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A conversation with Nico Ros, co-founder and CTO of SkyCell.
Nico Ros, who is not only a Swiss engineer, but a member of SkyCell’s c-suite as its chief technology officer, partnered with co-founder Richard Ettl to establish the pharma container manufacturer over a decade ago. The cold chain company has put sustainability at the forefront of its efforts, with its product catalogue offering related environmental efficiencies in the transport of pharmaceuticals, specifically in the weight and space departments.
Pharma Commerce spoke with Ros to discuss the challenges that come with fully committing to environmental conservation initiatives, the current inefficiency obstacles impacting the pharma sector, and how life sciences organizations can balance cost and sustainability when making supply chain decisions.
Pharma Commerce: Environmental considerations and sustainability need to be implemented into a business from the start, as trying to accomplish that after the fact can be a challenge. How can this be accomplished?
Nico Ros: It has become very clear over the last several years that a focus on sustainability is non-negotiable. It’s not just merely something that’s “nice to have”—businesses that cannot or will not adapt to improve their footprint will not survive. This is particularly true for operators in the pharmaceutical sector, as major companies come under increased pressure in regard to their sustainability practices. This, in turn, will trickle down to the wider supply chain industry, which will come under increasing pressure to meet the highest sustainability standards and demonstrate a plan for continuous improvement toward net-zero goals and beyond.
Figuring out how to tackle the problem of CO2 emissions and steering a business toward this—and sustainability as a whole—is no easy task. One way to accomplish this is by creating incentives for taking sustainable actions. For example, if a business were to give any CO2 emissions reduced internally a monetary value per ton, and different departments would receive more budget the more they reduced, then this incentivization could ensure that sustainability is more of a strong consideration for all. At SkyCell, we’ve set a goal for all departments to reduce their CO2 footprint wherever possible, and when it comes to each new product that we develop, we ensure that it’s more CO2 efficient than any products that came before.
Incentives can accelerate change, so by giving CO2 a price, newer, better, and greener solutions moving forward will become much more lucrative from both a monetary and sustainable perspective.
External factors will also help encourage businesses to implement these considerations from the start. Increased government regulation, such as stricter limits on CO2 emissions, penalties for generating landfill waste, and bans on single-use plastics will force businesses to take action to remain compliant, while also generating cost-savings as a secondary benefit. Investor pressure is also something to keep in mind, as environmental, social, and governance (ESG) becomes further ingrained in their value-making processes.
What are the main inefficiency challenges facing the pharma industry? How can embracing the circular economy help to combat these obstacles?
When SkyCell was established in 2012, my co-founder Richard Ettl and I decided that one of the defining principles of the company would be to embrace the circular economy by combatting the inefficiency and sustainability challenges that the pharmaceutical industry faces. The global healthcare industry emits approximately two gigatons of CO2 emissions annually, which by itself makes it equivalent to the world’s fifth largest emitter country.
One of the reasons for this infamous ranking is the inefficiency during the transport of temperature-sensitive pharmaceuticals.
For example, a typical intercontinental transport of one pallet of medication, including packaging, emits between six and 14 tons of CO2, so a pharmaceutical organization producing around 100,000 of these pallets emits about one million tons of CO2 through the transport of their products alone.
These emissions are the equivalent of the energy used by 125,000 homes in the US in a single year.
These inefficiencies are caused by the fact that about 70% to 90% of these temperature-sensitive medications are still transported in low-tech single-use packaging, which are essentially cardboard and Styrofoam boxes with cold bricks. Next to the natural resources that they consume and the waste they create, they are also extremely inefficient in terms of their weight-volume ratio. This means that these single-use pharmaceutical containers can weigh up to five times as much as the actual product, and they use 3.5 times the space of the product they secure. Their transport creates unnecessary air traffic and consumes much more fuel than is actually needed.
That’s where the circular economy comes in place. Due to the reusability of the newest pharmaceutical containers, it becomes economically and technically feasible to use high-performance materials, which are light and thin, thus drastically reducing the amount of space and weight needed to transport pharmaceuticals. As an additional benefit of these circular containers, the waste and global landfill can be drastically reduced. SkyCell’s newest product, the 1500X hybrid container, only needs about 1.5 times the volume compared to the product it secures, and weighs only 228 kg (503 lbs) for every cubic meter transported, thus reducing the necessary aeroplane trips and the fuel needed to transport life-saving pharmaceuticals.
As nice as these circular solutions sound, their leasing fee is often higher compared to single-use packaging. How can a pharma company balance cost and sustainability in their supply chain decisions?
When it comes to pharmaceutical containers, as is true for many other clean technologies such as electric cars, it is crucial to compare the total costs of ownership. For pharmaceutical transport, an important component to consider is airfreight costs, which are charged as a function of weight and volume. CO2 emissions from transport are also a function of weight and volume, and by reducing these two factors, pharmaceutical shippers can, therefore, reduce both factors simultaneously, which is the beauty of the transport sector. As an example, for every kilogram of intercontinental transport, the industry emits 20-30 kg (44-66 lbs) of CO2, at a cost of currently about 4.5 USD per kg. Reducing the weight per pallet by 200 kg thus reduces CO2 emissions by about five tons, and reduces costs by approximately 900 USD.
In addition, single-use containers are prone to temperature excursions, leading to costs for cost-and-preventive actions (CAPAs) and lost products. When adding the cost, single-use containers become even more expensive and less sustainable, since products need to be discarded, remanufactured, and re-transported.
To sum up, when considering total costs, using circular solutions in most cases makes sense both economically and ecologically.
In September 2022, SkyCell released its second annual Sustainability Report, which details the progress made in achieving net-zero emissions within the entire supply chain and making pharma supply chains more sustainable. Could you describe the outcomes of that report?
Our goal of eliminating loss in the pharmaceutical supply chain is closely linked to how we embrace sustainability as a company and our pursuit of becoming net-zero by 2040. With our Sustainability Report, we want to lead by example and demonstrate how we are taking steps toward reaching our net-zero goals.
For pharmaceutical companies, supply chains represent such a large portion of the emissions they create, with scope 3 emissions being the most challenging to reduce as they fall outside of any one company’s direct control. Pharmaceutical companies on average report emissions anywhere between 5.6% (Amgen) to 10.5% (Eli Lilly) of their emissions with transport. However, most pharmaceutical companies do not report the non-CO2 effects of their transport. By accurately including these effects, the actual emissions of transport would likely be approximately twice as high.
To reduce these emissions, which are a large part of the total emissions of any pharmaceutical business, three measures can be taken: optimization of the route, optimization of trucks and aeroplanes (including fuel switching), and improvement of the packaging. In the short term, the optimization of the packaging has the biggest effect. Switching from a single-use to an efficient multiuse container can reduce CO2 emissions by around 50% due to the higher volume-efficiency, as mentioned earlier. In the climate section of our annual report, we highlight this principle. Another key highlight was that SkyCell had successfully transitioned our operations to run solely on renewable electricity in 2021.
The report also highlights our continued work on embracing the circular economy and the reusability of our products. The opening of our first in-house production center was a big step toward taking further ownership of our own supply chain and the increased life cycle of our products. Additionally, SkyCell was awarded an EcoVadis Gold Medal in recognition for its accomplishments in environment, ethics, labor, and sustainable procurement.
We will continue to publish these sustainability reports so that we can hold ourselves accountable, and, in turn, help the pharmaceutical industry to tackle the enormous sustainability challenges it faces.
The sector has seen a plethora of companies make carbon-neutral pledges over the next couple of decades and beyond, including SkyCell. How can the pharma industry continue to push the envelope on this?
Historically, the pharmaceutical industry has not been especially focused on environmental sustainability. For instance, in the past, some pharmaceutical companies have been accused of dumping hazardous waste, disregarding the normal legal processes for this type of activity. This has had a very detrimental impact on the reputation of these businesses, notwithstanding the necessity for them to spend hundreds of millions to clean up these sites. Many companies do not want to repeat these mistakes of the past and as such have announced bold sustainability goals, including carbon-neutral pledges. Many do this for ethical reasons, but the risk of climate litigation and its associated repercussions will loom large in their minds. Emitting over what is allowed in accordance with the Paris Agreement isn’t just harmful to the environment—it also increases the risk exposure of these businesses.
The first pledges of the industry mostly pertained to the emissions of their sites and from the energy they procure (scope 1 and 2). As a consequence, the sustainability actions taken were focused on these scope 1 and 2 emissions and targeted renewable energy and energy efficiency.
Therefore, improving the pharmaceutical supply chain, including the transport of pharmaceuticals, has up until recently not been in the sustainability scope of the industry. It has come to accept an average loss rate on shipments of products that results in millions of doses of potentially life-saving medicines going to waste each year. It has also been slow to adopt reusable solutions, with single-use boxes and external cooling solutions still being widely utilized. This is why the reduction of temperature excursions is so important, as preventing excursions means fewer product losses, which then leads to less waste, less creation of new inventory, and less resending of products.
In the past couple of years, we have learned that supply chain emissions (scope 3), caused by processes such as described earlier, are about five times the emissions of scope 1 and 2 combined. Therefore, future pledges and actions will focus on the supply chain.
With this new shift, losses in the supply chain will no longer be tolerated, and inefficiencies will be eliminated to reach net-zero goals.
To reduce these inefficiencies, low-tech packaging that does not utilize technology and data are simply not fit for purpose. One solution that’s becoming more widespread is the “hybrid” container, which is a temperature-controlled container that allows pharmaceutical companies to optimize their supply chain by reducing, and even predicting, the risks associated with delivering sensitive medicines. From a sustainability perspective, these containers are designed to be reused and put a stop to the heavy usage of single-use solutions that have been a staple of the industry.
If a net-zero future is to be achieved, it’s imperative that the industry works on the development of environmentally-friendly and technologically-driven methods like this to move these essential products.
How do you envision the future of pharma sustainability shaping out?
I see the future of pharmaceutical sustainability in the continued greening of the supply chain. The industry’s supply chain has a history of wasteful and unsustainable behavior, but going forward, concerns from the likes of governments, shareholders, and consumers will push businesses to consider ways to minimize their carbon footprint. Pharmaceutical companies have already reacted and several companies, such as AstraZeneca and GSK, have recently launched sustainable procurement programs, which will advance their sustainable purchasing.
As suppliers, we are eager to do our part to work together as an industry to reach our net-zero goals. I envision that in the next year or two, we will see the first net-zero pharmaceutical transport using clean-tech solutions, such as sustainable aviation fuels, hybrid containers, electric trucks, and ammonia-powered container ships.
From there, we can scale this flagship project to operate entirely on net-zero emissions. To truly become carbon-neutral, the pharmaceutical industry as a whole needs to fully embrace these renewable energy transport methods, while also seeking to become as energy efficient as possible.
To ensure the efficiency of net-zero transport like this, I envision that pharmaceutical companies will develop an increased digital visibility of their shipments to optimize efficiency and eliminate losses. Our SECURE software platform accomplishes this and allows for the optimization of all of our shipping lanes, which when combined with our containers, creates one of the highest payload efficiencies globally. The more companies that achieve this oversight, the better and more sustainable the coming years will be.