Making sustainable transformation work for manufacturers
1 April 2021
Reducing waste, creating value and securing investment. As we prepare to launch the Sustainability Association, a place for businesses to get the support they need to progress sustainability initiatives, Steve Evans and Ian Bamford cover a few of the main areas businesses need to focus on.
By Steve Evans, Director of Research in Industrial Sustainability, and Ian Bamford, Commercial Director, Centre for Industrial Sustainability
Building back better. Targeting net zero. Creating a circular economy. In the wake of COVID-19, there has been a renewed focus on not just the importance of sustainability in UK manufacturing businesses, but on how sustainable business transformation can have a positive impact on both job growth and the bottom line.
There are a lot of simple methods out there to push this transformation, but many organisations face the challenge of moving from intention to action. Having agreed to pursue sustainability, maybe even setting a specific target, the exact pathway remains unclear. Our work with many manufacturers shows that they need clarity about both ‘what to do’ and ‘how to do it’ – and critically, ‘what do we do now?’ Getting started is hard, and we study how to make that easier.
“Cutting waste and improving profitability can go hand-in-hand and can be done with existing technologies. The key is to learn how to see the new types of waste, like energy waste, water waste and material waste”
The University of Cambridge’s Centre for Industrial Sustainability at the Institute for Manufacturing (IfM) has worked with over 400 businesses, assisting them with understanding what works and what does not, in differing conditions across many sectors. This research, carried out in live businesses rather than in laboratories, has helped us to shape emerging tools and approaches ideally suited to support organisations in adapting their businesses to the many sustainability challenges we face right now.
Crucially, these do not rely on new technological solutions, and in many cases are simple steps that can start today. Many actions are cheap to implement, often generating cash quickly (so don’t rush to buy that wind turbine for the car park just yet!).
Three key areas to focus thinking
We study what works when manufacturers act to become more sustainable, where they implement programmes across resource efficiency; building resilience; evaluating energy and material wastes; implementing industrial symbiosis; creating sustainable business models; identifying sustainable value propositions; and many others.
Drawing on this experience we find that three things are important when starting on the journey towards sustainable manufacturing.
1. Reducing waste and improving efficiency
Waste is everywhere, and it doesn’t make any business sense. Cutting waste and improving profitability can go hand-in-hand and can be done with existing technologies. The key is to learn how to see the new types of waste, like energy waste, water waste and material waste. We have observed many manufacturers learn how to see these wastes, so that they can then use their standard tools to identify root causes of the waste and propose solutions. If Toyota at Derby can save about 10% of all energy with a programme that switches machines off when not producing cars, then what can you do?
Many manufacturers can tell us how much waste they produce. We then calculate the weight of purchased materials against the weight of sold finished goods. This is not the buy-to-fly ratio that is often calculated. One factory told us they had 14% material waste – but we showed them that 54% of their purchased material became waste. When we know how big the problem is, and learn how to see waste clearly, then staff are able to make huge savings quickly.
The leading manufacturers have taken this a step further – for the waste that is inevitable (such as the skin of the sugar beet, for example) they have searched for ways to make this valuable to others. AB Sugar at Wissington has pioneered this in sugar manufacturing, where some of its waste is now sold as nutraceuticals that can be much higher in value than core sugar products. Everything is turned into something of value and sold.
2. Creating value through sustainable business models
Your ‘business model’ is the logic of how you create value, for example, “I make cars and sell them for a large amount” or “I rent cars for as long as possible and get a small amount of cash back each day.”
Business models are changing as the world changes, as we go digital and as we become more sustainable. The leading manufacturers are experimenting with their business models now, sometimes in some quiet corner where no-one notices.
We started over 10 years ago examining business models to understand what works and what doesn’t, as manufacturers investigate new ways to do business, for example, “Should I rent? Should I lease?” We learnt something interesting – almost all companies are good at explaining what value they exchange with customers, and sometimes with wider society and the environment, but most were not so good at explaining their value failures – where the customer wants something but they are not supplying it, or where they are supplying it but the customer doesn’t want it.
It seems that the classical approach of failure modes analysis needs to be applied to our customer relationship, and once we know about the failures we again automatically know what to do to resolve them. Of course, there is a little more subtlety to doing this well and consistently, but this is the essence. The well-known example of Rolls Royce and ‘power-by-the-hour’ delivers what the customer wants and doesn’t deliver what the customer doesn’t want, resulting in less fuel per passenger-mile.
Understanding where a business is creating – and failing to create – value today is important in assessing how value might be generated in different future scenarios. For example, we recently worked with a company that is highly dependent upon the petrochemical sector that was asking to transition to become a part of the world of renewables. By creating maps of current and future value exchanges, it was possible to develop new value propositions and ways of delivering value, and hence set out the core of new business models.
3. Securing investment in sustainability projects
Sustainability doesn’t need to conflict with other business requirements – profit and sustainability go hand-in-hand – so compelling business cases can be made to senior leadership if the correct paths are identified and there is evidence to ensure that the resources are in place for new sustainability initiatives. The best paths can generate the cash needed for the more expensive, investment-based later stages of a sustainability plan.
We have worked with enough businesses in our regular research to know that different senior leaders make decisions in different ways, so the key is fitting the case to the questions that arise. People need to buy into change for any initiatives to be effective. It’s important to persuade others to change – from gaining commitment to change from senior leadership to identifying and working with the right partners in your business ecosystem that are aligned with your new vision.
Support for change
While these are starting points, there are even more opportunities in sustainability that we think will become increasingly important. Thinking around circular economies is in its infancy but our research on systems thinking in the industrial space shows a number of ways to make it work. Better and more sustainable design in products and services ensures that they can be reused, either in biological or technical cycles, so that nothing is thrown away and there is a reduced need for purchasing new commodities.
The list of things that you could choose to do is vast. And you are trying to create a plan when you have not travelled this road before. That is why we are launching the Sustainability Association, where you can get together with others going on the same journey and learn from those who are already ahead.
You can also draw on the Cambridge Centre for Industrial Sustainability’s extensive research. The Association will provide training, tools and practical leadership support to enable businesses to progress sustainability initiatives.
We believe that collaboration and sharing of best practice, from industry to industry and from research to industry, is an essential ingredient.
If you’re interested in learning more, please contact Ian Bamford, Commercial Director for the Centre for Industrial Sustainability, at firstname.lastname@example.org or Rob Driver, Marketing Manager at IfM Engage, at email@example.com