Episode 003 | January 24, 2022 | Duration: 21:15
Transcript
Note: This transcript has been auto-generated and lightly edited for readability. It may contain minor errors or inaccuracies.
003 – The Business Case For a Circular MedTech Sector – Frederik Van Deurs
003 \- The Business Case For a Circular MedTech Sector \- Frederik Van Deurs
Frederik: \[00:00:00\] Hello, welcome. My name is Frederick Fundera. I’m the CEO of Green Innovation Group. Today is a special episode because unfortunately, Joachim couldn’t make it. I’m going to be here on my own, but I’m going to talk about something that I’m quite passionate about, and that’s the business case for a circular MedTech sector.
And you may ask yourself, why does this even matter? Why would we care about having a circular MedTech sector? In its essence, the healthcare industry and the health sector accounts for 6% of all global emissions. And 6% might not sound like much, but when you consider that the aviation industry is accounting for 2% and the global shipping industry is accounting for \[00:01:00\] 4%, you’re looking at the combined emissions from both the aviation and the shipping industry to account for the healthcare sector.
The thing is with healthcare. This industry has never really asked the question why are we emitting that much? Because they’re saving lives. There’s been a very clear priority to improve the life of the patient and save lives. But today we have come to the conclusion that global warming and the associated consequences of that are also going to do significant harm.
And therefore it’s something that cannot be overlooked when developing new treatments and new cures. That’s why the business case for circular MedTech sector is super important, and that’s why I’m really excited about it. How do we know anything \[00:02:00\] about that? Well, in Green Innovation Group we have advised some of the major pharmaceutical firms in the world, but also some of the major financial institutions.
And we’ve been looking at more than 12,000 green innovations and run advisory for major public and private institutions. That’s kind of our claim to fame. Historically, CO2 levels have only gone one way since 1950. There’s no doubt that this is manmade. The consequences are going to be quite dire, and that’s why we need to change it.
So just for context, in order to survive in the way that we know civilization today, we are going to have to reach drawdown. Drawdown is the point in time where we are taking more greenhouse gases out of the atmosphere than we are emitting into the atmosphere. \[00:03:00\] As you can see, we’re quite far off that track, and that’s why reaching drawdown is the most important mission in the history of mankind.
I cannot stress that enough. The healthcare sector right now is 13% more emission intensive than the automotive industry. I hope that comes as a surprise to you. But that’s when we are looking at the combined emissions from the industry. When we are looking at the amount of Euro generated in revenue in the industry, the healthcare sector is actually 55% more carbon intensive per Euro revenue than the automotive industry. That’s quite significant. But in order to put this into a larger context, the Paris Agreement says that we can stay within the boundary of a maximum two degree global warming before the year 2100.
\[00:04:00\] It’s targeting 1.5 degree temperature rise. Right now we are at 1.1 degree temperature rise. I think it’s safe to say that you have to be very much of an optimist to believe that we are going to stay within 1.5 degree. Two degrees is going to be pretty significant. First off, shellfish will no longer be able to form the shells the same way they do today.
That has consequences that reach much further than we are not going to go to the seafood buffet and get delicious prawns. It means that a lot of the animals that are helping cleanse and maintain the delicate ecological balance in our water ecosystems will no longer be able to protect themselves and survive in the same way that they do now.
This is an observation from experiments that have been run with shellfish where \[00:05:00\] scientists have been mimicking the conditions of a two degree global temperature rise and concluded that the shellfish were not able to actually form the shells in the conditions post in these waters.
Then on top of all the ecological consequences that will follow from this, we’re going to see the global water deficit doubling. That just means that the stress on our global infrastructure, on the system for handling refugees, for making sure that development aid and catastrophe aid is actually being distributed, is going to be much higher. That burden is going to multiply with the factor that’s much higher than the factor two from the water deficit doubling. It means that it’s much more likely that we will see civil wars or basic resources such as drinking water or irrigation water for crops. And then on top of that, and this is the final piece of good news that I’m going to bring to you today in this episode, \[00:06:00\] we are facing a mass extinction of species.
Right now we have, in the past 50 years, lost 67% of all known species. That’s not very good. But luckily, Denmark is here to save all of us. Denmark is the greenest country in the world. We can rest assured that this is not going to be any problem at all. But however, as we talked about in recent episodes, even if the 25 biggest listed companies in Denmark reach their sustainability targets, we are still on a three to four degree temperature path.
It’s critical that we get better targets because this is a three degree temperature path if they reach all of their sustainability goals, and I don’t think it’s very feasible that they’re going to reach them. \[00:07:00\] We need better targets.
When we are looking at the circular economy, what you’re seeing here is half of the butterfly diagram known from, made famous by Pilot and MacArthur. What I’ve tried to do here is highlight for you what are the big no-nos. I’ve marked it in red. Basically extracting raw materials in order to do your product or service should never happen. And then of course, having an end user taking the resource or the product or service and putting it in inspirational landfill, that cannot happen. We need to find other ways of doing value creation within this circle.
Of course, digitalization and dematerialization is one of the most powerful ways of doing it, but also pushing a demand on your suppliers for only using recycled materials. That would be a great first step. We can pull the plug on extracting new raw materials. Pollution in the healthcare industry comes in many forms.
Of course, number one is general medical and hazardous waste. That’s always going to be a big one. Here, I just want to focus on that and say, okay, but if we are looking at that, well, what’s something that can get me to understand that problem better? \[00:08:00\] The main driver for implementation of green chemistry in pharma companies, it’s actually not about investor ability to attract and retain talent.
It’s not about investor pressure, it’s not about reputation. It’s not about customer demand. Reason number one is cost. It’s about cost reduction. Reason number two is regulation. \[00:09:00\] Regulation is coming in hard. We have the EU taxonomy, we have the EU Extended Supplier Responsibility Act, new ESG standards, science-based target initiatives, ESG accounting. We have so many initiatives and so much regulation that’s coming into place. We have the EU green deal where money is being funneled into green projects. There’s a lot of initiatives going on and cost reduction is basically the main driver for companies to change.
I think that’s very important to remember that a green solution has to be cost effective, it has to have the same quality as the comparable product, and it has to be deployable. Second, of course, we have non-renewable materials. It’s very interesting to look at the refurbished pharma industry, and the refurbished pharma equipment market is actually expected to reach 12 billion this year, 2021.
\[00:10:00\] It means there’s actually a sizable market. That of course has to do with two factors. One is that it has very high material and production costs to do pharmaceutical equipment. The second one is that there’s a relatively small refurbishment cost associated to it.
Unless it’s a business model that hit the nail on the head by doing a single use device extremely cheaply with very high margins, usually there’s actually a market to refurbish, exchange parts and then redistribute the products. Third, we are looking at environmental pollution, and one of the key elements here, as I was touching upon earlier, is the dematerialization. Can we have patient-centric treatments developed that are solely digital, that don’t involve a physical interaction with a physician that don’t involve the prescription of a drug or a treatment in some way?
The digital and IT health space is actually expected to reach 511 billion US dollars by 2027. \[00:11:00\] I think we are seeing a huge trend going in that direction. One thing that’s interesting to have in mind is that in 80% of instances, a physician will not have to lay hands on a patient, so a lot of our consultations could actually be conducted virtually. But then on environmental pollution, a lot of the active product ingredient production processes have a huge environmental footprint and a lot of them consume a lot of water, for instance. Can we find ways of recapturing and recleansing and redistributing the water inside the production facilities and reutilizing it more times over? \[00:12:00\] We are also going to see a reduction in the environmental pollution and more likely than not a reduction of the cost. That’s why I think it’s quite probable that we’re going to see much broader implementation here. Same goes for filtration technologies, both for ventilation and air purification, but also for water purification. I was asked, hey Frederick, what kind of cool cases do you have you can bring to illustrate this? One case that I really am proud about actually is a case we did with the facility management team of Novo Nordisk, where we were tasked with finding solutions that they were already spending money on, and then identifying together with a team of technicians and engineers from Novo Nordisk Facility management to figure out which solutions that are already in the market that have a \[00:13:00\] comparable cost.
Better quality, scalable across the entire neurological organization and will reduce the CO2 emission from this activity. We came up with some great solutions together with the good folks at Novo. One of the solutions was to use a different roofing. It’s the same provider of the roofing, but this new material cost the same. It’s just 25% recycled material. In there you’re seeing that the supplier of the roofing was actually having a product on the shelves that was the same quality, same price, reduced CO2 footprint and scalable across the organization.
We find that quite often to be the case. Another area was with a very advanced piece of technology \[00:14:00\] that does cleaning, and it was a carbon-based solution that was flown in, a very heavy solution that was flown in from a different continent where we managed to identify a solution provider that is making a nature-based solution that is produced here in Denmark, right next to the plant where it’s being used. That was a significant CO2 reduction. Same or better quality, same or better price and scalable across the organization where they’re using this device. I’m not sure I can say what the device is, that’s why I’m being so mysterious about it.
Another example is something we’re doing with Janssen and Johnson Johnson where we are working on providing an LCA data hub, a lifecycle assessment data hub. So clinical research designers \[00:15:00\] can actually have an idea of the environmental consequences and the environmental footprint from the activities and the instruments that are involved in the design of a clinical trial.
Right now it’s not a factor in clinical trial design, but our hope and expectation is that it will be, and that regulation will catch up very soon. That also means that concepts such as decentralized clinical trials are very interesting to us. Digitalized clinical trials are very interesting as right now a lot of clinical trials are not succeeding.
That means in essence that the majority of all the resources that we are putting into the clinical trials are essentially wasted. We need to have a better margin of success for clinical trials, and we need to make sure that the treatments and cures that actually make it through phase three and make it to market are also suited and \[00:16:00\] future proof for a time where the environmental impact of the treatment and the cure is being taken into account, both for the business model, but also to figure out is it safe, is it efficient? It also has to be efficient not just in treating the illness or the condition of the patient but also in how much CO2 are we actually paying to get this treatment. Another example is we did the Novo Nordic Innovation Challenge that we did together with Matter. That’s a Chicago-based Health Tech hub. Really good folks in Matter. I loved working with them. Together with Novo Nordisk, we were tasked by Novo Nordisk to help them find solutions for realizing their circular for zero strategy. Basically, Novo Nordisk is producing an insulin injection pen. \[00:17:00\] They’re also the world’s largest producer of insulin. You can see how it makes business sense to also distribute and produce the device that you use to inject the insulin. However they were not happy with the environmental impact from those pens.
We were looking into how to design and how to find solution providers that could help them go circular. We basically scouted 350 potential solution providers together with Matter, and then we narrowed that down until we ended up with one winner, a company called Genesis that’s based out of Canada.
What they do is basically they take organic waste, then they feed it to the reactor and they produce a PHA or A-P-H-B-P-H-A, I think it’s a bioplastic. They can take the yeast waste from \[00:18:00\] Novo insulin production and turn that into a bioplastic that is biodegradable and it’s also programmable. You can program how stiff or soft this plastic will be. That’s absolutely fascinating. When Robin and Luna from Genesis showed me that little piece of plastic, it just made me incredibly happy and incredibly proud to have taken part in that. It’s a great example of any green innovation that has to happen and any circular innovation that has to happen. It has to make business sense. If we can take a product that you usually pay to dispose of the yeast waste and turn that into another product that you can feed into your production line, into your supply chain, then you’re looking at a good circular business case, and you’re probably also looking at a decent business case.
That’s basically the main learning that I want to pass on. \[00:19:00\] Remember that businesses are neither good nor bad. They’re driving to optimize for profit, and that makes it quite predictable. Everything that we consider as sustainability professionals or climate professionals has to have cost in mind. Always consider what the cost is. Consider that the solution has to be competitive. It has to be compatible, it has to be scalable. It doesn’t work if we think too small. We need to be really ambitious. A final shout out in this area is that the health company Philips, that you may or may not be familiar with, have set up a concrete sales target that by 2025, 5% of all of their revenue has to come from circular products or services.
That’s a way to directly tie their revenue generation into the circular economy \[00:20:00\] and into the circular economy ambition of the company. I think that’s where we need to be. We need to consider regeneration and circular economy as a core and integral part of the business strategy.
Yeah, I know this may have felt a little bit scripted. I was in here alone because Joachim couldn’t join us. But I hope you enjoyed this talk. It’s one that I often give to health and pharma professionals and also university students. I’m looking forward to the next episode and of course, as always, feel very free to link up with us on LinkedIn.
Go to green innovation group.com and find our downloads. One of them is a white paper that we did together with a group of students and with Matter and Ava, one of our good partners, and it’s a super rich resource that I’ll warmly recommend if you’re interested in this agenda. \[00:21:00\]
Let us know in the comments or directly what you think of the show so far. We are looking forward to producing many more episodes. Cheers.