Product manufacturers have led the world in perfecting just-in-time processes to drive waste and cost out of their business. End to end supply chain operations have been perfected with tools as various as enterprise resource planning, data analytics, digital process flows, and Six Sigma and 5S methodologies.
Now, the growing global climate emergency requires a new focus. Regulators, shareholders and consumers are all turning up the pressure on product manufacturers, demanding that they make their businesses and operations more sustainable. So, how can brands make a sea change, rather than a step change, to embed sustainability into their business model and make this pivot profitable over the long-term?
Bank on sustainability in product manufacturing
Becoming a sustainable manufacturer isn’t as simple as adopting lighter-weight materials in product builds or buying carbon offsets, although those changes can’t hurt. Instead, organisational leaders need to rethink strategically about where their business and industry is headed to place the right bets on sustainability. To get started:
1. Rethink the business model against market trends
Product manufacturing is changing fast. Consumers are using products in new ways, such as buying subscription and digital services, participating in product takeback schemes and buying second-hand goods. Regulators are accelerating demands, such as the European Union’s new proposal to reduce carbon emissions by 55 percent in a decade and tax foreign companies for the pollution they cause. And financial institutions re-structuring their funding and investment criteria. As a result, companies with legacy products and processes may not qualify for the liquidity and protection they need to run and grow their businesses.
However, sustainability also creates significant business opportunities, opening up white space for innovation. There are multiple ways to play: Organisations can make products and packaging more sustainable or truly circular, designing materials for recovery, recycling and reuse. They can also develop subscription business models, notching regular sales; bundle products with digital services for higher profitability; and use recovered materials in developing new goods, unlocking greater value across product lifecycles. Major retailers such as eBay, H&M and Asda have already adopted circular initiatives, and PA has worked with numerous brands to define new circular business models that make sense for each application.
Organisations increasingly need to explore market opportunities, customer priorities and business dynamics across industry sectors to direct where strategic bets should be placed. Partnerships can unlock new business model and supply chain opportunities capable of driving sustainability. In addition, business owners will want to map the new skillsets they’ll need and create a workforce hiring and development plan to obtain them.
2. Transform product portfolios to be more sustainable
Many companies rely on abundant clean water for product manufacture, tap fossil fuels for production and logistics, or use plastics for packaging. In the space of just three months, a semiconductor fabrication plant, producing microchips for computers, phones and cars, consumes over 900 million gallons of fresh water. As a result, it’s beneficial to create a structured, sequenced plan for transforming product portfolios before they become outmoded, due to new regulations governing material use and carbon emissions or changing customer behaviours. As part of this process, product manufacturer will look to reduce fossil fuel dependence. There is increasing adoption of biofuels in production processes; the harnessing of more renewable energy supported by a myriad of financial instruments; and the opportunity to turn waste into revenue, as UBQ is doing with residential solid waste.
Product manufacturers can envision a series of FutureWorlds for how they’ll develop and deliver sustainable products and interact with customers. This process allows different possible business realities to be explored, forecasting ROI potential and the investment, timeframe and technical feasibility of multiple options. Brands can then select the business models, products and or services that best aligns with their purpose, ambitions and capabilities.
3. Design products for circular use
Products historically have been designed for use and disposal, resulting in growing landfill volumes, chemical leachate and lost value. As a result, many organisations are exploring how to design products for circular use, to reduce waste, keep products in use longer and regenerate natural systems. This process can involve reconceiving offerings, adopting new materials, creating interoperable parts, reskinning current products or pivoting to a service model.
Using a methodology that explores different options to analyse products for cost, carbon and circularity impact (the 3Cs) can help organisations find the best path forward. Tearing down anticipated and/or existing products and providing an informed view of options for achieving the best balance of the 3Cs and avoids unintended consequences, such as implementing new product designs that actually increase carbon emissions.
A leading communications company used 3C Edge, PA’s 3C methodology, to analyse 10 innovative concepts for redesigning their devices, selecting three for further exploration. If implemented, the design concepts will save millions of dollars and reduce carbon emissions by several hundred tonnes annually.
4. Redesign packaging to reduce its environmental impact
Only 14 percent of plastic packaging is ever recycled. The negative impacts of this waste, from growing landfill volumes to ocean and water table pollution and wildlife harm, are plain for all to see. As a result, 74 per cent of consumers are willing to pay more for sustainable packaging.
Brands are moving beyond recycling initiatives to tackle packaging across the value chain. Working with partners, they’re eliminating unnecessary packaging and exploring new material combinations, coatings and technologies with the potential of supporting a more sustainable future The adoption of closed loop and re-use and refill solutions are expanding as consumer attitudes change and regulations tightened and fiscal penalties extended
Pulpac uses renewable pulp and cellulose to create dry-moulded fibre packaging that can substitute for single-use plastics, and Dunnet Bay Distillers has developed a closed-loop system for packaging its product Rock Rose Gin. After being used, the brand’s lightweight recyclable foil pouches can be returned via post to be refilled and used again and again.
Given the fast pace of regulatory and market change, many product manufacturers are accelerating their sustainability strategies. They can rethink their business models, transform product portfolios and redesign products and packaging to be more sustainable. By so doing, they can lead their industry and capture the economic value that will be created with the market drive to sustainability.