The Attainability of Sustainability for Manufacturers
- February 20, 2023
Like most industries, manufacturing has seen sustainability take new prominence on the executive agenda. Embracing sustainability principles allows manufacturers to see benefits as wide-ranging as increased operational efficiency, from reducing costs and waste to stronger customer loyalty by responding to the increasing preference for sustainable products. The challenge is that even though some sustainability programs are simple and offer quick returns, others can be quite complex and call for significant changes to product portfolios and business operations.
In this article, we will look at drivers for the growing importance of sustainability in manufacturing, examples of common sustainability initiatives and the obstacles they face, and the role digitization plays in enabling sustainability.
Why a sustainability focus is on the rise
Drivers from regulatory policy to board mandates to customer preferences have enterprises considering a wide range of sustainability initiatives. We are seeing the creation of executive roles responsible for sustainability, with titles such as Chief Sustainability Officer. While there is an abundance of reasons for this focus, we can highlight some key factors.
First, environmental concerns influence consumers in their buying decisions. An actively pro-green brand may infer an advantage in recognition, particularly in specific product segments, geographies, and customer demographics. Enterprise customers are beginning to source raw materials with less or zero carbon footprint to achieve carbon neutrality.
Another factor is that regulatory bodies are increasingly propagating regulations in areas such as pollution, forest, and water conservation. Some of these regulations can be addressed through reporting. Others can require a redefined product portfolio, as with the electrification of automobiles and the shortage of (and alternative sourcing of) raw materials.
Sustainability considerations are increasingly important to investors and hedge funds. Sustainability executives can expect support and direction at the board level. Boards react to market forces and create a backdrop against which enterprises can establish their corporate mandates.
A look at sustainability initiatives
The sustainability outcomes that enterprises seek are wide-ranging. Among the top benefits realized from sustainability are improvements in resource efficiency and costs, enhanced brand image, product and service innovation, and alignment with the market, investors and regulatory bodies.
Sustainability initiatives are as varied as the enterprises that undertake them. They can include energy management and optimization, transitioning to power train electrification, or exploring alternative fuels.
The sourcing of critical raw materials is becoming vital in driving sustainability outcomes. For example, with the advent of net-zero carbon steel products, automakers are sourcing that material to help reduce the overall carbon footprint of their product. Reductions in raw material carbon footprint have an additive effect toward net-zero contribution downstream.
Impediments to sustainability projects
Even with a supportive board, a strong Chief Sustainability Officer, and formal environmental, social, and governance (ESG) criteria, orchestrating a circular economy is still challenging — partly because members of the extended CE ecosystem will invariably have conflicting priorities. Aligning the stakeholders around a profitable common cause poses a high hurdle. Cost, investments and ROI lead time are major impeding factors. In the 2022 3PL survey, 67% of shippers and 52% of logistics providers cited cost as the greatest challenge to aligning in a circular economy. But the same survey showed that only 8% of shippers and 8% of providers felt that the inability to validate return-on-investment improvements represented a prevalent challenge.
Legacy technologies and simple inertia can also pose significant challenges to sustainability initiatives. If an equipment manufacturer has a large installed base, shifting or transitioning to newer technologies, such as alternative fuels, could be challenging.
Digital strategy enabling sustainability outcomes
Digital and information technology can contribute significantly to the success of sustainability initiatives. Digital and IT solutions are recognized as similar in importance to key technology enablers such as renewable energy and management, recycling, and materials technology.
Digital technologies such as 3D printing, AR/VR, IoT, data analytics, AI/ML, cloud, automation, and blockchain have significantly enhanced the ability to run an efficient business. A well-defined sustainability vision requires the support of a well-orchestrated digital strategy. The vision should align with business priorities. It should also guide functional mandates for stakeholders throughout the enterprise value chain.
Digital and IT, technology product and service providers are increasingly committing to achieving specified levels of carbon neutrality by specified points in time. For example, the NTT Group has taken an aggressive target of achieving an 80% reduction in greenhouse gases by 2030 and becoming carbon-neutral by 2040. This involves using renewable energy, an internal carbon pricing system, and introducing innovative technologies like IOWN, which incorporates an all-photonics network with new optical technologies at every level to enable ultralow power consumption.
If you’d like to discuss sustainability efforts within your manufacturing enterprise, please don’t hesitate to contact us.