The pressure’s on for sustainable manufacturing
Demands for organisations around the globe to get on board with decarbonisation grows every day. And as a major emitter, the Australian manufacturing industry is in focus – stakeholders and the community are expecting the sector to quickly become smarter and greener with their processes.
Fortunately, technology in manufacturing is evolving at speed too, and the implementation of Industry 4.0 is leading to ground-breaking advancements in sustainability.
This will not only benefit the environment, but if done right, can position businesses to reap rewards in profit, resilience and future growth.
A playbook to optimise your operations and grow your manufacturing business
Find out more about Industry 4.0: the Australian manufacturing advantage.
Practical steps to help manufacturers build a competitive edge locally, and on the global stage.
Prosperity through technology transformation
Sustainability is not only a social responsibility, but a critical business priority of manufacturers today. As at March 2023, stationary energy (which includes manufacturing) accounted for 22.2 percent of Australia’s carbon emissions.1
That reason alone should be compelling enough for manufacturers to transform, but evidence is mounting that by reducing environmental impact, enhancing operational efficiency, and aligning with consumer values, manufacturers can create a more resilient and prosperous future.
What’s more, as consumer preferences change, manufacturers that fail to adapt may find themselves at a distinct disadvantage in the market.
The Business Council of Australia’s 2023 Seize the moment report (PDF 7.0MB) explains that Australia’s ‘ability to attract new investment will dictate whether we prosper from the international shift to clean energy, the increased use of technology and changes in the way goods are manufactured … If we fail to get the basics right, Australia will continue to fall behind our peers, neighbours, and competitors.’
Sustainability issues in Australian manufacturing
While Australian manufacturers are focused on meeting their ESG regulations, they have more work to do, and their biggest barrier is the complexity involved in changing to sustainable practices. This includes a lack of implementation expertise, and the overall costs of decarbonisation.
To help solve these issues, Australian manufacturers need to focus on entering the era of Industry 4.0 via digital transformation.
It can drive better transparency and operational and supply chain efficiencies for a more agile, competitive, and environmentally responsible organisation.
Smart manufacturing that’s circular
A circular economy is an economic system that replaces the end-of-life approach to processes using the 4 R’s – reduce, reuse, recycle and recover.
In nature there is no such thing as waste. A circular economy mimics this waste-free natural system and shifts the focus from extraction to regeneration. It is based on three principles:
1. Design out waste and pollution
2. Keep products and materials in use
3. Regenerate natural systems
In our 2023 report 30 Voices on 2030: The ESG Revolution we found that by 2030, companies will have moved beyond vertical integration and instead be investing in the full lifecycle of their products – otherwise known as circular integration.
Benefits of a circular economy
A circular manufacturing process can enhance business profitability by reducing the material costs, minimising waste, creating new revenue streams, improving brand, and aligning with sustainability trends.
KPMG modelling, commissioned by the CSIRO, shows that by embracing a circular economy Australia can expect:
Industry 4.0 uses in circular, sustainable manufacturing
Industry 4.0 can offer more real-time access to data, improved efficiencies, lower costs and transparent risk management technology for waste reduction, cost reduction and revenue/profit generation.
Digital technologies, data analytics and predictive analytics, e.g. Internet of Things (IoT), data analytics, cloud computing and system integration
Examples of circular benefits:
- improved operational efficiency and reporting capabilities
- predictive maintenance and reduced downtime
- enhanced customer experiences
- end-to-end tracking and tracing of materials throughout the supply chain
- forecasting of returned products or waste that can be turned into green energy
- interlinking of secure supply chain systems
- improved data quality to minimise waste and drive innovation.
Eco-design and material innovation
Examples of circular benefits:
- reduced environmental impact
- reduced costs from more efficient processes
- increased market appeal
- potential for product differentiation.
Product design for durability, easy repair, and upgrades
Examples of circular benefits:
- increased customer satisfaction
- reduced replacements
- potential for aftermarket repair services
- enhanced brand reputation.
Automation, robotics and artificial intelligence (AI)
Examples of circular benefits:
- optimise processes and reduce waste through better data analytics
- predictive maintenance
- efficient resource management including reprocessing and recycling processes
- disassembly of returned products
- convert returned products into a new raw material.
Biotechnology and smart sensors
Examples of circular benefits:
- help create new methods for restoring damaged ecosystems
- monitoring systems to help manage natural resources more sustainably
- sensor technology to help manage and reduce waste.
Blockchain technology
Examples of circular benefits:
- enhanced decision-making with blockchain technologies that can store, access and verify data underpinning digital twins of physical assets
- carbon tracking
- real asset transfers
- currency supervision
- identity authentication
- supporting a sustainable, reliable and connected local and global supply chain network.
Digital twins
Examples of circular benefits:
- enhanced decision-making through simulation
- help with environmental impact assessments
- support supply chain management
- carbon footprint monitoring
- predictive maintenance
- forensics and memory retention.
Transitioning to a more sustainable business model
Manufacturing businesses need to consider their next steps carefully.
For a circular economy, the first port of call is to understand your baseline data, including waste, emissions and energy. This can be done by conducting a materials lifecycle assessment, or by measuring the circularity of your business using circularity transition indicators.
Lifecycle assessments measure the environmental impacts of a product or a service. This method assesses environmental impacts associated with a holistic view, all stages of a product's life cycle, including raw material extraction and material processing, manufacture, distribution, use and end-of-life.
LCAs take into consideration many more aspects of the products impact than just GHG emissions. The metrics that you may be interested in for consideration include but are not limited to:
- global warming potential (CO2 impact)
- water consumption
- waste generation
- recycled content
- recyclability of product
- resource depletion
There are several ways an LCA can be undertaken:
- Cradle-to-gate: impact is measured only from the point of raw material extraction to the point when the product is ready to leave the manufacturer's gates.
- Cradle-to-grave: impact is measured from the point of raw material extraction to the point when the product has finished its useful life.
- Cradle-to-cradle: impact is measured from the point of raw material extraction to the point when the product is recycled or reused and starts a new life cycle.
The method is standardised and guided by ISO 14044:2006, which makes the results comparable globally and across products.
CTI is one the first global open standards allowing business to measure circularity at a business unit, site or company level. The comprehensive framework enables us to take you through the key stages of how to set the scope, collect data, calculate the indicators and analyse them.
The most recent version of CTI v3.0 was recently released, updating the 2021 methodology for measuring the impact of recycled sourcing on GHG emission reductions.
Using CTI, a range of metrics can be measured and analysed, including a company’s ‘percentage material circularity’ of specific products (as outlined in the figure below):
- To determine percentage circularity, metrics for the recycled content of raw material or product part, which are inputs in the production process can be analysed for recovery potential and actual recovery (recyclability)
- Water circularity and recycled content and waste generation can also be analysed within a CTI assessment
- A high-level carbon footprint can be developed; however, this will not give an LCA level of detail, but enough to demonstrate impact from sourcing recycled content versus virgin material.
CTI is particularly useful for year-on-year comparisons of product sustainability improvement by providing the established framework, and easy to communicate metrics.
Organisations will then need to develop a circular strategy to set objectives and targets and plan what steps to take, which can include:
- adopting Industry 4.0 technologies to disrupt the current business model
- aligning workforce attitudes to make sure employees support the company’s circular economy principles
- developing new skills such as engineering and data science to help maximise the benefits of technology and drive innovation
- focusing on supply chain resilience and relationships to promote a circular economy across all sectors.
Why KPMG
We bring deep industry expertise and global best practice to help Australian manufacturers establish themselves as global leaders. Talk to us about how you can embrace Industry 4.0, sustain your existing business, embed new processes and drive operational efficiencies and agility to become more competitive.
KPMG’s circular economy advisory services can help organisations take advantage of the circular economy. These services include research and trends analysis, opportunity identification, strategy development, strategy implementation, and a Circular Advantage Program that helps companies design circular economy strategies while exploring collaborative opportunities.
Contact us
Get in touch to learn how the KPMG manufacturing team can help create a suitable asset optimisation strategy for your organisation and usher you into the era of Industry 4.0.
