GlaxoSmithKline & Carbon Neutrality · GlaxoSmithKline (GSK) is an international leader in the pharmaceutical industry with the mission to “improve the quality of human life by

GlaxoSmithKline & Carbon Neutrality

GlaxoSmithKline & Carbon Neutrality Huang, Kolstad, Schaart, Schneider, Schreiber, Shah, Uche

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Table of Contents

ABSTRACT................................................................................................................................... 2

EXECUTIVE SUMMARY .......................................................................................................... 3

GLAXOSMITHKLINE................................................................................................................ 4

DEFINING CORPORATE CARBON NEUTRALITY............................................................ 5

CARBON TRUST: INDEPENDENT EXPERTS ON CARBON REDUCTION ................... 7

THE VALUE AND COST OF THE CARBON TRUST STANDARD CERTIFICATION.10

STAKEHOLDER PARTICIPATION ...................................................................................... 12

NEW STANDARDS FOR CORPORATE SUSTAINABILITY ............................................ 16

CONCLUSION…………………………………………………………………………………20

BIBLIOGRAPHY....................................................................................................................... 21

APPENDIX.................................................................................................................................. 26

APPENDIX I......................................................................................................................... 26

APPENDIX II ....................................................................................................................... 27

APPENDIX III ...................................................................................................................... 28

APPENDIX IV ...................................................................................................................... 29


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Abstract

In 2011 GlaxoSmithKline’s (GSK) announced its goal of becoming carbon neutral by

2050. This case investigates GSK’s pursuit of carbon neutrality and their engagement with the

firm Carbon Trust. Their recent attainment of the Carbon Trust Standard certification for carbon

neutrality sets an intriguing precedent for carbon management in multinational corporations. Not

only have they proved that carbon neutrality is possible for large international corporations, they

have shown that it can bring value to the corporation. After providing background information

on GSK, carbon neutrality, and the Carbon Trust, the case investigates the significance of the

Carbon Trust Standard certification as well as its values and costs. The case also examines

GSK’s commitment to stakeholder engagement. Finally, the case concludes by relating the

Carbon Trust Standard to other prominent sustainability standards such as LEED, ISO 14000,

and the Greenhouse Gas Protocol. This case study’s overall goal is to present an objective

analysis of GSK’s efforts to achieve its goal of carbon neutrality by 2050. We have found that

while GSK has realized significant energy cost savings in reducing its carbon footprint, the

primary benefit of the Carbon Trust Standard certification is reputational. We expect carbon

neutrality to gain popularity as a concept and as a standard as the effects of climate change

become more obvious and as corporations strive to remain competitive in a resource-constrained

world.


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Executive Summary

GlaxoSmithKline (GSK) is an international leader in the pharmaceutical industry with the

mission to “improve the quality of human life by enabling people to do more, feel better and live

longer”. The company’s roots can be traced back nearly three centuries. Over the years GSK has

made several breakthroughs in healthcare, perhaps most notably the discovery of amoxicillin in

treating bacterial infections. GSK’s commitment to social well-being continues today, but not

solely through its innovative healthcare products. The company recognizes the link between

social and environmental health, and on March 30th, 2011 it announced the goal of becoming

carbon neutral by 2050.

The concept of carbon neutrality has increased in popularity as corporations struggle to

address climate change. Carbon neutrality can be achieved, in very broad terms, through a two-

step process. Generally a business will first reduce its carbon footprint as much as possible. Then

it will pursues carbon-offsetting strategies, such as purchasing Renewable Energy Credits

(RECs), to reduce its net carbon emissions to zero. Now corporations also have the option of

getting their carbon emissions and reduction plans examined by a third part such as the Carbon

Trust.

The Carbon Trust is an international non-profit that partners with businesses and

governments to help address greenhouse gas emissions. They provide an independent assessment

of corporate carbon footprints through their Carbon Trust Standard service. GSK became the first

company worldwide to receive its global certification, the benefits of which are discussed in this

case.

While GSK has realized significant energy cost savings in reducing its carbon footprint,

the primary benefit of the Carbon Trust Standard certification is reputational. The certification

provides an unbiased verification of GSK’s carbon reduction efforts, thus lending credibility to

the organization’s social and environmental initiatives. The certification also gives companies an

opportunity to communicate their achievements through the Carbon Reduction Label.

GSK’s attainment of the Carbon Trust Standard certification is largely an appeal to

stakeholders, whom the company must continue to engage as it pursues carbon neutrality. GSK

has fostered constructive relationships with its employees and external partners including


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universities and regulators. The company has also created a 10-member external stakeholder

panel to address several Environmental, Health & Safety (EHS) concerns.

As carbon neutrality becomes an increasingly popular topic within corporate

sustainability, new corporate standards such as the Carbon Trust Standard’s certification will

continue to emerge. Currently there are many different standards that relate to similar aspects of

corporate sustainability. For example, the LEED rating system for buildings and the Global

Reporting Initiative (GRI) both help companies make progress towards “sustainability”.

However, as the impacts of climate change become more obvious and severe, corporations will

become increasingly concerned with managing their carbon emissions and becoming “carbon

neutral”. Thus we can also expect carbon footprint standards to increase in popularity and value.

GlaxoSmithKline

GlaxoSmithKline (GSK) is a multi-national pharmaceutical corporation. Glaxo

Wellcome plc and SmithKline Beechman plc have been working together for nearly three

centuries. Their partnership began in 1715 with the Plough Court Pharmacy established in

London, England (GlaxoSmithKline). The two groups worked towards assisting the London

community with health care products from the beginning. Up until the 1950s to late 1990s they

focused their partnership on researching and developing steroids to treat skin diseases, along

with vaccines. One of the most famous breakthroughs was their discovery of amocycillin and the

development of Zantac (GlaxoSmithKline). Beginning in the late 1990s SmithKline pursued

greater social entrepreneurship by developing its manufacturing plants in third world countries

and focusing many of its efforts on assisting communities in those regions. For example the

company assisted the World Health Organization with research on lymphatic filariasis, also

known as “elephantitis” (GlaxoSmithKline). The two groups merged in the 21st century into

what is now GlaxoSmithKline (GSK). This merger strengthened the company and refocused its

mission and strategies.

The overall mission of GSK is to “improve the quality of human life by enabling people

to do more, feel better, and live longer (GlaxoSmithKline). GSK has re-worked its strategy in

response to new challenges, such as the decline in research and development productivity, and


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the increasing pressures from payers and regulators on costs and safety in the industry. In the

1960s and 1970s the pharmaceutical industry had to deal with a series of environmental issues

related to air and water pollution. It wasn’t until the 1980s that the industry in the United States

was faced with regulatory pressure under the Clean Air Act and the Clean Water Act.

Interestingly, compared to other large-scale industries the pharmaceutical industry is relatively

small, however its waste is significant and has a large impact. It was discovered that GSK needed

over 100 tons of input materials to generate less than one ton of active pharmaceutical

ingredients (Hagan). Moreover, the pharmaceutical industry in the U.S. had an even harder time

working within regulatory frameworks as the reporting requirement associated in Section 313 of

the Superfund Amendment and Reauthorization Act. Conclusively, the pharmaceutical industry

seemed to have a relatively large impact on toxic releases (Hagan).

Over the course of research and development, GSK developed a series of methods that

“built in” rather than “bolted on” solutions (Hagan). GSK thus used innovation to align their

substantial use of resources with natural cycles. They tried to find new products that didn’t use or

generate persistent, bioaccumulative, or toxic compounds, which resulted in products and by-

products that could be used beneficially (Hagan). When the merger occurred in 2001, their

strategy needed to change. It now encompasses a series of new strategic goals to create long-term

sustainable growth with a bottom-up approach, including growing a diversified global business.

Currently, the company has 97,000 employees in over 100 countries (GlaxoSmithKline).

Additionally, they seek to deliver more products while simplifying their operating model.

GSK is now a leading multinational corporation. Its operating model brings the global

consumer market a series of popular over-the-counter goods. In terms of long-term sustainability,

they now plan to reduce their environmental impact drastically by becoming carbon neutral by

2050. As GSK continues to grow in the future, we can expect them to continue incorporating

environmental concerns into their business strategy.

Defining Corporate Carbon Neutrality

Climate change is undoubtedly one of the greatest challenges facing the world today. As

businesses and governments seek to respond responsibly to this global crisis, it is only natural

that the concept of “carbon neutrality” has captured the corporate imagination. On March 30,


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2011 Britain’s largest drug maker, GlaxoSmithKline (GSK), announced its goal to be carbon

neutral by 2050. The maker of well-known brand drugs like BC Powder, Levitra, Nicorette,

Zantac and Sensodyne said the commitment applies to its own operations and those of its supply

chain (SustainableBusiness.com News).

The Department of Energy & Climate Change (DECC) published a definition of carbon

neutrality in October 2009: ‘Carbon neutral means that through a transparent process of

calculating emissions, reducing those emissions and offsetting residual emissions-net carbon

emissions equal zero’ (Guidance on carbon neutrality). Carbon neutrality also refers to the

emissions of other greenhouse gases (GHG) measured in terms of their carbon dioxide

equivalence (CO2e)—the impact a GHG has on the atmosphere expressed by the equivalent

amount of CO2 it would take to have the same impact. The basic process in becoming carbon

neutral is simple. Firms first calculate their overall carbon footprint and then reduce it as much as

possible. This is often done through measures such as energy efficiency, usage of renewable

energy, behavior change programs, or supplier engagement. Firms then offset any residual

emissions so that their net GHG emissions equal zero (Steps to Going Carbon Neutral). Carbon

offsetting involves funding projects that reduce or avoid emissions, and using the subsequent

carbon credits to offset the equivalent amount of emissions remaining from business operations.

These carbon credits can even represent savings compared to a business-as-usual

scenario. The carbon savings made must be in addition to the savings that would have happened

anyway without the funding from the sale or purchase of carbon credits. But these simple steps

mask much complexity — and a range of key management decisions. For example, companies

need to define their own boundaries, time frames and approach to neutrality (How should

business approach carbon neutrality?The solutions and benefits).

Making a decision to pursue carbon neutrality is significant. A business should first

assess the external forces within its environment. Examples of considerations include energy use,

strategic shifts in an industry, competitors, and pending or potential regulations. They must also

assess stakeholder perceptions of carbon neutrality in their markets. Awareness and stakeholder

perceptions of carbon neutrality can also vary widely across different geographies.

There are also a number of internal forces that can push firms towards carbon neutrality.

While altruism can sometimes be a starting point, more fundamental business drivers need to be


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considered such as: maintaining the license to operate; managing energy risk; differentiating the

corporate brand; generating new demand; and driving innovation and cost-efficiency.

By adopting a carbon neutral strategy GSK might be trying to remove or reduce energy

risk for its business, partly due to uncertainty over the future energy costs. Saving energy is also

a high priority for their building stock. One strategy specific to GSK is setting up an internal

fund for efficiency projects. Over the past four years GSK’s fund has supported over 800

projects, which have collectively saved approximately 170,000 tons of CO2e (GSK CSR Report).

In next 40 years GSK aspires to have no net greenhouse gas emissions from its raw

material sourcing, manufacturing, distribution, product use and disposal. It will address this goal

in stages, with interim emissions reduction goals of 10% by 2015 and 25% by 2020. In GSK’s

2011 Corporate Sustainability report Andrew Witty says, “we also made progress on

implementing our environmental strategy which has been revised to set ambitious goals for our

entire value chain – from raw materials to product disposal. We need to work in ways that enable

business growth while protecting the natural resources for the future.” For example, almost 40%

of GSK’s carbon footprint is derived from propellants when patients use inhalers. Eliminating

chlorofluorocarbons (CFC) gases from the products has substantially reduced inhaler emissions –

from 24 million tons of CO2 equivalents in 1998 to less than 5,000 tons today.

A high-level analysis of the carbon footprint of GSK’s value chain revealed many

opportunities. “[T]he largest contributors to our carbon footprint are supply chain material inputs

(5.7 million tons), propellants used in some of our inhalers (5.2 million tons) and our own

operations (2.6 million tons)” (GSK CSR Report). GSK learned that 40% of its overall emissions

are found in the supply chain, while another 40% are produced by customer use of their inhalers.

Replacing CFCs with hydrofluoroalkanes (HFAs) reduced inhaler-related emissions from 24

million tons of CO2e in 1998 to 4.7 million tons in 2010 (GSK CSR Report). The company is

also experimenting with different valves that release less gas, new formulations, and HFA

alternatives with less global warming potential (GSK CSR Report).

Understanding their carbon footprint of the supply chain is difficult due to the varied and

complex composition of GSK’s products. To gain deeper insights GSK is working closely with

key suppliers and the Carbon Trust advisory consultancy to develop a product carbon footprint


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approach. This will be used to identify carbon emissions from individual products, which will

help target carbon hotspots in the company’s operations.

Carbon Trust: Independent Experts on Carbon Reduction

Since it was founded 2001, Carbon Trust has aimed to “tackle climate change by creating

a vibrant low carbon economy” (The Carbon Trust Visits Taiwan, About Us-Carbon Trust).

Carbon Trust is an international non-profit that partners with businesses to help them better

understand and manage their own carbon footprints. Some of their past clients include Coca-

Cola, General Electric, and Dyson. Their $5 million partnership with General Electric is

developing “early stage technologies” for lower carbon emissions (Client Services-Carbon Trust,

Annual Report). They have also provided initial financial support to firms such as Partnership for

Renewables, Low Carbon Workplace, InSource Energy, and Solar Press (The Carbon Trust

Visits Taiwan, About Us-Carbon Trust). Additionally, Carbon Trust has been heavily involved in

international standards for emissions reporting; they co-authored the Scope 3 Calculation

Guidance for the World Resource Institute (WRI) and the World Business Council on

Sustainable Development (WBCSD) Corporate Value Chain Standard and the PAS 2050

Standard (Carbon Footprint Measurement).

Since 2009, Carbon Trust broadened its offering of commercial services with expert

guidance on emissions reduction, carbon footprinting, and related carbon suppliers. This earned

them a profit of £10.830 M in the 2010-2011 tax year (2011 Annual Report 3). General

consultation fees for their services vary depending on annual firm expenditure. Carbon Trust has

reported a total of £4.5 B of direct cost savings and a “48% average internal rate of return” for

large business energy efficiency investments, which indicates the tremendous value in their

services (Client Services-Carbon Trust, Take Control of your Sustainability Strategy).

However, the Carbon Trust Standard’s global certification is not easy to obtain.

Substantial corporate costs, including both time and money, are inevitable in pursuing this

accolade. For small and mid-sized businesses, the firm also pioneered the lower cost “Footprint

Expert”, a carbon footprinting software that breaks down the lifecycle of a product into stages—

from raw material input to final use and disposal using the highest international standards

(Carbon Footprint Measurement). Its “Value Chain Hotspotter” software calculates projected


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risks and finds hidden opportunities within supply chains (Carbon Footprint Measurement). A

one-day basic carbon footprinting course, at £400 per person, is also available (Carbon Trust-

Training Courses). Once adequate training is completed, companies must provide carbon

footprint data from the previous two to three years of operations. However, even with relevant

training, corporations may not be fully prepared for this step in the certification process. If this is

the case, businesses could purchase the Carbon Trust Standard’s “Gap Analysis” service for

£1000 per day. This service instructs companies on how to best prepare for the certification

process. This may include investing in required technologies or creating a more robust data set,

which can incur additional costs (“Gap Analysis”). Combining services help corporations better

understand and manage their greenhouse gas emissions throughout their supply chains.

Carbon Trust “Carbon Reduction Label”, which appears on over £3.8 billion of products

across 21 countries, certifies the GHG emissions of consumer goods (Carbon Footprint

Measurement, see appendix I). It can be used to differentiate and enhance a brand, as well as

streamline supply chains (Carbon Trust Footprinting). The process of certification usually takes

six to ten weeks from an accepted application and signed contract. Companies may also choose

the newer option of a “Carbon Label” which indicates work with Carbon Trust without a carbon

reduction commitment (Carbon Trust Footprinting).

Carbon Trust also independently validates corporate carbon footprints with its Carbon

Trust Standard. The Carbon Trust Standard criteria verifies the accuracy of a firm’s carbon

footprint, emission reduction, and carbon management; it is also an approved EAM (Early

Action Metrics) under the Carbon Reduction Commitment (CRC) Energy Efficiency Scheme,

the non-voluntary carbon cap and trade system in the United Kingdom (United Kingdom-

Guidance 2). The CRC targets organizations that use more than 6,000 MWh of electricity each

year (“CRC Energy Efficiency Scheme”). The Early Action Metric is a program “designed to

reward organizations (sic) that have taken initiatives to reduce emissions before the start of, or

during [the mandatory requirements of] Phase 1 of the CRC Scheme” (United Kingdom-Early

Action Metric 1). Other approved Early Action Metrics by CRC include BSI’s Kitemark Scheme

for Energy Reduction Verification and CarbonLow Emission Ltd’s CarbonLow CLEEAR

Standard, among others (United Kingdom Equivalent Schemes, see appendix II).


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Outside the United Kingdom, Carbon Trust works with nation-specific affiliates, such as

Carbon Training International (CTI) in China and Carbon Decisions in Ireland, which can also

award the Carbon Trust Standard (International Assessment). According to general manager

Harry Morrison, the standard has been “designed as a continual improvement process” wherein

recertification becomes increasingly more difficult as years pass (Bateman). In 2010,

GlaxoSmithKline became the first multinational company to receive this certification (King).

The Carbon Trust Standard certification has been awarded to over 600 organizations, and

27,000 businesses (Client Services-Carbon Trust). Cumulatively, these businesses have achieved

a carbon emissions reduction of 5.5 Mt (“Footprint Certification”). By incentivizing companies

to reduce their carbon emissions, the Carbon Trust Standard certification is encouraging the

corporate world to be proactive in addressing climate change. Unfortunately, the cumulative

carbon emission reduction is virtually negligible when compared to net global emissions.

Compared to common sources of emissions, in 2007 the average coal-fired power plant in the

United States released over four million Mt of carbon dioxide into the atmosphere (Calculations

and References). While this is a discouraging comparison, the Carbon Trust Standard

certification is nevertheless an important step forward in a growing corporate movement to

address climate change.

The Value and Cost of the Carbon Trust Standard Certification

The value of the Carbon Trust Standard certification can be understood from several

different perspectives. Richard Pamenter, head of sustainability for GSK, revealed the extensive

benefits of achieving the certification when he said “the experience of striving for carbon

accreditation in the UK was hugely beneficial – from a financial, ethical, operational and

reputational point of view and demonstrated the value of applying for the Carbon Trust Standard

on a multi-country basis” (ClickGreen staff). From a financial perspective, GSK’s ongoing

efforts to reduce its carbon footprint resulted in the company saving £3.8M, or approximately

$6.1M (USD), in energy costs (ClickGreen staff). In addition, over the course of GSK’s three-

year assessment period, the company increased its revenue per tonne of CO2 emissions by 17%

(BusinessGreen staff). The prospect of achieving the Carbon Trust Standard certification helped

motivate GSK to reduce its carbon footprint. Thus the certification has been of financial value


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However, the financial benefits associated with the Carbon Trust Standard certification

were dwarfed by direct reputational benefits. GSK understood that achieving certification would

have a positive impact on its brand (King). While several companies received the Carbon Trust

Standard certification prior to GSK, the British multinational was the first company to receive

the global carbon certification (ClickGreen staff). By becoming globally certified, GSK revealed

the breadth of its commitment to addressing climate change through carbon reduction. Prior to

awarding this distinction to GSK, the Carbon Trust assessed the company’s carbon footprint over

a three-year period, across 65 countries and 200 corporate locations (ClickGreen staff). The

Carbon Trust found that GSK reduced its CO2 emissions by over 84,000 tonnes during this

period, corresponding to a 4% reduction in the company’s carbon footprint (BusinessGreen

staff). The comprehensive and unbiased nature of the Carbon Trust’s assessment bolstered

GSK’s carbon reduction claims and in doing so likely satisfied many corporate stakeholders. A

recent Carbon Trust survey—which revealed that 90% of consumers think all UK businesses

should reduce their carbon emissions by 3% annually—emphasized the importance of GSK’s

carbon reduction efforts to stakeholders (“Press Releases”).

The value of the Carbon Trust Standard certification can be further understood by

examining the experiences of other companies that have received the distinction. For example

when Kingspan Insulated Panels became certified in May 2012, Mark Harris, the company’s

Divisional Building Technology Director, stated, “attaining the Carbon Trust Standard is

independent proof of our achievements in our ongoing efforts to reduce our carbon and energy

footprints” (Hughes). Thus the distinction represents an unbiased validation of a company’s

success in reducing its carbon footprint. Harris also stated “the Standard will provide a platform

and catalyst for our renewed efforts to save energy in the short-term and forms part of our long-

term goal of achieving net-zero energy at all Kingspan sites” (Hughes). As a result the company

is incentivized to uphold its commitment to carbon reduction in order to retain the certification.

Attaining the Carbon Trust Standard certification gives companies the potential to display

the internationally recognized Carbon Reduction Label on their products, but they must first

comply with supplementary requirements in the Footprint Expert Guide and the Code of Good

Practice in order to use the label (“Carbon Labelling”). Thus it serves as a third party “eco-label”

that has the potential to attract new customers and increase brand value. Therefore, not only does


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the Carbon Reduction Label result in reputational benefits for companies, but it can also help

companies generate revenue by increasing their market share. No evidence has been found that

GSK uses this label on its products, but the company’s new product carbon footprint approach

suggests that GSK may be eligible to use the label in the near future (GlaxoSmithKline 87).

Another attractive quality of the Carbon Trust Standard certification is that it is as an

“early action” metric in the new UK legislation (the Carbon Commitment Energy Efficiency

Scheme, formerly the Carbon Reduction Commitment (CRC)) as stated above. By receiving the

Carbon Trust Standard certification, businesses can score better in the comprehensive ranking in

the CRC Energy Efficiency Scheme (“Guidance Documents”).

Furthermore, there is value in completing the requirements needed to achieve the Carbon

Trust Standard certification. In order to obtain certification, companies must devote themselves

to reliable carbon emissions data collection. This data-driven methodology central to the

certification process is of tremendous importance. Tilde Herrera’s June 2011 article on

GreenBiz.com articulates this data-focused ideology succinctly, “you can’t manage what you

don’t measure: if your underlying data is unreliable, it makes it that much more difficult to truly

foster improvement.” Therefore, companies that receive certification also end up with valuable

data that can be used to better manage the company and its environmental impacts in the future.

All of the aforementioned corporate benefits associated with the Carbon Trust Standard

certification—financial savings, an independent carbon reduction assessment, advertising with

the Carbon Reduction Label, points towards the CRC Energy Efficiency Scheme, and valuable

carbon data—are instrumental in providing businesses with a competitive advantage. There is no

doubt that customers, investors, and other stakeholders are becoming increasingly aware of

environmental issues. In fact, a survey by the Shelton Group indicates “that 64 percent of

Americans are searching for greener (more energy efficient, natural, sustainable, etc.) products”

(Lannuzzi, 147). Globally, Andrew Winston reports that 86 percent of consumers are concerned

with climate change, and 50 percent seek “out eco-products or consider environmental and social

aspects in their purchases” (Winston 2009). Therefore, many stakeholders will respond

positively to companies that have received the Carbon Trust Standard certification because it is a

credible assessment of a business’s commitment to the environment. By achieving global


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certification, GSK is better positioned for a world of tougher environmental legislation, as well

as increased consumer awareness and investor interest.

Stakeholder Participation

In order to reach net zero carbon emissions, GlaxoSmithKline brought a broad range of

stakeholders to the table. These stakeholders included employees, external partners, universities,

governments, and regulators. A select number of examples will be discussed that best illustrate

the affect partnerships had on achieving carbon neutrality

Internal Global Involvement

In 2001, GlaxoSmithKline created an Environmental, Health and Safety (EHS) Plan for

Excellence. Originally, this 10-year plan set targets for energy and water consumption,

wastewater organic material, non-hazardous waste, and ozone depleting substances used in the

production of inhalers. It has since been extended to reach targets by 2015. The plan called for

GSK to reduce its climate change impact by reducing carbon emissions throughout the lifecycle

of its products and supply chain (GlaxoSmithKline, 2006, 12).

In 2005, GSK revisited its Environmental, Health and Safety (EHS) Plan for Excellence

by surveying its employees about their views on the progress of the EHS Plan. Employees stated

three things: one, that GSK could add value to the business by “doing the right thing”; two, they

reiterated a need for a culture where employees contribute to the success of EHS; and three, for

the Plan to be flexible to different rates of progress in various parts of the business

(GlaxoSmithKline, 2005, 75-76).

In response, the company gave training to their EHS professionals regarding vision and

strategy. GSK has also consulted extensively with key internal and external stakeholders to

ensure that relevant EHS concerns and the needs of the business would be reflected in the

extended plan. Training included integrating the EHS Milestone Aligned Process (MAP) into the

company’s product development and supply processes, including the R&D “design for

manufacture” initiative. To further increase employee buy-in, the Chief Executive Officer’s EHS

Excellence Awards recognize GSK sites for EHS Initiative and EHS innovation in Green

Chemistry/Technology (GlaxoSmithKline, 2005, 85).


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In 2005 this award was presented to the Rajahmundry, India plant. This was the first

GSK facility to receive the ISO 14001 and OHSAS 18001 accreditation for Environment and

Health & Safety. The facility received the first prize in EHS Initiative - Environment Award. It

was revealed that most of the methane generated at the Rajahmundry effluent treatment plant

was burnt through a flare stack. This problem was solved when the EHS team diverted the

methane to use as fuel in the site canteen instead of liquefied petroleum gas (GlaxoSmithKline,

2005, 79).

The second place prize went to Rixensart and Wavre, Belgium for their management of

green spaces. Both of these sites have developed a number of short and medium term projects to

protect the natural environment, and improved the biodiversity in and around the facilities. Third

place prize was awarded to Thane, India for their water conservation efforts. The facility carried

out a water conservation project that included raising employee awareness. They also

implemented a number of interesting initiatives, including harvesting rainwater for reuse,

introducing water saving and recovery measures in the site’s heating and cooling systems, and

recycling treated effluent water for gardening. These awards encourage employees worldwide to

be more engaged in the EHS initiatives. They also incentivize green, cost-saving innovation and

raise awareness around best practices (GlaxoSmithKline, 2005, 79).

In order to address its supply chain, GlaxoSmithKline carried out life cycle assessments

of several of its products, technologies, and packaging in 2008. Part of their goal was to integrate

sustainability into the manufacturing process and measure supplier performance across the entire

value chain. In this same year, GSK set a goal for factories to achieve tangible benefits from

investment in ‘green chemistry.’ With the goal for the Jurong factory in Singapore to be the

“factory of the future,” GSK set targets for the factory on the environmental performance of

energy, water, and chemical oxygen in wastewater, amongst other initiatives (Manufacturing).

Performing product LCA’s and setting targets for factory performance are additional examples of

techniques to simultaneously improve performance and raise employee awareness around EHS

issues. Engaging employees through awards and targets can be a powerful mechanism for

integrating sustainability into a company.

External Global Partners


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The company has engaged with various agencies and organizations to discuss key EHS

concerns and expectations in the pharmaceutical industry. GlaxoSmithKline created a panel of

external stakeholders facilitated by The Environment Council. This 10-member panel included

representatives from GSK’s customer-base, environmental organizations, suppliers, regulators,

and socially responsible investors. The panel drafted an opinion on pharmaceuticals and the

environment, policy on chemical use, and climate change (GlaxoSmithKline, 2005, 76-78).

In order to address biodiversity more effectively in the company, GSK partnered with

Earthwatch Institute (Europe) and Green Alliance to conduct a study concerning ways to achieve

better environmental regulation, as a means of targeting climate and thus carbon related issues

throughout GSK’s audit programs (GlaxoSmithKline, 2005, 77).

Higher Education Institutions

In 2012, GSK formalized its partnership with the University of Nottingham as a means of

constructing a carbon neutral sustainable chemistry laboratory to addresses sustainable chemistry

in the pharmaceutical industry. In order to embed sustainable chemistry principles in the next

generation of scientists, GSK supported the construction of the GlaxoSmithKline Carbon Neutral

Laboratory for Sustainable Chemistry building with a £12m grant to the university. This is both a

good public relations move for GSK as well as a legitimate investment in the future of the

industry. Furthermore, investing in green chemistry research and development has the potential

to drastically reduce the environmental impacts of pharmaceuticals in the future. The facility will

deliver advanced undergraduate teaching to students by utilizing sustainable chemistry principles

in the university curriculum (Utton).

The GSK Medicinal Chemistry module is designed as an option for chemistry students in

the third year of their 4-year Master of Science courses. The 12 students selected by the

university will then pursue an active research program in the laboratory on a molecular target

that the pharmaceutical company is developing. This is an innovative example of external

engagement because it simultaneously trains new scientists while helping advance current

research and development.

Regulation


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In 2005 GSK collaborated with government entities in both the U.S. and in Europe

concerning environmental risk assessments of pharmaceuticals and the impact of

pharmaceuticals in the environment. In Europe, GSK has lobbied for the environmental impacts

of pharmaceuticals to be regulated by the European Agency for the Evaluation of Medical

Products. The company is an active member of the Association of British Pharmaceutical

Industries’ working group on pharmaceuticals in the environment. The Association actively

engages with the UK Environment Agency (GlaxoSmithKline, 86). In Sweden, the company

participated with LIF, a Swedish-based pharmaceutical research company, on the classification

of pharmaceuticals according to their effects on the environment. By working with the European

Federation of Pharmaceutical Industries and Associations (EFPIA), GSK contributed to the

development of guidelines for environmental risk assessment of pharmaceuticals by the

European Medicines Evaluation Agency (EMEA). GSK lobbying efforts have also extended to

the U.S. government through PhRMA, the Pharmaceutical Research and Manufacturers of

America. In the U.S., the company has engaged with governmental task forces on

pharmaceuticals in the environment (GlaxoSmithKline, 2005, 86).

In 2010 GSK extended its corporate engagement with the country of Singapore.

GlaxoSmithKline has incorporated a long-term commitment with Singapore, which includes a

Green and Sustainable Manufacture Program. Additionally, GSK has committed S$50 million

(£24 million) to the Singapore Economic Development Board to fund research in green and

sustainable manufacturing. GSK’s actions have shown a willingness to cooperate externally and

help others through mutually beneficial projects.

New Standards for Corporate Sustainability

GlaxoSmithKline, a leader in the pharmaceutical industry, has set the goal of reaching

carbon neutrality by 2050 with 10% and 25% reduction by 2015 and 2020, respectively

("GlaxoSmithKline (GSK) - global healthcare company. Do more, feel better, live longer ").

Currently, various standards exist as guidelines to help corporations become more sustainable.

While the Carbon Trust Standard helps corporations become carbon neutral, there are other

standards that target different aspects of sustainability, including corporate sustainability,

sustainability of facilities, and sustainability of the manufacturing process.


17

ISO 14000 series

The International Organization for Standardization (ISO), the world’s largest developer

of voluntary international standards, has published more than 19,000 international standards in

various fields ranging from technology to business ("About ISO."). The ISO 14000 series covers

environmental management with various standards to help corporations minimize the effects of

their operations on the environment (Johnson). The 14000 series was adapted by ISO in 1996

and has since been used by at least 230,000 organizations around the world including GSK

(Johnson). One unique aspect of ISO 14000 series is its voluntary approach (Goetsch). Instead of

a standard where specific approaches are listed for corporations to follow, ISO 14000 provides a

set of generic lists that corporations can implement in its management.

The core of ISO 14000 series is ISO 14001:2004. Like all other ISO14000 series, ISO

14001:2004 provides a framework that a corporation can follow to setup its environmental

management systems. The standard is based on a four step process: Plan, Do, Check, and Act

(PDCA). The “plan” is to establish the objective and processes that the corporation deemed

necessary in compliance with its own policies. “Do” refers to implementing the plan. “Check” is

to monitor and measure the process against target goals and “act” refers to responding to

“Check” and adjusting the “Plan” accordingly. The ISO14000 series is often used in conjunction

with the ISO 9000 series. ISO 9000 is the standard of quality management (Jackson). Both

standards are similar in that each can act as internal managements through PDCA while at the

same time they are used as a marketing tool to the customers and clients (Boiral 127-146). The

ISO 14000 series has a myriad of benefits. In various industries, ISO 14000 has become a

customer requirement (Goetsch). It is beneficial for corporations to remain in compliance with

ISO 14000 to remain competitive. Besides external benefits, corporations can experience internal

benefits. For example, methods to identify areas of waste, reducing energy and resource

consumption, maintaining consistency within the manufacturing process, preventing pollution

cost, identifying the corporation as “green”, and reducing environmental risks.

Even with the benefits of ISO 14000, it does not cover all of the components of corporate

sustainability. Even if a corporation is certified for ISO 14000, it does not mean that the

corporation is in compliance with all regulations. As mentioned above, the ISO 14000 standards


18

are simply frameworks that a corporation can use to achieve corporate sustainability (Corbett and

Kirsch).

GHG Protocol

Greenhouse Gas (GHG) Protocol is an accounting tool that corporations can use to

understand, quantify, and manage greenhouse gas emissions. The GHG Protocol started in 1998

through a partnership with the World Resources Institute (WRI) and the World Business Council

for Sustainable Development (WBCSD) ("About the GHG Protocol."). In 2001, the first edition

GHG Protocol, The Greenhouse Gas Protocol: A Corporate Accounting and Reporting

Standard, was published. GHG Protocol’s main goal is to help corporations create a GHG

inventory that truly represents overall emissions, and provide information that can helps

corporations build a strategy to manage and reduce these emissions. The Protocol’s tool for

calculating GHG emissions is also consistent with that of the Intergovernmental Panel on

Climate Change (IPCC) ("About the GHG Protocol.").

WRI and WBCSD joined with ISO in creating the ISO 14064 standard in 2006 ("ISO,

WRI, and WBCSD Announce Cooperation on Greenhouse Gas Accounting and Verification.").

ISO 14064 details requirements that are recognized internationally for defining, examining,

monitoring, and reducing GHGs. This is a good example of how these various standards can

work together to improve corporate sustainability.

GRI

The Global Reporting Initiative (GRI) is a non-profit organization with the mission to

make sustainability reporting standard practice in corporations by providing guidance and

support ("About GRI."). The vision of GRI is a sustainable global economy where corporations

can manage their economic, environmental, social, and governance performance equally and

transparently. GRI guidelines include core metrics that all corporations can adapt , with specific

sectors for specific enterprises. The key structure of GRI is its multi-stakeholder approaches that

help ensure credibility and trust ("About GRI."). The benefits of GRI’s third generation (G3) are

different than those from the ISO 14000 certifications and GRI’s first two iterations. G3 can be

used to evaluate a corporation’s sustainability in terms of laws and regulations. By addressing


19

the three areas of corporate needs in economic, environmental, and social aspects, GRI

guidelines can lead to growth through evaluating cost, customer interaction, community

interaction, and environmental impacts.

Some argue that GRI guidelines, though strong for setting a starting point in corporate

sustainability, are not enough considering that different industries face different sustainability

challenges (Dienel). Furthermore, some also believe that a GRI based report with a long list of

mandated performances is not a direct indicator of sustainability and that it is the principles and

actions that are repeated daily that should be standardized.

LEED

Leadership in Energy and Environmental Design (LEED) is a rating system for the

design, construction, and operation of facilities. Developed by the United States Green Building

Council (USGBC) in 1995, LEED has since grown into a definition of sustainable building

("About USGBC."). Like GRI, LEED is an open and transparent rating system, which can be

adjusted according to the wisdom of experts in the field. LEED’s rating system allocates points

into various categories based on the potential environmental impacts and human benefits. LEED

points are distributed across 5 major categories: Sustainable Sites, Water Efficiency, Energy and

Atmosphere, Materials and Resources, and Indoor Environmental Quality (Winkler). To

determine whether a building meets the requirements setup through the point system, LEED uses

reference buildings and data collecting to determine the impact of the building in each of the

categories. Different LEED rating systems place different emphasis on building qualities, but in

general energy use is given high priority.

However, because of the strict point system critics often argue that it can be inflexible.

Because of this, LEED has improved the development of its rating system. Currently LEED is in

its fourth version with nine rating systems for various design and facility (Winkler).

Which Standard to Use?

With so many standards including those mentioned above, which standard should a

corporation use and what are the differences between these standards? How do these standards

compare to those of the Carbon Trust? Please refer to Appendix IV to view a list of standards in


20

corporate sustainability. With all the different standards, each with its own guidelines and

system, it is often difficult to determine which standard a corporation should follow. The current

standards for carbon neutrality are still not firmly established. There is no set guideline to follow

and it is up to the corporation to determine which standard to use based on the goals that the

corporation wants to achieve. GSK’s goal for carbon neutrality fit into the Carbon Trust

Standard, while its desire for better facilities translated at various times into LEED, the Carbon

Trust Standard, and ISO certifications. However, no matter the differences between them, all of

these standards seek to help corporations achieve sustainability.

The Future of Corporate Sustainability Standards

A systemic view of the standards mentioned above and others shows that they are

complementary, instead of adversarial (Proposing a Unifying Framework for Sustainable

Development). The future of standards in carbon neutrality will include using all the tools,

concepts, standards, and programs available bring clarity, enable action, and monitor process.

Ultimately, it is up to the individuals within the corporation to determine which standard to use

for each goal. In all likelihood, achieving corporate sustainability will require the use of many

standards.

Conclusion

GlaxoSmithKline’s recent attainment of the Carbon Trust Standard certification for

carbon neutrality sets an intriguing precedent for carbon management in multinational

corporations. Not only have they proved that carbon neutrality is possible for large international

corporations, they have shown that it can bring value to the corporation. While GSK has realized

significant energy cost savings in reducing its carbon footprint, the primary benefit of the Carbon

Trust Standard certification is reputational.

Carbon neutrality is an increasingly popular term in the corporate sustainability world.

More importantly, it is an increasingly popular goal among companies. Becoming carbon neutral


21

is not a simple process, however. It takes a deep understanding of a company’s operations and

supply chain to even begin considering carbon neutrality. Thankfully, firms like Carbon Trust

exist to help companies interested in becoming carbon neutral navigate the process. As we have

discussed in this case, there is tremendous real and potential value in becoming a certified carbon

neutral company. Not only does it please consumers, it has the potential to increase market share,

attract investors, and strengthen a firm’s public image. These advantages are largely dependent

on the use of a credible third party for verification. Carbon Trust offers clients a variety of

services, including training, software, and certification, and even an eco-label for products.

These services can help firms attract new customers, better understand their own operations,

weed out risk in the supply chain, and make efficiency gains. As carbon neutrality becomes an

increasingly popular topic within corporate sustainability, new corporate standards such as the

Carbon Trust Standard’s certification will continue to emerge.

While the Carbon Trust’s Carbon Trust Standard certification is available, it is by no

means the only standard of corporate sustainability. Others such as LEED, GRI, the GHG

Protocol, and ISO 14000 also help corporations in their pursuit of sustainability. We have

concluded that these standards are more complementary than adversarial. While the future is

uncertain, climate change may force more companies to consider “carbon neutrality” as part of

their overall corporate sustainability agenda as they strive to remain competitive in a resource-

constrained world.

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27

APPENDIX

Appendix I

Carbon Trust Standard Logo


28

Appendix II

Price List for Carbon Trust Standard’s Certification Fee

Organization’s Annual

Energy Expenditure*

Certification

only

Assisted

Certification

Online

Certification

Less than £50k £1,000 £1,700 £500

£50k-£500k £2,000 £3,500 n/a

£500k-£1.5m £5,000 £8,000 n/a

£1.5m-£5m £6,000 £10,000 n/a

£5m-£10m £8,000 £12,000 n/a

More than £10m £10,000 £15,000 n/a

(Carbon Trust)

http://www.carbontruststandard.com/pages/Price-list.

Description of Price List for Carbon Trust Standard’s Certification Fee:

Certification only: For organizations that are able to complete the assessment

form and spreadsheet themselves.

Assisted certification: For organizations that would like support in collating evidence

and completing the assessment form and spreadsheet.

Online certification: For organizations that are able to guide themselves through the

assessment process; currently only available for small organizations (less than £50k energy

spend).


29

Appendix III

Carbon Trust Equivalent Schemes


30

Appendix IV

List of Standards in Corporate Sustainability

Name ISO

14000

GHG ISO 14064 GRI LEED CTS

Origin ISO WBCSD and

WRI

ISO CERES USGBC Carbon Trust

Type of

standard

Non-

specific

Specific Specific Non-

Specific

Specific Specific

Type of

Specificity

N/A Greenhouse

Gas

Emissions

Greenhouse

Gas

Emissions

N/A Facilities Carbon

Emission

Certified/

Verified by

Third

party

certified

agencies

Government

Certified

agencies

Government

certified

agencies

Self-

reporting

with

reviews

Third party

certified

agencies

Third party

certified

agencies

Geographic

Specificity

Global Global Global Global Global Global

Key

Methodology

Plan, Do,

Check

and Act

(PDCA)

Prepare,

Simplify,

Reduce,

Consistency

Plan, Do,

Check and

Act (PDCA)

Principles,

Reporting,

Strategy,

Approach,

and

Indicator

Potential

Environment

al Impacts

and Human

Benefits

Footprint

measurement,

Reduction,

and Carbon

Management


31