A financially sustainable approach to carbon neutrality

Article｜2023-11-13

6 minute read

Approaching carbon neutrality in the right way can improve processes, generate revenue and enhance brand image, says Johan Carstens, Head of Smart Factory Manufacturing at Fujitsu.

To reach net-zero emissions, McKinsey forecasts that capital spending needs to increase by 3.5 trillion annually over the next three decades.(*1) However, rather than only viewing carbon neutrality as an urgent expense from an ethical and regulatory compliance standpoint, with the right mindset companies can use Sustainability Transformation to gain competitive advantage.(*2)

“Firstly, companies need to ask themselves why they want to become carbon neutral. If they genuinely want to be more responsible, that's a good start. And then they can start to investigate their facilities, processes, suppliers, and their suppliers' suppliers.”

This three-step framework can be used in any sector to spot opportunities for reducing carbon footprints and boosting revenues on the journey towards carbon neutrality.

Step 1: Diagnose baseline carbon emissions performance using data visibility

Reducing carbon footprint requires an in-depth awareness of your company’s operations and processes.

Data-tracking exercises that connect different metrics, sources and business components in an accessible format (a dashboard, for example) are vital for driving interventions to reduce emissions in operations. Leaders can also forecast changes to emissions levels based on anticipated growth in sales or changes to the product line. This performance visibility allows leaders to detect and respond to situations with agility and proactively improve their business models.

My experience has taught me that about 90% of carbon emissions come from supply chains. So, a good place to start is addressing the carbon tracking through your supply chains, as well as those of your suppliers. Leaders need to first understand their suppliers’ commitments to emissions reduction, before baselining performance and co-identifying improvement opportunities.

One of our customers, a manufacturer of pods for coffee machines, drew inspiration from observing the supply chains used by dominant market players in their industry. Rather than follow the crowd and produce coffee pods with plastic that ends up in landfill, which adds to carbon footprint levels, our client designed biodegradable packaging. Thanks to the design, users can compost the pods and use them in their garden to help their plants grow. By creating biodegradable pods and giving users a true choice between solutions, the manufacturer empowers their end users to actively exercise their sustainability beliefs through their spending choices. This move not only boosted the company’s reputation, but it also created a competitive advantage by demonstrating to customers they genuinely care about sustainable causes.

Thorough data tracking of business activities can reveal the carbon emission hotspots that need to be prioritized. And this data can open up opportunities to outpace your competition. For instance, reporting data on your ESG progress could enhance your company’s attractiveness to potential investors seeking green investment prospects.

“If you want to be a leader in a market, you need to have full visibility of your value chain. You can't improve on what you can't see.”

Step 2: Solve problems using digital tools

Once you have identified your top carbon hotspots, you need to map out your plan of attack. At this stage, digital tools should be leveraged to enhance your energy efficiency.

Digital twin technologies, for instance, can provide powerful insights into reducing carbon emissions. By simulating your company’s existing workflows and processes, these systems provide a safe environment for business leaders to experiment and test ideas without the risk of causing damage or wasting resources on a failed approach. Digital twins enable learning, which can inform the investment strategy to reduce emissions.

In smart manufacturing, digital twins have the functionality to interact with supply chains. This interoperability creates an ‘industrial metaverse’ where equipment faults can be prevented to minimize downtime, shifts in product demand can be responded to in real-time and energy use can be reduced when demand slows.

Of course, digital twins are only one option in the toolkit. Cloud computing, AI, automation and robotics are other valid options to consider when shrinking your carbon footprint.

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“Clearly defining carbon neutrality and revenue-boosting objectives will provide a good indication of which digital tools to use and how to use them effectively.”

Selecting the right tool will rest on your company’s ability to clearly define the carbon challenge at hand as well as its revenue objectives. Ask yourself:

Do we have an indication of our emission hotspots and how these will change over time based on growth?
Could this problem be addressed with digital tools that are already available in our company?
How is emission impact included as part of the capital investment process?
What budget or resource do we have allocated to address this area?
Do we need to invest in new tech to tackle this carbon hotspot?
What revenue opportunities could spring from addressing this carbon challenge?

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Step 3: Don’t launch and neglect – Track progress and routinely refine your approach

The most successful companies are those who are not scared to push the boundaries, asking themselves questions such as, “Our overall equipment effectiveness (OEE) is running at 60%, but how do we push this higher?”

“Through analyzing and having visibility of your data, you will identify opportunities to reduce emissions. And it's not a one-off exercise. You're constantly measuring what you're doing and how you do it.”

To achieve carbon neutrality, companies should be looping back to step one of this framework and regularly tracking emissions from their business model. Staying in close proximity with carbon emissions performance progress will uncover new opportunities for improvements and revenue generation.

Emission analysis of existing processes allowed a watchmaker we work with to save millions of dollars. After assessing its carbon emissions, we informed them that with better planning they could ship their products from China to the US instead of using their current choice: airfreight. This change not only reduced their carbon footprint, but also halved their distribution costs, saving around $15 million per month.

Automating tasks like data entry or report generation will make it easier to monitor progress on a regular basis, as will setting up trigger notifications to flag any changes in emissions in real-time. Regular data review meetings with stakeholders and partners will ensure that changes are implemented.

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Boosting carbon neutrality while keeping an eye on revenue generation

Closed-minded organizations that stick to their comfort zones and ignore the green agenda will miss out on opportunities to evolve and gain competitive advantage.

These three viewpoints will ensure your business follows the forward-thinking companies:

Make data visible and accessible.
Making data from all business functions visible and accessible will present opportunities for both carbon neutrality and manufacturing process optimization. Use dashboards to monitor and track the data.
Create trust, transparency and accountability through reporting.
Data transparency is the foundation on which digital tools can operate and carbon neutrality can be implemented. Reporting also creates accountability, driving performance and, ultimately, strengthening trust between stakeholders.
Optimize your supply chain.
Continually analyzing this emission-heavy area will reveal significant opportunities for carbon neutrality and revenue generation, optimizing the supply chain and ensuring on-time logistics.

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Making, small, incremental adjustments will raise standards and ensure continual progress is also manageable and measurable. One simple change can set the principle and inspire the next step.

Johan H Carstens
Smart & Sustainable Manufacturing leader, Fujitsu North America

Johan is a Smart Manufacturing Leader with over 20+ years’experience embracing and leading digitalization in manufacturing. Deep experience in transforming global manufacturing operations with demonstrable experience within steel manufacturing, mining, heavy industries and process manufacturers,including working on production systems on the shop floor.

Johan’s overall focus has been on the digital enablement and automation of key manufacturing capabilities and ability to drive compelling value to Fujitsu clients.