With sustainability a rising priority for industrial business owners, a group of Made Members gathered to share their strategies and discuss the barriers to progress they face.
Sustainability has become a critical focus for manufacturing companies driven by customer and supplier demand, regulatory requirements and a desire for greater operational resilience and relevance.
An increased emphasis on environmental responsibility was the key takeaway from Made in Group’s inaugural BIG Sustainability Survey that gathered the views of directors at more than 200 small and medium-sized (SME) manufacturing companies.
The results show that:
- Two in three manufacturing business owners and decision-makers rank sustainability as being of high or very high importance in their organisation
- The most common environmental steps already taken on the operations side include investing in energy-efficient lighting and HVAC systems and undertaking an energy audit
- Production side actions have largely focused on reducing and/or recycling waste and replacing paper-based processes with digital solutions
- By becoming more sustainable, manufacturers expect to benefit from enhanced reputation and cost-savings
- The top sustainability priority for 2023 for industrial business owners is to formalise their sustainability strategy with clear goals and KPIs
However, while awareness surrounding sustainability has undeniably grown and many SME manufacturers have taken some initial steps, the majority remain in the foothills of the journey. As a result, organisations are looking for support and best practice from others to move forward.
That conclusion was reinforced during a recent Made Masterminds roundtable that gathered a dozen business leaders to explore the common barriers to sustainable manufacturing they face and what can be done to overcome them.
From the discussion, it’s clear that larger SMEs are significantly further ahead on their sustainability journey versus the average small business – from their understanding of related terminology and regulations to the scope and complexity of programmes.
This was reflected in the two larger organisations present both having dedicated sustainability managers, a role not present at any of the 10 smaller companies represented.
Why this is was attributed to the primary barrier SMEs face in becoming more sustainable, a lack of pull or pressure from the market.
As one Member noted; “Almost all the changes we've made as a business are the result of customers or legislation making something necessary to continue trading. Those are the most compelling driving factors that any business will get. And, quite honestly, we haven't had any pressure yet to do any of this in relation to sustainability or net zero.”
The Managing Director of an SME automotive supplier added; “We haven't had any pressure yet from OEMS to do any of this but we know it will come in the next 12 to 24 months so we're looking to get ahead.”
Sustainability becoming a key procurement criterion
That might be the case currently but requirements are starting to cascade down the supply faster than business leaders anticipate. Take having to report on Scope 1, 2 and 3 emissions. The different scopes reflect how much control an organisation has over the sources of emissions:
- Scope 1 – Direct emissions created by your activities, for example running boilers, generators and vehicles (if not electrically powered)
- Scope 2 – Indirect emissions from your use of electricity, heating or cooling
- Scope 3 – All other indirect emissions that occur across your value chain, from material extraction to disposal (Scope 3 emissions make up the majority of total emissions for many companies)
Large companies have been required to report publicly on their Scope 1 and 2 emissions since 2019. This will become mandatory for all UK businesses, including SMEs, by 2025.
Scope 3 reporting is voluntary but could become compulsory as early as December 2023. Many organisations are choosing to get ahead of future requirements by getting a handle on their carbon emissions now.
The Sales Director at an energy consultant commented; “Don’t assume that because you’re an SME none of this applies to you. It does. Even if your company doesn’t have a legal requirement, your customers might, so this will cascade down and you are going to be asked the question. Don’t risk potentially being denied a contract because you don’t have the answer or even a basic awareness of what’s required.”
Being able to evidence where you are and that your company is on a sustainability journey is becoming increasingly important. Already, businesses large and small need firm climate plans and commitments in place to supply major government contracts. Other industries have similar requirements in place, as do rising numbers of individual organisations.
The Sustainability Manager for a manufacturer of specialist construction products commented; “We recently had an architect say that if we don't have environmental product declarations [EPDs] for our products, they may not be able to continue working with us. The push that we're seeing now is coming directly to ourselves and then we have to then push back onto our supply chain.”
Sustainability remains second to efficiencies
Despite many not – yet – facing direct pressures to become more sustainable, manufacturers are still becoming ‘greener’ because their cost-saving or productivity initiatives are also creating environmental improvements.
Faster, more capable machines may have been bought to increase throughput but they are also significantly more energy-efficient than the older models they replace. Choosing to source UK-made components may have been done to reduce supply chain disruption but those parts will also have a much smaller carbon footprint by not needing to be shipped halfway around the world.
The Managing Director of an industrial engineering company explained; “Recent innovations in our packaging and packing processes have created considerable carbon reductions but sustainability wasn’t the primary driver; cost reductions were. It was done primarily to counter the huge hike in shipping costs of late.
He continued, “Our philosophy is to try and solve a problem at source rather than further down the line. For sustainability, that means minimising our energy or material use in the first instance, then identifying self-generation opportunities.
“Minimisation as the first priority enables us to not only understand our use of resource but it also means we don’t overproduce when we progress to self-generation.”
Another Director added; “There are regulatory drivers and stakeholder drivers but the commercial driver is an important one. If you can take cost out of your business while simultaneously becoming more sustainable, your company will have a clear commercial – and competitive – advantage.”
Sustainability guidance and support are crucial
The conversation moved on to discuss what actions would help manufacturers, especially SMEs, accelerate their efforts to become more sustainable.
The Managing Director of an SME automotive supplier summed it up in one word – “support,” adding; “We’ve started our journey but it’s certainly a big challenge to make the changes needed in the timeframe available so we’re going to need a lot of help.”
Another Member added; “Companies are crying out for guidance and support and it's just not there. Yes, companies should be challenged to change but they can’t be left to do it alone.”
Sitting within a larger group enables companies to tap into the insights and innovations pioneered by affiliated businesses. Such is the case for the Regional Manager of a global metal recycling company. He commented; “For every tonne of infeed that goes into one of our shredders, 250kg comes out as waste. When you’re handling a million tonnes of scrap in the UK every year, that percentage becomes very big.
“There’s a big focus within our group to create energy from that waste and a pilot plant is currently under development in Queensland, Australia. Once successfully demonstrated, this first-of-its-kind energy from waste plant can be duplicated wherever we operate shredders, including the UK.”
Other SMEs are fortunate enough to receive a helping hand from larger customers. The Sustainability Manager for a manufacturer of specialist construction products explained; “We're currently rolling out a project that has us assess a supplier’s sustainability credentials. If there are found to be lacking in some areas, we then look at how we can support them to improve.
“Each of us has key suppliers that we want to retain so how can we help them get to that level we need them to be? Ultimately, we all want to achieve the same goal. That’s why it’s so crucial we share knowledge and best practice.”
Many companies will seek specialist support from independent advisors and consultants. However, it’s hard to know who can be trusted, noted several Members. SMEs need to be confident that they are placing their trust – and money – in a reputable organisation.
Companies were advised to choose consultancies with accreditations such as ISO 14064 (quantifying and reporting greenhouse gas emissions) and PAS 2060 (demonstration of carbon neutrality). Or, if consultants aren’t yet accredited, to ensure they at least follow the methodology.
Whether they choose to engage with an external party or not, the suggested starting point for companies embarking on their sustainability journey was to create a carbon reduction plan.
The Director of an environmental quality management consultancy noted; “A carbon reduction plan is a great starting point because it can be as simple as creating a Spreadsheet.
“It will give an idea of where you are and where you need to be. Analyse your processes and equipment, identify where your energy hot spots and potential problem areas are, map where the biggest gains can be made and begin to move forward.”