6 MIN READ

How to decarbonize a painkiller

14:55

Here’s how to take the fossil fuels out of your pharma formula — before it gives your CFO a splitting headache.

Pharma has a fossil fuel addiction — and it’s costing both the planet and your profits. The pharmaceutical industry is running out of time to decarbonise at 4.4% of global emissions and 55% more carbon-intensive than the automotive sector. It’s a bitter pill to swallow, but the question isn’t whether to change — it’s how fast you can cut fossil fuels from your production lines.

Decarbonization is no longer optional. It’s already happening.

As a pharma plant manager, you’re stuck in a pressure cooker. On one side: relentless ESG targets, tightening regulations, and fossil-fueled energy costs just keep climbing. On the other: leadership demands solutions that protect both margins and compliance. And if that wasn’t enough, you’re also navigating a regulatory labyrinth — from GxP and GMP to the growing complexity of the energy market.

And every choice you make today will echo across your climate impact, your supply chain — and your bottom line — for years to come.

In a rush? Read the 4-step formula to decarbonize your pills >

The first question to ask: Do you have to decarbonize?

To help pharmaceutical companies navigate the complexity of decarbonization, we sat down with Lars Martinussen, Commercial Director Northern Europe at Kyoto Group.

With years of experience in industrial energy transitions — and with his ear always to the ground — Lars has seen first-hand the challenges companies face when moving away from fossil-fueled process heat — and why acting now definitely is your smartest move.

– It might seem unnecessary to even ask if the pharmaceutical industry has got to decarbonize, he says. - But it’s an eye-opener.

He points out that many pharmaceutical companies face a significant gap — between the expertise required to pull off a profitable energy transition and the business-as-usual operations they’ve run for decades. In many cases, he stresses, gas boilers are still the backbone of high-temperature sterilization or energy-intensive API synthesis processes.

Lars says the real question starts here: How’s the pharma industry to move past them?

– If you answer “yes” to the need for industrial decarbonization, Lars says, – follow up with: What is it going to take? What are the risks and benefits of acting now versus delaying? Is it possible to postpone the question for, say, five years?

– It sounds like you’re implying the only real answer is ‘yes ’— decarbonize now?

– Exactly. Stick with fossil-fuel heat, and you’ll face soaring CO₂ costs and growing ESG pressure from every direction, he says.

Take the EU’s Green Deal Industrial Plan and global initiatives like the UN’s Net Zero Healthcare initiative, already backed by pharma giants like GSK and AstraZeneca. The pressure on the industry is growing — not just from regulators, but from healthcare providers and investors demanding low-carbon supply chains. With scope 3 rules tightening across Europe, pharma companies that delay decarbonization risk losing credibility, contracts, and access to key markets.

And the consequences don’t end there. Companies dragging their feet on clean heat also face higher borrowing costs, dwindling investor interest, and a consumer base that’s paying closer attention than ever before.

– So, Lars says, going forward. – The real question quickly becomes: “Do I want to keep shipping pills — or end up on someone’s non-compliance list?” Of course, you don’t.

Assess in-house expertise or identify knowledge gaps

It may feel strange to mention painkillers and decarbonization in the same sentence. After all, you’re a pharmaceutical manufacturer — not an energy utility, right?

But the reality is that electrification and decarbonization are non-negotiable, even in this highly regulated industry. With the EU’s legally binding target to cut emissions by at least 55% by 2030 — and growing consumer demand for sustainable production — the pharmaceutical industry is facing intense scrutiny to reduce its carbon footprint, fast.

– This all boils down to one thing: do you have sufficient expertise within your company?

Lars Martinussen explains that many pharmaceutical companies assume they’ve got it covered. After all, they know their production processes and regulatory requirements inside out. But understanding energy markets and how to navigate a green transition is a different ballgame.

And that’s exactly where the pharma company’s project manager or energy manager fits — right between a somewhat vague understanding of the ongoing transition and the challenge of determining how to act.

– It’s a grey zone for many manufacturers, Lars says. – That’s why I stress that the ultimate question comes down to expertise and resources: Do I have enough technical, commercial and energy market know-how within my company to make a qualified assessment of what’s actually needed for us to electrify?

He smirks and adds:

– Without the right expertise, you’re just hoping for a placebo effect.

This all boils down to one thing:

Do you have sufficient expertise within your company?

Quick take: Decarbonizing pharma

Identify your needs: Decarbonizing isn’t optional—it’s inevitable. The pharmaceutical industry is among the most carbon-intensive sectors globally. Ask yourself: Do we need to decarbonize now, or can we risk waiting?
Assess your expertise: Do you have the in-house knowledge to navigate this shift? Many pharmaceutical manufacturers lack the technical and energy expertise required for an effective transition.
Evaluate commitment: Is management fully committed — beyond ESG headlines and annual reports? Real change demands top-level buy-in.
Build the business case: Decarbonizing pharma production isn’t just about climate impact — it’s a financial safeguard. The longer you wait, the higher the costs, from carbon pricing to supply chain risk.

Act now or risk waiting: the window is closing

What else makes decarbonization urgent? One word: time.

The iceberg is rapidly approaching on the horizon, and the world is headed straight for it. Is there still time to steer away? Put simply: Does the transition away from fossil fuels have to happen right now, or can we afford to wait and see?

– In the EGS reports, the decarbonization goals look nice and glossy, right? Lars says. – But who’s making sure there’s action behind the words? This is where things fall short. How easy is it really for a pharmaceutical company to know whom to reach out to for help? It takes quite a bit to know what you don’t know.

If you’re thinking about sitting this one out for a few years? Lars doesn’t recommend it.

– Delaying action on inevitable changes rarely pays off. And the transition is already well on its way. The question to ask when you have assessed your company’s expertise—is this: Is management fully committed?

Here’s something else to consider:

Two independent studies estimate that 40 000+ European companies — pharmaceutical companies included — will need to decarbonize their process heat over the next decade. Both studies highlight thermal storage as a critical solution to achieve this. And with fewer than 10 suppliers currently able to meet demand for industrial-scale thermal storage systems, the race is already on.

In other words: Will there be a solution available to you, when you’re done waiting?

Ensure management buy-in

Let’s face it: there’s a world of difference between ESG commitments in annual reports and rewiring how you generate process heat. Especially in the pharmaceutical industry, where quality control and regulatory compliance reign supreme.

– On one side, there’s an ideological component here, Lars says. – Everyone wants to contribute to the climate fight. But on the other hand, this is hard economics. As a CFO or CEO, can you justify sitting on your hands while regulatory and market risks keep growing? When you’re measured on shareholder value and margins, can you justify waiting?

– Can pharma afford to wait?

– No. And they shouldn’t, Lars says. – Decarbonizing your pharma production is both a business-savvy and risk-averse move. Yes, shareholder value matters today, but waiting could cost you even more. Do the exercise of calculating the financial and reputational risks of inaction. And the pressure from regulators, investors and supply chain partners? It’s only accelerating.

Lars Martinussen’s final reminder?

– Money talks. The endgame is speaking the language management understands. Skip the ESG poetry. What they need is a no-nonsense blueprint they can act on.

Decarbonizing your pharmaceutical producion

is a savvy business decision

that could keep you ahead of the game.

A 4-step formula to decarbonize your pills a.k.a. pharmaceutical production:

Step 1: Find out if emission cuts are on track

Set expectations accordingly. Review your ESG reports and compare your current emissions with targets. Identify if there are shortfalls and adjust timelines or goals if needed to set realistic expectations for decarbonising your company.

Do I have sufficient competence in-house?

Assess the expertise level within the company. If internal knowledge gaps exist in energy management or decarbonization, this is a good point to decide if you’ll need to outsource certain roles or hire a dedicated energy manager. If the assessment reveals insufficient knowledge, explore hiring external consultants or a permanent energy manager.

Find out to what extent management is invested in meeting carbon-cutting goals

Gauge management’s real commitment by discussing the resource and time investments required for decarbonization.

Use ESG reporting as a benchmark or goal

Use the company’s ESG report not just as a goal statement, but as a working document to track progress against defined targets. This keeps efforts grounded.

KPIs

Most managers are measured purely on fiscal KPIs, not green ones. Time to change? Are there any KPIs reflecting emission reductions?

What if we wait?

Run the exercise of calculating the financial and reputational impact if you wait to get started with the energy transition. This question is crucial to sensitize management and force them to understand that yes, sustainability costs more, but there’s no way around it.
Conduct a risk assessment comparing immediate decarbonization versus deferring action. Highlight risks like increased costs, potential penalties, long lead times and reputational impacts of delaying, investor impact.

Step 2: Test first-hand technical assumptions

Technical assessment of necessary equipment and new installations. In simple terms: Will new energy equipment fit physically–and are you allowed to do it, or alter what you already have?

Determine the demand for heat

Analyze your current heat usage to better understand production requirements and to properly size new heating solutions.

Conduct an energy audit

Review current energy consumption patterns for inefficiencies. An energy audit will help determine if energy use can be optimized before investing in new technology.

Compare possible solutions

Compare possible solutions by evaluating various technological options, such as electric boilers, thermal batteries, and hot water systems. Explore renewable energy sources like solar, wind, or geothermal to electrify pharma production and identify the best fit for your facility.
Can the production process be altered to remove steam and, implicitly, gas?

Permits needed

Look into any required permits, especially if noise, regulatory or environmental impact assessments are needed for installation.

How much space do you have available onsite, for new installations?

Check if there is sufficient space at your facility for new equipment, like thermal storage systems or electric boilers, which may require significant physical space.

Decarbonize:

It's now...

...or later

Step 3: Reinforce the business case with an engineering and commercial study

Validate or disprove assumptions of the previous step. Based on your initial assumptions, order an engineering study to establish whether they can be confirmed or need to be challenged in order to make the energy transition feasible.

Engineering study

Conduct an engineering study that covers technical feasibility, ensuring all planned equipment and technology solutions are viable in your specific setting.

Financial study

Create a financial projection for the proposed decarbonization steps. Include potential cost savings, anticipated ROI, and how these investments will affect the bottom line over time.

Explore funding

Look into available grants, subsidies, or funding options that could offset the upfront costs of decarbonization projects. In some regions, these can cover a significant portion of the expense.

Step 4: Decarbonize: It’s now or later

Decision gate for management. That’s right, it’s time for management to decide if they want to go ahead with decarbonization now—or wait. Outline implications for each choice.

Consequences short-, mid- and long-term

Clearly outline the consequences of delaying industrial decarbonization, including rising costs, financial penalties, and the risk of falling behind competitors. Address short-, mid-, and long-term impacts on market positioning, regulatory compliance, and the growing financial burden of inaction

Costs of waiting, costs of acting

Detail the estimated costs for each approach and weigh them against potential cost increases (e.g., rising gas prices or CO2 taxes) associated with waiting.

Position in market

Highlight how early decarbonization can enhance your market position by meeting customer and investor expectations for sustainability, compared to the risk of falling behind.

Gas prices now—and later on

Consider current and projected gas prices in the analysis, as fossil fuels become increasingly volatile and expensive.

CO2 taxes are not going down

Factor in the likelihood of rising CO2 taxes, which would make traditional fuel sources progressively more expensive, providing an economic argument for timely decarbonization.

Buy heat-as-a-service (HaaS)

As an alternative to fully investing in decarbonization technologies, consider HaaS. This model allows you to meet green goals by outsourcing heat production, offering flexibility without the need for significant upfront costs or operational involvement.

Ready to make your decarbonization goals a reality?

Decarbonizing is no longer an option — it’s a financial and reputational necessity. The steps are clear, but only you can decide when to begin.

Connect with Lars Martinussen, Commercial Director Northern Europe at Kyoto Group, to discover how to turn your decarbonization ambitions into concrete action.