Conventional manufacturing follows a linear consumption model, where finite energy resources are used during production and products are often discarded. However, owing to increasing concerns about resource scarcity and rising costs, businesses are shifting to green manufacturing. This approach helps conserve resources and reduce costs while addressing consumer backlash against unsustainable practices. Additionally, green manufacturing provides some independence from volatile supply chains and geopolitical events and mitigates the unpredictable risk associated with weather.
Limitations of traditional manufacturing processes
Traditional manufacturing prioritizes profitability and production efficiency. However, supply chain disruptions, escalating energy costs and resource depletion are prompting a shift to green manufacturing. To understand why traditional methods are no longer workable, consider two critical aspects: energy consumption and pollution.
First, the substantial energy needed to run factories, warehouses and supply chains is essential for modern society. Yet, current energy sources are finite. Second, pollution was earlier overlooked in traditional manufacturing, but public awareness has reversed the situation. While ‘green manufacturing’ is a buzzword, embracing sustainable practices is crucial for a brighter industry future.
Green manufacturing provides a compelling solution to this issue. Addressing detrimental pollution and unsustainable energy usage in the manufacturing sector does not hinder the production of essential and luxury goods. As a result, the industry can implement stable processes with a favorable outlook.
Countries’ emphasis on green manufacturing development
The European Union (EU) and other countries have initiated national-level projects or planned to develop intelligent and advanced manufacturing, including green manufacturing, to continue leadership in the manufacturing industry. A few of the significant initiatives taken by the national governments to encourage green manufacturing are:
United States (US)
- The Biden-Harris Administration has announced grants of approximately $160 million to support the clean manufacturing of steel and other construction materials in the US, as well as expand the penetration of climate-friendly resources These grants will likely help businesses produce low-carbon materials and reduce climate pollution associated with manufacturing. The country leads in the production of clean construction materials.
- The US government’s Federal Buy Clean Initiative uses the government’s purchasing power to catalyze demand for clean construction materials in federal buildings, highways and infrastructure projects.
European Union (EU)
- The EU has set up policies and regulations to improve the environmental performance of manufacturers, including those related to green supply chain management.
Japan
- Japan is actively promoting green manufacturing practices through various initiatives, including energy-efficiency programs and waste-reduction strategies.
China
- The Chinese government has published a comprehensive policy document to help in the transformation of its massive manufacturing sector, emphasizing on accelerating the green and low-carbon transition of traditional industries.
Major task ahead for manufacturers
According to a study by Boston Consulting Group, to align with the goals of the Paris Agreement, i.e. to meet the 1.5°C target for limiting the global temperature increase, emissions from production and logistics must decrease by approximately 45% by 2030. This reduction is crucial for achieving net-zero emissions. Manufacturers have a pivotal role to play in this effort by switching to cleaner operations and transitioning to sustainable methods of production.
Various forces are driving change. Governments, for instance, are becoming more innovative in advocating for substantial shifts. Meanwhile, consumers are raising their expectations from businesses. According to an IBM survey in the year 2020, of 18,980 consumers from twenty-eight countries, 78% preferred environment-friendly products, while 72% preferred ‘clean’ products.
Around 75% of investors in PwC’s Global Investor Survey 2021 believed that companies should address environmental, social, and governance issues even if they affect short-term profit. Additionally, 49% said they would divest from companies that failed to act.
Innovative sustainable manufacturing practices pose greater challenges in certain industries compared to others. However, these sectors often offer the greatest potential for positive impact. For example, the carbon-intensive steel and cement industries are actively exploring hydrogen-based processes to reduce their environmental footprint. The transportation and aviation industries face similar opportunities for transformation. In response to our changing climate, manufacturers must adjust their operations in response to the increasingly unpredictable weather patterns. Adapting to climate change is essential. This is a long-term investment in a future that is more sustainable.
Gunung Capital’s journey to decarbonize industries has strengthened our mission to accelerate the shift to a low-carbon economy by leveraging sources and strategies like value creation, financial institution development, and forming strategic partnerships and collaborations with leading businesses in renewable energy solutions. This is a long-term investment in a future that is more sustainable.
