4 key areas that are keeping your factory from getting to net-zero.

The EU’s goal of reaching climate neutrality and net-zero greenhouse gas emissions by 2050 is putting strong pressure on manufacturers to make big reforms. The sector has historically been a major emitter of greenhouse gasses, but on the brightside, modern technology is enabling factories around the world to reduce their carbon footprint and develop products in a more sustainable manner. To capitalize on emerging solutions, manufacturing companies should look to open innovation. For manufacturing companies, open innovation can be a highway to net-zero – but in order to get organized, factory managers must consider emissions from areas of their factory that are not as obvious as smoke stacks or drain pipes. 

"For manufacturing companies, open innovation can be a highway to net-zero – but in order to get organized, factory managers must consider emissions from areas of their factory that are not as obvious as smoke stacks or drain pipes."

‍Here are four key areas that may be impacting your factory’s CO2 emissions.

1. Disconnected factories.
‍Running a disconnected factory is a one-way street to inefficient power usage, storage, and distribution. A factory that does not leverage the power of the Industrial Internet of Things (IIOT) is missing out on crucial data that could help operations managers harvest key insights about their workforce and production lines. By connecting a factory and its workers to the internet, managers can monitor their employees’ locations on the floor throughout the day. This way, factories can avoid overconsuming electricity with excess lighting and air conditioning. A connected factory uses just the right amount of both, based on learned data and predictive modeling. This idea will continue to come up in discussions about reaching net-zero: with proper data, wasted energy can become a thing of the past.

"A factory that does not leverage the power of the Industrial Internet of Things (IIOT) is missing out on crucial data that could help operations managers harvest key insights about their workforce and production lines."

A factory’s power source is an extension of its connectivity – so relying on traditional fossil fuels limits managers’ ability to connect a factory to the IIOT. In the future, we can imagine fully connected factories directing power to necessary areas that speak to each other, helping to limit overuse of energy. Many factories around the world continue to run on non-renewable fossil fuels, contributing to the warming of our planet and slowing the rate at which manufacturing reaches a net-zero state. In Europe, the Emissions Trading System allows manufacturing companies to buy and sell pollution credits based on their costs to cut carbon. This system allows for a gradual reduction of sector emissions, but companies are still looking for cleaner ways to power their operations – and it’s a great time to do so: renewable energy is increasingly cheaper than fossil fuels. 

Beyond considering what renewable energy sources a factory should use, manufacturers  need to consider how this energy will be stored. For a factory to lose its dependence on fossil fuels, energy storage must allow for the saving and subsequent distribution of stored power – in a connected and cleanly-powered factory, storage systems would harvest energy at peak supply and distribute it during times of peak demand. This technology would allow manufacturers to save energy costs and lessen the impact of their carbon footprint by only using the power that is needed and allocating it as efficiently as possible with usage data. 

"A factory’s power source is an extension of its connectivity – so relying on traditional fossil fuels limits managers’ ability to connect a factory to the IIOT."

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2. Supply chain inefficiencies.
‍Manufacturers should also consider where they source materials from. How far do supplies travel before getting to your factory? Are there any suppliers nearby that can provide comparable quality? Industrial clusters can improve supply chain efficiency by influencing different parts of the vertical chain to settle near each other. (Think of Silicon Valley and the proximity of emerging startups to established VCs.) The shared location of chemicals, cement, manufacturing, steel, and ports can make the integration process quicker and require less energy expenditure for transportation. Another benefit for manufacturers is that industrial clusters have the ability to generate localized hydrogen as a power source, further reducing carbon emissions.  Within a cluster, the circular ecosystem maintains a high level of productivity and continually attracts new entrants all while making electrification more accessible. 

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A less substantial but non-trivial source of carbon emissions in manufacturing is the overuse of trucks and cars for logistics and worker commutes. Factory workers who commute individually are collectively generating avoidable carbon emissions. But this is not the employees’ fault. In areas with low-quality public transport, it can seem that a worker has no choice but to drive to the factory or risk losing their job. For executives in manufacturing, considering how employees get to work is a crucial step in the trek towards net zero. We can imagine that the best factories of 2050 will feature a robust infrastructure for employee carpooling (as seen in some large factories today like BASF), whether that comes through subsidized public transport or privately-owned shuttles powered by renewable energy. Furthermore, industrial clusters can also reduce the overuse of cars if housing is built for factory workers and their families. 

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3. Production processes.
‍Another driver of carbon emissions comes at the most basic level of manufacturing. For thousands of years, humans have been turning raw materials into usable products through subtractive manufacturing – taking a resource and chopping it down into what’s needed. Today, as manufacturers try to contain their carbon footprint, additive manufacturing (otherwise known as 3-D printing) is quickly transforming the production process – instead of chopping down resources, we can now build products from the ground up, particle by particle, layer by layer, making sure that we only use what is needed. Additive manufacturing is well on its way to mainstream status in manufacturing. From medical devices to drones all the way to consumer ceramics and even metals, additive manufacturing is making a renewable splash. You might be noticing a trend here – with new technologies and data, consumers and manufacturers no longer have to tolerate waste.  

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4. Digital twins.
‍Metaverse technologies are all the rage these days, but their applications for industry have thus far been underdiscussed. Consider this problem: Today, if managers want to make a change to a process, they have to waste valuable resources – time, money, and raw materials – testing this new approach; they may even have to halt production. Technology can help us get rid of this waste. By 2050, it’s possible every major factory in the world will have a duplicated version of itself in the metaverse – also called a “digital twin.” Digital twin technology can save valuable time and reduce excess waste by allowing operations managers to simulate different approaches to manufacturing and see which is the most efficient, preserving crucial resources in the process. Factory workers are also being trained with XR technology, which can create a more efficient and less mistake-prone (wasteful) workforce.

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"By 2050, it’s possible every major factory in the world will have a duplicated version of itself in the metaverse – also called a “digital twin.”

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Key takeaways.
‍For the manufacturing sector to reach net-zero carbon emissions, huge collective action must be taken by all relevant stakeholders. Companies have a fiduciary duty to decarbonize quickly or risk damaging their business prospects due to overwhelming long-run costs, including insurance loss, or inability to take out financial loans. In a not so distant future, insurance companies will no longer insure non-green companies, and banks may not do business with them either.

Consumers can and will be putting pressure on companies to be kinder to the environment, and will increasingly spend more money on sustainable goods. Governments have their own roles to play in regulating carbon emissions and steering their economies towards clean energy. To expedite the net-zero transitions, managers and executives should look to open innovation: cooperation between companies to reach common goals and grow together. Collaboration is the only way out of the climate crisis. Managers and executives interested in learning more about decarbonizing their factories should look to their peers in German industry.