Summary
Details
- Global
Mandatory: environmental criteria where included in supplier contracts.
Functionally mandatory: emissions and environmental data from priority suppliers.
Stronger requirements: suppliers contributing materially to Scope 3, water, and nature impacts.
Category-dependent: implementation varies by supplier type, contract, and risk exposure.
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What’s Required
Novartis has developed a contractual and science-based supplier climate governance system for pharmaceutical supply chains. Its approach is more explicit than many corporate frameworks because environmental sustainability criteria are incorporated into supplier contracts and connected to value-chain emissions reduction.
The architecture includes:
Environmental Sustainability Criteria for Suppliers.
Supplier contractual environmental requirements.
Climate transition plan.
Net-zero value chain target.
Nature-positive strategy.
Water stewardship and waste reduction expectations.
Supplier engagement and reporting systems.
This creates a pharmaceutical supplier governance model, where emissions, water, and nature requirements are embedded into commercial relationships with suppliers.
Novartis states that it aims for net-zero emissions across Scope 1, 2, and 3 by 2040 and has established a transition plan to reach that goal.
1. Emissions Disclosure, Measurement, and Reduction
Suppliers are required or expected to:
Measure greenhouse gas emissions.
Reduce emissions from products and services supplied to Novartis.
Track energy use and resource consumption.
Provide environmental data.
Support Novartis climate targets.
Align with supplier environmental sustainability criteria.
For strategic suppliers, this includes:
Contractual environmental sustainability clauses.
Scope 3 emissions coverage.
Emissions reduction plans.
Water stewardship requirements for prioritized suppliers.
Waste and resource efficiency expectations.
Novartis’s January 2025 supplier criteria state that the company is committed to becoming net zero across the value chain by 2040.
2. Scope 3 Governance and Value Chain Integration
Novartis’s Scope 3 emissions are influenced by:
Purchased goods and services.
Contract manufacturing.
Active pharmaceutical ingredient supply chains.
Packaging.
Logistics.
Capital goods.
Use and disposal of products.
Healthcare system procurement expectations.
Suppliers must:
Provide emissions and environmental data.
Comply with environmental criteria in contracts.
Support Scope 3 emissions reduction.
Align with climate and nature objectives.
Improve resource efficiency.
This creates a contractual Scope 3 governance model, where supplier obligations are explicitly linked to value-chain climate targets.
Novartis’s updated environmental sustainability strategy includes a target to reduce absolute Scope 3 emissions by 42% by 2030 from a 2022 base year and by 90% by 2040 from a 2022 base year.
3. Supplier Data and Contractual Governance Architecture
A defining feature is the use of contractual environmental criteria.
Suppliers may be required to:
Accept environmental clauses.
Provide emissions information.
Report progress.
Implement environmental management practices.
Support water maturity assessments.
Demonstrate improvement over time.
The system enables:
Contract-level Scope 3 coverage.
Supplier segmentation by environmental materiality.
Integration of climate criteria into purchasing.
Supplier reporting and engagement.
Tracking of progress against annual targets.
Novartis reported progress against the percentage of Scope 3 emissions covered by environmental criteria in supplier contracts, reaching 76% at 9M 2024 against a 2024 target of 70%.
4. Pharmaceutical Manufacturing, Chemicals, and Product Stewardship
Suppliers involved in pharmaceutical production must manage:
Energy use.
Process emissions.
Water use.
Waste and hazardous materials.
Chemical impacts.
Packaging and materials.
Quality and regulatory compliance.
This creates a pharmaceutical manufacturing governance layer, where environmental expectations sit alongside strict health, quality, and safety requirements.
Supplier performance affects:
Medicine production footprints.
Manufacturing resilience.
Regulatory compliance.
Healthcare procurement claims.
Corporate environmental disclosure.
5. Nature, Water, and Waste Requirements
Novartis’s environmental sustainability framework is not limited to climate.
Suppliers are expected to support:
Nature-positive objectives.
Water risk management.
Waste reduction.
Pollution prevention.
Resource efficiency.
Environmental compliance.
Novartis states that its environmental sustainability strategy includes a nature commitment to “halt and reverse nature loss by 2030” on a 2020 baseline and achieve full recovery by 2050.
This creates a climate-nature-water governance model, particularly relevant for pharmaceutical supply chains that depend on chemicals, water-intensive manufacturing, and regulated waste treatment.
6. Audit, Verification, and Monitoring Systems
Novartis enforces compliance through:
Supplier contract requirements.
Environmental criteria monitoring.
Supplier assessments.
Data collection.
Water maturity ladders.
Corrective action processes.
Annual sustainability reporting.
Suppliers must:
Provide environmental data.
Demonstrate compliance with contract requirements.
Address identified gaps.
Maintain appropriate environmental management systems.
Support continuous improvement.
This creates a contractual monitoring regime with measurable supplier coverage targets.
7. Procurement Integration and Supplier Segmentation
Environmental performance is embedded into procurement through:
Supplier contracting.
Supplier onboarding.
Environmental clauses.
Scope 3 coverage tracking.
Risk-based supplier engagement.
Category-specific procurement processes.
Suppliers are segmented based on:
Contribution to Scope 3 emissions.
Manufacturing relevance.
Water risk.
Nature impact.
Strategic importance.
Contractual exposure.
High-impact suppliers face:
Stronger environmental criteria.
Greater reporting expectations.
More detailed monitoring.
Higher pressure to align with Novartis targets.
8. Upstream Cascade Requirements
Suppliers are expected to:
Manage environmental risks in their own operations.
Engage relevant sub-suppliers.
Support traceability and data provision.
Improve environmental performance across upstream processes.
This extends governance into:
Contract manufacturers.
API suppliers.
Chemical suppliers.
Packaging suppliers.
Logistics providers.
Laboratory and technology providers.
The framework, therefore, operates across multi-tier pharmaceutical and healthcare supply chains.
9. Lifecycle and Product-Level Implications
The framework directly affects:
Medicine manufacturing emissions.
Packaging impacts.
Healthcare procurement sustainability.
Product lifecycle emissions.
Waste and water impacts.
Resilience of pharmaceutical supply chains.
Supplier performance influences:
Scope 3 reporting
Healthcare customer disclosures.
Regulatory and investor expectations.
Product and portfolio sustainability.
Corporate net-zero delivery.
This aligns supplier operations with the pharmaceutical product lifecycle and healthcare system climate requirements.
Important Deadlines
Key timelines include:
2030 target to reduce absolute Scope 3 emissions by 42% from 2022.
2040 net-zero value chain target.
2030 nature-positive milestone.
2050 full nature recovery ambition.
Annual sustainability reporting cycles.
Ongoing expansion of supplier contract coverage.
Novartis’s current environmental sustainability strategy sets near- and long-term climate targets through 2030 and 2040.
Current Status
The framework is active and advanced, with increasing focus on:
Contractual supplier coverage.
Scope 3 reductions.
Climate transition planning.
Nature-positive strategy.
Water stewardship.
Environmental criteria in supplier contracts.
Novartis publicly states that its environmental strategy includes both climate and nature objectives.
Penalties for Non-Compliance
Enforcement may include:
Corrective action requirements.
Contractual remediation.
Enhanced monitoring.
Loss of preferred supplier status.
Reduced sourcing opportunities.
Contract termination.
This creates a direct link between environmental performance and supplier eligibility.
Examples of Known Failure Modes
Typical risks include:
Failure to provide emissions data.
Weak environmental management systems.
Insufficient water risk assessment.
High-carbon outsourced production.
Poor chemical or waste management.
Non-alignment with supplier contract criteria.
These issues affect supplier risk classification and future procurement access.
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