The EU Sustainability Directive’s Influence on Pharmaceutical Supply Chains

Pharmaceutical and healthcare companies are gearing up to navigate the implications of the new European Union (EU) Corporate Sustainability Due Diligence Directive (CSDDD) on their operations. A recent survey conducted by supply chain management expert INVERTO, sheds light on how these companies perceive the directive and the measures they are taking to ensure compliance. For UK-based pharmaceutical companies, compliance with this directive is particularly important as they will be held legally responsible for the actions of their subsidiaries and suppliers.

New Directive Prioritizes Human Rights and Environmental Protection in Business Operations

The EU has introduced a new directive called the Corporate Sustainability Due Diligence Directive (CSDDD), which aims to ensure that companies prioritize human rights and environmental protection in their business operations. On March 15, 2024, the Council of the European Union (representing Member States) voted to endorse an extensively revised edition of the CSDDD. This revision mandates Member States to establish regulations compelling specific EU and non-EU firms to undertake environmental and human rights due diligence across their worldwide operations and value chains. This directive applies to large European companies with a turnover exceeding €450 million (485 million USD) and more than 1,000 employees. They are required to disclose sustainability details throughout their supply chains and implement effective policies to adhere to the directive.

According to findings from the survey conducted by supply chain specialist INVERTO, 84% of pharmaceutical and healthcare companies view the new EU CSDDD as a chance to “harmonize human rights and environmental protection with their business goals.”

For UK-based pharmaceutical companies, compliance with the CSDDD carries significant legal implications, as they will be held liable for the non-compliance of their subsidiaries and suppliers.

A Large Majority Believe Compliance is Achievable, Forecasting Positive Financial Gains

Since a majority of pharmaceutical and healthcare companies see the CSDDD as an opportunity to align their business goals with sustainability objectives, it appears as if supply chains will not be negatively impacted. Furthermore, the survey reveals that 74% of respondent companies believe that compliance with the directive is achievable, and have already taken steps to ensure they meet its requirements. These proactive measures include developing compliance procedures, issuing financial reports, collaborating with industry peers, and monitoring performance indicators. 

Despite the potential benefits, companies in the healthcare sector acknowledge significant challenges in implementing the directive. Key obstacles include a lack of capacity and unclear guideline directives. However, companies are optimistic about the long-term financial benefits and the positive impact on their image and environmental responsibility. Specifically, 60% of participants anticipate a positive long-term financial impact from the directive, expecting a return on investment. Additionally, 55% believe that stricter regulations could enhance their company’s image, while 51% highlight the benefit of greater environmental responsibility.

Sustainability of the Pharma Supply Chain in Context of International Operations & EU Regulations

Sabrina Morton, Principal at INVERTO, emphasizes the significance of the CSDDD in promoting transparency within supply chains, particularly in the healthcare industry. “Companies are now receiving uniform rules for the entire EU, which is particularly advantageous for the healthcare industry. The CSDDD enables companies in the healthcare sector to make their supply chains more transparent. UK businesses with international operations need to consider carefully how they need to align their operations with that of the EU.” 

Morton added that by creating transparency, companies can identify cost-saving opportunities and reallocate resources accordingly, contributing to the operational efficiency and thus driving innovation and competitiveness.

The survey, which gathered insights from over 680 decision-makers from business-to-consumer (B2C) and business-to-business (B2B) companies with more than 500 employees, underscores the importance of aligning operations with EU regulations, especially for UK businesses with international operations.

As pharmaceutical and healthcare companies brace themselves for the impact of the CSDDD, proactive measures aimed at achieving compliance and leveraging sustainability as a strategic advantage will be essential. By embracing transparency and environmental responsibility, companies can not only meet regulatory requirements but also drive positive change within their supply chains and the broader industry landscape. ems, us, global warming, green, epa, pollution, climate change, sustainability, agency, dep, environmental pollution, environmental science, environmental engineering, ewg, business operations, CSDDD, environmental protection, ESG, EU, Going Green, subsidiaries, Supply Chain, Sustainability, UK, worldwide

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Author

Bernice Lottering