2030 OUTLOOK ON SUSTAINABILITY IN THE BIOPHARMA INDUSTRY

White PaperJune 2016

2

Acknowledgements

Project Leaders

• Hector Rodriguez, Senior Director, Global Facilities Management, Massachusetts – Biogen

• Johanna C. Jobin, Director, Global EHS & Sustainability – Biogen

• Annie White, Associate Director, Research Products - Sustainalytics

• Hazel Goedhart, Sector Manager, Healthcare and Chemicals - Sustainalytics

Advisory Panel

We gratefully acknowledge the effort and insight of the panelists who contributed to this project.

About Biogen Through cutting-edge science and medicine, Biogen discovers, develops and delivers worldwide innovative therapies for people living with serious neurological, autoimmune and rare diseases. Founded in 1978, Biogen is one of the world’s oldest independent biotechnology companies and pa-tients worldwide benefit from its leading multiple sclerosis and innovative hemophilia therapies. For more information, please visit www.biogen.com. Follow us on Twitter.

Jason Jay, Ph.D.Senior Lecturer and DirectorSustainability Initiative at MIT Sloan

Rebecca M. HendersonJohn and Natty McArthur University ProfessorHarvard Business School

Lawrence WeinerSenior Director, Innovation & Program ManagementBiogen Chuck Pappalardo VP, Global Facilities Management Biogen

John WarnerPresident, Chief Technology Officer, Board MemberWarner Babcock Institute for Green Chemistry Jorg ThommesSenior Vice President, Technical DevelopmentBiogen

Cary KrosinskyExecutive Officer Neto

3

About Sustainalytics

Sustainalytics is an independent ESG and corporate governance research, ratings and analysis firm supporting investors around the world with the development and implementation of responsible investment strategies. With 14 offices globally, Sustainalytics partners with institutional investors who integrate environmental, social and governance information and assessments into their investment processes. Today, the firm has more than 250 staff members, including 170 analysts with varied multidisciplinary expertise of more than 40 sectors. Through the IRRI survey, investors selected Sustainalytics as the best independent responsible investment research firm for three consecutive years, 2012 through 2014 and in 2015, Sustainalytics was named among the top three firms for both ESG and Corporate Governance research. For more information, visit www.sustainalytics.com.

Disclaimer

All rights reserved. No part of this report may be reproduced, transmitted or published in any form or by any means without the prior written permission of Sustainalytics and Biogen.

This report was drafted in accordance with the agreed work to be performed and reflects the situation as on the date of the report. The information on which this report is based has – fully or partially – been derived from third parties and is therefore subject to continuous modification. Sustainalytics observes the greatest possible care in using information and drafting reports but cannot guarantee that the report is accurate and/or complete. Sustainalytics will not accept any liability for damage arising from the use of this report, other than liability for direct damage in cases of an intentional act or omission or gross negligence on the part of Sustainalytics.

Sustainalytics will not accept any form of liability for the substance of the reports, notifications or communications drafted by Sustainalytics vis-à-vis any legal entities and/or natural persons other than its direct principal who have taken cognizance of such reports, notifications or communications in any way.

.

4

Foreword

Biopharmaceuticals present enormous opportunities both economically and for society and human well-being at a global scale. At Biogen, we have a passionate commitment to discover, develop and deliver innovative therapies that improve the lives of patients, but we know that the successful pursuit of this mission is underpinned by also ensuring environmental sustainability.

With the increasing attention being paid to the 2030 Sustainable Development Goals (SDGs), we were inspired to think about what the long-term implications of environmental sustainability (or lack thereof) could mean for companies in the biopharma industry. The variables driving the potential answers to this question are numerous, and the perspectives needed to appropriately answer it demanded the inclusion of relevant external stakeholders. We were thrilled to be able to secure the meaningful engagement of several respected sustainability leaders with business, science, finance, and academic backgrounds. Their input will certainly influence our strategy going forward and we hope that it will inform that of many others.

The intent of this paper is to share Biogen’s view of key long-term sustainability trends and challenges, begin a conversation on a shared vision for the path to sustainability through the year 2030, and to inspire the biopharma industry to join us in making transformational improvement in environmental sustainability across the industry and throughout its value chain. Biogen is committed to using innovation to drive great advances in sustainability but we recognize that true transformation will also require industry-level collaboration and dedicated leadership. Many of the challenges we face on our path to sustainability are shared by the industry and are best addressed through collaboration. How this innovation and collaboration will look and work is not fully known at this time, and this paper does not attempt to predict the results. The goal is to begin to ask the challenging questions that our industry will need to answer to do our part to establish long-term industry, society, and environmental sustainability.

At Biogen, we have proudly aimed to lead through our sustainability-focused actions, utilizing the same intellectual discipline and rigor that drives our science, and we are pleased to have been recognized by organizations like DJSI, Newsweek, and Corporate Knights. We also know, however, that achieving this sense of sustainability we must attain as an industry, society will require new ways of thinking and new forms of collaboration. We hope this paper will help in moving that critical conversation forward, and encourage you to join us on the journey.

We hope that you the reader will find value in this discussion and encourage you to directly engage with us to continue this conversation.

Hector R. Rodriguez Senior Director, Global Facilities Management, Massachusetts-Biogen 225 Binney Street | Cambridge, MA | 02142 hector.rodriguez@biogen.com

Johanna C. Jobin Director, Global EHS & Sustainability Biogen 225 Binney Street | Cambridge, MA | 02142 johanna.jobin@biogen.com

5© 2016 Biogen. All rights reserved. 6/16

Introduction

This paper examines the role of biopharma companies in long-term environmental sustainability . Inspired by the Sustainable Development Goals (SDGs), this paper is unique in that it seeks to take a long-term view - outwards to 2030 - in answering the following questions:

• What is the role of biopharma companies in contributing to long- termenvironmentalsustainabilityinasignificantandmeaningfulway?

• Which macro trends are likely going to have the greatest impact on biopharmacompanies?Whichenvironmentalsustainabilityrisks andopportunitiesarepotentiallythemostsignificant?

• What actions can biopharma companies take to drive innovation in environmentalsustainabilityandensureresilience?

The expectation for business to contribute to sustainable development in transformative ways is outpacing current approaches to corporate sustainability programming and strategies. Across industries, progressivecompaniesareseekingtodefinethenextevolution of sustainability leadership.

This paper seeks to explore this next realm of leadership for the environmental dimension of biopharma. However, it does not claim toputforthdefinitiveanswers.Ratherthehopeistosparkadialogue at the industry level and further engage companies, employees, scientists,professors,students,andotherstakeholdersondefining what transformative environmental leadership will look like in 2030 for the biopharma industry.

This paper is largely based on the results of one-on-one interviews with a small panel of experts, facilitated by Sustainalytics, followed by a half-dayworkshopatBiogen’sheadofficeinCambridge,Massachusetts. In Section One, we explore the macro trends that are projected to impact the industry through 2030. Section Two explores environmental focus areas expected to gain prominence, from both a risk and opportunity perspective. Section Three concludes the paper by pointing biopharma in the direction of next steps.

The interconnection of human health and environmental sustainability: It is fully recognized that biopharma has a tremendous role in ensuring positive impact within the social dimension of sustainable development, such as through improving access to medicine. The industry must continue to invest and innovate in these areas. This paper aims to give due focus to environmental aspects by recognizing the connection between the environment and society. When clean air, fresh water, soil, biodiversity, and the climate are threatened, so too is nutrition, health and, ultimately, human well-being. A clear link has been established between societal well-being and the environmental performance of the healthcare industry.

Pharma vs. Biopharma

Biopharmaceuticals represent some of the most sophisticated achievements of modern science. The primary difference between biopharmaceuticals and traditional pharmaceuticals is the method by which the products are produced. Biopharma products are manufactured through chemical synthesis in living organisms such as bacteria, yeast and mammalian cells, whereas traditional pharmaceutical products are manufactured through chemical synthesis in non-living reactors

6

Section One: Global Macro Trends

The imperative for sustainable development is driven by a series of global trends that lie outside of the control of industry or any one group. Here we consider which of these macro trends are most likely to influence the direction of biopharma over the coming 15 years.

Momentum Trends: Important today and projected to gain momentum by 2030

Population and Demographic Shifts: Thanks to sophisticated treatments, evolving research and new therapies put to market, the pharmaceutical industry has been a major catalyst in advancing reproductive rights and life expectancies around the world. Yet as lifespans continue to increase, so too does the rate of chronic disease, brought on in part, by increased affluence and resource consumption. To demonstrate environmental leadership under these conditions, while still serving an ever changing population, biopharma companies will need to develop new business models and ideas that go beyond incremental improvements to existing environmental programs.

Employee Awareness and Values: By 2025, it is estimated that the Millennial generation– the cohort of people born between 1980 and the mid-2000s - will make up roughly 75 percent of the workforce. When it comes to recruiting and retaining Millennial talent, this generation is motivated less by traditional monetary incentives and instead place a higher value on the societal significance of their work and the products that they consume. Biopharma companies need to visibly demonstrate to Millennials that their organizational goals and plans are consistent with those of this generation. A mechanism within the academic context is essential to make the alignment early, so as to stand out from other sectors early. Companies that demonstrate strong sustainability efforts, namely through technology and transparency, will be best positioned to earn the attention of Millennial talent.

More Stringent Regulatory Environment: Biopharma companies spend an increasing amount of money on sustainability-related regulations. Chemists and scientists may increasingly need to be aware of the regulatory environment. This is a trend that has been gaining momentum for decades, and will remain important, particularly if the precautionary principle applied in Europe is adopted more broadly. Many biopharma companies’ current sustainability strategies are based on responding reactively to this trend, through a compliance-based approach. While adopting more forward looking sustainability strategies, companies should actively participate in regulatory debates to help maintain rational and effective compliance mechanisms.

Climate Change: Climate change is a fundamental threat to development. An ever-greater understanding of the risks and opportunities it presents for businesses and society have contributed to a willingness among corporate leaders to help shape solutions. Companies are acting on their own to reduce greenhouse gas emissions and explore new low-carbon market opportunities. Additionally, a growing number of businesses are calling on the government to provide investment certainty through clear climate policy. The biopharma supply chain may need to adapt in order to ensure resilience to climate-related disruptions– important from both an operational perspective, as well as to ensure access to medicine.

7

Changing Investor Expectations: The world of investment is shifting. There is a realization that the environmental, social and governance (ESG) impacts of economic activities, both positive and negative, are relevant and material to investment decisions and manage-ment. There is mounting evidence — produced by leading brokerage firms, academics and others — that the incorporation of ESG impacts and risks into the investment process leads to better outcomes for the investment process itself, as well as better outcomes for society. Environmental issues such as climate change, water scarcity and deforestation are putting a strain on natural resources, which has direct implications for corporate financial performance across industries.

Emerging Trends: Not so important today, but likely to become so by 2030

Accumulation of Toxins in the Environment: The release of toxic or synthetic substances, even in small quantities, can radically alter ecosystems and introduce new risks to human health. Businesses play a significant role as the producer of these substances, yet their full impact has yet to be quantified, particularly when it comes to nanomaterial and plastic particles. Compounding this issue is that academic institutions are not currently training scientists destined to work in biopharma to have a working knowledge of these issues. Unless we fill this education gap, we are ill prepared to tackle this critical issue.

Sustainability as a Platform for Innovation: Across industries, there are increased efforts to seek, define, and quantify the business case for environmental sustainability. In the coming years, corporate sustainability leaders will increasingly demonstrate that improved environmental performance not only lowers costs through resource efficiencies, but also presents new models and approaches to spurring innovation. Companies will experience an ever increasing commercial pull from existing and future customers to help them meet their own sustainability objectives. This is a great opportunity, if companies are sensitive to their customer’s needs, to help them articulate and meet their own sustainability objectives.

Consumer Trust and Awareness: On average, projected populations will be better educated, with more affordable access to secondary and post-secondary education. One impact of improved education is the development of a more informed consumer base. At the same time, the rapid adoption of online connectivity, user-generated digital content and mass communications means that consumers are increasingly turning to each other for trusted information and to help frame their opinions on the impacts made by large companies. These trends have had a particularly noticeable impact on consumer-facing brands and at times, have led to a mistrust of corporate claims. For the biopharma industry, however, customers are not yet very outspoken about the industry’s environmental impact. In fact, 2030 may be too short a time frame to capture this as a significant trend. Still, environmental advocacy may accelerate if environmental impacts start to manifest themselves as social issues, for example, drinking water polluted with pharmaceutical byproducts.

8

Section Two: Environmental Focus Areas, Present - 2030

This section explores those areas that have the potential to be high on the radar of biopharma by or before 2030, given the key macro trends discussed above. Unlike trends, the focus here is on areas that are to a large extent within the industry’s sphere of control and/or influence. Biopharma companies may consider how these areas map to each phase of their value chain, how they link to drivers of business value (risks and opportunities), and the relative degree of environmental impact. The materiality matrix illustrates, at an industry-level, how these areas may relate. Companies are strongly encouraged to conduct a similar exercise within their own specific context, and apply as long-term a view as possible.

Figure 1 - Biopharma materiality matrix (Biogen workshop in 2015, Cambridge, MA)

The issues plotted above in the matrix can be clustered into three overarching environmental focus areas:

• Sustainability Integration and Collaboration

• End-of-Life Impacts

• Environmental Impacts of Manufacturing

Signi�cant Impact

NegligibleImpact

ENVIR

ON

MEN

TAL

IMPA

CT

LINK TO BUSINESS VALUE (RISK/OPPORTUNITY)

RAWMATERIAL

USE

ENERGY USE/INTEGRATED

ENERGY SYSTEMS

PRODUCTIONWASTE

PACKAGING & DELIVERY

SYSTEMS

NANOPARTICLES & other emerging

technologies

PHARMACEUTICALS IN THE

ENVIRONMENT(PIEs)

WATERUSEINTEGRATION

& COLLABORATION:Sustainable Science

Education

Negligible Link Strong Link

9

Sustainability Integration and Collaboration

Transformative environmental sustainability in biopharma in 2030 significantly depends on the degree to which it is integrated into academia. One of the biggest challenges for the biopharma industry is to overcome the current lack of sustainability training across various scientific disciplines. Throughout undergraduate and graduate levels, science-based degree programs typically do not provide students with industry-oriented training on how to identify, measure, and quantify sustainability impact – starting at the molecular level to the product or drug development phase.

This sustainability knowledge gap among scientists may lead to new products being developed that, at a later stage, need to be reformulated to adhere to environmental regulations. Such costly readjustments can be avoided by investing in the capacity to develop new products that are both sustainable and innovative from the outset. On the opportunity side, the biopharma industry can collaborate with universities and colleges to ensure relevant training is provided for up and coming scientists. By helping to train future talent, companies can position themselves to take advantage of the projected growth of the global “green chemistry” market, which is predicted to increase significantly by 2030. The future workforce should be able to proactively respond to positive opportunities for growth areas, such as the development of tools to allow for a sensitive and appropriate response to these unmet sustainability needs.

End-of-Life Impacts

Any well-designed product stewardship strategy must identify both environmental risks and opportunities from the conceptual phase of research, through to disposal and the end-of-life of the product. One significant environmental risk to biopharma companies is pharmaceuticals that end up in surface and ground waters through end-of-life disposal or patient excretion. Known as “pharmaceuticals-in-the-environment” (PIE), these waste elements can negatively affect ecosystems and biodiversity. To date, few studies have determined precisely how pharmaceutical by-products interact with ecosystems, and what their ultimate impact might be on people and the environment. Every increase in efficacy, something a well-managed company naturally strives toward, correlates to less pharmaceuticals in the environment. Building in a plan for after-use destruction and degradation is the new opportunity, but unfortunately, regulatory requirements are not currently aligned with this approach and in some cases, are posing direct barriers. Over the next few decades, a major opportunity for biopharma companies will be to create design processes and pathways that prevent pharmaceuticals from reaching the environment in the first place.

Similar to the disposal of medicines, the disposal of “single-use devices” (SUDs) presents environmental challenges. SUDs, such as injection devices or delivery pumps are processed as waste after one use despite being, in some instances, fully functional for one or more additional uses. And, with the growing number of at-home, self-administer-ing patients, demand for SUDs is only expected to increase. Though challenges related to public perception and safety exist, the rise of SUDs presents biopharma companies with an opportunity to design devices that are widely eligible for green disposal options or to define new, industry-wide rules for safe reuse.

10

Finally, nanoparticles present one of the most difficult challenges related to end-of-life design. It is widely held that nanoparticles possess groundbreaking applications in medicine, yet the long-term effects of nanoparticles within ecosystems will continue to raise important questions. Unknowingly contributing to this potentially detrimental impact constitutes a risk that should be on the radar of the biopharma industry.

Environmental Impacts of Manufacturing

During the manufacture of biopharmaceuticals, companies use water, energy, and raw materials. Biopharma companies should strive to eliminate manufacturing inefficiencies and waste. Significant efficiency gains are still to be made in each of these areas, and also in terms of reducing waste generation during production. This would not just reduce environmental impact, but also enhance business value in terms of direct reductions of operating costs, and helping to maintain a social license to operate in regions where resources, such as freshwater, are scarce. Some environmental issues, such as waste and energy, may be viewed as having a less significant connection to business value, perhaps because they represent a small fraction of costs compared to other sectors or other areas of value such as human capital. However, these issues can be expected to become more salient to the extent that they can create operational disruption through delays in the development and delivery processes. The industry should thus continue to invest in technical solutions to environmental issues, such as integrated energy systems or single-use manufacturing technology.

Section Three: Future Directions

In light of the current and emerging trends and challenges related to establishing and maintaining a sustainable environment, society, and industry in 2030 and beyond, biopharmaceutical companies must strive to innovate and collaborate in new and different ways. While we do not know how this innovation and collaboration will work entirely, our goal is to begin asking the questions to challenge our industry to do our part in establishing long-term sustainability. We have focused questions in the following areas.

Aligning long-term sustainability strategy with long-term business and innovation strategies

Considering the long-term nature of the biopharma industry in general, where break-throughs are the result of decades-long planning and innovation processes, biopharma companies should be conditioned to take a long-term view to sustainability as well. 2030 can provide an aspirational timeframe for big objectives, while allowing for the develop-ment of plans with 3, 5, and 7-year milestones. Some questions to consider include:

• How can the industry encourage companies to integrate sustainability into their business strategy and encourage companies and investors to adopt a longer-term view?

• What would it take for the biopharmaceutical industry to not just reduce environmental impacts, but to actually become restorative to resources – to have a net positive impact on the environment as well as human health?

11

• What is needed to demonstrate true accountability, and innovation, in relation to substances of concern, end-of-life product responsibility, and similar issues?

• What innovative pharmaceutical product and delivery mechanisms will need to be developed to help cure disease more effectively and sustainably? (Example: highly targeted delivery so as to reduce required doses, minimize waste and cost).

• What type of innovative distribution and/or pricing models may be needed to address issues of equitable access to medicine while respecting intellectual property and R&D investments?

Investing in sustainability training and work with academic institutions

In the past decade, there has been a proliferation of sustainability degree programs in higher education, and in general, “sustainability” has emerged as a recognized academic field. Further, there is a trend to develop interdisciplinary programs which seek to incorporate sustainability theories and principles into a wide variety of foundational disciplines, including environmental science, economics, and social studies, but it is not clear that it has branched deep enough into the curriculum of chemical and biological science programs. The science behind sustainability is critical for developing and implementing sustainable developing strategies, and thus must be part of the education of future leaders and innovators.

• How do we inspire students to not only pursue careers in science and engineering, but also to encourage academic institutions to include sustainability as part of regular coursework?

• What incentives are needed to embed sustainability teachings into science curriculum?

• At what age should we start sustainability teachings in science programs?

Collaborating internally on sustainability, and partnering externally

Investing in sustainability only makes sense if the business case is clear to all. From an internal perspective, sustainability must therefore be thoroughly embedded into corporate structures, through measures such as having operations and R&D work together on the innovation/sustainability nexus. Companies can garner internal support by defining how sustainability strategies support the business, and by formalizing internal sustainability governance structures. Further, companies would be well-advised to leverage any momentum brought by the sustainability-minded Millennial generation. External partnerships, on the other hand, are critical for ensuring transformational improvement and new ways of thinking to drive industry-level collaboration.

• How can we further improve collaboration with external stakeholders such as NGOs, regulators, and academia, to deal with these complex emerging issues?

• How can we work together and with relevant stakeholders to set environmental impact reduction goals across our full value chains that are rooted in the science of climate change, resource depletion, and biodiversity?

12

• Given that more than an estimated 70% of the environmental impact of a product is outside a biopharma company’s direct operations, how can we expand our collaboration and influence with upstream suppliers, downstream customers and partners to more aggressively improve products while reducing impacts?

• What type of industry collaboration will be needed to address other important issues like access to medicine, pricing and distribution in 2030 and beyond, Extended Producer Responsibility requirements, and others?

Concluding Notes

In order to stay ahead of the curve and be ready for 2030, the industry needs to take a proactive stance and start integrating sustainability into its core business today. This will require a well thought-out product stewardship strategy that encompasses the entire product value chain. Sustainable product design, as well as end-of-life impacts will likely gain importance in the coming years. The future leaders in the biopharma industry will be those who start teaching stakeholders about sustainability today, so that they can drive the conversation ahead of their competitors.

Bibliography

Daughton, C. G. (2003). Environmental Stewardship of Pharmaceuticals: The Green Pharmacy. Environmental Protection Agency (EPA).

Deloitte. (2015). 2015 Global life sciences outlook: Adapting in an era of transformation.

Global Sustainable Investment Alliance. (2015). 2014 Global Sustainable Investment Review.

Harper, C. L., & Leicht, K. T. (2007). Exploring Social Change: America and the World. Upper Saddle River, NJ: Prentice Hall.

Langer, E. S. (2012). 25 Years of BioPharma Industry Growth. BioPharm International.

Meteos. (2015). Vital Connections: Science, Society and Sustaining Health.

PMPNews. (2008). Sustainable Packaging Reaches Pharmaceuticals and Medical Devices. Pharmaceutical & Medical Packaging News.

Steffen, W. (2015). Planetary boundaries: Guiding human development on a changing planet. Science.

Steffen, W., Rockström, J., Noone, K., & Persson, Å. (2009). Planetary Boundaries: Exploring the Safe Operating Space for Humanity. Ecology and Society, 14(2)(32).

13

Trucost. (2015). Making the Business & Economic Case for Safer Chemistry.

UNDESA. (2005). World Urbanization Prospects: The 2005 Revision. New York: United Nations, Department of Economic and Social Affairs (UNDESA).

UNEP. (2011). Towards a green economy: Investing in energy and resource efficiency. United Nations Environment Programme (UNEP).

UNFPA & HelpAge. (2012). Ageing in the Twenty-First Century: A Celebration and A Challenge. United Nations Population (UNFPA) & HelpAge International.

Warner, J. C. (2015). Where Should We Focus Green Chemistry Efforts. Aldrichimica Acta, 48(1) 29.

Winograd, M., & Hais, M. (2014, May). How Millennials Could Upend Wall Street and Corporate America. Retrieved from Brookings: http://www.brookings.edu/~/media/research/files/pa-pers/2014/05/millennials%20wall%20st/brookings_winogradfinal.pdf