Sustainable manufacturing has become essential for manufacturers to maintain customer loyalty, win new business, and remain competitive in today’s supply chain based marketplace. In the past, manufacturers were slow to set goals in this area. As a result, many didn’t focus on sustainability or their broader Environmental, Social, and Governance (ESG) plans. But that’s all changing fast.
Many manufacturers are part of supply chains now that need to meet and exceed sustainability and ESG targets annually. 50% of B2B buyers are considering replacing suppliers who don’t measure up when it comes to sustainability and ESG initiatives, based on a recent survey by FleishmanHillard. 64% of buyers in the same survey say manufacturers who ignore sustainability & ESG plans risk losing their business. In addition, 60% of buyers now include sustainability objectives in their RFPs.
A solid sustainability manufacturing plan and transparency about results help increase sales, improve customer loyalty, and reduce operating costs.
Defining Sustainable Manufacturing
Sustainable manufacturing focuses on balancing production performance, the need to achieve profitability, the environmental needs of the planet, and the health & safety needs of people. The United States Environmental Protection Agency‘s definition is “sustainable manufacturing is the creation of manufactured products through economically-sound processes that minimize negative environmental impacts while conserving energy and natural resources. Sustainable manufacturing also enhances employee, community, and product safety.” The OECD Sustainable Manufacturing Toolkit provides many valuable online resources to learn about sustainable manufacturing. And the
Why Sustainability Attracts The Most Loyal Customers
Manufacturers don’t typically communicate directly with consumers about sustainability, but their end customers do. Customers are getting more vocal about preferring brands and companies with the most sustainable supply chains and products. For example, 73% of global consumers say they would change their consumption behavior to reduce their environmental impact. In addition, 66% are willing to pay more for products produced using sustainable manufacturing, also according to Nielsen’s Global Corporate Sustainability Report. For manufacturers, sustainability is now an imperative for doing business.
An example of how manufacturers are putting this into action comes from the automotive industry. Tier 1 automotive manufacturers anticipated this decades ago when they defined the ISO 14001 standard for suppliers selling to them. Ford, Honda, Toyota, BMW, and General Motors adopted the ISO standard to meet customers’ demands and improve their production processes, reducing their environmental impact. Tier 1 auto manufacturers have among the most loyal customer bases in the world, attributable to how transparent they are about their sustainability progress.
How Manufacturers Can Become More Sustainable
According to the U.S. Department of Energy, the manufacturing and industrial sectors consume 36% of the total U.S. energy consumption today. The figure increases when the energy used to transport materials, including finished goods, is factored in.
Improving sustainability needs to start by taking action to reduce electricity waste, reduce greenhouse gas emissions, and become more efficient at energy and water use. Reducing waste created as a byproduct of production helps reduce operating costs and a manufacturer’s impact on the environment.
Additional steps manufacturers can take to reduce waste and become more sustainable include the following:
- Capture real-time production, process, and consumption data to establish a baseline and set goals. Knowing how much energy a plant consumes, the product recycling rate, water usage rate, water reclamation rate, and scrap rates by machine & production lines are an excellent place to start. Benchmarking how much or little waste is happening in each resource area helps identify which gaps need to be closed the fastest. The goal is to identify and embed sustainability metrics across manufacturing operations to provide insights on how to set goals and improve.
- Identify where the widest sustainability gaps are and what they cost. Building a business case to keep investing in improving sustainability requires having accurate costs. For example, identifying which sources of waste are the most costly in manufacturing operations and then completing a root cause analysis helps gain additional budget to improve sustainability and reduce costs. Instead of manually doing the cost analysis, it’s more efficient to use integrated ERP, MES, Accounting, and Analytics applications that share the same data to quantify how wide the gaps are and how fast they’re growing. ERP and MES systems sharing the same data can also help permanently close the gaps causing environmental and financial waste.
- Offer customers a Take-Back program to recycle materials that can be used again in manufacturing. Take-Back programs provide the added benefits of recycling reusable materials back into production while reducing operating costs and waste. For example, our customer Fabricated Extrusion initiated their Trim Buyback program to help customers recycle plastics they no longer need. Today it’s proving to be an excellent source for materials they need for production runs. Fabricated Extrusion also implemented a water reclamation plan ahead of schedule that delivers cost reductions. They’ve also initiated an energy conservation program based on solar energy panels now on their production center’s roof.
- Monitor spoilage rates in supply chains and inventories, reducing environmental waste with better traceability. Identifying time-sensitive materials and expiration monitoring to ensure they’re used in production before expiration dates also improves sustainability. Using track and trace systems to monitor and manage time-sensitive materials before they expire reduces waste and materials costs. Track-and-trace is invaluable for pinpointing supply chain bottlenecks that could lead to waste, non-compliance, and product quality challenges.
- Manufacturers are using Design-for-sustainability to enter new markets while reducing their impact on the environment. From initial product concept through production, design-for-sustainability reduces operating expenses and manufacturers’ long-term impact on the environment. The primary product development goals often concentrate on creating more biodegradable, lighter-weight products with recyclable packaging materials. As a result, manufacturers have more opportunities to reduce sourcing and procurement costs from the product concept phase through first shipments to customers. Recycling packaging can reduce costs by 60% or more, according to Hewlett-Packard’s extensive work on their Design for Environment (DfE) program.
Customer demand for more sustainable products and packaging is reordering today’s manufacturing landscape. Relying on real-time data to benchmark production and process performance is a significant first step to identifying potential sustainability gaps. Knowing how much waste costs is a must-have to build a business case to keep improving every aspect of manufacturing sustainability for the long term.