Lonza’s legal counsel and head of sustainability discusses solar energy initiative in collaboration with Spanish Ignis
by Mercedes Galán.
Lonza, a renowned and listed Swiss Contract Development and Manufacturing Organization (CDMO) dedicated to advancing therapies in the pharmaceutical and biotechnology sectors, has recently concluded a sophisticated Virtual Power Purchasing Agreement with Ignis, a Spanish integrated renewable energy group. This strategic collaboration aims to establish two new solar power facilities in Spain, aligning seamlessly with Lonza’s overarching pan-European energy requirements. Iberian Lawyer has talked about this initiative with Matthias Hoffmann (pictured left), Lonza’s Head of Sustainability, and Mark Ainsworth (pictured right), Lonza’s Legal Counsel.
ESG is now a legal requirement for companies, complementing best practices. It will be essential for lawyers to have ESG knowledge?
Mark Ainsworth (MA): In the past, environmental and social requirements were regulated by specific legal frameworks. However, today, more comprehensive guidelines exist for managing ESG topics, leading companies to actively incorporate broader ESG themes. A growing trend involves corporations adopting a systematic approach and establishing specialized teams for ESG matters. In the future, lawyers will need greater ESG awareness due to its impact on various commercial aspects and corporate governance. This is crucial due to increased public disclosure requirements, with potential penalties for non-compliance or false reporting, especially for listed or large organizations.
How do companies tackle the challenge of reducing their carbon footprint?
Matthias Hoffmann (MH): In the context of climate change, companies are embracing the challenge to dramatically reduce their carbon footprint from fossil fuel energy consumption. One way to reduce it is to shift towards “green” renewable. Companies can achieve this by establishing solar or wind power facilities or partnering with specialized developers in the field.
Regarding ESG initiatives, what are your goals for Lonza? How is the company minimizing its impact on the environment?
MH: In the context of the environment, we are actively working to reduce our environmental impact, focusing on energy, greenhouse gases, water, and waste. Our long-term goal is to achieve net-zero greenhouse gas emissions by 2050. Additionally, we aim to procure all our electricity from renewable sources by 2025, where available, and implement heat recovery and energy efficiency programs in our facilities. In the societal context, we promote equal opportunities, education, and community collaboration. Finally, regarding governance, our goal is to enhance our governance model across the company and employ systematic approaches. We’ve further strengthened our ESG agenda by working with Lonza’s Board and Executive Committee to embed ESG targets into our compensation framework since 2022.
In your experience, how does a strong ESG profile contribute to a competitive advantage, and how does this relate to the legal function?
MA: No doubt it enhances customer relationships and the execution of development and manufacturing contracts. The increasing trend of customers evaluating ESG scores influences partner selection. We reciprocate by assessing supplier and adviser compliance, focusing on environmental performance like carbon footprint. Investors are also prioritizing ESG factors in their investment decisions, making companies with strong ESG profiles more appealing to socially responsible investors. In the broader market context, ESG factors play a pivotal role in M&A deals, with the ESG status of the target becoming a crucial element during the integration phase.
Regarding the VPPA with the Spanish IGNIS, where the initiative comes from?
MH: The agreement is a direct result of Lonza’s Climate Action Plan. Besides energy efficiency, new technologies and manufacturing processes, green electricity plays an important role in reducing a company’s footprint. For Lonza, electricity accounts for a third of our carbon footprint, so we are committed to source it from green sources globally within the coming years.
Why in Spain?
MH: We chose it for our European Project as it has favourable solar conditions, available land, a well-established business model, and we found a partner with good projects to help us reach our green energy targets within our desired timeframe. The solar parks are scheduled to become operational in 2025.
How this kind of agreement works?
MA: The agreement is a VPPA – a Virtual Power Purchase Agreement. It differs from a PPA – Power Purchasing Agreement where the customer acquires electricity directly from a certain power facility. Under our VPPA, Ignis will build two new solar farms and its electricity will be sold into the European Electrical Grid. We guarantee a price for the electricity produced, and in return have the “Guarantees of Origin” (GOs) for the electricity. We continue to purchase electricity from our local network across Europe, but the GOs are used to demonstrate that our electricity comes from renewable sources. This framework is being utilized by many companies in Europe and it has been replicated across other countries to encourage companies to assist in developing more renewable energy sources.