Australian manufacturers planning a long term future must go down the sustainable manufacturing path, if they are going to survive. Alan Johnson reports.
Sustainable manufacturing is a critical part of doing business at Armstrong World Industries.
The truth is, many manufacturers, as soon as they hear the term ‘sustainable manufacturing’, switch off, believing it will only cost them money, and the only benefit will be a warm and fuzzy feeling that they are doing something for the environment.
However, according to the leader of CSIRO’s Sustainable Manufacturing, Future Manufacturing Flagship, Sarah King, that is completely false.
“Manufacturers who think sustainable manufacturing just adds cost to the production process, are looking at it the wrong way,” she told Manufacturers’ Monthly.
King said part of the problem is the term, sustainable manufacturing.
“There are a confusing number of definitions out there but for me sustainable manufacturing is simply about being economically sound, and environmentally and socially responsible.
“The reason there are so many definitions is because it is so variable, depending on a manufacturers operating environment. So it is very important companies define sustainable manufacturing for themselves.
To start with, King said not enough companies are looking closely at their waste streams and their utility bills.
“Too many manufacturers take them for granted. Instead companies should look for opportunities to replace them, and that’s where innovation can come in.
“Sustainable manufacturing is all about being resource efficient, and that can be about reducing costs, which can be about reducing the amount of materials from an input perspective or reducing the cost in terms of disposal costs.
“Companies should look at adding value to their waste streams. One of CSIRO’s latest projects, Aspire, looks at how we can connect companies to look at recycling and remanufacturing opportunities as opposed to sending stuff to landfill, and paying for it.
Already we have seen successful outcomes where companies, rather than sending material to landfill, they are separating it, compiling it properly, then sent to another company for reprocessing. That changes from a cost to revenue or neutral.
“Companies should also contact the various sustainable manufacturing networks out there, as well as their local council groups who do some fantastic work.
“One that is doing some great things is the Victorian Centre for Sustainable Chemical Manufacture and is looking to break down barriers between researchers and industry.
King said one of the advantages of going on the sustainable manufacturing journey includes reducing costs.
“For if you are using fewer resources and you have less waste, it’s going to cost you less. Then if you make a more sustainable product, you can differentiate yourself from your opposition, and if you are environmentally benign you have fewer risks
“There are only upsides to companies wanting to understand how sustainable manufacturing can apply to them.”
The CEO of Siemens Australia and NZ, Jeff Connolly said ultimately sustainability is about competitiveness.
“Australian companies need to rethink sustainability. For too long it’s been associated only with ‘environment’ but its true measure is a combination of economic, environment and social, which is how the DJSI measures it,” he said.
“Apart from being sustainable ourselves, our technology is designed to help other companies become sustainable by improving areas such as productivity, reliability and efficiencies. This usually has the added benefit of being good for the environment and for the communities in which we work.”
Connolly believes that with the pace of change, it’s important that Australian companies take action to secure their competitiveness and position in a world market. That means a constant review of technology that can improve their performance.
“Being in business today is like being in a formula 1 race – if you’re not looking ahead and investing in the latest technology every year then next year you won’t be in the race,” Connolly said.
Siemens AG has again been ranked number one in industrial sustainability by the Dow Jones Sustainability Index. The Swiss investment company RobecoSAM compiles the internationally renowned Dow Jones Sustainability Index (DJSI) each year. In this year’s DJSI, Siemens ranked first in the Capital Goods Industry Group, which includes about 350 companies from seven sectors.
Roland Busch, a member of Siemens AG’s Managing Board, with special responsibility for sustainability, is convinced that sustainability is crucial for Siemens AG’s long-term economic success.
“For this reason, achieving this recognition again makes us very proud, and confirms the strong emphasis we place on sustainability,” Busch said.
It’s a vital journey
The Dean of UTS (University of Technology – Sydney) Business School, Professor Roy Green, says it’s vitally important for Australian manufacturers to go on the sustainable manufacturing journey for their long-term future.
“For me sustainable manufacturing is made up of two interdependent parts, by applying energy efficiency and reuse concepts to the manufacturing process you also contribute to its long term viability.”
Green admits sustainable manufacturing does normally require some investment, as any change and improvement to a company’s competitiveness does.
“Investment is always a risk, but I have found that if the investment is properly calibrated to the nature of the business, especially in high cost countries where companies can’t compete on cost but have to compete on quality, design and innovation, the investment does pay off.
“We are now seeing around the world a growth of ‘micro-multi-national’ companies. They are SMEs that export, often most of their product, and who participate in global value chains, which might include services as well.
“We estimate we have over 1500 of these companies in Australia, but are far more prominent in Europe and in the US,” he said.
Green admits the environmental awareness of a product is not as strong in Australia as in Europe and Japan.
“Over decades they understand the relationship between energy efficiency and the efficiency of the economy as a whole. With each energy crisis, which has pushed the prices of energy and raw materials for companies, European and Japanese companies have had to do more with less and in the process have become more efficient economies and have been able to out manoeuvre the competition.”
For manufacturers looking to build a competitive business long term, Green said sustainable manufacturing should be an important component of their investment portfolio.
“Because if you don’t do it, you will go the way of the gas guzzler in the US, which was a very clear example of industries that did not pay much attention to what was going on in this context and have paid the price there,” Green said.
“They were clearly out manoeuvred by those companies in those parts of the world who understood sustainable manufacturing, which was called a sensible investment strategy at the time in the context of a high cost economy.
According to Green, it’s a matter of being able to more with less. “That’s where energy efficiencies, reuse, recycling all become dramatically more significant when developing a long term, viable business model.”
Green suggested the first step manufacturers should take, the low hanging fruit, is to reduce their reliance on high cost energy.
“This is also a decision for society in terms of the generation of electricity. What kind of sources of power can we develop that are not entirely related to fossil fuels? Can we develop a renewable energy industry?
“In fact, sustainable manufacturing can also mean manufacturing new products for the renewable
energy sector, which will become more important as a component on energy production as it is around the world.
“For example, the Chinese government is about to close down the fossil fuel power stations around Beijing and Shanghai to stop pollution, and are moving to renewable energy. This process is unstoppable and will eventually impact on our resources industry,” Green warned.
Regarding progressing on the sustainable manufacturing journey, Green advised manufacturers to look closely at their fuel bills, the use of energy and raw materials in the production process and to use standard methods such as Lean Manufacturing to ensure they are working smarter not just harder.
“Manufacturers should ensure they are not just competing on cost but on innovation, design and quality, and making as much use of waste materials as possible, with additive manufacturing a good example of that, because there is almost no waste in the process,” he said.
The plastics industry, once described as environmental vandals (and still is by some), has cleaned up its act in recent years.
According to Simon Whitely, CEO and MD of Melbourne-based Corex Plastics, the plastics industry is at a similar stage to where the paper and cardboard industry was in the late 80s and early 90s, where recycling might have had a bad reputation early on.
“But now filtration technology and the ability to maintain the highest level of polymer quality has caught up, and has given us the opportunity to substitute recycled material for origin without any detriment to the quality of the product produced,” Whitely told Manufacturers’ Monthly.
Corex Plastics, a 100% owned private company established in 1985, is amongst the world leaders in its field of plastic sheet extrusion, innovative re-useable and recyclable packaging, fabrication and design, as well as the recycling of polymers, with around 120 employees.
“For me, sustainable manufacturing, and the idea of not leaving a footprint, is very important. For us in the plastics industry, one aspect of sustainable manufacturing is looking how we can maximise the value of the resin that is used in the plant,” Whitely said.
“Our view now is that we don’t sell an end use product, we sell the use of the resin with the view that we will be able to recover it and then reuse it in another application, whether it’s the same customer or a different product group within our business.
So we take a holistic view of the polymer, where we retrieve it back and recover it at the highest possible yield to substitute for the virgin polymer.
“To make this practice work, I set up a new division in the business to interact with the customer side. So we sell the product, which we have done traditionally for the past 30 years, what we do now is also recover the product from our same customers, which is often complex because often our product is sold through distribution networks and the like, but now we diversified our source material in order to produce products that can be substituted with products that would have previously been from virgin material.
“While cost savings comes into the equation, recycling also gives us security of supply and stable prices for our customers.
“What hasn’t been highlighted has been the energy savings by recycling polymers.
By using recycled polymers there is something like an 80% reduction in energy usage compared with a virgin polymer. That’s why our recovery program is so high.”
Whitely is a supporter of the three Ps concept; People, Planet and Profit and says there are three elements to every decision a person makes in a business.
“You should make a decision on one without being detrimental to the other two. For example, it’s easier to flush things down the drain, which is good for profit and people, but not good for the planet.
“It’s about having a different lens through which you can look at a business.
“At the same time, you don’t want to just go for the planet, as some companies do; you have to make a profit out of your investments, but not to the detriment to the environment or your people.”
While a supporter of the three Ps concept, Whitely says it’s important to be open to new ideas and being able to pick the pieces that suit your business, and produce a better outcome for your business. Being a disciple to just one idea is not sustainable in itself.
Rob McLorinan, National Sales Manager Australia/NZ with Armstrong World Industries says sustainable manufacturing has been critical to what the multi-national flooring manufacturer has done for a number of years.
“In our industry, being environmentally aware is almost the norm now, and has always been in our KPIs.
For McLorinan, sustainable manufacturing covers a wide range of areas.
“From our perspective, we are working to reduce the amount of power we use, plus reduce the emissions and the amount of CO2 coming out of our stack. We also want to reduce the amount of material that goes into landfill and be more efficient. We want to do all that for our business and be a good corporate citizen too,” he told Manufacturers’ Monthly.
While McLorinan admits the industry had received some unwarranted negative publicity around PVC materials, he says that after working closely with the Green Building Council of Australia, the Council now encourages the use of PVC that is manufactured using best practice guidelines.
“And that’s exactly what we do here at Armstrong.”
He explained that Armstrong is the largest producer of resilient vinyl flooring in the world and the only Australian manufacturer of these products.
For McLorinan sustainable manufacturing at Armstrong is a critical part of doing business.
“It’s about minimising waste and operating with the least impact on the environment as possible. And if you take that a step further, we believe that product stewardship is being responsible for your material right through its lifecycle,” he said.
“We are looking to develop programs to reuse old PVC floors. So when companies are ripping up a building in 20 years’ time for example, we are looking at ways to reuse that material, and reduce the amount of raw materials we use even more.”
He explained that PVC flooring rarely wears out; in most cases it just gets replaced because the building gets refitted or the owner wants a change of colours.
McLorinan believes product stewardship is going to be the norm in a few years’ time. He warns companies that if they are not in the position now of being as efficient and sustainable as possible, they need to be at some time, if they want to exist.
“It makes business sense and is the right thing to do,” he said.
Arrium Mining and Materials’ Corporate Manager Environmental Sustainability, Phillip Ridgeway, also believes more companies should go down the sustainable manufacturing path.
“Australian manufacturers should be looking at their resource and energy inputs, and investigating cost effective ways to reduce costs.
“A lot of companies are already doing that, but wouldn’t recognise that as being sustainable.
Ridgeway said it’s important to define sustainable manufacturing. “It’s a very loose term. For me, sustainable manufacturing is all about being responsible with how you produce your product, and defining it to your business,” he said.
“I’m seeing more and more investors wanting you to be doing the right thing, so access to funds is important; banks and so forth are wanting companies to operate responsible. Also end users.”
Ridgeway is heavily involved with the Steel Stewardship Forum (SSF), a body formed to develop the steel stewardship scheme for Australia and across the entire steel supply chain.
The concept of the Forum is to bring together all major sectors of the steel product life cycle – from mining through to steel manufacturing, processing, product fabrication, use and re-use, and recycling – in the shared responsibility of working together to optimise the steel product life cycle using sustainability principles including minimising the impact on society and the environment.
The SSF believe that collectively we can continue to add value to and improve the performance of the steel industry across the whole product life cycle – thereby reducing negative commercial, social and environmental impacts.
Key purposes of the Forum are to maximise the value of steel to society whilst minimising negative commercial, social and environmental impacts across the life cycle, ensure policy makers, governments and the public generally are aware of the value of steel, and to unite key stakeholders along the steel product life cycle chain within a structured forum.
SSF is also working as a hub, linking information, knowledge, leading practice and activity in the areas of environmental improvement and sustainability across the steel life cycle.
Ridgeway is also heavily involved in SSF’s sustainability certification scheme, called ‘Responsible Steel’, which will eventually provide certification of compliance with nominated sustainability criteria for all sectors of the steel supply chain, and will cover the full life cycle of steel.
“Today far more people are interested in supply chains, where materials are sourced from, and whether they have been sourced appropriately, and not just a few indicators about social responsibility,” Ridgeway said.
“They are interested to see that people are extracting minerals safely, and that they are not using child labour, for example, that they are complying with the law, and their operating plant with good environmental controls.
Ridgeway said there is strong growing demand for this information, mainly driven by consumers and end users. While he admitted there are still people out there who simply buy on cost, he said there is a growing number of people who are very interested in where a product comes from because their reputation is on the line.
“Responsible sourcing is very strong in the US and Europe, and we can see a growing awareness in Australia in the general community,” Ridgeway said.
He explained that the Responsible Steel scheme covers everything from mining the minerals out of the ground, to what goes into a steel works to producing the raw steel, through to fabrication and how the product is used in the market.
“It’s primarily designed for the building and construction industry to start with. This area, the green credentials of a building is growing very fast, and has been for a number of years. The Green Star program is just one, with Tier one companies very interested in a company’s greenhouse footprint and other environmental credentials.”
Ridgeway said the scheme is open to steel importers as well as local companies. “It differentiates the companies who do the right thing, and those who don’t.”
The SSF aims to have a pilot scheme introduced initially for mining and steel manufacturing, then to be fully expanded across the steel value chain within five years.
The first step towards this goal has been completed with the development of an extensive pre-feasibility business case for Responsible Steel.
The Forum has decided to progress to the next stage of the project, the Detailed Design Phase, using mining and steelmaking as an initial internal pilot. It is anticipated this second phase will take between 12 and 18 months to complete and will lead to the next key decision point for the SSF on progression to implementation of the scheme through a live pilot which can then be expanded.