Race to net zero – Swiss manufacturers need to move to the next level
Sustainability is now a top strategic priority across most industries including manufacturing. In the race to reduce emissions, manufacturers are dealing with increasingly volatile energy prices and growing pressure from a range of stakeholders. Various governments and NGOs, as well as activists and general societal views are committed to reducing emissions with a net zero target. In response to this, manufacturing companies are rapidly integrating sustainability into their supply chains to improve their sustainability performance reporting to comply with regulations.
Manufacturers need to find the most effective way to build on their role in the value chain and work together with peers and upstream/downstream partners to learn from existing best practices. Companies that want to successfully shift to more sustainable products and services must evaluate their role in the value chain. This could require shifts in their offering portfolio to support the path to net zero and build longer term relationships to serve customers who are willing to ‘pay for green’.
Embracing sustainability as a value proposition from an energy efficiency and circularity perspective is an opportunity, e.g., selling more energy efficient products, developing new services to focus on better usage and offering buy-back schemes to enhance circularity.
Many Swiss manufacturers are starting to embrace sustainability
Sustainability is part of the agenda of most manufacturers in Switzerland. Companies want to comply with regulations that are not yet specific to Switzerland but may become so in the future. Doing so in a systematic and circular way also helps to create a positive brand image in the market.
Josselain Prost, an experienced CRM and Digital Marketing Director at Deloitte, says,
"As with GDPR everything starts with regulations that also push investors to look more closely. Fines for non-compliance with GDPR are expensive and manufacturers were a bit late in complying compared to other industries. The risk for ESG is increasing but not the same yet. Manufacturers deliver products and services around the world, so they will have to comply with international laws and regulations."
While manufacturers in Switzerland may have been slightly delayed in embracing sustainability compared to consumer and retail, they are now making steady progress. Companies that first started with reporting capabilities are now moving to planning road maps about possible solutions, processes that need to be analysed and how to get the data to make more informed decisions.
For example, they are trying to figure out how they can get increased visibility into emissions caused by their suppliers. This can then provide a basis on which to reduce those emissions by changing suppliers or materials or they could change the way in which parts are distributed. According to Peter Vickers, Deloitte Partner and industry lead for Energy, Resources & Industrials,
"Transparency is critical when a manufacturer looks at its supply base. Manufacturers need a lot more visibility into how parts/components that they buy are produced and what their carbon footprint is."
The maturity of sustainability in the manufacturing market is still quite low
Manufacturers need to not only understand the regulatory requirements, i.e., what dimensions do they need to report on, ways to finance their net zero journey and what they can do from a supply chain perspective to reduce their carbon emissions. Peter Vickers says,
"The biggest need that we see for our clients is to get to grips with the data they need to handle for measurement and reporting. Beyond their own internal data, access to supplier data is critical. This requires the right technology especially when trying to access primary data directly."
The benefits of pursuing a more sustainable route also need to be better articulated – this includes what manufacturers should do, where they should play and how they can improve what they make. From a cost perspective – with all the inflation on raw materials, manufacturers also need to find ways to buy more locally.
New products that are more recyclable are also more expensive to buy. Customers that operate in highly competitive markets need to be convinced to buy these new products that are more sustainable. The end-to-end relationship between the new products and the new technology needs to be clear so that for example – a project builder understands why it’s important to use more sustainable technology in construction projects.
Showing solid sustainability credentials together with strong supplier and customer relationships can result in a greater willingness to ‘pay for green’. Currently the sustainability trend in the manufacturing industry in Switzerland is still driven more by the regulatory environment rather than consumer demand for more green products which is a in the consumer and retail industry.
What to do?
- Expand reporting capabilities: Supporting regulatory reporting is a priority. This is followed by visibility into the supply base across many different assets. Manufacturers need to make the right technology choices, implement tools that can provide a supply horizon and illuminate different elements of suppliers.
- Use data for decision-making: Manufacturers are increasingly wanting to do a lifecycle assessment to understand the carbon emissions related to what they produce over its entire product life. To do this effectively they need to be able to collate data in terms of the raw materials, know the components that go into production and understand the carbon emissions related to the production itself. They also need to understand the carbon footprint of then actually distributing those products. Data therefore needs to be collected across the entire lifecycle.
- Focus on circularity, not just decarbonization: Many manufacturers are considering building a product passport. This digital product passport is not only about decarbonization but also about circularity. Customers can make choices about what product to buy based on the product passport, i.e., the associated carbon footprint of that product as well as the lifecycle of that product – where you refurbish it, repurpose, or repair it or extend its life. This whole life cycle view addresses the question of circularity.
