Comparing green performance in manufacturing - benchmarking study
Businesses in the manufacturing sector are under increasing pressure to become more green by reducing the environmental impact of their products, making their operational performance more efficient and meeting the requirements of environmental regulation. As a result, the concept of green business is rising up the corporate agenda in manufacturing, moving from being a marketing-driven 'nice to have' to a real operational necessity.
In order to meet the demands of consumers and environmental regulation, manufacturing businesses must look beyond simply promoting their green image. They need to make fundamental changes to put green business ideas at the heart of business strategy and take practical steps to improve their green performance.
To help leading companies meet this challenge, PA Consulting Group has carried out a benchmarking study that compares the performance of a range of leading manufacturing businesses – including Siemens, GE, Alstom, and ABB. Our benchmarking study compares the companies' respective green performance through a balanced scorecard approach and tracks how their performance developed between early 2011 and mid-2012.
To compare manufacturers' green performance we used information from publicly available annual reports and corporate websites, and reports on sustainability and environmental compliance, including thereport. Our study focuses on three areas:
- product portfolio – understanding the extent to which manufacturing businesses contribute to global environmental efforts by creating a 'green portfolio' of products with limited or even positive environmental impact. Our green business experts compared the relative size of each company's green portfolio, the impact of its products on the environment over their full lifecycle, the proportion of revenue generated by this portfolio and the business's R&D expenditure relative to revenue
- transparency and operational performance – comparing the extent to which manufacturing companies are transparent about environmental performance and greenhouse gas emissions, energy consumption and water usage. We also drew on results from the Carbon Disclosure Project's Global 500 Index report
- strategy and organisation – examining manufacturing companies' statements in the public domain, assessing the clarity of their green business strategy and the measurable targets they have in place to integrate green approaches into operations and supply chains. We also looked for a dedicated resource within the organisation that focuses on sustainability and green business.
Siemens ranks first in our green benchmarking study, followed by ABB, GE and Alstom
Siemens was top-ranking green manufacturing business in the sample, primarily based on our findings of full-scale life cycle analysis of its products as well as its leading position in the Carbon Disclosure Project Global 500 Index report.
ABB secured a better overall rank than the year before – specifically because it expanded its green product portfolio and generated more revenue from this portfolio than any other company in the assessment. ABB also led in reductions it made in energy and water consumption, and in progress on carbon emissions reduction targets.
GE improved its green performance slightly when compared with the previous year, coming in third place – driven by a low score for its share of revenue generated by green products and for the percentage of products covered by life cycle analysis. GE did, however, show reductions in energy and water consumption, and progress on carbon emissions reduction targets.
Alstom retained its position as the lowest ranked green performer but made significant improvements on last year – closing the gap with competitors by improving the clarity and scope of its sustainability strategy and showing the highest coverage of ISO/OHSAS certification among its manufacturing units in the sample.
What can manufacturing companies do to improve their green performance?
Drawing on our experience – which includes working with a global manufacturer to overhaul its resource-intensive operations and meet its carbon emissions reduction targets – we recommend the following actions
- ensure transparency about operational impact by collecting hard data on energy consumption, carbon emissions and other key measures and publish that data in accessible and clear sustainability reports
- set clear objectives for the future and monitor performance against those objectives, which should be ambitious and lead to a cycle of continuous improvement, and establish a dedicated management role to oversee green performance
- look outside the company and consider the environmental impact of products across their whole life cycle. This means not just making great products, but also designing them in a way that minimises resource-use during their application and ensures they are recyclable and eco-friendly.
To find out how to improve green performance in your manufacturing organisation, contact us now.