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A trend toward European procurement countries adding
environmental sustainability to tender criteria for pharmaceuticals
and medical devices continued to gain importance during 2020. Our
ProcureIntel
analysis highlights growing space for the inclusion of
environmental criteria in the top-5 European markets between 2014
and 2020. Increases in the use of ESG-criteria in pharmaceutical
and medical equipment tenders in 2020 climbed well above recent
annual averages. This is despite contract notices with
environmental specifications still being below a 2019 peak. The
slight dip in 2020 activity is almost certainly a consequence of
COVID-19's impact on the market. Evidence gleamed from ProcureIntel
data hints at the likelihood that certain European governments
opted to use temporary exemptions from ESG award criteria to
facilitate urgent procurements of medical resources.
The move toward higher numbers of tenders with ESG-linked
components is subtle. All indications are that the European
pharmaceutical and medical equipment tender procurement market is
not on the verge of a revolution toward "green" criteria. But there
is upward momentum, and increased effort by purchasers, to
incorporate environmental calculations, albeit progress is gradual
and lower price criteria continue to be the substantially more
important factor especially for the pharmaceutical market.
Between 2014 and 2020 there were a combined total of 2,304 and
1,302 contract notices with environmental specifications of medical
equipment and pharmaceuticals, respectively, from buyers in France,
Germany, Spain, Italy and the United Kingdom according to
ProcureIntel. The seven-year average works out at 329 and 186
tenders per year for medical equipment and pharmaceuticals. This
compares to 414 contract notices with ESG criteria for medical
devices and 241 for medicines in 2020.
Variations between the top-5 European countries appear to have
expanded slightly in 2020. French medicine tender notices with
environmental specifications fell from 49 last year to 31 in 2020,
whereas medical device tender notices with environmental
specifications declined from 144 to 138 in 2020. ESG-referenced
tenders for medical equipment supplies in Italy during 2020
amounted to 33, which was slightly higher than an annual average of
31 since 2014 but still below a peak of 37 in 2019. The same is
true in the pharmaceutical segment, with ProcureIntel observing 10
contract notices containing ESG criteria, as opposed to an annual
average since 2014 of 12 and a peak of 14 during 2019.
Contradicting the relative reductions seen in France and Italy,
ESG specifications for pharmaceutical tenders in Spain climbed 39%
year-on-year (y/y) from 38 in 2019 to 53 in 2020. Spain's medical
equipment tenders involving ESG specification also rose 50% y/y
from 103 in 2019 to 155. Germany too offered above average contract
notices containing ESG specifications for medical equipment and
pharmaceutical tenders, with those for pharmaceuticals standing at
131 (versus a yearly average of 86), while those for medical
devices amounted to 28 (as opposed to a yearly average since 2014
of 26).
A basic calculation of pharmaceutical tenders with environmental
considerations tenders versus total tenders reveals that France
(11.2%) continues to have the highest overall share, followed by
Germany (10.9%), the UK (10.2%), Spain (4.9%) and Italy (4.5%). As
such, Italy and Spain continue to stand somewhat apart with a
conspicuously low level of ESG criteria embedded into the tendering
landscape. This is steadily changing, notably in the case of Spain.
The German market is where the gap between "green tenders" and
price-driven tenders has been growing the most significantly, with
pricing becoming more and more important, thereby widening the gap
with environmental criteria.
Looking ahead to 2021, the most important development in this
sphere is set to be the UK's implementation from January of the new
the Procurement Policy Note (PPN) 06/20. A core tenet of the PPN
sets out new requirements on "social value" when assessing tenders,
including environmental and climate change goals upon which a
public contract might be evaluated. The prior Public Services
(Social Value) Act 2012 merely required contracting authorities
"consider" social value elements when setting award criteria and
assessing tenders for public sector contracts. While the scope of
the requirement is something of a grey area, and there appear to be
certain exemptions that could be invoked, nevertheless the social
value model will mean the incorporation of ESG criteria becomes
increasingly standard practice. A minimum 10% weighting will apply,
but with flexibility for higher weightings.
The momentum that is set to build in 2021 and beyond for ESG
tender award criteria presents the pharmaceutical industry with a
complex array of challenges and potentially increased scrutiny of
the sectors environmental footprint, not only on the European
manufacturing scene but also internationally. The new mixture of
pricing and ESG criteria that is on display in the European tender
environment for medicines and medical devices is not only occurring
in France, Germany, Italy Spain and the United Kingdom. There is
growing evidence from the Nordic region that tenders which include
environmental and sustainability criteria is fast increasing also.
The latest evidence comes from the Nordic joint tender procurement
initiative - involving Denmark, Iceland and Norway - confirming
that criteria for winning tender contracts at the next 2021
competition will include qualitative criteria on the environment.
The outlook for suppliers is that significant investments in
environmental standards will be likely be needed to compete for
European tenders in future. The changing environment may give an
advantage to manufacturers in Europe and North America, at the
expense of China and India where ESG standards may take longer to
adjust. An expectation there will be a slight, but tangible,
reduced focus on primary price award criteria and a higher
weighting given to ESG over the medium-term outlook may also
benefit smaller and medium-sized companies, which may be able to
remain more competitive than today.
