Green manufacturing: Saving our planet while boosting business

TL;DR

• Manufacturing is one of the world’s most carbon intensive sectors, responsible for one fifth of the global carbon emissions and using more than half of the world’s energy sources.

• Companies who are investing in more sustainable practices are seeing economic benefits; UK manufacturers who already put sustainability at the heart of their business over the last 12 months reported a 40% increase in profit margins and a 30% increase in competitiveness.

• Green manufacturing can be achieved through several different routes including switching to renewable energy, finding energy efficiency measures, investing in the circular economy, optimizing the supply chain, and taking advantage of government incentives.

• Manufacturers working in all sectors – apparel, food and drink, electronics, and more – are all achieving promising results, ranging from curbing electricity and gas consumption by 15% to reducing carbon emissions by nearly four million pounds per year.

• With the multitude of options open to manufacturers, there seems little excuse for the industry to improve its carbon emissions and become a more sustainable sector, especially given the tangible economic benefits going green can offer.

The detail

In the fight against climate change, every sector has a role to play. However, manufacturing arguably could be one of the most impactful. The global economy is built around production and consumption, so any changes in this area could have a worldwide impact. In the UK alone, manufacturing contributes £224 billion to the economy and employs 2.6 million people. These figures demonstrate the key problem; manufacturing needs to reduce its carbon emissions and find greener ways of working, but the steps taken must not impact the sector’s output.

It’s also undeniable that manufacturing has a high carbon footprint. Manufacturing and production are responsible for about one fifth of the world’s carbon emissions and use more than half of the world’s energy sources.

Not all manufacturers are created equal. In the US, 76% of the energy consumption attributed to the industrial sector comes from manufacturing. 87% of that is generated from the production of chemicals, petroleum and coal products, paper, primary metals, food, and non-metallic material products. The first three in that list – chemicals, petroleum and coal, and paper – were responsible for 70% of the country’s total manufacturing energy use in 2018.

Adopting a greener approach

This is where green manufacturing comes in, where companies look to optimise the way they produce items to reduce the overall carbon footprint of the manufacturing process. Typically, a multi-pronged approach is required. To become a truly green manufacturer, businesses need to change their corporate processes, improve manufacturing practices, and shift their overall to prioritise sustainable best practices – all of which could help to lessen the industrial impact of climate change.

It’s not a wholly philanthropic exercise; there are several economic advantages for business adopting green manufacturing solutions. For example, doing so can increase operational efficiency by reducing costs and waste, consolidate trust among existing customers and attract new ones, and ensure business remains viable over the long-term. UK manufacturers who already put sustainability at the heart of their business over the last 12 months reported a 40% increase in profit margins and a 30% increase in competitiveness.

That may be why 30% of UK manufacturers were investing in energy efficiency measures pre-Covid. However, energy efficiency is not the only route that businesses can follow. Green manufacturing measures can also include adopting renewable energy, investing in the circular economy, supply chain management, benefitting from government incentives, and adhering to new legislation.

Making the switch from fossil fuels

Renewable energy represents an opportunity for manufacturers to maintain their rate of energy consumption while reducing emissions. Solar, wind and smaller clean energy sources such as hydropower and geothermal energy can all be harnessed by companies looking to move towards green manufacturing. Ford in Michigan, for example, has begun avoiding 600,000 tonnes of carbon emissions annually since it started purchasing carbon-free electricity from the Department of Transport and Energy’s MI Greenpower programme.

Making the switch from fossil fuels to renewable energy has become easier since both upfront and running costs have reduced. In 2010, solar power typically cost 710% more than the cheapest fossil fuel, but by 2022 it was 29% cheaper. Solar power is also relatively easy for manufacturing companies to adopt as they can use their buildings to host panels. The Hutt Brewery in Kassel, Germany, for example, integrated a solar heat system to help power its brewing process in May 2010. It now has 155 square metres of flat-plate collectors and delivers 400 MWh/year of solar energy.

However, it’s not always as simple as installing your own solar panels. Manufacturing often requires a vast amount of electricity, which can be challenging to obtain from renewables where the supply is limited, such as in Japan, Taiwan and Singapore. In these countries, manufacturers have been turning their attention to natural resources available locally instead. Seiko Epson, for example, has been able to switch to using 100% renewable energy in its Japanese sites by using hydroelectric power in the water rich Nagaon Prefecture, and hydropower and geothermal heat from the Ou mountains in Tohoku.

Cutting costs and curbing emissions

As well as moving away from fossil fuels, energy efficiency is another popular way in which manufacturers are becoming more sustainable. According to a 2021 report, 66% of UK manufacturers had taken steps in the previous five years to improve energy efficiency at their sites. This is most evident in smart factories – sites equipped with sensors to collect data and supporting analytics software that can provide operators with insights to help prevent equipment breakdowns, improve inventory management, streamline production, and identify power saving opportunities.

In the US, the Department of the Interior Bureau of Land Management implemented smart technology to make its rural sites more energy efficient. Monitoring energy use and making dynamic changes as a result has reduced the department’s carbon emissions by nearly four million pounds per year. Further optimisations can include implementing LED lighting, investing in more modern, energy-efficient equipment, and improving compressed air and HVAC systems.

Reuse and recycle

Working towards a circular economy can be more challenging as it requires manufacturers to redesign their products and processes to cut waste and reuse and recycle resources. Adidas is one company that has attempted this, with its Futurecraft Loop shoe. The performance wear manufacturer spent six years developing a closed-loop manufacturing system to produce a 100% recyclable performance running shoe.

The Futurecraft is an entirely plastic design, with no glue, that can be returned to adidas to be broken down and recycled into a brand-new shoe. However, it’s not a flawless product; the first Futurecraft that kickstarts each cycle is crafted with virgin plastic (thermoplastic polyurethane or TPU) rather than originating with recycled material.

Fairphone is another interesting use case. This Dutch company is credited with leading the way in repairable devices and is also e-waste neutral as it recycles the equivalent weight of electronics (212g) for each phone it sells. It not only recycles old phones and repairs existing models, but it also uses fair trade gold and silver, ethically sourced lithium and tungsten, as well as recycled aluminium, copper, magnesium and more.

While not entirely circular, companies like the Guayaki mate tea company have also found ways to optimise their product and make their process less wasteful. Interestingly, the firm reduced the amount of packaging it used each year by almost 20 tonnes simply by eliminating the overwrap and tea string from its single-use mate bags.

Making changes end-to-end

The supply chain in manufacturing often has a greater environmental impact than the processes required to create the finished products. On average, supply chain emissions are 7.7 times higher than those of direct operations. But addressing this problem isn’t always easy; supply chains are complex and locating greener materials can require new chains to be established and new agreements to buy raw materials to be put in place.

Blockchain is one emerging technology that can help manufacturers improve sustainability within their supply chains. 24% of industrial manufacturing CEOs are currently exploring or deploying the technology to obtain insights into their supply chains and track every component from end-to-end.

Blockchain holds an accurate record of what is shipped where and when so that companies can prove their products use ethically and sustainably sourced materials. It can be used by large and small manufacturers; tentree is a small apparel company, which plants 10 trees for every item of clothing sold. It trades on the claim that 98% of its clothes are made from preferred fibres and sustainable materials and so uses blockchain to eliminate materials falsely masquerading as sustainable.

Thai Beverage Can Limited is another success story. The company introduced sustainable sourcing alongside reducing its energy use and now obtains its aluminium solely from providers certified as meeting third-party sustainability standards. It has also reduced the amount of electricity and gas used by its canning machines by 15%.

All about tax

Manufacturers are also being encouraged to go green due to incentives and legislation in the UK and EU. They currently need to pay a climate change levy at differing rates depending on the sustainability of the energy they use, pay a landfill tax on waste, and pay an additional tax for any plastic packaging components that contains less than 30% recycled plastic.

Certain manufacturers are required to cut and trade emissions due to EU Emissions Trading Systems targets. They are also encouraged to invest in energy efficient tech and machinery as the full expensing scheme allows manufacturers to write off the total cost of qualifying machinery and plant investments against taxable income.

Additionally, the new Labour government has introduced funding to support the manufacturing industry. A £1.8 billion investment to the National Wealth Fund is intended to upgrade ports and build supply chains, £1.5 billion will be invested in new gigafactories for the automotive industry, and £2.5 billion earmarked to rebuild the steel industry.

With this government support offering the carrot and taxation providing the stick, there is arguably more than enough financial incentive for manufacturers to make the move towards greener operations. That’s not to say it’s simple, but the case studies shared above prove that there are several routes that manufacturers can pursue to improve their environmental credentials. Whether it’s making their processes more efficient, investing in renewable energy, keeping a closer eye on their supply chain, or improving their packaging design, manufacturers can make incremental changes across their organisations to operate more sustainably.

In a sector as sizeable as manufacturing, small changes can make a difference. Every action adds up.

— Lew 👋

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The Transition’s work is provided for informational purposes only and should not be construed as advice in any capacity. Always do your own research.