Sustainable paths to profitability

Manufacturing processes consume roughly one-third of the world’s energy, and the industry produces about a billion metric tons of CO2 emissions annually. While statistics like these have been dissected for decades, the massive energy consumption of the world’s factory floors is under increasing scrutiny from investors, customers, government agencies and boardrooms. As a result, sustainability is no longer a soft topic. It’s a consideration that will increasingly drive profitability and capital investment decisions moving forward.

Investors are required to demonstrate that their portfolios are comprised of responsible businesses. Consumers are beginning to demand evidence of sustainability throughout the entire supply chain before they commit to buying products. Government agencies are poised to enforce strict regulations regarding energy consumption and carbon emissions. Board members at companies of all sizes are aware of these changes and are pressuring their CEOs and senior company leaders to find answers quickly, especially as it relates to energy consumption and carbon emission of their operations.

Another economic driver is utility companies themselves. In the United States, for example, many providers have access to federal money they can use to fund promising initiatives for their customers — specifically, projects focused on electrification strategies to replace inefficient equipment wtih new technologies that reduce power consumption.

Sustainability, electrification and carbon reduction are paths that manufacturers of all sizes need to pursue. The key for most organizations is finding a balance of corporate responsibility, business profitability, appeasing investors, and compliance with regulations — and determining what kind of steps are actionable now. The answer to these questions isn’t simply just “buy the right equipment” or “develop a forward-looking strategy.” It’s a combination of both. This report outlines specific steps manufacturers can take to drive meaningful energy savings and build sustainable, modern operations.

To put a fine point on it: Energy savings and sustainability are becoming profit drivers. In addition to investor requirements and consumer behaviors, government agencies are unleashing floods of investment in sustainability. By 2030, the European Union (EU) will deploy more than €1 trillion (approx. $1.18 trillion) in public and private investments as part of the Green New Deal. The US will spend $5 trillion on the Climate and Environmental Justice Plan by 2050. China is already spending trillions of dollars to achieve its stated goal of carbon neutrality by 2060. Federal funds in the U.S., for example, are resulting in equipment rebate programs for both greenfield and brownfield projects initiated by manufacturing companies.

In addition to significant financial incentives, manufacturers across multiple industries feel pressure from consumers, investors and regulators to demonstrate meaningful sustainability improvements. No matter where it’s coming from, all that pressure ties back to – you guessed it – your pocketbook.

• Consumers are purchasing from suppliers that show a real commitment to sustainability.
• Investors are more selective than ever about what brands they support, often based on factors like their sustainability and corporate social responsibility initiatives.
• Regulators provide a bevy of incentives like tax credits to manufacturers in exchange for sustainability bona fides, like reduced energy consumption and carbon emissions.
• Governments are investing significantly in solutions that help them meet global sustainability benchmarks

Companies' top sustainability motivators have changed

Historically, sustainability efforts have been seen as brand-building. Companies would invest in energy-efficient technologies and infrastructures and expect “soft” payback, especially in terms of positive publicity and feel-good statements on websites and in investor meetings. But with the rise of electrification and the escalating cost of power, sustainability is now a prominent strategy for driving stronger margins and sustained profitability. In fact, in the 2021 survey by McKinsey, respondents at value-creating companies said they address sustainability to align with their mission and values or to “make a tangible, positive impact on an issue” that drives customer buying behaviors and investor practices.

The consumer and investor trends listed above – capital flowing increasingly toward companies that commit to real change – mean that even this shift toward broad-ranging corporate responsibility and environmental accountability has a compelling economic angle.

Even the most conservative sustainability commitment needs a strategic backbone. That’s because even the most well-intentioned initiatives tend to fizzle out without accountability, goals and ways to measure progress.

Having a sustainability plan is also part of remaining competitive in the modern era. In a 2021 survey, 37% of respondents from manufacturing companies said they don’t yet have a sustainability strategy but planned to have one within two years. For context, 28% said they already have one in place, 23% considered their sustainability strategy critical to their business and only 12% said they had no plans for sustainability at their companies. 

If you’re just getting started, get some quick wins under your belt. Just like replacing your lightbulbs at home with LEDs, every sustainability plan (whether you call it that or not) starts somewhere – often somewhere small, especially for small- to mid-size manufacturers. That’s why it’s a good idea to start with tactical, actionable changes that will make an impact you can see.

• Establish baselines. Know how much energy you use today, even if it’s just a ballpark.
• Invest in efficient equipment and practices. From pumps to lighting, the electric technologies outlined in this ebook are great places to start outfitting your facility for the sustainability-driven future.

Align quick wins with the big picture. Here’s where it all comes together. With the opportunities identified under your strategy, no matter how simple it is, you can start to leverage the equipment and practices you currently have to capitalize on them – or justify additional investment in the resources you need.

Sketch out a long-term strategy. In a silo, buying better equipment and remembering to turn off the lights will make a difference in your efforts – but you can only get so close to sustainability leadership without a roadmap.

• Collect and interpret data. If you’re replacing equipment, know how much energy and money it’s saving you. It’ll show you where your investments are having the most impact and help to identify additional areas of opportunity.
• Set specific goals. Once you start saving, don’t rest on your laurels. Using the information you collect, set milestones for your company to hit next, like kWh caps and recycling volume.

Create messaging. Taking a flexible approach to solid goals lets you discover what combinations of solutions work for your company, which can help position your company as a sustainability thought leader in your space. Quantify and position your sustainability efforts and their results to show you’re making progress for the audiences that care the most: the investors looking for focused partners, conscious consumers and advocates seeking out the most environmentally motivated manufacturers.

Graco is currently working with manufacturers across multiple industries to drive measurable and sustainable energy savings in their operations. The recent development of our electric-operated double diaphragm (EODD) pump allows us to bring cost-saving ideas to manufacturers of all sizes. We’ve collected data from plants around the world that shows air-operated double diaphragm (AODD) pumps drove the large — if not the largest — consumption of electricity in a manufacturing operation.

Graco sustainability and electrification experts can help you calculate current energy costs and potential energy savings if you transition old AODD pumps to modern electric alternatives. We also can help you explore incentive programs offered by utilities, power aggregators and government organizations that help pay for — or entirely cover — the deployment of sustainable new pump technology.