Overview of sustainable manufacturing

For more than a century, the manufacturing sector has been evolving and adapting in response to technological innovation and changing market expectations. Forty years ago, sustainable manufacturing practices began to attract attention. Initially, these were often minor, sticking-plaster-type platitudes—seen as inconvenient and costly, but necessary to keep up public appearances. Today, sustainability is a matter of survival for both the manufacturing sector…and the planet.

Environmental compliance and green manufacturing drivers

The best businesses genuinely care a great deal about environmental stewardship and ethical corporate values. But of course, it would be naïve to think that green manufacturing initiatives are entirely motivated by altruism and good citizenship. Businesses have a duty to remain profitable and competitive and in today’s market, that means paying attention to risks and opportunities. Corporate sustainability measures are motivated by myriad issues, but the following are some of the most powerful drivers:

• Reducing costs and waste: To make their operations greener and to succeed amid growing competition, businesses must look for ways to minimise waste and make more efficient use of energy and resources. Apart from the environmental benefits of these efforts, there is also a definite financial benefit to getting this right. Adopting a Kaizen approach to operational efficiency and frugality not only helps to reduce waste and cost, it also fosters a culture of productivity and cost-effectiveness that makes business more competitive from end to end.
• Avoiding risks and costs of non-compliance: In 2021, the United States EPA levied $1.05 billion USD in civil penalties for corporate environmental compliance violators, and the EU adopted a new directive to tighten compliance by introducing “new criminal offences, increased sanctions and better enforcement”. Every day, in countries around the world, standards are becoming stricter, and new legislation and regulations are being introduced. Each area of the supply chain—from raw materials sourcing to end-of-life reclamation and waste management—is coming under increased public and governmental scrutiny. Modern manufacturers are looking to intelligent supply chain solutions that can keep up with compliance requirements in real time and help them automate their operations accordingly.
• Facing increased public awareness and scrutiny: In a 2021 survey, PwC found that over 70% of American and British consumers pay close attention to corporate reputations and would modify their purchasing behaviour based upon a company’s social and environmental values. This reflects not only the increased level of global concern about environmental issues, but also an increased ability to access and share information. Modern businesses know that a single Twitter campaign has the capacity to undo years of reputation-building. This is a powerful motivator to remain on the right side of environmental issues. Smart business systems can be especially valuable in this capacity—being set up to monitor and report social media trends, giving companies the opportunity to get ahead of any concerns, and reassure customers that meaningful measures are being taken.

Principles of sustainability in manufacturing

The EPA defines sustainable manufacturing as: “The creation of manufactured products through economically-sound processes that minimise negative environmental impacts while conserving energy and natural resources.” For businesses to achieve true sustainability, they must examine literally every area of their supply chain and manufacturing operations to find ways to improve and optimise.

• Recycling and circular supply chains: The OECD recommends increasing the percentage of used materials involved in the production process. A closed-loop approach, or circular process manufacturing lifecycle, means that when a product reaches the end of its useful life, it is collected to be reused in a new product. In this way, manufacturers can optimise the use of energy, raw materials, and other resources while reducing waste and emissions.

• Renewable energy: The Energy Information Administration (EIA) anticipates renewable energy to represent 27% of total global energy consumption by 2030. This will be feasible due to an increase in worldwide initiatives to make renewable energy more accessible and practical—especially for commercial use. Today, many businesses are adopting more profitable ways to switch to sustainable energy. This includes setting up renewable (usually solar) energy microgrids—and becoming prosumers by storing and redistributing this collected power.

• Green and ethical raw materials: Vetting and tracking the provenance of raw materials is a vital component of any sustainable manufacturing strategy. Often, raw manufacturing materials are sourced from locations that do not reliably uphold stringent standards for environmental and labour practices. Traditionally, it is at this stage where businesses are most blind and exposed to enormous potential risk. Quite apart from any unacceptable ethical consequences, the risk of a product recall or PR scandal often originates at this stage.

• Sustainable product design: Einstein said: “We cannot solve our problems with the same thinking we used when we created them”. The best manufacturers realise that “sustainability” is not something you can realistically inject into existing products and processes that were not created with that in mind. Smart manufacturing software helps designers and R&D teams to collaborate on a unified platform—developing simulations, analysing data, accessing customer feedback, and integrating end-to-end production processes. The practice of sustainable design includes some of the following principles:

  • Uses less packaging
  • Has a more minimalist design with fewer superfluous parts
  • Is designed to minimise complexity in production and assembly
  • Has constituent parts that are easily disassembled and recycled
  • Is designed with durability—rather than obsolescence—in mind

• Conservation: Increasingly, large corporations are supporting global conservation efforts to protect their raw material suppliers and the natural resources upon which they depend. It is nothing new for large companies to wish to associate their brand with socially responsible initiatives. The difference today, however, is that these partnerships are more than simply financial sponsorships. Modern businesses are taking advice from conservationists to help them better understand and develop a culture of sustainability across all their teams and along all links of their global supply chains.

Green manufacturing technologies and implementation

New green industrial technologies are being developed at speed. They vary from industry to industry, including sustainable product design, more efficient raw materials processing (smelters, paper mills, cement), less energy-intensive manufacturing machinery, and environmentally friendly packaging. Carbon capture and other alternative and energy-saving technologies are also making great strides.

Each sector has its own progress milestones and its own set of challenges to analyse and overcome. However, across the board, one of the most important success factors for any green manufacturing initiative is access to smart technology.

When unified on a single platform, intelligent, cloud-connected manufacturing solutions can provide astounding insights and lead to ongoing improvements in efficiency and productivity. Here are some of the features and tools currently helping to advance green manufacturing.

• Cloud-connected Industrial IoT (IIoT) networks: An IIoT network serves to collect and share disparate and valuable data from assets and machines, all across the business. Unlike IoT devices which tend to operate on a more individual basis, IIoT networks operate within a data ecosystem. The data they collect and share is centrally processed and analysed and the insights derived can help to inform and automate workflows and processes. This can help to optimise assembly and production lines and inform predictive maintenance efforts, allowing machines to inform operators when they require maintenance or troubleshooting. IIoT data can even help to improve and streamline human tasks and teams.
• Predictive analytics: IIoT networks bring machine and device data into the central system. But there are numerous other sources of intelligence and data to be considered. This can include things such as customer feedback, weather or natural occurrences, sudden consumer trends, market and economic information, and even political or social events. In the not-so-distant past, companies were unable to analyse dissimilar types of data all at once, and struggled to get a data-driven, big-picture assessment of their operations. But with AI-powered systems such as smart ERPs, businesses can merge and analyse IIoT data, alongside other disparate and diverse data sets—to help them gain valuable insights and inform confident, swift decision-making.

• Supply chain control tower: As profit margins tighten and competition increases, businesses must make use of every possible opportunity to improve efficiency and agility. This often means working with networks of multiple smaller suppliers and partners, both locally and overseas. This is a shift from the traditional supply chain model and can introduce an enormous amount of risk and complexity if not properly managed. An intelligent supply chain control tower helps to unify operations across the entire supply and value chain. With device-agnostic and cloud-connected software, silo walls are broken down. This enables supply chain managers to handle disruptions or unforeseen events in real time, and to share and coordinate live action plans across their entire global business.
• Blockchain and sensors: Tamper-proof RFID sensors can help supply chain managers track and confirm the ethical and environmental provenance of the materials they source. And blockchain serves as an irrefutable source of truth when it comes to materials tracing and is therefore more reliable than any other method of provenance confirmation. Beyond ensuring that materials meet sustainability and ethical standards, blockchain tools can also monitor for potential fraud and other types of risk which help to reassure investors and shareholders. Furthermore, sensors can be configured to gather other types of data such as temperature and handling. These technologies mean that when a consignment of products arrives at a warehouse, supply chain managers never again have to guess who handled it, how long it was in transit, or even what kind of materials were used in its preparation, cultivation, or assembly.
• AI and machine learning: AI helps to manage and process data more quickly and efficiently but its true value lies in the ability to make sense of that data. Structured, relational data is like what you would see in a spreadsheet. It is literal and can be categorised into specific columns and rows. Today, however, it’s the analysis of Big Data that holds the most powerful insights, and Big Data is largely unstructured. That means it doesn’t neatly fit into a spreadsheet. It can include things such as IIoT video input, customer feedback, or testing results. AI and Machine Learning come into their own with Big Data. AI technologies can identify patterns, interpret qualitative content, and compare and contrast unstructured data sets. And machine learning means literally that: the system will learn over time, about what works, what doesn’t, and what leads to the most efficient and accurate outcomes.
• Automation for sustainability: Many manufacturers are developing the capacity for ‘lights-out’ manufacturing to reduce energy wastage. This involves the integration of collaborative robots (cobots) and other intelligent assets and tools that can automate production in real time and operate without human intervention. This enables companies to separate certain production lines that can operate without lighting or ventilation, increasing efficiency while reducing energy costs.
• ERP: A responsive, robust ERP with a powerful database can help to integrate manufacturing technologies and data with other relevant areas of the business such as Finance, HR, or Marketing. Every department across your business has a role to play in streamlining sustainability efforts. An integrated ERP provides a 360-degree view of your operations, generating data-driven reports that can be used to ensure sustainability and environmental compliance, analyse budgets and costs, connect with customers and employees, and forecast future trends.

6 business benefits of sustainable production

A robust economy is in everyone’s interest—from the customer to the CEO. For sustainability initiatives to be feasible and realistic, they must be undertaken with a win/win spirit—supporting meaningful environmental outcomes, and also helping to drive cost savings and profitability. With this in mind, we are seeing agencies such as the EPA, OECD, and the EU Advisory Board shifting their focus to develop and promote strategies like those below, which encourage long-term fiscal growth and corporate success.

1. Address growing consumer trends. Every year, consumers demonstrate a growing preference for dealing with green and ethical companies. In fact, 73% of Gen Z consumers are willing to pay a premium for a more sustainable product, and many are increasingly suspicious of greenwashing—as opposed to demonstrable and transparent commitments to ethical, sustainable business practices.
2. Nurture brand equity. Today's consumers demand greater choice, value, and faster fulfilment. The rise in online shopping has also led to a decline in brand loyalty. This means that now more than ever, businesses benefit from building unique, verifiable brand attributes such as sustainability and ethical values.
3. Benefit from subsidies. For many companies, a primary motivator for making their operations more environmentally friendly comes from risk aversion and the desire to avoid fines or losses. However, for companies that can provide “tangible and visible” evidence of meaningful green initiatives, there may be significant financial subsidies available from their governments. Smart technologies can help support this effort with automated searches for new and emerging subsidies and opportunities.
4. Be more attractive to investors. As Forbes reminds us, a company’s commitment to sustainable and responsible practices, conveys an image of success and “…ethical corporate behaviour, which reduces investment risk”. Implementing sustainable production solutions can open a company up to new streams of green investors.
5. Be more attractive to talented jobseekers. We are in a time when even the world’s most successful businesses are struggling to recruit good talent. 49% of Gen Zs surveyed by Deloitte said that a prospective employer’s values play a major part in whether or not they decide to accept a role. In a separate UK survey, 65% of respondents of all ages said that they would be more likely to work for a company with strong environmental policies.
6. Save money and reduce costs. Of course, a core focus of sustainability is the reduction of waste and the ability to make more efficient use of resources and energy. Every business can benefit from a thorough analytical review of their current practices and how their processes can be streamlined and improved.

Sustainable manufacturing: Next steps

Smart technologies provide an essential tool for achieving robust sustainability goals. But ultimately, it starts with your teams—your people. It’s important for businesses to develop communication strategies that go beyond the clichés that everyone has already heard. Your teams need to hear how green initiatives will impact their work, how the success of these measures will be judged, and exactly how a commitment to sustainability will lead to better corporate health and job security.

By focusing on the long-term benefits and communicating successes—and even challenges—with clarity and transparency, companies can set themselves up for a future that is not only greener but also more resilient, agile, and profitable.

SAP sustainability customers in action