonization of sustainability rules, for example, plastic packaging taxes across Europe, leads to even more complexity and a need for analysis.
The authors would like to thank the following individuals for their contributions to this article:
Dheeraj Gour, Senior Analyst, Health Sciences and Wellness, EY Knowledge
Kaveri Mahajan, Assistant Manager, Health Sciences and Wellness, EY Knowledge