Governments, corporations and organizations around the world are increasingly recognizing sustainability and climate change as critical issues. As they look for ways to reduce their carbon footprint, they must also recognize that the landscape is different across industries. There is no standard practice for taking an organization to net-zero carbon emissions, and often, business cases for this approach are difficult to justify.
One industry facing particular difficulty is manufacturing, where leaders are encountering an uphill battle when defining foundational business value for sustainable initiatives.
Recent research on sustainable manufacturing operations from the Capgemini Research Institute found that only 20% of U.S. manufacturers expect to be carbon neutral by 2030, significantly lagging behind the timelines and net zero goals of their peers in other industries. This is because manufacturing has a unique set of obstacles when it comes to embracing sustainability.
Financial Challenges
Research shows that 89% of manufacturers face continuous budget increases to fund sustainability initiatives, 89% say such initiatives increase the costs of creating products and 87% see low business returns when the initiatives are deployed.
However, many other types of investments that organizations make are measured based on long-term value versus current impact, and sustainability practices should be no different. The financial burden in the short-term is not indicative of what the future benefit will be. There are examples across industries where infusing sustainability into strategic business priorities has resulted in profitability. For example, one consumer products manufacturer in the study saw its sustainable brands grow 69% faster than the rest of its business over the past several years.
To tackle the sustainability challenge, manufacturing leaders must show their stakeholders the lasting benefits of a sustainable business, such as strengthened brand recognition and greater appeal to younger generations that prefer to buy from brands with sustainable manufacturing processes, the long-term financial upside and return become compelling. Businesses operate to make profits, and it is crucial for them to understand the financial trajectory of large investments. As manufacturers realize that sustainability projects deliver financial returns they can leverage for future expansion, they become advocates of sustainable business models.
Organizational Challenges
The Capgemini Research Institute found that 56% of manufacturers cite organizational culture and employee resistance as a top challenge in implementing successful sustainability initiatives. Additionally, 30% of manufacturers see changing the current process and value chain as a top challenge.
Building a company culture that prioritizes climate change takes time, energy, and resources. But without that foundation, it is very difficult to embrace change and enable employees to support a mantra of sustainability within their organizations.
To foster a culture that can diffuse sustainability throughout the organization, manufacturers must allocate resources to new approaches—such as creating a business function dedicated to corporate social responsibility, providing additional training to leadership on social topics and restructuring strategic business priorities. Then, they can demonstrate to employees the importance of these initiatives to the company’s success and align teams to the overall mission.
These enhancements to organizational culture may take time, but as teams gain education on these topics, they will become allies to the vision of the future and want to be a part of making it happen.
Benefits of a Successful Sustainable Initiative
Sustainable operations offer an abundance of opportunities, from cost savings to increased revenues. Capgemini research shows that more than 80% of such organizations have an enhanced brand reputation and an improved ESG (Environmental, Social, and Governance) rating. More than 50% also have improved efficiency and productivity, reduced costs, improved sales and boosted employee motivation levels.
As the world battles climate change, manufacturers want to be a part of the solution. While the industry faces many challenges in transitioning to a new era of sustainable operations, leaders must take a step back and evaluate their businesses from every aspect of the value-chain.
Breaking down the issues, addressing them step by step and setting measurable metrics along the way can bolster the foundation needed to achieve sustainability and the benefits that come with it.
Withstanding short-term obstacles and difficulties won’t be easy, but it can lead to new strategic business models that drive long-term gains and a sustainable future.
Vamshi Rachakonda is vice president, Manufacturing Market Unit leader, Capgemini North America.
