We are on the brink of a politically, economically and socially fractured world. That’s why the World Economic Forum’s Annual Meeting 2018 theme, 'Creating a Shared Future in a Fractured World’, aimed at developing a shared narrative to improve the state of the world. Being a WEF Strategic Partner for 19 years, Accenture brings leadership for digital transformation at the intersection of AI and Future Workforce, redefining strategy, sustainability, and technology.
The production industry faces a difficult dilemma. On the one hand, how can you offer mankind its necessary products, while, on the other hand, you will also exhaust Earth's natural resources for doing just that? Reaching the United Nations Sustainable Development Goals (SDGs) is not an easy task, but with the Fourth Industrial Revolution new technologies have emerged that can bring down production costs. WEF and Accenture's Driving the Sustainability of Production Systems sets out how to harness the technological progress of the Fourth Industrial Revolution for sustainable innovation.
Doing more with less. The aim of sustainable production is as simple as it is significant. To produce better products for a growing world while reducing and even reversing the emissions, waste and other destructive influences that are wreaking havoc on our environment and our climate.
Importantly, this attitude shift is not driven by abstract hypotheticals, but by very real and pressing concerns. Production and consumption are the pillars of the global economy, with enormous impact on the future of our world. Safeguarding that future means protecting and preserving our resources, both natural and human. While population growth increases the burden on our ecosystems, the rise of automation and artificial intelligence brings new pressures to bear on the workforce. It is clear we need different solutions.
It is clear we need different solutions
Fortunately, rapid technological and digital developments provide valuable tools to address these challenges effectively. Far from simply driving down costs, these sustainable production techniques are allowing industries such as consumer goods and manufacturing to reap the rewards of disruptive innovation and increase their competitive advantage. The time to seize the initiative is now, and it is in your best interest to do so.
Confronting a Troublesome Legacy
Since the First Industrial Revolution, our society has effectively become addicted to overabundance. In gaining the ability to produce goods cheaply on an unprecedented scale, we set an all-consuming engine of progress in motion. While it paved the way for prosperity in ways the world had never seen, it also laid the foundations for a deeply problematic cycle of unsustainability.
Skyrocketing demand for an ever-increasing variety of products at ever-decreasing prices motivated businesses to embrace economies of scale and maximize the utilization of manufacturing. Meanwhile, our collective belief in an endless supply of natural resources and raw materials ensured that neither consumers, manufacturers or governments saw much if any need to curtail waste or pursue different approaches to production.
New Opportunities through Sustainable Technology
The times are changing, however. Consumers are waking up to their impact on the environment. As a result, the demand for sustainable products has increased dramatically. Governments are also catching on, drafting new rules and regulations specifically designed to advance sustainable production. These developments are not lost on investors either, and “green is good” has rapidly gained traction as a guiding philosophy in capital investment.
These forces all combine to exert positive pressure on the consumer goods and manufacturing industries to embrace sustainable production. But the advent of new enabling technologies may be the biggest influencer of all, both in terms of driving new business models and furnishing the means to pursue them. The Fourth Industrial Revolution is proving to be a wellspring of disruptive innovation, introducing new technologies that are enabling new value propositions. Making sustainable manufacturing – above all – profitable business.
1. Revolutionizing Remanufacturing
As one of the most promising and important trends in the sustainable production landscape, advanced remanufacturing has the potential to become a cornerstone of the circular economy. Automation and artificial intelligence are transforming the traditionally expensive and labor-intensive recycling process, allowing companies to receive, process and disassemble complex consumer goods and packaging at lower cost. This will dramatically improve the commercial viability of reverse logistics in a wide range of applications.
Another key aspect of this trend is the use of sensors and digital labels to identify components and provide integrated instructions for disassembly. In addition to raising efficiency, this also provides new avenues to monitor how products are used, driving continuous improvements in quality and therefore also in durability, product utilization, and sustainability.
2. Developing New Materials
In the past, consumers didn’t think twice about the resource cost of commodities like meat, leather, and plastic. Tomorrow’s consumers are different. They are acutely aware of these issues and demand suitable alternatives to resource-intensive materials. Both these new materials themselves and the methods used to produce them present attractive business opportunities to manufacturers.
Packaging suppliers are already using fungi as a more sustainable alternative to plastic, while chemical plants are mimicking photosynthesis to power production processes with sunlight. This is only the beginning of a revolution in materials innovation, one where collaborations between startups and titans of industry will yield both significant environmental benefits and substantial profits.
3. Transforming Agriculture
The Netherlands has a leading position in global agriculture. This puts Dutch manufacturers in an excellent position to lead the push in next-gen agricultural solutions. And make no mistake, these solutions are urgently needed. We are already struggling to feed the global population. Meanwhile, more than a billion tons of food is wasted every year – lost during the harvest, in transit, at retail touch points or in the home.
The use of sensors, machine learning and other intelligent solutions in agriculture is allowing us to reshape the entire value chain from farm to fork, reducing losses while achieving better returns on investment.
4. Redefining Factory Efficiency
Lights-out manufacturing presents interesting opportunities to the consumer goods industry. The development of next-gen robotics and artificial intelligence has enormous potential to reduce the amounts of raw materials and energy used in the production environment. Innovative technologies will remove the contradictions between minimizing waste and maximizing quality, allowing manufacturers to optimize both sides of the equation.
5. Making Value Traceable
Consumers are increasingly focused on the origin of the products they purchase. From produce and coffee to electronics and luxury goods, there is an increasing demand for transparency throughout the entire value chain. Sustainability and ethical considerations are key motivators in this space, simply because a growing number of consumers is unwilling to support fraud, slavery or environmental damage.
Technologies like blockchain will allow the consumer goods and manufacturing industries to meet this demand – but doing so will not only benefit the consumers. Modern value chains are highly complex, connecting many markets and companies across international borders. Illuminating these connections will help increase efficiency and effectiveness while simultaneously reducing waste and costs.
Great Challenges, Greater Rewards
Sustainability is not a passing fad. It is a vision of the future, one that has already gained considerable traction with consumers, investors, governments and businesses the world over. The transition is underway, and the rise of new enabling technologies will only improve the business case for sustainable production as time goes by.
But that pursuit means abandoning your old ways. And those old habits die hard. As Peter Drucker so eloquently put it: “Culture eats strategy for breakfast”. Our current production systems are built to support linear value chains. Products are designed, prototyped and tested in silos. They flow from R&D into factories and onward into sales channels, where they are purchased by consumers who eventually throw them away. There is an unnecessary amount of waste at every turn, but at the same time, there is an established way of doing things.
Circular value chains require a radically different approach. Offering a product as a service means cutting across traditional silos and getting innovation, design, marketing, manufacturing, logistics, IT and sales to collaborate freely. And that’s just for value propositions you can roll out on your own. As soon as you start looking outside the confines of your business, like Akzo Nobel and Eneco are doing in their bid to use production plants as swing capacity for the electrical grid, you will need to promote culture shifts in silos that aren’t even your own.
This will require a massive effort, not to mention a good deal of trial and error and learning along the way, but the rewards are plain to see. In a world where sustainable products are offered as services, where businesses deliver value directly to consumers without stores or distributors or marketing, where nothing is wasted and remanufacturing is the norm, even a single consumer goods manufacturer might generate billions in reduced costs and added revenue. For the global economy, that number will be in the trillions.
It Starts with Accountability
Technological acceleration and financial potential notwithstanding, transforming your business into a sustainable one remains a human effort at its core. To seize the opportunities of sustainability, you will need to approach your business and value chain from an entirely new perspective. This is not an incremental change, after all, but a fundamental one. And that type of change hardly ever happens of its own accord. Successfully, at least.
As a result, you need to ask yourself who will lead the way for your company. Who among your senior executives will take responsibility for this transition and ensure its success? How will they be rewarded for their pioneering efforts? That accountability is crucial. Without it, the machine will keep moving as it always has, and everything will remain the same. An inspiring vision is set at the top and is absolutely essential, as is a sound strategy – but it starts with accountability.
To harness the potential of sustainable production is not an idealistic endeavor. In a future where consumers, governments, and investors demand sustainable products, it will be the only way to remain relevant at all. It may take decades to see the full impact of this shift in business and society, but the timeline has already begun. And when it comes to change, there is no time like the present.