The future of the industry is sustainable
Sustainability can mean different things for different people and industries. To make sure that we are all on the same page, let’s start with a definition of the word together with other terms commonly used in the same context.
Explanation of sustainability and other terms
The most common definition of Sustainable development, according to the Brundtland Report from the UN, is “meeting the needs of the present without compromising the ability of future generations to meet their own needs”. From an environmental aspect this basically means that one should avoid harming the environment and the depleting of natural resources in order to maintain ecological balance. In the business world, “sustainability” is often used within three different categories: environmental, social, and governance, known as ESG.
Environmental in this context can include, but is not limited to, waste disposal, energy and resource efficiency as well as greenhouse gas emissions. Social often includes employee health and safety, diversity and gender equality in the workplace as well as product safety. Governance mostly includes ethics and shareholder rights among other things.
Opportunities for the industry to develop more sustainable processes
According to research across the globe we consume resources as if we had between 1.5 to 4.9 earths at our disposal, depending on where you live. That number can be even higher in some countries. More than 30 % of the energy consumption comes from manufacturing industries. On a positive note though, many large corporations within all kinds of industries, and in particular within the industrial manufacturing sector, are changing the way they operate by creating more sustainable processes. Here are a few examples, many of which are also good examples of how to develop in accordance with some of the 17 Sustainable Development Goals set by the UN.
1. Develop and/or invest in more energy-efficient machinery
Nowadays, there is a great range of machinery that is not only of high quality and powerful but also resource-efficient and generates less waste and pollutants. Yes, it might be a larger investment at the time but that should be outweighed by the long-term benefits it will bring both to your business and the environment.
2. Reduce waste disposal by applying lean manufacturing
A lean production refers to the concept of reducing waste and scrap materials within a manufacturing system without sacrificing productivity. This could involve taking simple steps such as reusing materials for new products or finding ways to reuse packaging materials multiple times. Some companies have even developed more extensive plans where they have found a way to minimize waste by incorporating innovative 3D printing technologies.
3. Focus on resource efficiency when building new facilities
Your business is booming, and you are about to expand by building new manufacturing facilities in five new cities. Congratulations! You now have a great opportunity not only to maximize energy efficiency from the start, but also to source material and components locally, when possible. This allows for less energy and resources to be used both when building the facility but also throughout the manufacturing process. All at the same time as you can utilize the most cost-efficient and easily obtained materials.
4. Increase energy efficiency in already existing facilities
It might not come as a surprise that manufacturing industries are some of the biggest consumers of electric energy. But nowadays there is a growing trend for facilities to incorporate Factory Energy Management Systems, or FEMS. By adopting certain energy conservation frameworks, many manufacturers have reduced both their energy consumption and costs immensely. Another trend that has grown in popularity these past few years in places such as schools and offices is the use of natural lighting. This has so far been fairly unexplored in manufacturing facilities but is a great opportunity given that natural lighting is clean, free and proven to increase productivity as it creates a more pleasant environment for employees.
Sustainability is beneficial for manufacturers and a necessity for stakeholders
Most people are aware of the environmental problems that lie ahead of us. Not everyone sees it as an opportunity and a necessary development though. But according to the research team at the Governance & Accountability Institute (G&A), 85 % of the companies in the S&P 500 Index* published sustainability or corporate responsibility reports in 2017.
Louis Coppola, EVP & Co-Founder of G&A Institute, managed the annual analysis. He emphasizes the importance of developing your company according to the ESG issues:
– Mainstream investors constantly searching for larger returns have come to the conclusion that a company that considers their Environmental, Social, and Governance opportunities and risks in their long-term strategies will outperform and outcompete those that do not. So, it’s just a matter now of following the money.
For many start-ups, to include sustainability as part of their strategy from the beginning is a given. Incorporating it throughout a well-established business may however feel harder and sometimes almost impossible. But there are actually many large corporations that have completely changed their strategy in becoming more sustainable. Take Neste for example – a petroleum refinery with an annual revenue of more than $10 billion. Not only have they shifted their business from being a fossil fuel company refining oil to now spending over 50 % of their investments on sustainable products such as renewable biofuels. They have also increased their profits by doing so thanks to the higher margin on their biofuels business.
AxFlow – a good example
AxFlow, the Fluid Handling Solutions business group within Axel Johnson International, specializes in the marketing, distribution and provision of a complete sales engineering services for high quality fluid handling equipment. Elin Letterblad, Sustainability Manager at AxFlow and a member of the sustainability team at Axel Johnson International, emphasizes the importance of including sustainability in a company’s strategy.
– I believe it is absolutely necessary in order to survive in the long term and maintain competitiveness. Firstly, the demands from our customers are rising and if we cannot meet these requirements, we will simply lose business. Secondly, we are facing a massive global challenge in the terms of global warming and resource depletion, and it is not an option to continue “business as usual”.
In order to lay the foundation for a more sustainable business, AxFlow had an external party evaluating their operations from a sustainability risks & opportunities perspective in 2015. Since then, they have progressively carried out a number of basic sustainability activities, measuring impact and success rates based on a number of selected KPIs every six months, and doing follow-ups at board meetings. AxFlow also focuses on ensuring that they have a responsible and ethical supply chain, which is done with the help of their recently updated Code of Conduct.
– Another interesting project is the “material project” that we carry out on one of our pump models in partnership with the supplier. We have broken down the pump into all of its components and analyzed these to actively work to eliminate any dangerous substances and to ensure that these components are produced under ethical and accepted environmental conditions, says Elin Letterblad.
– I want to be able to look my children and grandchildren in the eyes with a clear conscience, and the work we do at AxFlow and Axel Johnson International is big part in reaching that goal, she concludes.
For Lean Clean Green //Maria Lundkvist
* The S&P Index is one of the most widely followed barometers of the US economy and conditions for large-cap public companies in the capital markets.