Resource efficiency: can sustainability and improved profit go hand-in-hand?
Moving towards improved sustainability might seem daunting for manufacturers. What should be prioritised, will it be a distraction and sink resources, and is any of it affordable? But what if you had a clear business case to show that improved sustainability would also help your bottom line? And what if that could be achieved with today’s existing technologies and know-how, rather than waiting for a silver-bullet solution to be invented? Professor Steve Evans, Director of Research at the IfM’s Centre for Industrial Sustainability, shares his insights into how resource efficiency can be good news for your profit margins as well as the environment.
Did you know that only 50% of edible food we produce is actually eaten? Or that only 10% of processed material reaches the customer? Just think about that: an eye-watering 90% of the resources we process to create goods are not reaching the person for whom they are made.
There are examples of inefficiency and waste all around us. For example, in the UK (a tiny island with a comparatively excellent motorway system) trucks on average carry only 27% load factor – so 73% of truck haulage capacity is not being used.
Factories are responsible for an estimated 36% of greenhouse gas emissions globally, and often the carbon footprint of manufacturing operations is closely related to how efficiently they operate.
It’s clear that we need to be working towards reducing such inefficiencies. But is it realistic to think we can take significant steps towards addressing these issues without sinking bank-breaking costs in the process?
Improving efficiency without reinventing the wheel
Rather than waiting for new revolutionary technological solutions, what can we do with the knowledge and capabilities already at our disposal? This is one of the main questions we need to ask about industrial sustainability, and an issue I regularly discuss with industry leaders and policymakers, because the solutions are often more about organisational strategy, culture and behaviour than about technical capabilities.
Many of the answers may surprise you. When analysing efficient use of resources, we’re talking about how we use energy, water and materials, and how we minimise waste and pollution. Economic principles would suggest that businesses will seek and find the most efficient ways to operate in order to drive down costs – and resource efficiency is imperative for this. And yet, the evidence shows that most companies are not using resources efficiently, and often are in fact unaware of where their inefficiencies exist, even if there are immediate actions that could be taken that do not rely on heavy investment.
Why is this worth doing? Take the example of Toyota In the UK, Toyota has been reducing the energy it uses to manufacture a car by at least 8% every year for 14 years, resulting in over 70% reduction over the period. The company can now make four cars for the energy it used to take to manufacture one car 14 years ago. Crucially, Toyota has done this by identifying improvements to energy usage, not by depending on a major new technology to revolutionise the business.
If manufacturers moved just half way from their current resource usage towards the usage of the most efficient companies in their own industry, our research indicates that the impact in manufacturing would be 12% increased profit, 15% more jobs and 5% reduction in greenhouse gas emissions.
An example from the cement industry
The cement industry is the second most intense industrial producer of CO2, responsible for around 5% of global emissions. If it were a country it would rank as the third highest producer of emissions after China and the US. It is an industry of low margins and high capital, resulting in many plants being decades old and inefficient.
Research by my colleague Dr Daniel Summerbell from the Centre for Industrial Sustainability has investigated the scope within existing plants to improve their efficiency through changes which do not rely on capital investment, through analysis of performance variations.
The research looked at three cement plants in the UK, using plant data and computer modelling to understand the impact of fuel mix on performance, particularly the fuel-derived CO2 emissions.
The increasing use of alternative fuels has been a defining trend in the cement industry over recent decades, which has had clear benefits for plants, primarily in reduced fuel costs as well as reduced carbon footprint. However, because of the diversity of materials being used as alternative fuels, the exact relationship between thermal substitution rate (TSR) and environmental impact in terms of CO2 emissions is not always clear. Accordingly, research by our team at the University of Cambridge with Hanson Cement has sought to investigate the uses and the limitations of TSR as a metric. The research has found that improving fuel mix, by the use of a newly-developed metric, could reduce fuel-derived CO2 emissions by 10% or more. While such improvement is subject to availability of appropriate fuel and operating conditions, the low capital requirement makes it very attractive to industry.
The chart shows the variation of fuel-derived CO2 emissions in a cement factory, produced to make a day’s worth of cement. The research compared the median performance of the plants with their 90th percentile best-observed performance. This gap was found to be large: essentially, there can be a huge difference in emissions between the best day (around 190kg emissions) and the worst day (around 340kg emissions). It indicates that standardising performance could reduce fuel consumption by ~6% and fuel-derived CO2 emissions by as much as 16%, all while operating within the existing capability of the plant.
As Daniel explained:
“Through uncovering this enormous variation, we were able to work with the plant to analyse where the variation was happening, and model the operations in detail to identify the causes. We found that the most significant variables were fuel mix and excess airflow, both of which could be adjusted using existing systems in the plant to improve efficiency. We estimate that at projected prices for 2030, the saving could be worth 1.7m euros per year in carbon prices alone for a single plant.”
How do we get there? Three strategies
So how can companies and their supply chains work towards improved resource efficiency?
At the Centre for Industrial Sustainability we are working on a number of ways to help manufacturers use resources more efficiently. We identify three key strategies as follows:
1. Understanding value opportunities
We need to start by pinpointing places where resources are wasted, and where opportunities are missed for creating value. As demonstrated in the examples from Toyota and from the cement industry, better use of resources is frequently a source of improved profit margins.
We have developed the Cambridge Value Mapping Tool to help companies recognise where value is being captured, and where it is not (which we refer to ‘uncaptured’ through missed, destroyed, surplus or absent value), using a structured and visual approach. We use this to analyse exchange of value through the lens of each stakeholder in the business network, with the natural environment and society each being given its own voice.
Beyond identifying where resources are squandered or where value is not captured for an individual company, we also need to understand how to scale the findings across industry.
For industrial sustainability to be more widely achieved, it is essential that we don’t just work in siloes where one company works out a clever trick and then says ‘job done’. We need to understand how to scale these solutions.
There’s an imperative to find solutions that work at scale and increasingly at speed. If we are to hit the targets set out in the United Nations Sustainable Development Goals by 2030, and the Paris Agreement, we need to work towards significant change at the rate of 6% or above improvement per annum of energy, water and material efficiency as well as reducing waste.
Scalability is also about cooperation across industry. Change can be achieved more effectively if organisations collaborate and learn from each other to achieve overarching goals that are in both the individual and the collective interest, by understanding how other companies are making efficiency improvements. This can be supported by engagement from policymakers.
3. Deploying simple tools
To make efficiency improvements more achievable for manufacturers, scalable, practical and easy-to-use tools are required. Resource usage needs to be more visible, then ways to address it made straightforward and measurable.
We’ve been collaborating with Manufacture 2030, an organisation which provides a cloud-based platform called M2030 Bee which helps manufacturers use less energy, water and materials, and thereby cut operational costs and environmental impact. This type of approach, well researched and carefully implemented, will make a valuable difference.
We have developed other tools and methods in the Centre for Industrial Sustainability that further support resource efficiency. These include our Zero Loss Yield Analysis (ZLYA), helping manufacturers measure their actual yield from raw materials compared to their expected yield. The results from YLYA are often enormously illuminating – a recent manufacturer we worked with discovered that their actual waste was 14 times greater than expected and was able to take steps to reduce it.
Continued efforts to help manufacturers to use resources as efficiently as possible can certainly result both in reduced carbon footprint and in substantial financial benefits.