Indian pharma sector sees rising renewable energy adoption amid growing global ESG pressure: ICRA
New Delhi, May 27
India's pharmaceutical sector is witnessing a steady shift towards renewable energy adoption and stronger sustainability practices, driven largely by rising pressure from regulated export markets such as Europe and the UK, according to a study by ICRA ESG Ratings Limited.
The report said renewable energy (RE) consumption across a sample of 53 pharmaceutical companies rose from 17 per cent in FY2023 to 25 per cent in FY2025, reflecting a gradual move towards cleaner energy sources. Active Pharmaceutical Ingredients (API) manufacturers recorded the sharpest rise, with RE usage increasing from 21 per cent to 31 per cent during the period, while formulation manufacturers improved from 9 per cent to 17 per cent. Integrated players saw RE adoption rise from 20 per cent to 30 per cent.
"Renewable energy (RE) is the central decarbonisation lever; procurement mode matters," the report noted, adding that large export-oriented firms are increasingly adopting open-access and group-captive renewable power procurement models.
The study highlighted that sustainability adoption in the pharma sector is being accelerated by overseas regulations and procurement requirements. According to the report, "Europe and the UK are increasingly linking procurement to sustainability performance, through regulations such as EU CSRD, CBAM, and UK NHS Net Zero requirements."
ICRA said API manufacturers remain the most environmentally intensive segment because of their dependence on chemical synthesis, solvent recovery, and thermal energy use. The segment recorded the highest emission intensity, nearly three to four times higher than that of formulation manufacturers.
The report added that formulation companies demonstrated the sharpest reduction in emission intensity, declining by nearly 30 per cent over FY23-25 due to increasing electrification and renewable energy usage.
Hazardous waste generation also continues to remain a key challenge for the sector. API manufacturers accounted for nearly 67 per cent of the hazardous waste share, while formulation players stood at around 38 per cent. Integrated companies reported improved recycling and waste recovery rates because of scale advantages and integrated operations.
On governance, the report noted that only around 35 per cent of pharmaceutical companies have dedicated board-level ESG committees, even as nearly 59 per cent have already established emission-reduction targets.
"Customer-cascaded SBTi commitments, mandatory carbon reduction plans for export contracts, and BRSR core maturation will pull Indian pharma into deeper disclosure and target setting faster than internal governance can institutionalise," the report said.
— ANI
Reader Comments
Finally some real data on this! As someone who works in pharma supply chain, I can tell you the EU regulations are no joke. CBAM is going to hit us hard if we don't clean up. But 25% RE in just 2 years is impressive progress 👏
Interesting report from ICRA. The API segment being 3-4x more emission intensive than formulations is a big challenge. India is the pharmacy of the world, but we need to make sure that title doesn't come at the cost of our environment. The hazardous waste numbers are concerning.
Yeh sab theek hai, but what about cost pass-through? 😏 RE adoption is good for environment but companies will pass on the cost to consumers ultimately. Also, 59% have emission targets but only 35% have board-level ESG committees - that's a governance gap. Need more accountability at top level.
As someone who tracks ESG for a UK-based fund, I can confirm that NHS Net Zero requirements are a huge driver here. Indian pharma companies are realizing that without green credentials, they'll lose lucrative European contracts. The 17% to 25% RE jump in 2 years shows market forces working.
My father runs a small API unit in Hyderabad. These regulations will be very difficult for smaller players to comply with. 🏭 The larger companies with deep pockets can afford open-access solar and group captive models, but small manufacturers might get squeezed out. Government should provide subsidies for green transition.
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