Episode 014 | April 25, 2022 | 30:16
Guest: —
Published: April 25, 2022
Duration: 30:16
Description
Today Joachim and Frederik are talking about the newly proposed Danish carbon tax and what carbon taxes in general mean for the healthcare industry and how it affects your business. Why it’s a good thing we are finally getting a carbon tax, why this happens now, and how the tax will look in real life.
Full transcript
About this transcript
This transcript was automatically generated and may contain inaccuracies, typos, or mistranslations. Episodes recorded before 2024 were transcribed by an on-site model and may have a higher error rate. The content reflects the original conversation to the best of our ability. For the authoritative version, please listen to the audio episode.
There is an introduction of carbon tax in Denmark. Most healthcare industry companies in Denmark are international companies, so it is going to influence the way they compete in the global market. But then it begs the eternal question: are we introducing an obstacle for Danish companies that will make them more likely to succeed in the international markets, or are we actually inhibiting growth? The interesting thing about a carbon tax is that if you are carbon efficient and optimizing for higher degrees of carbon efficiency, you are probably also going to optimize for profitability at the same time.
Hello, Joachim from Green Innovation Group here with another episode of the Sustainable Healthcare Podcast. In this episode I am talking with Frederik about the newly proposed Danish carbon tax and what carbon taxes in general mean for the healthcare industry and how it affects your business.
The Danish government has proposed a carbon tax for Denmark. First of all, let us celebrate that a carbon tax is actually being proposed. It is a milestone. It is extremely positive that something is actually happening, that someone has the courage to politically drive this agenda. The Danish government upon election went out and said we need to reduce national emissions by 70% compared to 1990 levels. That is a significant emission reduction. And since then, in all honesty, we have seen a whole lot of nothing. Everyone who knows something about emissions reductions has been pointing toward a carbon tax as the most efficient driver.
If you emit carbon into the atmosphere you have to pay for it as a company. When things get more expensive, there will be less of them. Increasing the cost is going to decrease demand and incentivize innovation. We have a single party government in Denmark right now, the Social Democrats, and they have proposed a carbon tax at 100 euro per ton emitted — not as high as recommended by economic experts who advocate 200 euro per ton. So 100 euro is better than nothing, but it is only half of what is recommended. Second part of the critique: the Danish government has also proposed a whole range of discounts for certain companies with emission-intensive businesses and low employment rates, which is quite problematic.
For the healthcare industry: most healthcare companies in Denmark are international companies, so it influences how they compete in the global market. Traditionally it has been an advantage that Danish companies have had higher environmental requirements — when international legislation catches up, Danish companies are already prepared. This is another big milestone in the sustainable healthcare megatrend. More and more healthcare organizations, hospitals, the Danish regions, the NHS, are setting climate goals and working toward zero carbon. A carbon tax is another big part of that.
Why is it important that the healthcare industry becomes sustainable and stops emitting carbon? The healthcare sector and industry is responsible for somewhere between 4% and 8% of all greenhouse gases. Welfare countries spend a higher percentage on healthcare. The healthcare sector is growing, demand is growing, life expectancy is going up. We will have no green transition without the healthcare sector taking part.
What does this mean for a pharma or medtech company? Look at the writing on the wall. A carbon tax will be introduced. Green procurement policies in the public sector are being introduced — likely to spill over to private hospitals. There is increasing demand for transparency, life cycle assessments, and emission estimates. To future-proof a company, put your own house in order. Most companies are looking at dollar spend and multiplying by a factor to guesstimate carbon footprint — better than nothing. But when 40% of revenue is generated from public actors introducing green procurement in a country with a carbon tax, all your future development projects need to take this future reality into account — from clinical research through production out to the sales force.
It is a holistic problem that calls for holistic solutions. The rise of preventive healthcare is a key megatrend. The most sustainable patient is the one that never goes into the hospital. An investment in prevention is a really good investment in a carbon budget.
Why carbon tax has such impact: it forces you to put a number on emissions. When we work with clients there is awareness that sustainability is important, top management has set the goals, but there is a very big execution gap. Large organizations are driven by people but also by spreadsheets where check numbers decide whether something is good or bad. In most cases, carbon emissions say zero in there at the moment. Material use says zero. There is a price for buying copper, but the fact that we are depleting it and the environmental cost is at zero. If you can just get something in there — anything so it is not zero — that changes the whole business case.
Sometimes we are hired to find new sustainable business cases. Often you can calculate really good business cases without a carbon tax. So if it is already good business to be sustainable, introducing a carbon tax makes it even more so. There will be activities and products that stop being good business when you introduce the carbon tax. The more knowledge you have in your product and IP, the more interesting the carbon tax is for you — because if you are just competing on price, that is poorly linked to carbon emissions. Western companies competing with Asian incumbents on price alone should welcome a carbon tax — it opens a new angle of competition where they are better suited.
If you are carbon efficient and optimizing for higher degrees of carbon efficiency, you are probably also optimizing for profitability at the same time. If you are saving carbon you are probably spending less. We are seeing it in tenders from public healthcare systems — pharma and medtech companies are losing tenders because of sustainability issues. Volvo introduced in their innovation department that all business cases should take in mind a 100 euro CO2 internal price. A good way to start is to introduce an internal carbon tax. Emissions had a cost before too — just not organized as a national tax.
What can you do to prepare? Throughout the value chain. Two places to start: one, educate your sales force and build basic literacy so they have a fighting chance in tenders. Two, figure out what the actual footprint is — run life cycle assessments so you can go to market saying the combined CO2 footprint of this product is X, calculated through this methodology. At first, tenders will ask for transparency and estimates rather than deciding purely on lowest emissions. Then they figure out comparisons — comparing apples and oranges is a problem, but having attempted an assessment is a qualifier or disqualifier.
Another area is clinical development. Clinical research itself is quite polluting, especially as you get toward phase three. It also creates lock-in effects that determine how you can produce and how the treatment will be. Once something is through the FDA it is very hard to change — locking decisions in for decades. Right now, sustainability is not a design factor. Something like: does it have to be cooled at -70 or -65 degrees? Scaled up to treatment for millions, that is a massive carbon difference. Or does the treatment protocol say a patient should go to a GP if they feel something is off, or go every six months for a chronic disease? Massive carbon difference. The drug should still be safe and effective, but there are so many things we do just because.
What is the role of telemedicine? What is the role of prevention? There are so many levers and opportunities. The wave is definitely there. If you are in pharma, medtech or healthcare services, you need to be working on this. Thank you for listening — subscribe wherever you get your podcasts.