Smart ways to enable sustainable manufacturing

Manufacturers are facing a dilemma – driven by the desire to invest in (and gain the benefits of) sustainability, combined with a reluctance to commit capital against a backdrop of volatile markets and economic uncertainty. Research from SFS finds smart finance techniques are needed to help manufacturing companies achieve sustainability goals.

Manufacturers are currently facing a number of challenges on their journey invest in sustainability initiatives. Both geopolitical uncertainty and volatile markets are among the key barriers. Regardless, there are well-known moral and commercial benefits to sustainability that manufacturing businesses want to access. Increasingly specialist finance solutions are helping them to do this. These smart financing techniques enable investment while letting companies retain business agility.

 

To better understand the challenges and the precise ways that technology and finance can respond to them Siemens Financial Services (SFS) has released new Insight Paper entitled Financing Sustainability

Sustainability in challenging times

Major economies across the globe have made substantial commitments to improving environmental sustainability in the face of climate change. In Europe, for example, EU law sets an intermediate target of reducing greenhouse gases (GHG) by at least 55% by 2030 compared to 1990 levels.

 

At the same time, global events (and their inevitable aftermath) are presenting new challenges to achieving these commitments, driven by geopolitical conflict, fossil fuel supply, supply chain disruptions and inflationary pressures.

 

Despite these challenges, it is unlikely that manufacturers will be diverted from their sustainability goals. Because – as many analysts have argued strongly – sustainable manufacturing not only results in moral and climate change benefits but also provide commercial advantages. 

Sustainable manufacturing in practice

The report outlines a variety of sustainability improvements that manufacturers can put in place to deliver cost savings, greater productivity, competitive brand advantage and increased security of supply, as well as making a contribution to carbon elimination, waste reduction and other sustainable goals. These include:

 

  1. Sustainability by design
  2. Energy efficiency
  3. Water conservation
  4. Raw material reduction
  5. Recycling and repurposing
  6. Retrofit and refurbishment

 

Many of these examples, but especially the last two, point to the growing importance of the circular economy in manufacturing equipment. Instead of replaced, technology can be retrofitted, refurbished and re-used and re-marketed.

Additive Manufacturing is frequently cited as one of the technologies driving sustainability. Smart finance will play a crucial role to accelerate the transformation towards more sustainable production at scale.
Karsten Heuser, vice president Additive Manufacturing, Siemens Digital Industries

Smart finance for sustainable manufacturing

Growing numbers of manufacturers want to access the commercial benefits of sustainable alternatives as soon as possible, to gain commercial and competitive advantage, and to meet socially responsible standards. Yet ambitious sustainability targets have to be affordable in practice, and there is clear consensus that private sector capital will be needed to enable wholesale sustainability transformation.

 

The research identifies the four main ways that smart, specialist finance contributes to sustainability. These are:

  1. Enabling investment in sustainable technology: aligning flexible financing arrangements with the expected rate of benefit gained through those investments
  2. Improved cash flow management: through tailored financing packages to suit a manufacturer’s cash flow needs
  3. Making the transition financially viable: ‘smoothing’ arrangements to manage onerous transitions from one production environment to another
  4. Helping sustainable technology vendors help customers: integrating smart finance as part of overall proposition facilitating customer investment in the best possible, sustainable solutions.

Focus on energy efficiency – smart finance in practice

Taking just one aspect of sustainable manufacturing – energy efficiency – the paper estimates the contribution that smart self-financing structures can make (if fully deployed) to sustainability targets between now and the initial climate target date (in most countries) of 2030.

 

The smart finance technique underlying these estimates is known as Energy Efficiency-as-a-Service.  At its core, the Energy Efficiency as a Service concept delivers budget neutral, or even positive financing for energy efficiency transformation.

In the food and beverage sector, new financing business models will prove critical, offering flexibility, removing the need to commit own capital, and offering various forms of pay-for-outcome arrangement.
Kai Schneiderwind, senior vice president Food & Beverage, Siemens Digital Industries

Investments in sustainability pay off

Investments in sustainable manufacturing bring substantial productivity, cost and competitive advantages. Smart, flexible, sector-specific financing techniques are bridging the gap between desire to invest in sustainable technologies and hesitancy to commit capital in uncertain markets.

 

Smart finance is a key enabler for manufacturers to invest in a more sustainable future. It enables the investment in sustainable technologies that reduce waste, minimise consumption of resources and energy, improve productivity and use less raw materials. It also enables the circular economy in manufacturing equipment, allowing that technology to be retrofitted, refurbished and re-used and re-marketed.

 

To find out more about smart finance for sustainable manufacturing, download your own copy of Financing Sustainability.

 

October 2022