Two-thirds of manufacturers “falling behind” commercially by ignoring sustainability

A Make UK report has found that only 1 in 3 manufacturers view achieving net-zero as a high priority. Although this figure has increased in recent years, it still leaves the majority of the industry unable or unwilling to embed climate action into central business decisions. This comes at a crucial time when sustainability is deciding the market leaders of the future.

The inability to prioritise net-zero runs deep within the manufacturing industry. The Make UK report finds that over half of the manufacturers surveyed currently have no plan to tackle net-zero emissions. 40% of these companies hope to begin one within the next 12 months, but a further 11% do not plan to address it at all.

Inaction could be the greatest mistake for these companies as their proactive competitors position themselves as the leading sustainable brands in their space. The winners of the race to net-zero could lock in market domination for years to come.

Legislation shapes the business case for net-zero

The journey to net-zero is often framed in terms of the science of climate change. While this is unquestionably important, it is a lack of awareness of the commercial risks and benefits that are largely driving apathy among manufacturers.

One of the greatest threats to manufacturing over the next several decades is climate-related legislation. As 2050 approaches, governments and international unions across the globe are rolling out legislation and carbon taxes to ensure the private sector falls in line with emissions targets.

The timelines of these regulations are volatile and unpredictable, creating significant risk for those operating in relevant countries. For example, the UK government recently brought its initial ban on fossil-fueled vehicle production forward from 2040 to 2030.

Climate regulation is also highly subject to international pressures. When one country sets an ambitious target, it puts pressure on other governments to signal through regulation changes that they are committed to net-zero.

This shifting landscape is a minefield for the majority of manufacturers that have no internal plan to tackle net-zero. Without a strategy to get ahead of climate regulation, their business models will need to change repeatedly and often at short notice, and this comes at significant cost.

The commercial benefits of a net-zero strategy

Setting targets towards net-zero is about more than just mitigating risk from legislation, it’s also becoming a key competitive advantage in winning business.

There is a growing expectation from customers and investors that the manufacturing industry must show that they’re actively reducing their emissions. However, the majority of companies have not accepted this or made significant progress to embed sustainability into their business.

In the retail sector, two-thirds of consumers say they are willing to pay more for a sustainable product, yet the same survey found that two-thirds of retailers believe consumers will not pay more for sustainable products.

This disconnect has created a window of opportunity for the brands that are proactive in their climate action.

Ibstock, a UK brick manufacturing company, is one of these frontrunners. After already achieving its existing goal of a 15% reduction in CO2 per tonne of production, it has set new ambitious targets to reduce emissions across scope 1 (operations), scope 2 (fuel), and scope 3 (supply chain). This is all working towards a target to build the “world’s first” net-zero brick factory.

By achieving this status and winning this race, Ibstock will capture the growing number of customers who need to meet their own sustainability targets. Other brick manufacturers that were slow off the mark will be outmatched in tenders as they simply cannot make the same claims.

How are proactive manufacturers creating their net-zero strategy?

It isn’t just apathy that drives the gap between the proactive minority and reactive majority of manufacturers. To set targets for a net-zero emissions reduction strategy, a business needs to understand what its current emissions are in the first place. Very few are equipped to do this well.

Establishing an emissions baseline shows businesses where they are on that journey to net-zero, and highlights what incremental steps they need to take to get there. This can’t just stop at scope 1 and 2 emissions, which are easier to control. It must also include scope 3, which is generated by the upstream and downstream value chain, as this contributes to around 90% of a company’s carbon footprint.

Visibility into the full scope of an organisation’s emissions reveals the areas that will have the greatest impact, like changing key suppliers or renegotiating energy contracts. By setting targets focused on the largest carbon hotspots, these businesses make maximum progress to net-zero through the minimum number of operational changes.

Being able to access emissions data doesn’t just help inform these internal changes, it also gives businesses the evidence they need to safeguard their commercial objectives.

As pressure to hit sustainability targets grows from customers, investors, and even employees, we’re going to see a rise in ‘greenwashing’ from manufacturers that want to capitalise on this. The winners in the race to net-zero and all the commercial benefits that brings will be the companies who have the most airtight data backing their claims, the rest will simply fall behind.

While the Make UK report found that a growing number of manufacturers are making net-zero a high priority, time is running out. Not just for the planet, but also for the race to carve out space in a sustainability-driven market. The frontrunners have a significant head start already and it’s growing every day.

- The author, Mauro Cozzi, is CEO and Co-Founder of Emitwise.

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