Biotechnology is a cornerstone of all our lives: Microorganisms help produce oxygen through photosynthesis, convert atmospheric nitrogen into forms that plants can use, and decompose organic matter, and their fermentation properties are at the core of bread baking and beer brewing. Recently, technological breakthroughs in biological sciences such as genetic engineering, combined with advances in AI and engineering, have made it possible to produce sustainable, bio-based solutions in many fields, including food, cosmetics, medicine, and chemistry.
These breakthroughs have given rise to an emerging sector known as “advanced biotechnology.” Just how significant could its economic and environmental benefits become?
To address that question, 11 companies and not-for-profit organizations in industries such as food, cosmetics, and manufacturing, with knowledge and analytical support from McKinsey, collaborated on a research report that seeks to evaluate the potential economic and environmental impact of advanced biotechnology on a global scale over the next 15 years to 2040. The report, Harnessing the economic and environmental benefits of advanced technology, provides a fact-based and forward-looking analysis of how advanced biotechnology could be used in four industry sectors: agriculture and food, chemicals, personal care, and transportation fuels. The promise of the biotechnology applications in these and other sectors stems from its potential impact on sustainability and delivery of tangible performance gains in the end products.
Advanced biotechnology’s full-potential effects
If the full potential of advanced biotechnology could be achieved, the results by 2040 would be substantial for the economy and the environment. The research estimates that advanced biotechnology could do the following:
- generate up to $1 trillion in economic value
- reduce CO2-equivalent emissions by three to four gigatons, or the equivalent of 5 percent or more of 2022 global emissions
- result in repurposing between two and four million square kilometers of land, about the size of India
- save 250 to 500 billion cubic meters of water, or the equivalent of three to six times the annual water flow in the Nile
A closer look at advanced biotechnology in four sectors
Four applications of advanced biotechnology—precision fermentation, biomass fermentation, organism-as-a-product, and tissue-as-a-product—stand out as game changers across the sectors covered in the research. Specifically, advanced technology can affect different sectors in the following ways:
- In agriculture and food, which contribute about one-third of greenhouse gas (GHG) emissions globally, advanced biotechnology could enhance the efficiency of crops and protein production, including by producing drought-resistant and nitrogen-fixing crops as well as alternative proteins. The research estimates that, for select applications, the simpler production process for alternative proteins could result in up to 90 percent less emissions and land use compared with conventional beef production.
- For chemicals, advanced biotechnology could make a difference by creating alternatives to conventional fossil-based plastics—both by producing bioplastics and by improving the biodegradability of conventional plastics. While these technologies face critical challenges, estimates suggest that they have the potential to reduce GHG emissions from plastics by as much as 75 percent if they can be effectively synthesized directly from waste or CO2 in the future.
- In the personal-care segment, advanced biotechnology is already making a difference and could serve as a catalyst for other sectors to accelerate their progress. Applications include replacing existing petroleum-derived surface-active agents with solutions such as plant-based biosurfactants. These biosurfactants drive customer-desired innovations because, in addition to being more sustainable, they allow for better integration with skin proteins and improve the technical performance of active ingredients in end products.
- Finally, transportation fuels, particularly alcohol-to-jet fuel produced using advanced-biotechnology techniques, can help reduce GHG emissions from the transportation sector. While electricity from batteries can propel automotives, electrification is not yet viable for trucking, ships, and planes. In aviation, sustainable fuel made via biomass fermentation could become an alternative to conventional and synthetic kerosene; its use could reduce emissions by 50 percent or more.
Realizing advanced biotechnology’s full potential
For all this potential, advanced biotechnology has not yet achieved the full scale of impact anticipated by industry leaders and stakeholders. Key challenges include scaling production, securing sufficient funding, overcoming the cost disadvantage compared with conventional alternatives, ensuring relevant health and safety protocols for certain applications, streamlining approval processes, and reducing barriers to consumer acceptance. If advanced biotechnology is to achieve its full potential in the market and in regard to sustainability, as outlined, the overall approach will need to be fundamentally rethought. While there is no single solution, several steps could be followed:
- First, resources could be allocated as a priority to products with the highest potential for accelerated adoption (for example, products that can outcompete on cost and deliver improved performance).
- Second, the scaling of advanced-biotechnology production could be derisked to increase success rates and reduce financing costs. By pooling capital with risk appetite into larger vehicles that can carry capital-intensive scaling tickets for longer periods of time, the market can focus on making a couple larger informed bets with higher odds of being successful. This may require new financing frameworks and structures that derisk investments between venture capital and established production facilities to make funding of pilot and first commercial-scale facilities more viable. Cumulatively, for fermentation alone, we estimate that investments totaling $500 billion by 2040 are needed.
- Third, production costs would need to fall in line with the cost reductions we have seen in other clean technologies, such as batteries and solar panels, as they scaled up production. Ensuring competitiveness of advanced-biotechnology products compared with conventional ones is critical for adoption speed and affordability for customers. Measures to achieve this include using the power of computer science to optimize and innovate strain selection; reducing the number of variables in, for example, process design; and transitioning from a bespoke “high tech” industry to a modularized and standardized “low tech” industry (exhibit).
Advanced biotechnology is not a magic bullet, but it has significant potential. The authors of the report hope that the analysis of the economic and environmental benefits can serve as a framework to help organizations set priorities and provide a unified and shared vision of advanced biotechnology.
About the author(s)
Anna Littmann is a partner in McKinsey’s Frankfurt office, Mark Patel is a senior partner in the Bay Area office, Roberto Uchoa de Paula is a senior partner in the Amsterdam office, where Pol van der Pluijm is an associate partner.
McKinsey provided knowledge and analytical support for the first report of the Advanced Biotech for Sustainability coalition (AB4S). Please download the full report here or visit www.ab4s.org for more information.