The latest IPCC report makes one thing clear: we must decarbonize, and we must do it now. We cannot wait another decade for a miracle technology to negate the impact of industrial emissions (although we should continue investing in them; more on this below).
Manufacturers often overlook a simple fact: reducing their environmental impact can save them money — today and even more so going forward. Proven technologies for process optimisation can jointly reduce emissions and costs, in my own experience, by 5–10% each.
Other sectors are already achieving these kinds of results. In freight shipping, machine learning-based route optimization is reducing fuel consumption and helping shippers maximize profit. In agriculture, digital monitoring and planning can more efficiently deploy fertilizers while increasing crop yields.
Why aren’t more manufacturers achieving these results in creating a sustainable supply chain?
Manufacturers face several common headwinds in turning their sustainability goals into tangible results. Two stand out to me:
- Siloed organizational structures. Each group within a plant tends to focus on its own performance metrics. One team may seek to cut raw material costs, while another might prioritize increasing throughput. This organizational structure enables local decision making, but with a complex goal such as reducing emissions, all teams must coordinate across the entire plant. The scope of a manufacturer’s impact may also extend to their supply chain, highlighting the further need to bridge silos, focusing on the entire product life cycle.
- A myopic focus on hardware. Adapting a factory to operate more efficiently is not easy. New methods of manufacturing can be prohibitively expensive, for example, requiring the replacement of existing machinery with updated equivalents that use less energy. Yet hardware is not the only solution to operate a plant more efficiently: empowered by software, factories can reduce their emissions by learning how to make better decisions, across an entire plant and the system at large.
How can manufacturers overcome these obstacles and decarbonize?
You cannot optimize what you do not measure. The first step is to quantify the carbon impact of the business, from the beginning of the supply chain to the final product, sharing relevant information with each organizational team. With this knowledge, manufacturers can prioritize which problems to tackle in order to make their production more sustainable, build cross-functional teams to address the issues and explore the variety of solutions at their disposal.
The most obvious problem may not be the best one to tackle first. Take, for example, a large steel company that would like to minimize its emissions. Say a specific furnace is revealed as emitting the most greenhouse gas. Should the company focus its efforts directly on reducing emissions from this furnace?
Exclusively following this kind of top-down approach can be too reductionist; in fact, this is a common criticism of Six Sigma for industrial process optimization. Focusing solely on one furnace may not have a scalable impact on the rest of the organization. If solving this particular problem does not directly translate to dozens of mills this company runs across the globe, we may have overlooked a different problem that does - possibly enabling a greater net reduction of emissions at scale, achieved in a similar amount of time.
Manufacturers should think broadly about which solutions can be scaled to make their entire process more sustainable. Some solutions are immediately accessible; for example, factory optimization software can inform engineering teams on how to minimize raw material consumption while maximizing throughput — an approach that involves no expensive hardware changes. It does require, however, a holistic approach to realizing the impact of raw material consumption and evaluating a variety of process-based solutions to minimize it.
Investing in both short and long term solutions is necessary to drive sustainable growth and build the factory of the future. Consumers — not only individuals, but also other participants in the supply chain — are becoming acutely focused on climate impact. Amidst a slew of new regulations, including proposed SEC rules which would require companies to make emissions data public, many companies are pledging dramatic emissions-reduction commitments.
The scale of the problem is large and we will need more energy-efficient equipment, cleaner energy sources, and carbon capture technologies to rise to the challenge. But these things take time — and there are actions that can be taken now that boil down to better decision-making during operations.
Manufacturers that get a head start on decarbonizing their businesses will increasingly become more competitive, just as companies that invested in digitization in the last two decades are benefiting from this head start today. These investments are already proving to be worthwhile. As the market continues to change rapidly and climate-driven shocks to prices accelerate, a more intelligent deployment of resources will be required to protect the planet — and manufacturers’ bottom lines.
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