Climate change TCFD disclosures, pharmaceuticals

AstraZeneca PLC – Annual report – 31 December 2020

Industry: pharmaceuticals

Taskforce on Climate-related Financial Disclosures Statement

We support the Taskforce on Climate-related Financial Disclosures (TCFD) and aim to develop our disclosures in line with its recommendations. This is AstraZeneca’s first report that follows the TCFD-recognised framework and it describes our process and actions as of 31 December 2020. All our business operations worldwide are in scope regardless of their function, unless otherwise stated. A full TCFD disclosure will be provided according to the Listing Rule for the 2021 reporting year onwards.

Our CDP response provides further disclosures on our approach to climate change and is available at https://www.cdp.net/en.

Governance

Non-Executive Director, Geneviève Berger, oversees our sustainability strategy on behalf of the Board, including delivery of our Ambition Zero Carbon programme, and evaluates our performance against our targets and commitments.

As outlined on page 6, our CEO is responsible to the Board for the management, development and performance of our business, including AstraZeneca’s Ambition Zero Carbon and climate-related risks and opportunities. Reporting to the CEO, the Executive Vice-President (EVP), Sustainability and Chief Compliance Officer (CCO) is responsible for the delivery of the AstraZeneca sustainability strategy, including our climate-related strategy and leads a quarterly update with the Board.

A number of strategic groups have been established to support delivery of our sustainability and climate strategies:

  • An external Sustainability Advisory Board (SAB) advises on strategic direction, recommends opportunities and provides insight. Our SAB comprises five SET members (EVP, Sustainability and CCO; EVP, Operations and IT; EVP, Human Resources; EVP & President, BioPharmaceuticals R&D; and EVP & President, International) and four external sustainability experts (Pankaj Bhatia, Deputy Director, Climate Program, World Resources Institute; Dame Polly Courtice, Director, Cambridge Institute for Sustainability Leadership, University of Cambridge; Louise Nicholls, Managing Director of Suseco and Vice Chair of IEMA; and Rain Henderson, Founder, Elementor Advisors). The SAB met once in 2020 where an update was provided on our climate strategy.
  • In 2020, we established an Ambition Zero Carbon Governance Group with executive-level ownership, accountable for the delivery of our Ambition Zero Carbon programme. The group meets monthly and includes AstraZeneca’s CEO; CFO; the EVP, Sustainability and CCO; and EVP, Operations and IT.
  • In 2020, a TCFD steering group was also established with cross-functional membership to identify and proactively manage the physical and transitional risks and opportunities posed to AstraZeneca by climate change. The Board was updated on progress in September 2020.

The outcomes from the specialist groups are regularly reported to the AstraZeneca Board.

Identifying and managing climate risk and opportunity

Our overall approach to risk management and a summary of our Principal Risks can be found from page 80. To inform the wider enterprise risk management process of any specific risks and opportunities posed by climate change and/or the transition to a low carbon economy, we have integrated climate assessments into the overall risk management process. In 2020, we conducted physical and transitional risk assessments and the process for these assessments is described below.

Physical assessment

In 2020, working with environmental resource managements experts, ERM Group, Inc, (ERM), we conducted a screening study of two future climatic scenarios to explore our physical climate-related risks (floods, water scarcity, extreme heat, cyclones and wild fires); Representative Concentration Pathways (RCP) 4.5 (+2°C) and RCP 8.5 (+4°C) were used for this study. These scenarios were applied to 61 AstraZeneca sites with predictions out from 2020 to 2030 and 2050. The sites evaluated included all business-critical operations sites, R&D Hubs, IT centres and other strategic hubs; pure commercial sites were out of scope as they posed a low material risk. The outcome of these screening studies across the 61 sites was combined with a revenue-based assessment for each site to identify medium- to long-term risks.

Transitional assessment

In 2020, working with ERM we defined the risks and opportunities associated with the transition to a low-carbon economy. To measure these transitional risks, we adopted two scenarios; a base case (~3.5°C) and low carbon (~2°C) scenario with predictions out to 2025, 2030, 2035 and 2040. Risks and opportunities were assessed at an enterprise level and product-specific level for the top ten brands where life-cycle assessment (LCA) data is available, representing approximately 50% of Total Revenue with examples from all therapy areas.

Outcome of the physical and transitional assessments

As a result of this analysis, a new risk ‘Failure to meet regulatory expectations on environmental impact, including climate change’ has been added as a standalone risk to the Group’s risk landscape. This risk has been shared with the Board and Audit Committee. The risk is not currently assessed to be financially material and does not impact our current business model. In many cases mitigation measures are already in place to address the risks and opportunities presented by climate change, including the transition to a low carbon economy. These risks and opportunities are explained in more detail in the table opposite/overleaf.

Climate change and our strategy

The nature of the risks and opportunities we face depends not only on the physical aspects of climate change, but also changes in the regulations in the markets in which we operate, pressures to reduce the carbon footprints of specific medicinal products, and our ability to understand and shape a culture of climate action. Our response to the identified climate risks and opportunities requires enterprise-wide action, in addition to further integration of environmental considerations in drug development and manufacture, and a greater focus on responsible procurement and sourcing across the entire value chain.

To mitigate the impact of AstraZeneca’s business operations on the environment, the Board of Directors approved a new climate strategy in 2019. Our Ambition Zero Carbon strategy was launched in January 2020 when we disclosed new targets to be zero carbon across our global operations by 2025 (Scopes 1 and 2) and be carbon negative across our entire value chain by 2030 (Scopes 1, 2 and 3).

Ambition Zero Carbon goes beyond the verified reduction goals of our existing Scope 1 and 2 Science Based Targets to limit global warming to 1.5°C. To support achievement of Ambition Zero Carbon we will double energy productivity, use 100% renewable energy for both power and heat, and switch to a 100% electric vehicle fleet five years ahead of schedule. Our actions to tackle climate change include plans to launch next-generation near-zero Global Warming Potential (GWP) respiratory inhalers and plant 50 million trees under the ‘AZ Forest’ programme. Overall, the $1 billion Ambition Zero Carbon programme brings forward our decarbonisation plans by more than a decade.

For more information, see our Sustainability Report available on our website, www.astrazeneca.com/sustainability.

Monitoring our progress

Since 2015, we have invested over $100 million in a natural resource reduction programme that has reduced our carbon emissions from operations by almost one third and our water consumption by almost one fifth.

In 2020, we sourced 99.9% of our imported electricity globally from renewable sources and generated over 5 GWh from solar PV installations on our own sites from renewable sources.

In 2019, the Science Based Targets Initiative confirmed that our Scope 1 and Scope 2 emissions targets aligned with the more progressive Paris Agreement target to limit global warming to 1.5°C. In 2019, AstraZeneca was also the first pharmaceutical company to join the EV100 initiative for electric  vehicles.

AstraZeneca is the first pharmaceutical company worldwide to reinforce its commitment to sustainability and climate control by joining all three of the Climate Group’s initiatives: RE100 (renewable energy), EV100 (electric vehicles) and EP100 (energy productivity).

We are one of only three companies worldwide to have been CDP A rated for Climate Change and Water Security for the last five years.