Establishing a biodiversity strategy

Customer: Merck KGaA

Category: Chemical & Pharma

Date: Sept. 2023

Customer Website

Merck is a chemical and pharmaceutical company headquartered in Darmstadt, Germany, with more than 64,000 employees in 66 countries. The founding family is still the main owner today. Merck is the oldest pharmaceutical-chemical company in the world – its beginnings date back to 1668.

Its businesses are divided into three divisions: Life Science, Healthcare and Electronics. Merck’s products include cancer drugs, ingredients for mRNA vaccines, and materials and solutions for the semiconductor industry. In 2022, Merck achieved sales of more than € 22 billion, with a growth of 6% compared to the previous year.

Sustainability is an essential part of Merck’s corporate strategy. As part of its sustainability strategy, Merck has defined concrete goals for climate and the environment. The goals of the sustainability strategy are incorporated into business decisions in order to increase the positive sustainability impact. In fiscal 2022, the independent Science Based Targets Initiative (SBTi) also confirmed that the emissions targets Merck has set for 2030 are in line with the current state of climate science. In addition to these ambitious sustainability efforts, Merck now also wants to set new goals for itself in the area of biodiversity and commissioned DFGE with the analysis for the creation of a biodiversity strategy.

“DFGE has already been accompanying us on our sustainability journey for several years and supports Merck in various areas, such as the creation and feasibility analysis of SBTi targets, the calculation of corporate carbon footprints (CCF) or the preparation of reports for CDP. We are glad to have DFGE’s experts now also on our side when it comes to biodiversity.”


The loss of biodiversity continues

In addition to the topic of climate protection, Merck also wants to address the topic of biodiversity, which is just as important for the environment and the Group, in the future. Not only external stakeholders and new reporting requirements such as the CSRD are increasing the pressure, but also Merck’s own employees. They want to become active and do something about the rapid loss of biodiversity. Pilot projects have been in place at some sites for some years now, such as the strictly designed wastewater management system, which benefits biodiversity.

However, the topic of biodiversity is very complex and so local and temporal factors are also relevant. Accordingly, it is not always easy to recognize what impact one’s own business activities have on biodiversity or what dependencies exist (e.g., with procurement of raw materials, access to pure water, etc.). Many companies often already have measures in place that make a positive contribution to the preservation of biodiversity, but they lack a consistent and cross-business unit strategy.


Biodiversity check, benchmark and framework analysis, materiality analysis

The main objective of the project was to identify the first steps to meet the regulatory challenges and demands of relevant stakeholders. This involved several project stages, starting with a materiality analysis.

As with materiality analysis according to TCFD or CSRD, this is a double (materiality) analysis. Accordingly, there are two perspectives – the “inside-out” perspective (what impact do business activities have on biodiversity) and the “outside-in” perspective (what impact can biodiversity issues have on business activities). According to TCFD and CSRD, the “outside-in” perspective analyzes the financial impact of different sustainability issues on the business and an issue must have a high relevance within one of the two perspectives to be considered material. Financial impacts typically include lost sales due to reputational damage, rising prices due to dwindling resources, or costs due to extreme weather events. In the case of biodiversity, however, there is also a third level, which analyzes the company’s dependence on different ecosystem services. The project focused on this dependency and the impact of business activities on biodiversity.

The project also included a competitive analysis that looked at the biodiversity activities of other market players. Specifically, what measures they have implemented, what indicators they use, and how they have integrated biodiversity into their business strategy. It turned out that the area of biodiversity does not yet occupy a prominent position among most companies.

For this reason, best practice companies from other industry sectors were also consulted. In addition to the materiality and benchmark analysis, the relevant frameworks, regulations and standards were also evaluated in order to gain a better understanding of what Merck will be facing in the coming years.

Based on the findings, the first measures could then be derived. These were divided into so-called “Action Areas”, which are determined on the basis of different parameters such as impact, dependency and location in the value chain. The recommended measures follow the so-called “mitigation hierarchy”. According to this, measures that avoid negative impacts should always be taken first, followed by measures that minimize negative impacts. The third level in the mitigation hierarchy focuses on measures that restore biodiversity, complemented by the possibility of using offsets.

As climate change is an increasingly strong driver of biodiversity loss, measures that reduce GHG emissions are very important. DFGE has also been calculating the Corporate Carbon Footprint (CCF) for Merck for a long time. Here, existing emissions data are presented transparently. Emission sources that have a particular impact on biodiversity can be quickly identified.

The project concluded with the measurement and assessment of the impact on biodiversity. Currently, there are a variety of different methods and some of them were presented in the joint workshop. The aim was to give Merck a better overview of the methods, databases and indicators relevant to them.


Creation of a resilient biodiversity strategy

Merck had already compiled a great deal of information on the subject of biodiversity before the project began and through committed employees. The challenge was mainly to establish a structure and decide which measures should be taken successively. This information was compiled into a comprehensible and resilient strategy plan, which now serves Merck as a guide for improving biodiversity.

“With DFGE’s support, we now have a structured overview of the biodiversity issues material to our business. The DFGE sustainability experts have also recommended concrete measures to achieve biodiversity improvements. The results of the biodiversity project are a very good basis for internal coordination.”

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