Episode 038 | January 9, 2023 | 35:33
Guest: —
Published: January 9, 2023
Duration: 35:33
Description
Several of the largest pharma companies in the world have made a coalition and founded the Sustainable Markets Initiative — with the goal of greening their supply chains and fundamentally changing the way carbon is emitted, or more precisely, not emitted. Enjoy this episode with Frederik and Joachim of Green Innovation Group.
Full transcript
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We have the CO2 equivalents. Now we are converting it to euro and dollars. That makes it quite easy for executive management to run their forecasting, run their financial models, go into different scenarios and say “if these are the decisions we need to make, now we know what to expect.”
Hello and welcome to the Sustainable Healthcare Podcast. Today we have a great episode about the Sustainable Markets Initiative — a group of very large pharmaceutical companies that have gone together to make their supply chains sustainable. They just came out with a report we are looking into.
What is the Sustainable Markets Initiative? Think of it as a group of the willing. It was formed in Davos at the World Economic Forum with His Majesty King Charles. Seven companies: AstraZeneca, Roche, Samsung Biologics, GSK, Merck, Sanofi and Novo Nordisk — all part of the Sustainable Health Care Coalition. At the very top level — CEOs leaning into this — going to the COPs and saying: if there is no political willingness from national governments to keep us at 1.5 Celsius, we as companies are going to do our utmost to stay on that trajectory.
The SMI came out with a report — Decarbonizing Healthcare Supply Chains. Recommendations on how to drive emission reductions across healthcare supply chains. Really well structured. They come up with nine levers to decarbonize the supply chain. All quite functional tools, scored at a dollar cost per ton of CO2 reduced, with maturity of the solutions and how fast you can get there.
The levers are scored in cost per ton of CO2 reduced. Three top-scoring at under €30/ton, then mid-tier at €30-120, then more than €120/ton. We have CO2 equivalents converted to euros — easy for executive management to model. A highly recommended exercise: do a marginal abatement cost curve. You will find some initiatives have a negative marginal abatement cost — you get paid to remove CO2. That sounds like good business. It is. “Here we pay €500/ton, here we pay €10/ton, here we get €100/ton paid” — easy to see, of course, the €500/ton ones may not be where you start.
Even with such opportunities, many initiatives are not being done. In Denmark we had very lucrative deals to install rooftop solar — very few people took it up despite stacked tax incentives. Companies, like humans, are not always rational.
Top three drivers in the report:
1. Renewable power. The usual suspect. Available, mature, reliable. You can invest in setting up your own on-site renewable production.
2. Process efficiency. Better at producing your product at lower cost in dollars and CO2. The market is heavily regulated though — changing small things in production may be subject to regulatory scrutiny, a hidden cost. Depending on team mandate it can be complex — control of the actual production line vs surrounding facilities vs utilities.
3. Product and packaging redesign. Reduce material and energy use. A lot overlaps with process efficiency. Curious that it is ranked alongside renewable power, which is far more commoditized — comparatively easy to do a PPA versus going into many complex production processes.
One thing I love: they give voice to regenerative agriculture. Extrapolating, about 0.5% of all global CO2 emissions come directly from the agricultural input to the pharmaceutical and healthcare sector. A significant portion comes from feedstock for biologics — sugar for precision fermentation, used to produce APIs like insulin. Biologics are on the rise — not only a big issue now but growing.
Regenerative agriculture has proven business models. For agriculture to be considered regenerative, it has to sequester more carbon than is expended in the system. Example: instead of leaving a field barren after corn harvest, plant a cover crop like clover that binds nitrogen, reduces fertilizer need, protects soil moisture, etc. We did two episodes on regenerative agriculture with coffee as the case via Sebastian from Slow.
One thing I dislike: carbon capture and storage is ranked side by side with regenerative agriculture. Regenerative ag has 50,000 years of traction, proven business models, working today. Carbon capture, storage and utilization has incredibly sparse traction. The major organizations working on CCS are fossil-industry companies — if they could really do what they claim at the cost they claim, the carbon tax would be the business opportunity of the millennium, yet they fight carbon tax with their lobby muscle. So that smells. Huge point deduction for me — Superman is in the dating list alongside your wife. Why is he there, he does not exist.
The separation of low-to-mid-temperature heat and high-temperature heat matters. Above 450°C you need a lot more energy — solar cells alone won’t get you there. We see this at pharma factory sites — one hand goes 100% green on power, but the steam side stays tricky. Concentrated solar power plus storage is getting closer. Our Green Innovation Group position: net zero only makes sense if everybody is net zero. At a global level there is still such a need for renewable electricity that maybe investing in helping other industries with less financial means is better than heavy-CAPEX steam plants. Counterpoint: driving the rollout of new technologies helps move the price down — someone has to move first.
Where to find the report: Google “SMI decarbonizing healthcare supply chains” — first hit. Key takeaways: regenerative agriculture finally gets quantified attention. Renewable power is still king — I do not know how it became number three in a list of nine, but to me it is indisputable number one (probably because many coalition companies have already done it). Clean transport is far away. Renewable heat for low-mid temperatures is attainable. Renewable heat for high temperatures is far away.
What I love most: these are some of the largest players in the market paving the way. It is coming at CEO level — incredibly important for urgency. Now it comes at a personal cost for the CEO if initiatives are not succeeding. And we have a king on board. Thank you Frederik. Thanks for listening — please share with a friend.