Many organisations are locked into a mind-set that believes improving efficiency performance requires money and big capital investments. Professor Steve Evans explains why sustainability shouldn’t have to cost more.
There are two roadblocks preventing us from rapidly moving toward a fully sustainable industrial system – first, a belief that sustainability costs money, and second, a presumption of efficiency.
Many people associate increasing sustainability with expense, but in fact, environmental and economic efficiencies are often aligned. When we reduce waste, increase energy efficiency and improve resource productivity, we actually save money, raise profitability and enhance competitiveness.
Despite this, many organisations are locked into a mind-set that believes improving efficiency performance requires money and big capital investments. Our research has shown there are many efficiencies to be found without spending any money.
The second roadblock – a presumption – is even harder to alter. The presumption is that because of high energy costs, factories wouldn’t use more energy than is absolutely necessary. It’s a presumption that doesn’t stand up to the data. We can point to reams of evidence that say this is an incorrect presumption.
We have undertaken research looking at what sort of efficiency gains might be possible in the UK – without spending any money.
Our conservative estimates of the benefits the UK could gain through increasing energy- and resource-efficiency amount to £10bn per annum in additional profit for manufacturers, 300,000 new jobs and a 4.5% reduction in our total annual greenhouse gas emissions. That’s a 12% profit increase for UK manufacturers without spending any money.
This potential profit boost, delivered from simply increasing resource efficiencies, was calculated by analysing what would happen if the UK’s average companies increased their efficiency halfway towards the efficiencies of the UK’s most efficient companies. We then extended this out to the whole sector.
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This is quite a conservative estimate – moving halfway to the best should be realistically achievable. While there are many small techniques that can be implemented to change performance, a trigger to change is needed – and this often comes about after being made aware of the variation in performance.
You need to be inefficient to become efficient
There are plenty of technologies, techniques and tools available to help you save resources like water. But why would you want to save water?
We have found the critical component to being efficient is to realise that you are inefficient. That’s a really big part of the work that we do, and at times it sounds trivial, but it’s immensely important.
There is no point directing people to information and websites that can tell them how to save water if they don’t know whether they have actually been wasting water. Research has shown that these techniques are not going to be used if people don’t know whether they have a problem in the first place.
Looking at the whole system
The greatest opportunity to increase industrial sustainability comes about when we consider the industrial system as a whole. The optimisation of any one part is ultimately constrained by the other parts.
Our research at the Institute for Manufacturing (IfM) focuses on three aspects to accelerate the transition of manufacturing towards a sustainable industrial system:
- Resource efficiency (aka: eco-efficiency)
- Manufacturing systems transformation
- Sustainable value exchange (aka: sustainable business models)
One of the most interesting things that we have found is the significant variation in the efficiency performance between two factories of the same company, or even variations in the performance between shifts at the same factory.
One extreme example that we found in a company was a 500% difference in the energy it takes to make the same chocolate bar between two factories using the same equipment. But this is actually not that unusual.
We have worked with manufacturers that were using 40% more energy on Monday than Thursday in the same factory, or using 80% more water in factory number one than factory number two.
What we’ve found is that once people can see that there’s a high variation in performance, they then use their standard ‘good old production engineering techniques’ to resolve it.
For example, Toyota’s UK factory, which was already a world-leading efficient factory, reduced the energy it takes to make one car by 77%. As a result, Toyota can make four cars for the same amount of energy that it previously used to make one.
Toyota didn’t buy any expensive new hardware to make that level of improvement. If other organisations can also make products with half the energy that it currently takes them today, then we are going to also halve the cost of energy consumed and significantly reduce pollution.
About 75% of the energy generated in China’s power stations, which is responsible for a large part of the nation’s air pollution, goes into factories. If you halve the energy consumed, then you can close every third power station in China. And if you close every third power station in China, you can breathe the air. That’s how powerful efficiency is.
Low-tech solutions to increase efficiencies
While increasing sustainability should not cost big pots of money, it does require imagination and skill – the IfM’s Centre for Industrial Sustainability concentrates on those elements. We are focused on what low-tech solutions can offer, not on expensive high-tech solutions. But low-tech doesn’t mean easy.
It’s much easier for a CEO to sign a cheque to buy a wind turbine than it is to get the heads of three departments together to figure out a way to save energy. This is because most energy savings aren’t going to be found in one single place.
You have to get marketing talking to design, you have to get design talking to manufacturing, and you have to get facilities management talking to production schedulers. These are people who don’t normally gather together to save energy or to save water.
These people are often working in different parts of an organisation with the only natural point of convergence being the CEO. It’s a big challenge to ask a company to do the sorts of changes that we’re advocating because the CEO has to become directly involved. It’s much easier to buy that wind turbine!
Moving from linear to cyclical manufacturing systems
The biggest challenge and where the biggest wins will come from is around resource productivity – being efficient with raw materials, minimising waste and looking at ways to capture value from waste.
The best way to do this is to move away from the traditional linear manufacturing system of ‘take-make-waste’ to a cyclical or ‘closed-loop’ system where waste is used to make new products.
We have quite good local government systems to collect household waste materials to be recycled. However, when we say recycled, we really mean downcycling. Materials collected are turned into lower grade products, such as a lower grade of steel or road building materials. In a better world we would be looking to ‘upcycle’ waste materials to manufacture more valuable products.
Sustainable business models
While increasing efficiency makes up about one-third of the industrial sustainability research that we undertake, about half of our work is focused on sustainable value exchange – also known as sustainable business models.
There are some interesting opportunities for transforming the way that value is exchanged between manufacturers and customers that can lead to increased sustainability. For example, the traditional automotive manufacturing business model is for customers to buy the car and also pay for the fuel that the car uses. As a result, there is no direct incentive for automotive manufacturers to build the most fuel-efficient car possible.
An alternative business model involving the car manufacturer retaining ownership of the car and leasing out the car with fuel included in the monthly charge provides a strong incentive for the manufacturer to make a more fuel-efficient car. As a result of this alternative value exchange, the car manufacturer would become more profitable the less fuel their customer uses.
Our researchers are collaborating with various companies who are experimenting with their business model, and I believe we will see most companies change their business models considerably over the next 20 – 30 years so that they improve their value exchange opportunities and deliver more value economically, environmentally and socially.
Professor Steve Evans is director of the IfM’s Centre for Industrial Sustainability. His research focuses on how industry can implement environmental and social sustainability approaches into its design and manufacturing practices, with a duel emphasis on urgent and practical change now and system-level change for a sustainable future.
He spent 12 years working in industry, including, engineering systems manager at Martin-Baker Engineering, the world-leading manufacturer of ejection seats; specialist adviser to the House of Lords on Waste Reduction; chair of the Manufacturing Policy Panel of the Institution of Engineering and Technology; co-chair of the Manufacturing Commission; and a co-founder of three clean-tech start-ups.
Contact Professor Evans: [email protected]