By Russ Banham
Forbes
Now that more companies are realizing the financial and environmental benefits of investing in production methods and technologies that take the dirty work out of making stuff, clean manufacturing is no longer an oxymoron.
An industry that has long been an ecological disappointment is poised to become an exemplar of eco-friendly practices, creating products the negative environmental impacts of which have been significantly reduced. While this shift toward sustainable practices is great news for people and the planet, it’s also a boon for companies’ bottom lines – reducing expenses, maximizing profits and boosting reputations to generate more sales.
The overarching goal of clean manufacturing is to make things using economically sound processes that minimize negative environmental consequences while conserving energy and natural resources. In pursuit of this objective, an increasing number of manufacturers have implemented a wide range of initiatives that minimize waste, energy usage and harmful emissions; improve manufacturing efficiencies and output; embrace Internet-enabled automated technologies; and involve the use of less harmful and more economical composite materials.
This momentum contrasts sharply with practices in the early 2000s, when pioneering companies embracing green initiatives were few and far between. According to the Environmental Protection Agency, what once was a “small niche” now includes many major manufacturers that are “building long-term business viability and success” from their clean manufacturing programs.
Clean And Smart Manufacturing
While the positive experiences of these larger companies demonstrate that environmental improvements and profit-making go hand-in-hand, most midsize and smaller manufacturers across the world have yet to seize upon such opportunities.
“They may be struggling with their short-term survival, or cost pressure from clients, or lack of knowledge and resources to invest in environmental improvement,” stated Andrew Wyckoff, director of the Science, Technology and Industry Directorate at the Organization for Economic Cooperation and Development (OECD).
Overcoming such struggles may well be worth it. A dollar invested two decades ago in a select portfolio of public companies focused exclusively on growing their businesses would be worth about $14 today, according to a study by the Harvard Business School. But if that dollar had instead been invested in a portfolio of companies that focused on important environmental and social issues – along with growing their businesses – it would now be worth more than $28.
What explains such outsized gains? The latter companies focused on sustainable measures that trimmed manufacturing costs and improved equipment efficiency, which benefited both the environment and the bottom line. In other words, by doing good, these businesses also did well.
Such measures can be attributed in part to so-called smart manufacturing. Machines that are embedded with Internet-enabled semiconductors and sensors can report on looming maintenance needs. And by integrating lessons that the sensor-outputted data from equipment on the factory floor have to teach, products can be manufactured to customer demand, thereby limiting energy usage, production excess and inventory warehousing costs.
Leaner methods of production are also being attained through the increasing use of robotics, 3D printing of parts and engineered composite materials that present the means to make stronger, more durable, lighter-weight products with unique properties such as thermal and electrical conductivity. Composite materials have at least two constituent parts, being typically blends of different types of resins, polymers, ceramics and natural fibers. The end result is a product that uses less metal, reducing the environmental degradation caused by mining.
Burnishing The Brand
These various activities also have significant reputational value. A report by McKinsey & Company notes that environmental sustainability is now a strategic and integral part of many businesses, given its positive effect on corporate reputation. A Nielsen study of 30,000 consumers across the world indicates that 73 percent of Millennials are willing to pay extra for sustainable goods.
“Consumer brands that haven’t embraced sustainability are at risk on many fronts,” warned Carol Gstalder, Nielsen’s senior vice president of reputation and public relations solutions. “Social responsibility is a critical part of proactive reputation management. And companies with strong reputations outperform others when it comes to attracting top talent, investors, community partners and, importantly, consumers.”
Added up, the economic and eco-friendly benefits of sustainable manufacturing are compelling. By engaging in sustainable manufacturing, companies may also be eligible to receive government tax credits, grants and other incentives at the federal and state level. The reason for this largesse is the economic payback: The National Association of Manufacturers found that for every dollar spent in manufacturing, another $1.89 accrues to U.S. gross domestic product (GDP).
Unfortunately, approximately 31 percent of companies are unaware that such government incentives even exist.
The Next Industrial Revolution
Certainly, many midsize and smaller companies need to first understand that there is demonstrable business value in sustainable practices. The challenge, in Wyckoff’s view, is that these manufacturers “simply do not know where to start.”
To flatten this learning curve, the OECD has created a sustainable manufacturing toolkit for use by businesses of all sizes and types. The toolkit offers technical advice and best practices, in addition to measurement methods for calculating the return on an investment.
Sustainable improvements in manufacturing really have no downside. Consumers want products that are good for them and for the planet. In the decades to come, such products will be an increasingly possible, profitable reality. The great hope is that clean manufacturing will become a business-as-usual practice across industry – to the benefit of companies and the world at large.
Russ Banham is a Los Angeles-based financial journalist and author.