Over 75% of the global top 50 machine builders are actively promoting ways in which their machines enable greater sustainability for manufacturers – from energy efficiency to retrofitting. New research from Siemens Financial Services reveals how these machine builders define sustainability enablement, based on their published statements.
There is no question that manufacturers are investing more in sustainable practices – right across the globe. Several key factors are driving this push.
Firstly, many companies are adopting ethical stances on sustainability, with over 60% of CxOs[i] and 70% of manufacturers[ii] saying environmental sustainability is highly or very highly important to their business strategy.
Second, regulators are mandating sustainability reporting for larger companies. This requires continuous improvement up and down the supply chain to meet climate targets. Manufacturers have to enable sustainability in the industries they supply (such as retail, electronics, fashion, transport, etc). And in turn, suppliers of manufacturing technology and machines have to deliver sustainability-enabling features to their manufacturing clients.
Third, a closer association is now being made between digitalisation (or Industry 4.0) and the effective deployment of more sustainable manufacturing. Additionally, sustainable gains often lead to financial gains, such as waste reduction and cost savings, and offer a competitive advantage, as 74% of firms now integrate ESG criteria[iii] into supplier contracts.
Lastly, corporate fundraising in the public markets is also focusing on attracting investor funds through ‘green’ and ‘sustainable’ bonds. Independent analysts assess a company’s sustainability claims and the price of funds is sometimes subject to a ‘greenium’ – in the form of a marginally lower interest rate demanded by investors. Raising capital in this way improves a company’s sustainable profile and credentials.
Why sustainable transformation can’t wait
The urgency to invest in sustainable manufacturing is therefore driven by both financial benefits and competitive positioning. Early adopters simply start gaining the financial advantages and savings more quickly – lower cost of energy, raw materials, water, consumables, catalysts, lubricants, etc.
In addition, manufacturers can gain a competitive advantage by embedding sustainability while the market is still developing. For early adopters, sustainable claims are a stand-out factor which can beat the competition to a sale or contract. After all, an increasing number of invitations-to-tender from manufacturers now include sustainability requirements[iv] .
Sustainability-enabling technology almost always involves digital transformation. The market for digitally-enabled, more sustainable manufacturing[v] has a ‘tipping’ point when around half of manufacturers will have invested ‘significantly’ in digital transformation. Research predicts this ‘tipping point’ to be around 2026 for larger manufacturers, and 2030 for smaller to medium-sized companies[vi]. Those who invest in the first half of the cycle should gain competitive advantage. Those who wait until the second half will simply be playing catch-up.
Currently, 25-30% of global manufacturers of all sizes have currently made ‘significant’ adoption of digital technologies[vii] – the essential technological basis for sustainable manufacturing. All this tells us that investing in sustainability-enabling technology still has plenty of potential for competitive advantage, but the clock is ticking.
Which technologies are the focus for sustainable transformation?
A new study by Siemens Financial Services highlights the pressure on manufacturers to invest in sustainability. In turn, machine builders are also driven to enable that more sustainable production footprint (both technologically and financially) for their manufacturing customers.
To provide current insights on sustainability priorities, this report analysed the sustainability -enabling features of manufacturing equipment and machines, as promoted by the world’s top 50 production machine builders.
While there is a certain amount of ‘embodied carbon’ in the construction of a production machine, the vast proportion of its lifecycle emissions come from its use in a manufacturing plant. Therefore, machine builders are keen to develop machines that help their manufacturing customers reduce emissions and drive efficiencies in the production line.
The most universal sustainability gain focuses on decarbonisation and resource efficiency, specifically energy efficiency, applicable to most production machines. Almost as popular as energy efficiency are the benefits of digitalization, in the form of productivity gains through Industry 4.0 that enables manufacturers to do more with the same/less.
Circularity is also clearly a major issue for most machine builders, over half of whom are offering retrofit and refurbishment options to their manufacturing clients in order to save natural resources in machine construction (carbon savings that then can be passed on to the manufacturing client’s Scope 3 measurement).
Additionally, many machine builders are remanufacturing worn parts, sometimes using additive manufacturing or 3D printing, while digital twin technology enables rapid development of new, more sustainable machines.
Water efficiency and the use of alternative or recycled raw materials are only relevant to certain production machine technologies. The key clusters for these sustainability-enabling capabilities are Food & Beverage processing machines (where water is a key raw material) and Semiconductor making machines (which use a great deal of water for cooling).
Other sustainability features, such as waste reduction, recycled materials, and flexible, modular designs, show no significant sector-specific trends.
Barriers to sustainability investment
Although manufacturers recognise the need to invest in sustainability, and machine builders are developing more sustainable equipment, investment challenges persist. Globally, economic and manufacturing outlook is quiet, despite the occasional positive uplift[viii]. Inflation has pushed up input prices for manufacturing, putting further pressure on manufacturing margins. In this environment, most companies prioritise having cash available, so they can act nimbly in response to changing or developing market opportunities.
Third-party financing is crucial for advancing sustainability in manufacturing. Financing tools help machinery and equipment vendors sell their more sustainable solutions by making it easy for the manufacturer to invest through monthly payments, with no need to find (and tie up) substantial amounts of scarce capital. Usually available from specialist financiers who have a deep understanding of the underlying technology and its commercial and sustainability enabling benefits in the field.
Key financing categories include:
Integrated Finance: Spreads costs over several years, aligning payments with cash flow, while vendors are paid immediately. It operates separately from existing bank credit lines and covers total ownership costs through subscription models.
Flexible Structures: Financing specialists adjust terms to make options affordable, offering low-start or deferred payments aligned with operational benefits. Emerging models include managed services and ‘as-a-service’ options tied to outcomes like uptime or output.
Retrofit Finance: Covers the modernization of existing machinery, reducing costs and carbon footprints. It requires financiers with expertise in retrofitting to structure deals and assess risks effectively.
Pay Later: Benefits machine builders by allowing them to delay payment for components for up to six months, aligning with machine order and delivery timelines to better manage cash flow.
Prioritising sustainability in machine building
This article has highlighted where machine builders are enabling sustainability for their manufacturing customers. It outlines the areas of resource efficiency which are being offered through new models or retrofit upgrades. These in turn may be taken as a direct reflection of the areas of sustainability improvement demanded by manufacturer clients.
By examining the degree to which each of these areas of sustainability gain are being featured and promoted by machine builders around the world, a clear priority order emerges. Energy efficiency and productivity gains from digitalization are the most widely applicable across industry sectors, whereas areas such as water efficiency or recycled raw materials are not always so widely relevant.
It is clear from this research that almost all production machine builders are emphasizing some form of sustainability enablement for their machines. Yet challenging economic circumstances mean pressure to transform to more sustainable manufacturing can only be optimized and accelerated when technology is combined with specialist financing tools that make the conversion affordable and cash-flow friendly.
About the author: Stefania Moruzzi is a Business Development Manager for the manufacturing division at Siemens Financial Services. She is a dedicated and dynamic professional who has been an integral part of the SFS team for more than 13 years. Throughout her tenure, she has established strong relationships within the manufacturing and industrial sectors, leveraging her extensive expertise to provide her customers with optimal solutions tailored to their business requirements.
[i] https://www2.deloitte.com/content/dam/Deloitte/is/Documents/risk/deloitte-2024-cxo-sustainability-report.pdf
[ii] https://www.cognizant.com/en_us/insights/documents/how-manufacturers-can-accelerate-the-sustainability-agenda-wf1936400.pdf
[iii] https://www.edie.net/report-small-manufacturers-struggling-to-meet-customers-increasing-esg-demands/
[iv] https://pwemag.co.uk/news/fullstory.php/aid/5726/Manufacturers_accelerate_ESG_strategies_as_customer_and_supplier_requirements_increase.html; https://www.themanufacturer.com/articles/esg-high-on-the-agenda-for-procurement-professionals-report/
[v] https://www.imeche.org/news/news-article/circular-economy-and-energy-efficiency-key-to-manufacturing-sustainability
[vi] For instance: https://www.siemens.com/global/en/products/financing/whitepapers/whitepaper-tipping-point-for-manufacturers.html
[vii] https://industryeurope.com/sectors/technology-innovation/research-from-thoughtspark-reveals-realistic-digital-adoptio/ ; https://www.thoughtsparkagency.com/report/digital-divisions-manufacturing-adoption-report/
[viii] https://www.imf.org/en/Publications/WEO; https://www.reuters.com/markets/asia/china-jan-feb-industrial-output-retail-sales-beat-expectations-2024-03-18/
Energy in Demand - Sustainable Energy - Rod Janssen 