GLAXOSMITHKLINE (GSK) PLC.:SUSTAINABLE SUPPLY CHAINS

GLAXOSMITHKLINE (GSK) PLC.: A CASE STUDY ON SUSTAINABLE SUPPLY CHAINS

Table of Contents 1.

Executive Summary.....................................................................................................................3

2.

An Analysis of the Sustainability Performance of GSK’s Supply Chain.................................3 2.1 Environmental Impact: Quantified Analysis of GSK’s CO2 Emissions, Other Emissions and Waste.......................................................................................................................5

3.

2.2

Social Impacts....................................................................................................................14

2.3

Economic Impacts..............................................................................................................15

Benchmarking GSK with Johnson & Johnson........................................................................16 3.1

Procurement.......................................................................................................................17

3.2

Production..........................................................................................................................17

4.

Recommendation and Application through Lifecycle Management......................................18

5.

Conclusion..................................................................................................................................19

6.

References..................................................................................................................................20

GLAXOSMITHKLINE (GSK) PLC.: A CASE STUDY ON SUSTAINABLE SUPPLY CHAINS 1. Executive Summary The key objective of this report is to evaluate and analyse the sustainability performance of GlaxoSmithKline’s (GSK’s) supply chain. GSK’s supply chain will also be examined through the application of the triple bottom line (TBL) technique and assess its economic, environmental, and social impact. In particular, the analysis outlines major areas in GSK’s supply chain requiring improvement, including waste management and CO2 emission. A benchmarking exercise will also be undertaken using Johnson & Johnson examining how it tackles and addresses its sustainability issues, as well as noting key points that would be beneficial to GSK. Finally, this report will provide a comprehensive recommendation using the lifecycle management framework to tackle its waste management issue and CO2 emission, as well as improve its environmental and social sustainability.

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2. An Analysis of the Sustainability Performance of GSK’s Supply Chain According to Stanciu, Constandache, & Condrea (2014), in the current globalised economy, many large organisations have realised that the maximising short-term profits policy is never a success guarantee in highly competitive environments. Thus, these many large organisations have realised that such a maximising short-term profits policy should be accompanied by a sustainable behaviour development since it creates a unique concern towards making sure that these organisations attain their sustainable performances through balancing between environmental, social, and economic (financial) performance. Numerous recent research studies by renowned scholars have shown that many organisations nowadays have embraced the sustainability performance concept especially in the latest climate change emergence, which has gradually ensured that such firms report on their sustainability strategies and performances to the public for scrutiny.

On the same note, it is imperative to note that the TBL (triple bottom line) concept is among the most prominent approaches, which many organisations have continued to utilise to attain their sustainability performances. In principle, the triple bottom line concept primarily focuses on three major areas when analysing business decisions and their different sustainability impacts. These three major areas include society, economy, and environment.

In reference to Miller (2020), the TBL (triple bottom line) refers to a unique business concept positing that organisations must be committed to measuring their environmental and social impacts, as well as their financial performances. Miller (2020) further articulates that the triple bottom line concept also posits that organisations should not only focus on the standard “bottom line” or generating profits, but should measure their environmental and social impacts. It is worth noting that the triple bottom line concept can be classified into “three Ps”: the Planet, People, and Profit. Hence, the triple bottom line concept notes that sustainability

can be attained in different organisations by balancing social and environmental outcomes with financial or economic benefits. The illustration below shows the triple bottom line with the three major components:

(University of Wisconsin, 2022) In particular, the analysis of GlaxoSmithKline (GSK) Plc.’s sustainability performance will be undertaken by examining its sustainability using the TBL (triple bottom line) concept, analysing its economic, social, and environmental impacts associated with its business supply chain.

2.1 Environmental Impact: Quantified Analysis of GSK’s CO2 Emissions, Other Emissions and Waste According to Ecodesk (2022), GlaxoSmithKline (GSK) is among the world’s prominent research-based healthcare and pharmaceutical organisations, supplying and developing medicines to the global market. Ecodesk (2022) also states that GSK operates in more than 100 countries where it has employed over 97,000 individuals and the firm has an extensive global supply chain. It is worth noting that nearly one third of the firm’s carbon impact has been traced to its raw materials. Hence, for the firm to become successful in its goal to

achieve its environmental sustainability objectives, GSK should ensure that its suppliers undertake bold actions to drastically minimise this particular carbon impact.

In reference to GSK (2020), the company has continued to remain committed to drastically minimising its environmental impact especially on its CO2 emissions. It is paramount to note that GSK is among the first pharmaceutical firms globally to develop and implement ambitious environment targets during the financial year 2010. Notably, after developing and implementing these ambitious environments targets across its operations, the company has significantly minimised its total water usage by 31%, waste to landfill waste by nearly 78%, and carbon (CO2) emissions by 34% according to its 2019 figures.

On the other hand, in reference to GSK (2021) in what is referred to as “GSK value chain carbon footprint 2021,” the illustration below highlights the key activities of the firm contributing to its carbon footprint:

(GSK, 2021)

It is evident from the above illustration that GSK’s value chain carbon footprint is derived from its various activities, including purchased services and goods, GSK’s operations, logistics, consumer and patient use, and disposal. According to GSK (2021), the total estimated emissions in reference to the company’s 2021 statistics is at 15.9 million tonnes of CO2 annually, whereby its purchased services and goods contributes 7.2 million tonnes of CO2 per annum, translating to 45%. In particular, this category is the largest value chain carbon footprint contributor in GSK. Notably, the purchased services and goods emissions are classified as Scope 3 emissions derived from the different services and goods that GSK purchases from other firms. The 7.2 million tonnes of Coz per annum from this particular activity is further divided into six categories with their individual contributions, including upstream energy contributing 0.2 million tonnes of CO2 annually and business travel contributing 0.2 million tonnes of CO2 annually. Others include commuting activities contributing 0.1 million tonnes of CO2 annually, capital investments contributing 0.3 million tonnes of CO2 annually, 1.7 million tonnes of CO2 annually, and 4.7 million tonnes of CO2 annually.

On the other hand, the illustration above also shows that GSK’s operations are regarded as Scope 1 and 2 emissions derived from operating the company’s commercial offices, factories, and laboratories, contributing 8% of the total CO2 emissions or 1.3 million tonnes of CO2 annually. Notably, this category is further divided into various categories depending on its contribution share, including its sales force contributing 0.1 million tonnes of CO2 annually, HFA and manufacturing emissions contributing 0.3 million tonnes of CO2 annually, and energy contributing 0.9 million tonnes of CO2 annually. The above illustration further shows that the logistics activities of GSK produce Scope 3 emissions derived from delivering consumer health products, vaccines, and medicines across the globe. In particular, these logistics activities contribute 6% of the total GSK’s CO2 emissions per annum, translating to

0.9 million tonnes of CO2 annually. Furthermore, the illustration also shows that consumer and patient use activities of GSK are regarded as Scope 3 emissions from consumers and patients using its products. It is worth noting that these specific consumer and patient use activities category is the second-largest value chain carbon footprint contributor in GSK since it contributes 40% of the total company’s CO2 emissions, translating to 6.4 million tonnes of CO2 per annum. This category is further divided into two categories, including use of other products activities contributing 1.0 million tonnes of CO2 annually and metered dose inhalers’ usage contributing 5.4 million tonnes of CO2 annually.

Lastly, GSK’s disposal activities are regarded as Scope 3 emissions derived from the disposal of the firms’ products by consumers, patients, and GSK. Notably, these disposal activities of GSK contribute the lowest value chain carbon footprint for the company translating to less than 1% of the total annual CO2 emissions, contributing 0.1 million tonnes of CO2 annually.

In practice, by assessing GSK’s emissions in the above illustration greatly assists in highlighting areas, which should be considered for improvement and efficiency.

In particular, according to GSK (2019), energy usage within GSK operations and activities also lead to GHG (greenhouse gas emissions). Hence, GSK (2019) articulates that deforestation, fossil fuels consumption, and other industrial and human activities, generate the largest portion of GHGs, such as HFC (hydrofluorocarbons), HCFC (hydrochlorofluorocarbons), CFC (chlorofluorocarbons), methane, nitrous oxide, and carbon dioxide. GSK (2019) notes that the company produces GHG emissions due to its consuming energy consequence to manufacture, develop, and discover medicines, as well as to deliver them to individuals globally that require them. GHG emissions in the company are also produced due to usage of its GSK products especially when patients and consumers utilise treatments for asthma and COPD. GSK (2019) also states that the company has drastically

minimised its direct (Scope 1 and 2) CO2 emissions by 30% since 2010 after it implemented a systematic energy reduction programme.

Most importantly, it is paramount to note that GSK has unfortunately been increasing its CO2 emissions in its value chain carbon footprint as portrayed in the illustration below regarding its 2020 statistics:

(GSK, 2020a) In reference to the above illustration, it is noticeable that its total estimated CO2 emissions tonnes per annum in GSK was at 14.45 million tonnes of CO2 annually. Notably, compared to its 2021 statistics where the total estimated CO2 emissions was at 15.9 million tonnes of CO2 annually, it is noticeable GSK significantly increased its CO2 emissions by 1.45 million tonnes of CO2 (GSK, 2020a). In principle, this is a huge increase and GSK has committed itself to undertaking drastic measures to substantially minimise its CO2 emissions, waste, and other emissions as portrayed in the illustration below:

(GSK, 2022) According to the above graph, GSK is committed to achieving a net zero (0) carbon emission by 2030. Notably, the graph above portrays how GSK projects to significantly reduce its carbon emission pathway by 2030 within various sections of its carbon footprint. In particular, according to the graph above, GSK notes that by 2025, 100% of its electricity requirements will be derived from different renewable sources. GSK also envisions exploring various options for a substantially reduced carbon impact propellant, which will be utilised in its Ventolin metered dose inhalers. Moreover, the company also envisions transiting 100% of its sales transportation fleet to low or electric emissions vehicles and integrating “eco-design” criteria into all the company’s new packaging formats and products.

GSK also plans to operate energy efficiency programmes to drastically minimise the energy it utilises in its sites annually, embrace and promote virtual working methods to reduce business travel, and build eco-design into the company’s products to minimise the environmental impact by 25%. GSK also envisions offsetting the emissions it cannot eliminate by utilising different nature-based projects, which will also be beneficial to local communities. GSK also

plans to work with its suppliers to drastically minimise its supply chain environmental impact (GSK, 2022c).

On the other hand, besides CO2 emissions and energy usage, waste production is another key element that has an environmental impact. According to GSK (2022a), GSK was sending 17,200 tonnes of waste to landfill in 2010, forcing it to establish a target to attain a “zero waste to landfill” in all its sites by 2020. GSK (2022a) further states that more than 60% of the company’s offices and sites have already attained the set target. GSK (2022a) also notes that the company is developing and optimising different waste treatment and minimisation technologies in certain areas of interest, including device recycling and packaging, water recycling and treatment, high boiling organics recovery, aqueous alcoholic waste, and high inorganic wastes.

According to GSK (2020b), the following was the company’s waste emission summary for its 2020 operations as outlined in its “GSK ESG Performance Summary 2020”:

(GSK, 2020b) In reference to the above illustration, the total amount of wastewater discharged in its 2020 operations was 9.5 million cubic meters, which was a huge reduction compared to its 2017, 2018, and 2019 operations. Moreover, the illustration also shows that the total beneficial use waste from its 2020 operations was 87.5 thousand tonnes, which was also a huge reduction

compared to its 2017, 2018, and 2019 operations. The total non-beneficial use waste for its 2020 operations was 20.6 thousand tonnes, which was also another huge reduction compared to its 2017, 2018, and 2019 operations. The total overall waste that GSK produced was 108.1 thousand tonnes, which was also another huge reduction compared to its 2017, 2018, and 2019 operations. The illustration also shows that the company produced 2.2 thousand tonnes as the total waste to landfill in its 2020 operations, marking a significant reduction from its 2017, 2018, and 2019 operations. Notably, the percentage (%) of waste that the company sent for beneficial use was 81%, marking a substantial increase compared to its 2017, 2018, and 2019 operations. It is imperative to note that GSK has been conducting tremendous reforms towards reduction its waste production and this can be confirmed from the above illustration.

According to GSK (2022b), the company is committed and dedicated to drastically minimising its operational waste and minimising the environmental impact of its packaging and products as outlined in the illustration below:

(GSK, 2022b) In reference to the above illustration, GSK is committed to attaining zero operational waste and eradicating single plastics usage by 2030 in its Biopharma section of operations.

Moreover, in Biopharma section, the company also envisions to attain 25% environmental impact minimisation for its packaging and products by 2030 in its products and packaging.

Subsequently, in its Consumer Healthcare section of operations, GSK envisions achieving TRUE Certification in all its manufacturing sites by 2030.

GSK (2022b) further notes that the company envisions reducing its virgin petroleum based plastic usage with a 10% minimisation by 2025 and by 1/3rd by 2030 in its Consumer Healthcare section of operations. The company also envisions developing viable solutions for all its products’ packaging, ensuring that they are recycle-ready by 2025, which will eventually become a major milestone towards making all its packaging reusable or recyclable

by 2030 in its Consumer Healthcare section of operations. Additionally, GSK plans to work in collaboration with different partners to drive local and global initiatives to recycle, sort, and collect Consumer Healthcare packaging in various aggressive exercises by 2030. In its supply chain, GSK envisions attaining a 10% waste minimisation by 2030 within its supply chain (GSK, 2022c).

2.2 Social Impacts According to Talan, Tyagi, & Surampalli (2020), the social dimension of sustainability has continued to attain acceptance as a sustainable development elemental component in the past.

Talan, Tyagi, & Surampalli (2020) further articulate that the social dimension of sustainability provides a unique holistic approach that can be utilised to improve the quality of life. Thus, this is achieved through considering different social or human and safety aspects involved in all the phases of a product life cycle, such as community and diversity impact, communications, training, labour conditions, and human rights. In particular, from the GSK case study, it is noticeable that the company considers health and safety matters as key priorities since it fully comprehends the importance of ensuring that all its employees and consumers are highly protected. According to GSK (2019a), the company established 13 public commitments in 2018 to portray how it will address the UN’s Global Goals for Sustainable Development and ensuring that it delivers improved, sustainable financial returns to its esteemed stakeholders and shareholders. Moreover, GSK noted that it would support the SDG 3 through utilising its science and technology in addressing various health needs and making its products available and affordable (GSK, 2022c).

Moreover, GSK (2019a) also notes that the company is also committed to successfully developing and researching innovative products and developing needed, high quality, differentiated consumer products, vaccines, and medicines to improve global health. GSK also has a world-leading scientific expertise that it utilises in the treatment and prevention of

infectious diseases. GSK also supports various global efforts to drastically minimise the burden of NTDs (neglected tropical diseases), malaria, TB, and HIV/AIDS, which disproportionately affects many developing nations’ citizens, through a wide variety of R&D initiatives. GSK also supports the SDG through providing access to NTD treatment, HVI medications, and vaccines, engaging in the “Save the Children” partnership interventions, and training frontline health employees.

In particular, GSK (2019a) states that the company effectively supports its employees’ wellbeing and health through providing a comprehensive preventive healthcare package to all its workers including their eligible dependents in all its global operations. GSK employees are also provided with personalised development plans through its people managers to ensure that its workers also grow in their professional and personal lives. GSK also has global LGBT+, ethnicity, gender, and disability councils tasked with driving its diversity agenda together with immense support from its employee resource groups. GSK has also signed the “Charter for Change” and offered its support for the “UN LGBTI global business standards” to ensure inclusion, dignity, freedoms, and rights for individuals with disabilities to reduce inequalities effectively. GSK is also dedicated to upholding the International Labour Organization’s core labour standards and the Universal Declaration of Human Rights.

2.3 Economic Impacts In principle, numerous recent research findings conducted by authoritative scholars have shown that proper application of the sustainability concept in organisations greatly assists in addressing “the bottom line” effectively. Moreover, these research findings also show that the sustainability concept enables firms to recognise and address their impacts on the environmental and social systems, which eventually enables them to achieve profitable competitive advantage after addressing these impacts. Notably, GSK is committed to balancing its environmental and social aspects through publishing its annual ESG

(Environmental, Social, and Governance) Performance reports where it outlines different important changes (GSK, 2022c).

In particular, in addressing the complexities of balancing environmental and social aspects with business and economic success, GSK is committed to utilising its science and technology expertise to tackle health needs through health security, global health, and new medical innovations. GSK is also committed to making its products available and affordable through healthcare access, product reach, and pricing. GSK also envisions becoming a modern employer through supporting its employees’ personal and professional development, wellbeing, and health, advocating for inclusion and diversity, and engaging people.

Moreover, GSK also envisions becoming a responsible business through attaining a net positive impact and a net zero impact on nature and climate by 2030, as well as using data transparently and responsibly to improve scientific and patient engagement. Subsequently, GSK is also focused on attain the highest standards of ethics and values through operating in a values-driven, ethical culture where issues are addressed transparently and swiftly. GSK also envisions attaining reliable supply through committing to reliable, safety, and quality supply of its products for consumers and patients (GSK, 2021a).

3. Benchmarking GSK with Johnson & Johnson In practice, Johnson & Johnson (J&J) is among the world’s most broadly based and largest healthcare companies, producing life-changing scientific breakthroughs that eventually transform the healthcare sector globally. According to Johnson & Johnson (2021), the company is a renowned American multinational corporation that develops consumer packaged goods, pharmaceuticals, and medical devices. J&J boasts of 130 years of its heritage and caring where it has continued to strive to establish a healthy environment, body, and mind within reach of everybody, everywhere, as well as create healthier communities and improve affordability and access. Notably, Johnson & Johnson has been selected due to its

remarkable performance and huge heritage spanning over 130 years, as well as being in the same healthcare sector with GSK. Thus, this benchmarking is necessary for GSK since it provides insightful best practices that it can implement to become a more sustainable firm with remarkable performance.

3.1 Procurement  J&J According to Johnson & Johnson (2021a), J&J has an extended supply base consisting of nearly 50,000 suppliers globally within its three business segments. J&J works with these valued partners where it upholds the highest standards to deliver new business models, which eventually contribute to its mutual objectives for streamlined processes, sustainability, and growth. J&J also upholds these highest standards for sourcing innovative solutions, encouraging its suppliers to adopt new technologies and for responsible corporate citizenship and sourcing.  GSK According to Efficio Limited (2022), GSK recently introduced a unique procurement strategy that works effectively with the business users and supply markets to maximise its value delivered. Hence, this unique procurement strategy has two major goals, including making purchasing easier for its employees through connecting them to the appropriate suppliers seamlessly and increasing the value delivered to the company. It is also worth noting that this unique procurement strategy is also structured into 32 Category Councils and this concept has greatly assisted GSK to improve its procurement system effectively.

3.2 Production  J&J According to Johnson & Johnson (2021b), the company reduced its absolute CO2 emissions by 20% by 2020 and it envisions reducing the same by 80% by 2050. J&J has also started

producing electricity from renewable, clean sources by 2020, whereby this amount accounts to its 20% energy procurement. The company also aspires to powering all its facilities by 2050 with renewable energy.  GSK GSK is committed and dedicated to significantly minimising its CO2 emissions within its entire value chain. The company has also committed to introducing a raft of various measures to attain its sustainability objectives, including new supplier screening, enhancing its internal capability on energy efficiency and sustainability, recognising risks in paper packing, and enhancing supplier engagement (GSK, 2021a).

4. Recommendation and Application through Lifecycle Management The recommendation will focus on lifecycle management since it will greatly assist GSK to effectively manage the total life cycle of its different healthcare products and attain exceptional sustainable consumption and production. It is imperative to note that lifecycle management is also paramount to GSK because it primarily deals with healthcare products, which have to be produced scientifically and reach its targeted consumers and patients in good condition. The illustration below portrays the lifecycle management and its different components:

((Sonnemann, Margni, & Springer Science+Business Media, 2017).

Notably, lifecycle management will significantly assist GSK to undertake various functions to attain high sustainability standards, including data protection, product assessment, demand management, quality, risk, and compliance, product domain, technical product deliverables, process improvement, and offer operational support. Others include people management, service management, change management, adoption strategy, and manage, analyse, organise, and target product-related activities and information. Moreover, lifecycle management will also assist GSK to effectively identify how different markets are receiving its healthcare products and recognise any required changes (Sonnemann, Margni, & Springer Science+Business Media, 2017).

5. Conclusion GSK is among the world’s largest and renowned pharmaceutical companies reputable for its innovative and groundbreaking healthcare products. The triple bottom line concept has been utilised in this report to assess GSK’s sustainability on various major issues, including waste production, other emissions, and CO2 emissions. GSK can take advantage of the different concepts that J&J has implemented in its operations to enhance its sustainability operations.

GSK can also embrace the lifecycle management to become more environmentally and socially sustainable to attain a competitive edge, protect the environment, and increase its revenues.

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