Strategies for sustainable innovation and competitiveness in healthcare

All companies in the healthcare sector—from big pharma to life science startups to MedTech providers—have a rigorous compliance mindset, which is essential for maintaining their licence to operate. Over many decades, they’ve become accustomed to meeting detailed industry regulations from bodies such as the European Medicines Agency (EMA) and the US Food and Drug Administration (FDA), which set requirements for product safety, efficacy, and quality. More recently, the EU’s Green Deal has introduced a whole new set of regulatory opportunities, requiring healthcare companies to consider environmental sustainability in their operations and products—driving change in their approach to social and environmental impacts.

Although the effects of the EU Green Deal are often viewed as an added compliance burden—an issue acknowledged by the European Commission through the Omnibus RegulationOpens in a new window¹, the intent of these regulation is different. They are designed to drive a shift in mindset and behaviour, with significant financial and supply chain impacts. As a result, they present major opportunities for healthcare companies that look beyond compliance and harness it proactively to create business value. Timing and awareness are crucial.

For example, the newly proposed Clean Industrial DealOpens in a new window² aims to position the EU as an attractive location for manufacturing, promoting clean technology and circular business models. By using the data and insights generated through aligning with the Green Deal and Clean Industrial Deal, healthcare companies can manage their operations, supply chains, and societal and environmental impacts more effectively, improving their overall performance and competitive advantage.

It’s important to recognise that for many healthcare companies, deciding whether they will be affected by specific sustainability regulations can be complex. In many other industries, exposure to these rules is clearer, making compliance requirements easier to define. But for healthcare businesses, Green Deal regulations often apply in more nuanced ways, making it harder to assess regulatory exposure, and leading to unexpected compliance obligations.

Take the Carbon Border Adjustment Mechanism (CBAM), an EU policy that imposes a carbon price on imports of certain goods (such as screws and bolts) to meet the same climate standards as products made within the EU, thereby preventing carbon leakage. While medical screws and bolts are generally exempt, a company importing aluminium to manufacture these products within the EU would fall within the scope of the regulation. Therefore, indirectly CBAM might still increase cost prices. Another example is the EU Deforestation Regulation, which applies to materials such as paper packaging and rubber gloves, making it relevant for the healthcare sector.

The key takeaway for healthcare organisations? Don’t assume that, just because you’re not engaged in heavy industry or selling directly to consumers, sustainability regulations won’t apply to your business. At the same time, remain alert to the potential benefits of these regulations—particularly their ability to provide insights into the risks and resilience of a business model in the face of climate change.

While most Green Deal regulations can have an impact on healthcare businesses, we find businesses are especially eager to seek our opinion on three aspects.

Impact on your supply chain: packaging regulations

Healthcare companies are often associated with high levels of waste generation. Under new packaging regulations, all packaging must be recyclable by 2030, with specific recycled content requirements for plastic packaging. The pharmaceutical sector has been granted time-limited exceptions until 2035, particularly for packaging in direct contact with medicinal products and medical devices.

Despite exemptions, the healthcare sector struggles with recyclability and recycled content standards. Traditionally using a linear model due to hygiene requirements, it must now adopt a circular approach. Healthcare companies typically have detailed supply chain knowledge, but regulatory complexity limits flexibility. For example, switching to recyclable blister packs requires regulatory approval.

Consider the case of Limulus Amoebocyte Lysate (LAL), a compound derived from the blood of horseshoe crabs and used in pharmaceutical testing to support patient safety. In some jurisdictions, the use of LAL is tightly regulated, further limiting supply chain flexibility and making supplier transitions more challenging.

Given these complexities, healthcare companies must develop a detailed view of their supply chains’ sustainability impacts and plan for changes well in advance. Beyond risk mitigation, these granular insights can also enable businesses to make better decisions and steer their strategies to increase their company value—optimising sourcing and the use of scarce resources. 

Transparency on your impact on nature: the Corporate Sustainability Reporting Directive (CSRD) 

The CSRD requires detailed and extensive disclosures about how sustainability issues affect a company’s business, as well as its impact on society and the environment. Beyond targets and metrics, CSRD disclosures cover sustainability governance, the interaction of sustainability risks and opportunities with business strategy, and the policies and action plans in place to manage them. All this information must be independently assured.

The main challenge here is that, up to now, healthcare companies’ focus on impacts has generally centred on their—usually positive—effects on people and society. With CSRD, they must not only continue to raise their game in societal impact reporting but also shift and expand their focus and disclosures on their environmental impacts, an area where industries such as consumer goods are more experienced and mature.

CSRD reporting can also reveal opportunities for operational and strategic improvements—from optimising raw material use and reducing water consumption to finding suppliers in climate-sensitive areas. For instance, some drug extracts come from plants vulnerable to climate change, making it beneficial to explore alternative compounds. Or a vital supplier might be based in a flood-prone region, prompting a reassessment of supply chain risk.

The financial impact: Extended Producer Responsibilities (EPR)

As highlighted before, the effects of many Green Deal regulations on healthcare businesses are nuanced and complex, and the impact needs to be defined on a case-by-case basis. Many healthcare companies are concerned about exposure to EPR along the product lifecycle, including collection, recycling and disposal. Additionally, depending on a healthcare company’s size, product focus, business model and supplier base, several other sustainability regulations might also apply—making it vital to assess each one individually.

A clear example of EPR’s impact can be seen in the Urban Wastewater Treatment Directive. Under this directive, producers of human medicinal products and cosmetics must cover at least 80% of the costs associated with quaternary wastewater treatment to remove micropollutants, as well as 100% of the costs for data collection and other administrative expenses. Beyond increasing transparency in waste treatment practices, this regulation places a significant financial burden on pharmaceutical companies, requiring investment in advanced wastewater treatment technologies and data management systems.

Green Deal regulations are already in place—and they potentially affect every activity and function within a healthcare business. To navigate these regulatory challenges and turn them into opportunities for growth and long-term value creation, companies should take the following five steps:

• Analyse your current status—and identify the triggers for change: You should review closely which regulations apply to your business and what their impact is, depending on factors such as your turnover, revenue and type of products. This will involve gaining a deep understanding of both regulations and of your business’s operations and supply chain.
• Establish a horizon-scanning process: Having set the current baseline impact, you need to find what triggers will change your exposure over time as your business grows, innovates, acquires new entities, or enters new product categories or markets. It’s also vital to track ongoing regulatory changes. The horizon-scanning should also include scenario planning on the effects of any changes on your regulatory exposure.
• Verify that your sustainability data and systems are fit for purpose: Are you collecting and analysing the information needed to understand and report on your sustainability impacts? If not, investment is needed in the right data infrastructure. It’s also important to consider how AI tools can support and sharpen your sustainability insights. 
• Develop a strategy and roadmap founded on cross-functional collaboration and communication. Since sustainability regulations touch all aspects of the business, it’s imperative that every function is involved in the response. This means bringing together teams ranging from regulatory ethics and compliance to procurement and supply chain, and from the legal company secretariat to R&D and production, all working together based on a single strategy, roadmap and action plan. 
• Embed the strategy within your operations and supply chain. Following sustainability regulations—and realising the business benefits they offer—is not a one-off box-ticking exercise, but a continuous process of learning, feedback and improvement. So, this needs to become an integral part of business-as-usual.

With the right Green Deal regulatory strategy, processes and data, a healthcare company is well placed to turn compliance into a competitive edge. By feeding the data-driven insights back into the business, it can manage its supply chain and operations more efficiently as well as more sustainably, make itself more attractive to healthcare buyers, and make better decisions on actions ranging from supplier selection to finding potential acquisitions. There can also be direct financial benefits, for example from increasing the efficient use of sustainable energy—incentivised by governments in some cases—and reducing the need to buy carbon credits.

The message is clear. There’s value at risk from not following Green Deal regulations. But there’s an even greater upside value opportunity once compliance is achieved—providing a solid foundation for growth and differentiation. The time to start laying down that bedrock? Today.