Manufacturing & Supply Chain

Study finds manufacturers prioritising sustainability have seen major profitability increases

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Study finds manufacturers prioritising sustainability have seen major profitability increases

Study finds manufacturers prioritising sustainability have seen major profitability increases
June 09
09:49 2020
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A study from industry organisation Make UK and energy firm E.ON has found that manufacturers who have prioritised sustainability measures have seen a 40% increase in profit margins, and 30% increased competitiveness levels.

According to the report, titled Towards a net-zero carbon UK manufacturing sector, a total of 90% of businesses in the sector, including those operating within the confectionery, bakery and snacks segments, are aware of the wider 2050 net-zero target for emissions, while almost half see this as a business opportunity which they are grasping as the roadmap to sustainable growth once the world opens up again.

Before COVID-19 and the global impacts hit, 30% said they have made real inroads into energy efficiency investments in the last 12 months, with the majority of the changes in relation to building improvement, equipment and manufacturing processes. Improving the energy efficiency of buildings was the second most impactful of technical measure for 11% of companies and was seen as a relatively simple step to take in the net-zero journey. Other simple measures which did not require major investments included buying energy from renewable sources, switching to LED lighting and control or replacing outdated equipment such as fans and pump systems.

As part of the study, businesses’ feedback revealed that one of the biggest barriers to moving further forward with major energy efficiencies is the cost of technology, further hampered by the fact that accessing available Government funding and grants is often difficult. Companies also said that better fiscal incentives to enable investments in energy saving technology would provide a further boost to activity in this area.

The study, commissioned shortly before government quarantine measures took hold, looked in detail at specific actions manufacturers have taken to respond to the net-zero target, with simpler measures some of the most popular across the sector. In the last 12 months, 40% of respondents have renegotiated their energy contracts and 65% were able to get a better deal.

Businesses have invested heavily to reduce energy consumption in manufacturing processes (54%) with a further 20% looking at this going forward, while others opted to generate part or all of their energy onsite (17%). Investment in more efficient equipment was seen as a quick fix with 71% of companies taking this action. Making this change in equipment was seen as the most impactful measure overall as almost a third (27%) of companies said the installation of energy saving technology had boosted their business.

The majority of manufacturers (75%) understood the benefits of digitisation and over half (57%) have already installed smart meters while 78% collect their energy usage data. A further 13% plan to do so. Monitoring power with Industrial Internet of Things (IIoT) sensors analyses each phase of the production process, indicates actual energy performance highlights consumption pain while taking actions to optimise costs, energy consumption and actual CO2 footprint. Businesses are now recognising this as one of the most important drivers to improvement and are putting in resource accordingly.

Companies told us they are also working closely with staff with two thirds (65%) of manufacturers already having introduced behavioural change activities to convince their employees to improve energy efficiency. Interestingly, shop floor level engagement is on the increase with half of shop-floor staff across companies of all sizes actively involved in energy management strategies. Office staff are the least bought in (43%) indicating a lack of awareness of the basic simple habit changes that could significantly reduce energy usage.

The main driver for implementing energy efficiency measures remains cost reduction, but improving company ethos is now seen as important as part of overall business strategy. Some 80% of board directors and senior management are engaged in energy efficiency, up from 50% in our sustainability survey last year.

Stephen Phipson, CEO Make UK, the manufacturers’ organisation, said: “These results show that manufacturers are committed to playing their part in the transition to a net-zero carbon economy. As businesses recover and learn from the COVID-19 crisis, they have the opportunity to ensure improved sustainability is factored into their resilience plans.

“As well as taking steps to reduce energy use and CO2 emissions, they are developing the innovative new products and services we all need to decarbonise. With the right policy and regulatory environment manufacturers could move even more quickly to unlock the benefits of green growth, and we look forward to working in partnership with Government, regulators and the energy industry to make that happen as part of the future new norm.”

Michael Lewis, CEO, E.ON UK added: “While the response to COVID-19 rightly remains the priority for most manufacturers in the short term, the UK’s net-zero target remains the key challenge for our future. It is heartening to see from this research that awareness of net-zero is high and that manufacturers are investing in energy efficiency and seeing the commercial benefits.

“Both Government and the energy industry must work to remove barriers to further investment as reported by manufacturers, notably cashflow and profit margin impacts, as well as payback periods on investments. The COVID-19 crisis has demonstrated that collaboration and cooperation across government, industry and society can transform how our economy operates and we must now work together to deliver a green recovery which continues the transition to a low-carbon economy but also makes economic sense.”

Minister for Energy and Clean Growth, Kwasi Kwarteng, said: ““Businesses putting sustainability at the heart of their operations are boosting profitability, productivity and helping to protect the environment. As we recover from the impact of Covid-19, we must lay the foundations for sustainable growth and a future net-zero economy.”


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