The manufacturing sector is no stranger to dealing with difficultly. With challenges like rising prices, issues with supply chains and skills shortages all cause for concern, it can push investment in sustainability down the priority list. Dave Atkinson, Head of Manufacturing at Lloyds Bank, discusses how manufacturers can keep up their momentum in reaching Net Zero while tackling challenges and unlocking benefits for the bottom line.
As one of the UK’s most innovative and forward-thinking sectors, it’s natural that manufacturers are ambitious in their sustainability objectives. Through our survey of SME manufacturers in the UK, the Net Zero Monitor, we found that almost all (89%) say sustainability is important to them, with four in five (80%) emphasising that it has become more important in the past year.
Reducing emissions in the manufacturing sector forms a key part of the UK’s wider efforts to achieve Net Zero by 2050. According to Make UK’s latest Manufacturing Sector Net Zero Roadmap, manufacturing is the UK’s third most emitting sector and is responsible for a sixth of the country’s total emissions. This makes the efforts of manufacturers in reducing emissions, even on an individual level, hugely important for halting climate change.
However, manufacturers don’t just have a role to play in reducing their own emissions. They are also key enablers in helping other businesses and industries work towards net zero. Manufacturers are right at the heart of sustainable innovations, whether it be product improvements to make them more energy efficient for the end user, or creating entirely new carbon neutral technologies. They are also at the heart of supply chains, with manufacturers’ emissions having a direct impact on the scope 3 emissions of the businesses they work with.
A fantastic example of a manufacturer which straddles these dual roles within the sector, reducing its own emissions while also enabling other businesses to do the same, is Hillbrush. The family-owned business, based in Warminster, is the UK’s largest manufacturer of food safe brushes and hygienic cleaning products.
Over the past ten years, Hillbrush has been through a period of renewed focus on, and investment in, sustainability – ensuring it’s bringing the latest in environmentally conscious products to its customers and operating with the highest sustainability credentials. While the business has faced challenges on its journey, its efforts have opened up new business opportunities, while reducing its own operating costs. Hillbrush’s success showcases the value of continued commitment to environmental goals, no matter the hurdles.
The cost benefit equation
Reducing emissions isn’t easy and the process doesn’t come without its challenges; many of which have intensified recently.
Almost half of manufacturers believe high costs against a backdrop of insufficient budgets present a significant challenge to net zero, citing recent headwinds such as rising inflation (75%) and interest rates (54%) as having had a negative impact on their sustainability goals.
However, investments in decarbonising operations can help futureproof manufacturers, paying dividends down the line. When Hillbrush needed to move to a new premises, it chose to construct one with sustainability at its core. The building is equipped with solar panels, energy efficient lighting, water pumps and lighting with sensors, which all drive down its emissions.
What’s more, investments in sustainability measures can even help businesses overcome the rising cost they believe is representing the largest barrier to decarbonisation – energy prices, which was named by manufacturers as the single largest factor (79%) having a negative impact on their net zero efforts.
ANT Industries, an aerospace parts manufacturer based in Warwickshire, is one such business which has invested in measures to reduce its energy costs as well as carbon emissions. It has installed 13,000 sq ft of solar panels on the roof of its factory, where it manufactures and assembles complex components for the aerospace and power generation industries. The new system has significantly cut ANT Industries’ energy bills by providing almost a third of its energy requirement, while also reducing its CO2 emissions by 23.2 tonnes per year. Across the industry, more than a third (35%) of businesses are already sourcing renewable energy in some form to reduce their costs and cut emissions.
Manufacturers also aren’t required to bear these costs alone. Utilising funding can help protect cashflow over the payback period for an investment. A quarter (25%) of SME manufacturers working towards net zero are using government grants to support them, while a similar percentage are taking advantage of green finance products from banks and other financial institutions (23%). In the case of ANT Industries, its solar panels were funded via Lloyds Bank’s Clean Growth Financing Initiative, which provides customers with access to discounted lending for green purposes, and a grant from the government’s Coventry and Warwickshire Green Business Programme.
Another key issue facing manufacturers working towards net zero is complexity – both in measuring their own environmental performance or impact (38% named as a challenge), and in reducing emissions beyond their own processes due to the complexity of manufacturing supply chains (32%).
It’s no secret that manufacturers have faced supply chain disruption over the past few years, with 63% saying it has negatively impacted their journey to net zero. Unexpected global events such as the pandemic and the Russia-Ukraine War, as well as Brexit regulations, have forced many manufacturers to switch suppliers at short notice, with sustainability and clarity on suppliers’ emissions sometimes having to take a backseat to availability or cost.
When it comes to measuring scope 3 emissions, or those of a business’ value chain, Hillbrush’s Chairman Philip Coward thinks this is still one of their main challenges, and they are continuing to look at how this can be best accomplished. However, Philip also believes the complexity of his business’ supply chain is also one of its greatest opportunities. It puts Hillbrush in a unique position to enable education across the industry, working with customers and suppliers to engage them, as well as sharing best practice and key learnings. Across the industry, two thirds of manufacturers are engaging directly with others on how they can best reduce emissions, showing that collaboration truly is the way forward.
Another manufacturer, Rebellion Brewery in Marlow, is taking an alternative approach to reducing its scope 3 emissions with a local-based sales model. Manufacturers usually struggle to control the emissions produced by distributing their products once they leave their own premises. Rebellion Beer is changing this, with 98% of its sales being made within a thirty-mile radius. This used to be 70 miles, but as the business grew locally it shrank the area it delivered to, rather than increasing capacity.
Previously, the business also outsourced its bottling to a company in Kent, meaning its beer was making a 160-mile round trip. With Lloyds Bank’s support, Rebellion Brewery invested in an on-site bottling line, saving 16,000 road miles a year. With its proactive approach, Rebellion Brewery is taking control of its value chain emissions to reduce its environmental impact.
While many of the UK’s manufacturers have engaged with their responsibilities and are taking proactive steps towards achieving carbon neutrality, almost a third (31%) are still operating without clear sustainability targets. making it hard to understand where they’re at and where they need to go.
Hillbrush has tackled this problem by working with an environmental consultant, Planet Mark, to measure and reduce its emissions in areas such as the product lifecycle, supply chains and products and packaging. Additionally, the business has invested in recruiting a new product designer who is looking at how the impact of the products across the range can be minimised. For example, some product’s redesign can provide a 20-30% saving on the amount of plastic used. This trend can be seen across the industry, with almost half (46%) of manufacturers employing people to evaluate sustainability across operations.
Sustainability is set to become somewhat of a licence to operate in many sectors, with customers shying away from businesses which fail to demonstrate they are taking appropriate action. Two in five (41%) manufacturers feel that other businesses they work with are pressuring them to reduce greenhouse gas emissions. Manufacturers such as ANT Industries also report simply feeling it is the right thing to do, with one in five saying that protecting the natural environment for future generations is a key benefit of achieving ambitious net zero goals.
However, reputational risk and altruistic intentions aren’t the only reasons that manufacturers are looking to drive change. Net zero also comes with significant opportunity for growth too.
Aside from the clear cost benefits to many sustainability measures, supporting other sectors to reach their targets opens up new business opportunities and revenue streams.
Jasun Envirocare is one such manufacturer making the most of green opportunity. The business manufactures a range of bespoke and standardised air filters and air filtration systems, which can reduce business’ energy costs by up to 80%. As sustainability becomes a more pressing concern for its customers in the commercial, retail and office space, Jasun Envirocare is seeing an increase in demand for its products, which it has measured at around 15.7% since the beginning of the pandemic.
Likewise, car manufacturer Birchills Automotive found that its excess material could be transformed into impressive, handcrafted sculptures. The new project, Birchills Sculptures & Metal Restorations, repurposes unused metal from its manufacturing process which otherwise would’ve gone to waste into art – some of which have already commanded six-figure sums in markets the business had never previously been involved in.
The road ahead
Despite the challenges, the UK’s manufacturers are tenacious in their efforts to reach net zero. A small percentage (7%) have already achieved carbon neutrality, while almost two thirds (62%) have measured their greenhouse gas emissions and either have a plan in place or are working on one to them get there.
There is a clear understanding that sustainability isn’t just a tick box exercise anymore, but a key business advantage that can open up new opportunities for manufacturers, not only to reduce their operational expenses and cut waste, but to develop sustainable products that support customers to do the same. Manufacturers are key supply chain enablers to many of their customers as well as suppliers, and for those who are willing to take on the challenge, opportunity is waiting.
Five tips for maintaining momentum on Net Zero
Even when the benefits of investing in sustainability are clear, it’s easy to get caught up on the challenges that are standing between your business and Net Zero. Here are four tips to help you stay on track.
- Share learnings
The journey to Net Zero isn’t one that businesses are on alone. Manufacturers need to work together as sector, sharing knowledge, best practice and learnings. By listening to other businesses about the strategies that worked for them, as well as things that haven’t gone so well, we can all get there faster.This doesn’t need to be restricted to partners just within the manufacturing sector. All businesses across the UK economy are on this journey, including your suppliers and customers, and many learnings can be applied by all different types and sizes of business.
- Measure and monitor
Measuring can feel like a big job at first, but it quickly pays off as it allows you to demonstrate return on investment for sustainable changes, as well as show customers how you’re shifting the dial. There’s no need to tackle a full assessment of all of your business’ scope 1, 2 and 3 emissions at first. Start small, maybe by looking at how much fuel is used by your business’ fleet, and what this means in terms of emissions. There are lots of tools available to help you start measuring, such as the Lloyds Bank Green Buildings Tool, which helps assess the impact of your buildings on the environment.
- Create sustainable skills
You might not have all the answers, so surround yourself with those who do. Look to bring in talent with specialist skills in sustainability, or work to upskill your existing employees so they can help support your business in working towards net zero. One route is via the Advanced Manufacturing Training Centre (AMTC), which offer a ‘step on, step off’ pathway, training and upskilling staff at different points during their career. This helps colleagues keep up to date with the latest innovations which can help drive sustainability and efficiencies in manufacturing.
- Utilise financial support
Cost can often be a major concern for manufacturers which want to invest in sustainability. However, there’s a variety of support from government, industry bodies and banks available, often as a grant or at preferential rates. Do your research and find out what’s out there.
- Make use of available expertise
As the ninth largest manufacturing nation in the world, the UK has a wealth of institutions which can support manufacturers with expert knowledge and insight. One good example is the Manufacturing Technology Centre (MTC), which offers manufacturers nationwide a complimentary sustainability line walk to explore how their business could make sustainability improvements to its factory and processes, as well as identifying energy and cost saving opportunities.
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About the author
Dave Atkinson is Head of Manufacturing at Lloyds Bank, a role he has held for more than eight years. He is also regional director for the Midlands at Lloyds Bank, working with SMEs and Mid-corporates in the UK’s manufacturing heartlands.