By Christophe Schilling, CEO, Genomatica.
I’ve been in biotech for over 20 years. The good news is that our industry is starting to deliver technology that works in the real world, with benefits people want and solid economics. The bad news is that adoption is too slow to meet market demand and growing sustainability concerns. This article is meant to challenge you to explore these issues and take the actions needed to accelerate change.
Root causes: Why so slow?
Many biotech companies over-promised and under-delivered these past several years. But now that’s starting to be fixed, with commercialisation proof points, tools that keep getting better, and renewed interest from customers and investors. Despite this recent progress, the sense is that current initiatives by the majors fall short of meeting the demand from brands that are increasing the priority of sustainability. Some areas to look at:
The major chemical and material producers: Most major chemical and material producers have sustainability initiatives. But without published targets and actions taken with greater transparency of results, it’s unclear how serious each firm is in taking real action. Are they just investigating new options or actually implementing them? Or is it just corporate marketing dollars at work?
In comparing experiences with major brands and other biotech firms, I hear significant scepticism, wondering to what extent producers have inherent conflicts of interests due to their existing investments.
Let’s say you’re a major producer of a widely-used chemical and use fossil feedstocks, and you decide to invest in new, more sustainable production technology, perhaps bio-based. Would you aggressively market the benefits of your new, more sustainable or renewable products, even if it highlighted sustainability problems of your existing products and assets? This is not an easy challenge for players in the current value chains when more sustainable solutions are present and ready to be deployed. Companies must find a way to unshackle and embrace innovation despite the potential impact on their existing business. This is the classic innovator’s dilemma, but made harder for this industry due to the scale of their capital investments.
Some companies are stepping up. But many are conspicuously absent in terms of substantive action given their ability to lead change on a global scale – and dare I suggest, given their responsibility to do so. Could the path forward be for these companies to re-examine their core values and how consistent their actions are with their public statements? Or for their customers to demand more from their suppliers?
Major brands: Many brands recognise that their customers increasingly care about how their products are made, where they come from, and where they end up after use; they are initiating strong sustainability and circular economy initiatives to match. Why hasn’t this translated into greater market pull for bio-based products and technologies further up the supply chain?
One reason could be that bio hasn’t been very visible to them as part of how they can achieve their overall sustainability objectives. Their products are often a few steps removed from where bio has direct impact, and they may not know what bio can do for them and their customers. But it’s also possible that brands aren’t getting an accurate picture from their supply chain. I have had many conversations with brands where supplier told them bio wasn’t ready. As brands learned more of the facts, they would sometimes be puzzled why their suppliers were painting a picture that didn’t match.
What can brands do to take the bull by the horns? See my recent comments re. Brands – a pragmatic approach to bio-based chemicals. An action plan includes increased awareness of your inputs and of what bio can do; closer coordination with your suppliers on your sustainability priorities; sending tangible market signals about what you will and won’t buy; and publicising your actions.
The bio industry: Here’s an issue distinct from technology. How well does the green chemical and materials industry explain what it is good for, both to the public and to brands? For example, even with increased discussion of a more circular economy, we’ve tended to emphasise renewable feedstocks, and perhaps miss an opportunity to explain all the ways we address a broader set of issues, including better product design, support for end of life and improved upcycling. For thoughts on how to change this, see Five ways biotech supports the transition to a more circular economy.
Tangible Market Signals and New Value Chains: Five Questions.
So, let’s go back to my original challenge of how to accelerate a transition to more sustainable value chains. Customers will increasingly demand more sustainable products and solutions with positive end-of-life and beginning-of-life stories. I believe brands will increasingly flex their muscle and insist on more sustainable ingredients and materials. I predict that more brands will stand up to send tangible market signals and say they are doing something.
And now the million-dollar question(s):
- If large producers move too slowly, will new entrants seize the opportunity?
- Would nimble new firms that aren’t beholden to their corporate fossil feedstock legacy investments serve our collective interests better and faster?
- Could we see some restructuring, as materials-makers realize they can back-integrate and economically produce sustainable versions of the ingredients they need, at modest plant size?
- What will happen to major producers if they see their customers defect to more sustainable options?
- Will institutional shareholders apply more pressure to established fossil-based producers to reinvent themselves and lead the way to more sustainable products?
New technology can reshape value chains and markets, no matter how big (just ask retailers about Amazon). These questions should be a catalyst for existing suppliers to think hard about their strategy and change direction as needed. on how to change this, see Five ways biotech supports the transition to a more circular economy.
Feeling the foreshocks?
Here’s what I can say, from a very personal perspective. My company, Genomatica, has focused on driving that sustainability transition by enabling industry leaders with our technology. It’s in our core purpose;
it’s on the back of our business cards; and we’re deeply passionate about it. We are doing our best to enable that transition and will continue to do so. But some of the companies with the resources to do so much more are not acting very quickly. And meanwhile, we’re hearing a continually-increasing number of product-makers and brands that are impatient to move faster.
Who will be the leaders that shape the sustainable value chains of the future, deliver on the circular economy, and become the hallmark of true corporate social responsibility? I’m eager to help move things forward, and eager to hear your thoughts. Contact me at firstname.lastname@example.org.
This expert view was first published in Issue #13 of the Bio Market Insights Quarterly.
Guest posts do not necessarily reflect the views of Bio Market Insights editorial team and management.
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