For businesses operating today (and that hope to survive into tomorrow) sustainability is on the radar screen in a big way. Customers are demanding it. Governments are requiring it. Partners and suppliers are racing to keep up. It's true that achieving sustainability represents a whole new challenge for manufacturers. But there is also great opportunity. Organizations ready to embrace the journey are finding that sustainability not only makes good business sense; it's a natural result of optimization. Which means, if you're already finding and implementing efficiencies, you're very likely becoming more sustainable in the process.
Sustainability, in a business context, simply means acting in a way that minimizes your impact on the environment, whether it's through reducing emissions from your plants and vehicles, using less material to create and package your products, or lowering your operation's fuel and power consumption. Businesses can use the principles of sustainability to help society move to a circular economy, where materials and resources are re-used instead of pulled out of the ground. This may seem like an unattainable goal, but getting closer to it has become a high priority, and one of the most pressing C-level conversations being held around the world.
Sustainability is the new KPI
"Sustainability is a metric by which all companies will be evaluated going forward," says Eric Kaese, Deloitte's US asset lead for Cloud4M, a Salesforce-based customer relationship management (CRM) solution. He notes that partners, suppliers, and investors are all looking at sustainability reports the way they used to look at earnings reports. At the same time, governments are implementing new environmentally focused regulations, placing manufacturers' environmental performance in the spotlight. And consumers are factoring brands' levels of sustainability into their purchasing decisions, creating pressure that moves up through the value chain.
Quite simply, businesses that don't make sustainability a priority are about to be left behind, constantly playing catch-up with new rules while losing business to more planet-friendly competitors.
"Sustainability is fundamental and strategic," echoes Frederik Debrabander, Deloitte's global asset lead for Cloud4M. "It's driving corporate strategies, M&A, divestments, and acquisitions, because companies realize that it's do or die."
Debrabander sees more and more of his clients, among them major chemical companies, making the sourcing of green energy a priority. One of the largest such organizations has even invested in massive wind farms in Europe. In turn, electricity producers are investing heavily in green initiatives, because the demand is there. On the consumer side, some packaged goods manufacturers have challenged their suppliers to work toward net zero emissions.
Investors are also forcing a shift to more sustainable operations. For example, Debrabander points to a large investment management firm that recently declared its intention to invest only in sustainable companies going forward.
Together, these factors represent a significant shift in the way business is conducted, and that's good news for everyone.
Good for the planet, even better for business
Take, for example, a consumer goods manufacturer whose products are burdened by excess packaging. By using advanced design and 3D printing to create a more intricate, smaller box, that manufacturer can use less – and thus spend less on – packaging material. Product weight is reduced, which reduces transportation costs. The manufacturer can now afford to lower prices, making their products more attractive to consumers.
"Reducing your carbon footprint means reducing waste," agrees Kaese. This requires a renewed focus on efficiency. Consider an organization looking to optimize their field service and reduce the number of times a truck must leave the depot. "If you can cut that in half, which means fixing things right the first time, having the right parts in the van when it departs, and ensuring the technician knows what needs to be done before they get onsite," Kaese continues, "our studies show that you can cut the number of your truck rolls way down. That's a simple way to make a large impact just by getting your operations in order."
Visibility into your processes plays a big role here, enabled by digitization. "The old challenge with inventory," Kaese continues, "was that you didn't have a good picture for when someone's going to need something. So you always had it on the shelf." But, by digitizing operations, manufacturers can generate a much clearer picture of who needs what, in what time frame, all across the supply chain. This reduces the need to stockpile.
"There is a correlation between sustainability and margins," adds Debrabander. Take, for example, a plastics converter making PVC window profiles for the consumer market. The price of the resin for those profiles, supplied by chemical companies, has steadily increased over the years. However, if that plastics converter can set up an ecosystem such that, whenever a building is torn down, the existing PVC profiles can be taken out, ground down and recycled, then the need to pay for expensive new resin is significantly reduced, with a corresponding improvement in profit margins. "That's when your business becomes circular," notes Debrabander.
Beyond cost savings and efficiencies, being seen as planet-friendly matters, too. If you have a good sustainability message, this positively impacts consumers' perception of your brand and may even spur new customers to check it out. "There's also an impact to your employees," notes Kaese. "They could become not only more efficient in their work, but potentially prouder of where they are employed." When you consider the recent shift to remote work, sustainability represents a whole new opportunity for businesses to keep their employees happy.
Clearly, sustainability is a value-generator on multiple levels. So it's no surprise that it's proving to be the impetus behind several big trends.
Get ready for a whole new environment
Perhaps one of the most significant transformations taking place across industries has been the move to sensor-ize operations and take advantage of the Internet of Things (IoT), as a means to more closely track activity and generate a clearer picture of emissions. "If you were to ask somebody what their carbon footprint is," Kaese notes, "a lot of companies have an idea. But would they be able to tell you what specific activity is driving the most? Or where they should start if they wanted to reduce?" The ability to track operations in detail gives businesses the power to answer those questions.
Janney agrees. He points to one US-owned marine solutions and logistics company, which uses sensors and IoT to track 4.2 million metric tons of carbon from 160 ocean-going vessels around the world. Armed with such an accurate picture of their impact, this company can better identify and target specific activities for improvement.
The desire to shrink the footprint is also pushing many organizations to look at re-shoring or near-shoring their production. After all, bringing products to your plant by rail from a neighboring locality will generate a lot less pollution than bringing that same product in from overseas on a ship. "If you can localize sourcing and the supply chain," notes Janney, "it's of great help in reaching that sustainability goal."
Transportation, in fact, has been an obvious place to look when it comes to reducing emissions. "Electrification is really changing the car manufacturing industry," says Debrabander. "Twenty or 30 years from now, most of the cars will be electric. The oil and gas majors are really shifting gears and acquiring in the renewable energy space. Because soon, you will not be pumping gas anymore, you'll be pumping electricity."
Kaese notes that the construction and mining industries have already taken advantage of electric and autonomous vehicles to reduce emissions. "They've had machines running and driving by themselves in mine complexes for a long time," he says. "Adoption is even more advanced than on the consumer side."
Yet, while electricity is the future, combustion engines are still the present, and a shift is happening here, too. For example, Debrabander highlights a Scandinavian oil and gas giant that has invested a lot in chemical recycling. This has enabled the company to produce sustainable aviation fuels. Or in other words, jet fuel produced from waste streams instead of from a refinery. Debrabander knows of at least one professional services organization that has taken advantage of this, and is now able to tell their clients, "our consultants only fly on sustainable aviation fuel." The momentum, clearly, is in a sustainable direction.
It's time to step on the gas (figuratively, of course)
Debrabander, Kaese, and Janney all recommend that business leaders accelerate digitization to gain greater visibility into their processes, assets, and logistics. From there, organizations can begin to document the emissions caused by each source in their manufacturing environment, identify areas where energy use can be reduced or wasteful patterns updated, then create benchmarks against which progress can be charted.
Equally important is for businesses to look at their suppliers and ensure environmental performance is in sync. "It's also about consuming differently," Debrabander notes. "When you consume products that are more sustainable and circular, you close the loop."
Of course, it's one thing to gather data. It's quite another to pull actionable insights from it. Fortunately, businesses have a solution at hand.
Sustainable equals lean
The advantage of a CRM solution, such as Cloud4M, is that business leaders can see the impact of their entire operation, enabling them to track emissions and target specific activities for reduction, optimize routing and service call sequencing, better manage the availability of spare parts, and minimize downtime at plants – activities that can have a tangible, positive impact on an organization's sustainability picture, and that would be impossible to achieve with manual spreadsheets.
Of course, sustainability success will look different for each organization. But the key is to start now, define what "good" looks like for your business, and strive for improvement every year. Finally, remember that sustainability can be the natural result of following best practices, such as digitization, process optimization, and efficiency. After all, says Debrabander, "the leaner you can be in your operation, the more sustainable your business will be."