India Pharma Moves on ESG but Faces Waste, Energy Hurdles

According to the report ICRA ESG Ratings, India’s pharmaceutical sector is entering a decisive phase where sustainability is no longer a marginal initiative but a core competitiveness factor shaped by global regulatory pressure and export market expectations.

Decarbonization Gains with Structural Efficiency Gaps

The sector has made visible progress in renewable energy adoption, with usage rising from 17% in FY2023 to 25% in FY2025, signaling a gradual shift toward cleaner energy procurement models such as open access and group captive systems. This transition has helped moderate emission intensity, particularly among formulation players that recorded nearly 30% reduction.

However, the broader efficiency narrative remains mixed. Energy intensity per unit of revenue has increased, largely due to pricing pressures and evolving product mix, indicating that cost dynamics are diluting sustainability gains.

API manufacturers continue to remain the most carbon-intensive segment, with emission levels three to four times higher than formulation players, highlighting a structural decarbonization challenge.

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Water Positivity Improves, Waste Circularity Lags

Water management emerges as a relative strength for the sector, with declining freshwater intensity and a high adoption rate of Zero Liquid Discharge systems at around 83%. This indicates regulatory alignment and operational maturity in water stewardship. However, waste management continues to be a critical concern.

Hazardous waste constitutes nearly 67% in API operations, with limited recycling feasibility due to chemical complexity. While integrated players are leveraging scale to improve recycling and recovery rates, the lack of advanced circularity infrastructure and treatment technologies remains a bottleneck.

This imbalance suggests that environmental progress is uneven and heavily dependent on operational models.

Governance Maturity & Global ESG Pressure Redefine Strategy

Governance frameworks across the sector are still evolving, with only 35% of companies having dedicated ESG committees despite 59% setting emission reduction targets. This gap highlights a disconnect between intent and institutional accountability.

At the same time, global frameworks such as EU CSRD and UK NHS net-zero procurement are accelerating ESG integration beyond compliance into a business-critical requirement. Export-driven companies are increasingly being evaluated on Scope 3 emissions, supply chain transparency, and science-based targets.

As a result, ESG is transitioning into a procurement qualifier, forcing Indian pharma companies to strengthen governance, enhance disclosures, and align sustainability strategies with long-term export growth ambitions.