More and more small businesses want to help lead the charge to Net Zero, but this enthusiasm must be matched with a much better understanding of what’s involved if the UK is to achieve its ambitious climate change target.
Small businesses play a pivotal role say in whether the UK successfully transitions to a Net Zero economy and how quickly. SMEs, defined by the UK government as organisations with fewer than 250 employees and turnover of less than €50m, account for 99.9% of the total business population. As such, they hold tremendous collective influence. Carbon emissions are a prime example.
Despite individually having a much lower emissions footprint compared to a multinational corporation, collectively they account for around half of greenhouse gas emissions by UK businesses and a third of total UK emissions. It’s critical therefore that small businesses play their part in the transition to Net Zero.
Fortunately, more than a third of manufacturers, 37%, have already pledged to achieve Net Zero and three-quarters of those businesses plan to reach this milestone by 2040 or earlier (National Manufacturing Barometer, SWMAS).
Yet, while most SMEs have the desire to make a change, many remain unsure of how to implement that change in practical terms. Their uncertainty spans general knowledge around the subject, specific terminology, reporting requirements, commercial opportunities and even what happens within their own operations.
Lack of basic understanding
Part of the problem stems from small manufacturers being unaware of the business benefits gained through implementing a Net Zero strategy. These include lower costs, reduced risk, new revenue opportunities, increased resilience and relevance, greater customer and employee loyalty and enhanced brand reputation.
“There is too much focus on the upfront costs and not enough on the opportunity to improve processes, products and performance and gain a competitive advantage,” says Iain Crosley, Director at XpertRule Software.
“In manufacturing, production managers look to optimise their operations by focusing on quality, cost and delivery. Many now recognise that Net Zero is equally as important a performance indicator. What isn’t so well understood is how viewing everything through a Net Zero lens also underpins improvements in quality, cost and delivery.”
However, before formalising their sustainability strategy, decision-makers need to first understand what Net Zero is, what it entails and how it impacts a manufacturing operation. Once again, a quagmire of conflicting definitions, standards and advice is creating confusion.
Emissions are a common source of uncertainty, particularly how they are classified. A business’ carbon footprint is made up of three emission groups:
Scope 1 – Direct emissions from owner or controlled sources such as from facilities or vehicles
Scope 2 – Indirect emissions from the generation of purchased electricity, steam, compressed air, heating and cooling that is consumed by your business
Scope 3 – All other indirect emissions that occur within your value chain including purchased goods and services, travel, waste disposal and from the use of your products and/or services
Scope 3 emissions are often the most significant part of an organisation’s carbon footprint but are also the most difficult for businesses to measure, manage and reduce. Doing so may appear daunting but the process is made significantly easier through collaboration. After all, one business’ Scope 1 emissions are likely another business’ Scope 3.
SMEs may wrongly assume their operation is too small for mandatory emissions reporting but that isn’t the case.
Publicly listed companies have been required to report their direct energy use and carbon emissions (Scope 1 and 2) since 2019. This reporting is set to become mandatory for all UK businesses, including SMEs, by 2025.
Scope 3 reporting is currently voluntary but could become compulsory as soon as December 2023. Many organisations, large and small, are choosing to get ahead of future requirements by getting a handle on their carbon emissions now. Indeed, emission declarations are already necessary to bid for work in several industries, including construction and government contracts.
With incoming regulations and reporting requirements cascading down supply chains, effective reporting mechanisms are swiftly becoming vital to not only thrive but survive.
“Information systems, digital connectivity and process automation are not only necessary to run an effective operation, but they are also essential for Net Zero,” says Roger Singleton, Managing Director of Net Zero consulting firm, Riscon Solutions.
“Take energy. The only way most businesses monitor energy usage is through their utility bill, and many don’t know how that usage is split between powering their buildings and maintaining a comfortable work environment and what is consumed by their manufacturing processes. Gaining such knowledge would be an incredibly good Net Zero starting point for many.”
Lack of basic infrastructure
What gets measured gets managed, as the adage goes. At the moment, however, many SMEs don’t have the procedures in place to monitor their processes, let alone track carbon emissions over the entire lifecycle of their goods and services.
The level of information gathering and the amount of data points to be considered means doing this manually isn’t an option. The good news is that many businesses already have adequate IT systems in place, they just need to be unified, updated, and optimised.
“Frequently, there is a lack of interconnectivity between MES and ERP systems, supply chain management and administrative systems,” says Roger Halliwell, Senior Consultant at Op-tec Systems, a leading supplier of process control and industrial automation technology.
Information gathering is one thing, but many SMEs don’t have the time and skills to take data and transform it into actionable intelligence. That’s where the change happens, not only for Net Zero but for all business improvement programmes.
Continual reporting at the information layer enables staff to start making more informed, better and longer-term choices, rather than the short-term sticking plaster decisions too often taken today.
“Measurement must be at the heart of how a business plans and manages its transition to Net Zero,” says Iain. “Transforming manufacturing operations requires a holistic view of everything that’s going on. Such a view relies on capturing, aggregating, and processing data from sensors, actuators, control modules, IT applications and back-office systems to monitor, assess and - most importantly - act.”
Technology is unquestionably crucial. But the right culture is equally as important, Iain concludes. “To make this transition, all businesses but particularly SMEs need to have an open mindset and be prepared to collaborate, share experiences and learn from others.”
Decision-intelligence powered manufacturing
XpertRule helps companies reach their Net Zero goals through constant and ongoing optimisation. It is a journey, not a sprint. Working together with companies in the manufacturing sector, XpertRule improves performance through better utilisation of people, plant, processes and products to drive better profits (the 5Ps).
XpertFactory software incorporates multiple AI capabilities to digitally capture both human expertise and manufacturing processes to improve any manufacturing plant. By allowing manufacturers to properly understand the processes they are able to optimise, monitor and control them, in real-time, to improve overall efficiencies and increase uptime, while lowering their carbon footprint.
SMEs on the journey to Net Zero
Iain Crosley, Roger Singleton and Roger Halliwell recently took part in a ManufacturingTV panel debate discussing how expert advice and proper data acquisition and analysis can help SME manufacturers not only meet the challenge of Net Zero but profit from it.
You can view it here:
Find out more: Accelerate the road to NetZero