Volume XXV, Issue 25 |


The UK’s National Health Service (NHS) has committed to reaching net-zero greenhouse gas (GHG) emissions by 2045. As well as all direct (Scope 1) and indirect (Scope 2) GHG emissions from the NHS estate, this ambitious net-zero target includes all GHG emissions originating from the NHS supply chain (Scope 3). 

As shown below in Figure 1, more than 60% of the NHS’s carbon footprint is contributed by its supply chain. A substantial proportion of these Scope 3 emissions occur in the UK, and just under half originate in the production and supply of medical equipment and medicines and chemicals.

Given the amount that the NHS supply chain contributes in terms of GHG emissions, clearly NHS suppliers must reduce their own carbon emissions significantly to enable the NHS as a whole to reach net-zero by 2045.  

Indeed, in order to meet its 2045 net-zero target, the NHS must change its purchasing criteria to meaningfully reduce the GHG emissions of its supply chain. In 2021, Amanda Pritchard, NHS England’s chief executive officer, emphasised the importance of such a shift: “The effects of poor air quality and climate change are already being seen in our GP practices, and in our hospitals, and it is absolutely right that we are part of the solution. But we can’t do this alone, which is why it is so important that we throw down the gauntlet today to our suppliers too.”  

However, many NHS suppliers may not yet realise how much the NHS’s commitment to net zero will impact their ability to compete for and win tenders in the UK. The NHS is already making changes to its procurement rules to ensure greater sustainability, and pharmaceutical and medical device companies must seriously consider the repercussions of these changes for their business moving forward. 

While a commitment to sustainability is currently a differentiator for many suppliers, L.E.K. Consulting believes that a supplier’s sustainability track record will become a vital selection criterion for the NHS during the next five years. Beyond the five-year horizon, a lack of clear, reported reductions in GHG emissions will prevent suppliers from being successful in selling to the NHS at all.  

In this Executive Insights, we outline the steps the NHS is taking to reach net-zero by 2045, the new sustainable framework within which suppliers will have to operate and the impact this will have on the competitive dynamics of pharmaceutical and medtech companies operating within the UK healthcare sector. 

Wide-ranging net-zero plans 

Each organisation within the NHS is currently developing its own detailed and comprehensive net-zero plan, which includes individual initiatives focusing on medicines, medical equipment and other supplies. As an example, the Greater Manchester Integrated Care Green Plan1 includes the following sustainability goals:  

  • Benchmarking suppliers on sustainability 

  • Digitising healthcare where possible and promoting sustainable modes of travel 

  • Minimising food waste and using sustainable food sources 

  • Creating green spaces and increasing biodiversity 

  • Reducing emissions across NHS estates and facilities 

  • Reducing medicine waste 

As a publicly funded healthcare system, the NHS is subject to political influence, and it is possible that overarching net-zero goals may change over time or that timelines may shift. Moreover, any commitments to sustainability within the UK healthcare sector must be balanced against care quality criteria. Despite these caveats, we believe that the direction of travel towards net-zero is clear.  

Consequently, suppliers looking to work with the NHS in the future (either through new business or retaining existing contracts) must remain proactive and agile, ensuring that their products or services meet new sustainability targets that will be introduced over the remainder of this decade. 

An ambitious timeline 

To achieve its ambitious commitment to reach net-zero by 2045, the NHS must make immediate changes to its rules for the procurement of medicines, medical equipment and other supplies, as shown in Figure 2. The NHS net-zero roadmap includes the following key milestones for NHS suppliers: 

  • From April 2022, all NHS procurement must include a minimum of 10% social value weighting 

  • From April 2023, suppliers must publish a carbon reduction plan for contracts worth more than £5 million, expanding to cover all contracts from April 2024 

  • From April 2027, all suppliers must publicly report targets, emissions and carbon reduction plans covering all their emissions and in alignment with NHS net-zero targets 

  • From 2030, suppliers must demonstrate quantifiable progress in reducing carbon emissions (via published progress reports and ongoing carbon emissions reporting) to qualify for NHS contracts 

This ambition is already impacting procurement decisions, with social value representing c.10%-30% of score weighting in live tenders.  

There is currently no set definition of social value in procurement frameworks, and this has led to regional variations. Examples of social value criteria highlighted in our market discussions include reducing GHG emissions, fighting climate change, promoting well-being and equal opportunities, and tackling economic inequality.  

To maintain a working relationship with the NHS in the future, pharmaceutical and medtech businesses must make the right investment decisions now to ensure that they can meet the deadlines provided in the roadmap. 

A clear sustainability framework  

In 2022, the NHS piloted the Evergreen sustainable supplier assessment framework, a voluntary tool which allows suppliers to engage with the NHS during their sustainability journey. Once Evergreen is fully rolled out in 2023, the framework will align NHS procurement frameworks with clearly defined sustainability criteria, as shown below in Figure 3.  

To reach a higher level within the Evergreen framework and achieve higher scoring in NHS tenders, suppliers will have to demonstrate quantifiable progress in GHG emissions reduction, including actively reducing GHG emissions in their own supply chains. Achieving and maintaining a strong score is likely to be a significant administrative burden for both the NHS and its suppliers, requiring application of a suitable strategy, appropriate investment and the commitment to fulfil regulatory requirements.  

Is your business ready for a sustainable future? 

Faced with the urgent need to embrace sustainability objectives and reduce GHG emissions, boards and chief executive officers (CEOs) across the medtech and pharmaceutical sectors are increasingly focused on identifying and delivering on their customers’ sustainability requirements. They must also take into account the broader sustainability preferences of key stakeholders such as investors, regulators and staff. 

The journey towards greater sustainability begins with two fundamental areas of consideration — firstly, identifying which sustainability topics are material to the organisation, and secondly, developing sustainability goals and targets within those topics. At the same time, organisations should consider the strategic trade-offs that may be required and assess how critical it is for stakeholders and for the financial performance of the business to have a strong sustainability track record. 

When planning for success in this new, increasingly sustainable environment, pharmaceutical and medtech players may benefit from considering the following key questions: 

  • How much does sustainability matter to my stakeholders, including my customers?  

  • Taking my internal and external stakeholders into account, which aspects of environmental, social and governance (ESG) should I prioritise? 

  • Are my customers changing the way they buy because of my sustainability track record? And if so, how do I compare to my key competitors in terms of sustainability?  

  • Considering my current sustainability track record and how much it matters to my stakeholders, does a sustainability strategy seem like an opportunity or a threat?  

  • How will my sustainability strategy affect my brand, value proposition and competitive position in relation to other players in the market?  

  • (Medtech players only) How should I factor in sustainability when reviewing my portfolio of products to re-register in response to the European Medical Devices Regulation? 

  • How will a sustainable strategy impact my sales approach? 

  • How will a sustainable strategy impact my relationships with my own suppliers? 

  • What approaches can I take to reduce emissions and address other ESG issues across my own supply chain? And what are the implications of these changes for financial and non-financial goals in other areas of my organisation? 

After answering these questions, boards and CEOs should look at the practical changes that need to be made to operating models and organisational structures in order to meet their sustainability goals.  

In our view, the same principles and challenges will apply in other geographies, as most healthcare systems have similar levels of ambition and are moving towards similar goals — and in most geographies, emissions from healthcare services provision predominantly arise from the medtech and pharmaceuticals supply chain. 

How L.E.K. Consulting can help 

Over the past decade, sustainability has shifted from being a nice-to-have to a must-have in boardrooms. L.E.K. has extensive experience advising on sustainability issues across a wide range of business sectors, and we are leading the field with our efforts to help clients increase their commitment to sustainability. 

Our project experience spans critical and emerging sustainability themes, and we successfully support our clients on their decarbonising journey towards net-zero. The process includes devising net-zero strategies and advising on topics such as carbon reduction, emissions control, energy efficiency and renewable energy as well as wider ESG strategies which move beyond environmental considerations to focus on the full spectrum of sustainability. 

For more information, please contact Andre Valente, Partner and Verena Ahnert, Partner.  

The authors would like to thank Jessica Wrigley, Associate and Vineeta Mann, Manager for their valuable contributions.  

1NHS Greater Manchester Integrated Care Green Plan, 2022

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