What is sustainable manufacturing?
For more than a century, the manufacturing sector has been evolving and adapting in response to technological innovation and changing market expectations. 40 years ago, sustainable manufacturing practices began to attract attention. Initially, these were often minor, band-aid-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 actually do care a lot 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 minimize waste and make more efficient use of energy and resources. Apart from the environmental benefits of these efforts, there is also a decided financial benefit to getting this right. Taking a Kaizen approach to operational efficiency and frugality not only helps to reduce waste and cost, it also empowers 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 an new directive to tighten compliance by introducing “new criminal offences, increased sanctions and better enforcement”. Every day, in nations around the world, standards are tightening, and new legislation and regulations are being rolled out. 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 smart 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 behavior based upon a company’s social and environmental values. This reflects not only the increased level of global concern about environmental issues, but 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 stay 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 out in front 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 minimize negative environmental impacts while conserving energy and natural resources.” For businesses to achieve true sustainability, they must look at literally every area of their supply chain and manufacturing operations, to find ways to improve and optimize.
- 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 into a new product. In this way, manufacturers can optimize 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 leaning into more profitable ways to convert 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 uphold reliably strident standards for environmental and labor 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 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 realize 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, analyzing 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
- Is more minimalist in design with fewer superfluous parts
- Is designed to minimize complexity in production and assembly
- Has constituent parts 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 materials suppliers and the natural resources they depend upon. It’s nothing new for large companies to wish to partner their brand with socially responsible initiatives. The difference today, however, is that these partnerships are more than simply financial sponsorships. Modern businesses are taking counsel 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.
Discover the sustainability paradox
Learn how to balance sustainability and growth in a rapidly changing world.
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 eco-friendly packaging. Carbon capture and other alternative and energy-saving technologies are also making huge strides.
Each sector has its own progress milestones and its own set of challenges to analyze 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 analyzed and the insights derived can help to inform and automate workflows and processes. This can help to optimize assembly and production lines and inform predictive maintenance efforts, letting machines tell operators when they need 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 intel and data to be considered. This can include things like 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 analyze 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 like smart ERPs, businesses can merge and analyze IIoT data, alongside other disparate and diverse data sets– to help them gain valuable insights and inform confident, fast decision making.
Predictive capabilities drawn from the analysis of rich, varied data, help companies made educated and efficient business decisions.
- Supply chain control tower: As profit margins tighten and competition grows, businesses must leverage 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 inject an enormous amount of risk and complexity if not properly managed. A smart 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 allows supply chain managers to deal with disruptions or unexpected events in real time, and 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 acts 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 shipment of products shows up at a warehouse, supply chain managers never again have to guess who handled it, how long it sat in shipment, or even what kind of materials went into its preparation, growth, or assembly.
- AI and machine learning: AI helps to manage and process data more quickly and efficiently but its true value comes 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 categorized 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 like IIoT video input, customer feedback, or testing results. AI and Machine Learning come into their own with Big Data. AI technologies can spot patterns, make sense of 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 smart assets and tools that can automate production in real time and operate without human intervention. This allows companies to separate certain production lines that can operate without lights or ventilation, boosting 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 delivers a 360-degree view of your operations, generating data-driven reports that can be used to ensure sustainability and environmental compliance, analyze 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 like the EPA, OECD, and the EU Advisory Board shifting their focus to develop and promote strategies like the ones below, that encourage long-term fiscal growth and corporate success.
- 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.
- Nurture brand equity. Today’s consumers demand increased choice, value, and fulfillment speed. The rise in online shopping has also led to a drop in brand loyalty. This means that more than ever, businesses benefit from building unique, verifiable brand attributes such as sustainability and ethical values.
- Benefit from subsidies. For many companies, a primary motivator for greening their operations comes from risk aversion and the desire to avoid fines or losses. But 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.
- Be more attractive to investors. As Forbes reminds us, a company’s commitment to sustainable and responsible practices, telegraphs an image of success and “…ethical corporate behavior, which reduces investment risk”. Implementing sustainable production solutions can open a company up to new streams of green investors.
- Be more attractive to talented job-seekers. 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.
- Save money and cut 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 serious analytical dive into 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 sustainable manufacturing solutions
Improve efficiency, profitability, and brand perceptions with green production.
SAP Insights Newsletter
Ideas you won’t find anywhere else
Sign up for a dose of business intelligence delivered straight to your inbox.