Ashley Adams is a principal consultant and decarbonisation strategy at Vendigital. He recently shared his insights with Manufacturing Management.
The Climate Change Committee (CCC) has recently reported that while the UK has published plans to tackle climate change, the country is not moving fast enough to reach its net zero targets. With tighter environmental regulation expected, decarbonisation is rapidly becoming a priority for manufacturers across industry sectors, and accurate, reliable data holds the key to success.
Some Boards might conflate the need to decarbonise with the need for an ESG strategy, and while both of these initiatives are important to businesses, each requires a different approach. ESG typically runs the gamut of employee rights, biodiversity concerns and corporate governance, and creating a strategy to encompass these vital areas should be broken down into manageable transformations to ensure the best chance of success. Decarbonisation, on the other hand, is a complex topic under one umbrella term, however, it’s one that brings many measurable and tangible benefits including long-term changes to product design, supply chains and day-to-day operations.
With the global push towards decarbonisation and legislation evolving to capture decarbonisation outputs, it is vital that manufacturers put a strategy in place as soon as possible. However, as the strategy will need to touch all functions of the business, knowing where to begin can be challenging. There are five key areas that business leaders should use as a starting point for discussion when preparing a decarbonisation strategy.
1. Know your carbon footprint
The first step in any decarbonisation journey should be to assess the company’s carbon footprint and gain a better understanding of how it measures up compared to competitors as well as counterparts in adjacent industries. Scope 1 and 2 emissions are relatively straight forward to calculate, as these sit within the business itself, however, it can be more challenging to calculate Scope 3 emissions, which sit outside the business’ direct control and typically account for 70% of emissions.
2. Benchmark results
Establishing baseline data is vital at the outset and will allow manufacturers to track any improvements. Armed with this data understanding, an external analysis of the supply chain should be undertaken to discover where any inefficiencies or areas for improvement lie. Changes to the supply chain could involve sourcing materials closer to the factory or plant to reduce shipping-related carbon emissions, or sourcing alternative materials that have a lower carbon footprint, with each change contributing to tangible, trackable results against initial benchmarks.
3. Allocate funding
Manufacturers need to understand the financial implications of implementing a decarbonisation strategy at the outset, particularly as it could require changes to their future financial plans. For example, it may be necessary to invest in decarbonising technologies and infrastructure, and businesses should be aware that a significant amount of upfront capital expenditure may be needed. However, there should be a positive return on investment once low-carbon technologies and streamlined processes are up and running.
4. Be prepared for transition downtime
High upfront costs are not the only risk factor to bear in mind. Other risks may include operational downtime as production lines are upgraded or replaced, or internal disruption as teams are trained to operate new machinery or systems.
5. Stay one step ahead
Finally, businesses need a thorough understanding of current legislation around decarbonisation, which is evolving rapidly. Penalties could soon be introduced for businesses that do not take sufficient action to reduce their carbon emissions, and having a plan in place which is underpinned by reliable data is imperative.
Accurate and meaningful data is key to making a success of any decarbonisation journey, providing both evidence and guidance. As the company’s data maturity improves, Boards will become more confident about using it as a decision-making tool. When applying a new decarbonisation strategy for the first time, manufacturers should consider trialling it on specific products or processes to assess its efficacy. This will involve identifying factors that are driving up carbon emissions and tackling them one-by-one. For example, this could include re-engineering a product to avoid using a carbon intensive process.
Data can also be used to train bespoke AI algorithms or to develop digital twins to guide strategic decisions. By using a digital twin of a factory’s layout, for example, business leaders can test the impact of new machinery or process changes virtually before funding is allocated. This technology can help to de-risk investment decisions as the digital twin is able to flag areas of concern. Once highlighted, a new virtual trial can be run, saving the business time and money.
Building a business case for any major changes or project trials will require careful planning to ensure they are aligned to the company’s decarbonisation strategy. Lifecycle carbon assessments of key products or processes should be used to set clear reduction targets that will encourage buy-in from stakeholders, investors and employees. Such targets should become business critical KPIs – something that will become more important as legislation continues to evolve and becomes regulatory instead of voluntary. In the spirit of transparency and accountability, it is vital that the company’s decarbonisation strategy and targets are communicated internally and externally to demonstrate progress and share success.
While ensuring sufficient budget allocation is important, manufacturers should also pay attention to timescales for delivery, and make sure that new decarbonisation strategies deliver the expected results. Once early-stage assessments have been completed, business leaders shouldn’t attempt to do too much too soon. Instead, they should utilise the data to prioritise some ‘quick wins’, which will make a tangible impact from day one, for example by using energy in a more efficient way such as switching to LED lighting throughout the factory or reviewing energy usage to cut down where possible. As data findings mature, businesses can then begin to tackle the more complex and/or costly activities.
While decarbonisation is gaining traction across industries, it is still early days for many manufacturers. It is important to have access to industry knowledge and tap into the vast knowledge base of organisations such as The Carbon Trust or higher education institutions such as the Cambridge Institute for Sustainability Leadership, which are dedicated to reducing carbon emissions in innovative and sustainable ways. As decarbonisation strategies develop, manufacturers should aim to take part in cross-industry conversations and share best practice. They could even provide insights to local and national policymakers to help shape future legislation.
Decarbonisation is a top priority for many manufacturers, but without access to accurate and reliable data, they are flying blind. Having a decarbonisation strategy is a differentiator for some businesses, but as the emphasis of legislation changes and initiatives move from voluntary to regulatory, it will soon become a ‘right to play’. By making net zero targets an integral part of corporate decision making and a baseline against which to measure success, manufacturers will be equipped for a sustainable growth trajectory.
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