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Transformational journeys can go hand in hand to improve competitiveness and performance.  

Nearly a quarter of U.S. greenhouse gas emissions come from industrial sources. Under mounting pressure to respond to investors, consumers, regulators, and employees alike, manufacturers have elevated sustainability to a board/C-suite level issue. In the January 2022 Climate Action 100+ report, 87% of companies reported having board-level oversight of climate change. While nearly 4,000 companies are acting on climate change, only one-third of them have set a net-zero emissions commitment, a near even split between enterprise (800 out of Global 2000) and mid-market (700 out of millions of SMEs).

A significant majority (87%) of respondents in the 2021 MLC M4.0 Sustainability and Net Zero survey said they believe the industry has a special responsibility to society to become more sustainable. Above all else, it’s the right thing to do — but it’s also a matter of business viability. Various studies, such as that by the IBM Institute for Business Value, find that consumers increasingly make buying decisions based on sustainability and are willing to pay more for products branded as sustainable or socially responsible, particularly Generation-Z and high-income shoppers.

Manufacturers are answering the call. In last year’s MLC sustainability survey, about a third of respondents said they already have publicly shared net-zero targets. Additionally, management’s focus on sustainability and net zero strategies increased at a third of companies. We are interested to see how that metric moves in this year’s survey, given recent economic developments.

Above all else, sustainability is the right thing to do — but it’s also a matter of business viability.

Anecdotally, we’ve heard from several manufacturing clients that sustainability initiatives and investments will have to take a back seat as their organizations prepare for the prospect of a recession or slowdown. Given sustainability’s overall impact on future business competitiveness, that’s a concern.

Maintain Momentum, Despite Uncertainty

The factors that initially made sustainability a top-tier priority are not going away. Driving toward net zero will be a long journey, likely over many decades with peaks and troughs in the business and economy over time. Focusing on sustainability can be beneficial for navigating rough economic periods — for example, reducing waste can also improve the cost of goods sold. And when the economy does turn positive, companies that can demonstrate progress will only have strengthened their competitive position.

Manufacturers already are seeing the value of becoming digital, because digital businesses perform better. We believe that aligning the digital journey with the sustainability journey can advance both goals and drive greater overall return on investments.

Focus Beyond the Four Walls of Manufacturing

Moving toward net zero certainly starts inside the factory walls. This is where being digital comes in. In the 2021 MLC sustainability survey, 52% of respondents said they believe M4.0 technologies will be significant to reaching sustainability targets.

Approaching digital manufacturing with a sustainability lens can help reduce waste, emissions, and costs. Industrial IoT sensors can be used to gather data that enables insight into optimizing energy usage. This allows companies to reduce energy costs and the associated emissions.

Similarly, AI-powered process controls can reduce defect rates, which in turn reduces waste. For example, Schneider Electric’s smart factory in Lexington, Kentucky, leveraged Industry 4.0 technologies to capture greater energy consumption granularity and leveraged IoT connectivity with power meters and predictive analytics to optimize energy cost. The result? Reduced energy consumption by 26%, net CO2 by 30%, and water use by 20 percent.

There are also significant opportunities to add to the impact outside of the factory and across the value chain:

Supply chain: Stakeholders hold manufacturers responsible not just for their own environmental footprint but also for their suppliers’. Establishing a strategy for sourcing sustainable products is key to reducing Scope 3 emissions. For example, Flex set sustainability goals in 2021 that included the commitment that a portion of customers and suppliers share responsibility for reducing Scope 3 emissions. The company invited preferred suppliers to disclose emission data through a questionnaire and then used that insight to provide appropriate education and resources to its suppliers. In the first year alone, 29% of preferred suppliers established their own emissions reduction targets.

Aligning the digital journey with the sustainability journey can advance both goals and drive greater overall return on investments.

Green IT: Enterprise technology accounts for 1% of global greenhouse emissions. This is driven primarily by the production of end-user devices such as laptops, printers, and smartphones. It’s important to work with vendors to reduce these emissions by employing green initiatives such as optimizing device use to extend the life cycle, consolidating the applications footprint, and moving to cloud providers that power data centers through renewable energy.

Circular economy: A growing number of manufacturers are committing to a circular economy. Dow recently announced its accelerated commitment to deliver 3 million metric tons per year of circular and renewable solutions by 2030. The running shoe company On offers a subscription-based model through which customers wear the shoes for a certain period of time and then return them. Used shoes are disassembled, recycled, and used as raw materials for new shoes.

Smart products: Smart products are not just digitally connected. They employ data and analytics to improve the performance of a physical product over time. For example, a smart thermostat in a facility has connected motion sensors that record activity levels. Analytical tools then use that data to learn patterns and optimize settings, helping reduce the facility’s electricity consumption. Philips is using digital technology to capture product life cycle information to reduce waste and extend the life of its products such as X-ray machines. According to the IDC, by 2024, 80% of global manufacturers will incorporate environmental sustainability into their product life cycle management process and ecosystem, improving sales by 3%.

Large manufacturing enterprises are making advancements in most of these areas. While the mid-market may not have the resources that larger companies do, some companies — such as the Cooley Group — are setting the pace for peers.

Getting on the Track to Net Zero

We see opportunities to advance both digital and sustainability goals by focusing on four key areas:

Strategy: The journey begins here. In the 2021 MLC survey, half of the respondents said their company has a formal corporate sustainability strategy in place, up from 39% in 2019.

We believe a sustainability strategy should include:

1. A moonshot vision (here’s a great example from Patagonia: “Build the best product, cause no unnecessary harm, use business to inspire and implement solutions to the environmental crisis”)
2. Ambitious goals such as net zero ahead of competition, zero waste
3. A data-driven estimate of emissions footprint around Scope 1, 2, and 3
4. Inventory of current and future sources of emissions
5. Climate mitigation initiatives
6. Roadmap and an execution plan to meet your objectives

These goals and the roadmap should be communicated through sustainability reports and become part of standard operating procedures.

Sustainability metrics require many pieces of data from many sources, and that data often resides in many formats.

With our clients, particularly manufacturing companies, most are early in the adoption curve where they are formulating their sustainability strategy and finding ways to embed it in their organization.

Data: To manage change and demonstrate progress, you must be able to measure the impact of your efforts. This remains a barrier for many organizations. Sustainability metrics require many pieces of data from many sources, and that data often resides in many formats. This is a significant effort that requires a high degree of manual activity for most.

Manufacturers need to accelerate their ability to use data for the good of the business, not just sustainability. A good starting point is an assessment that identifies the data required to measure total emissions, determines where that data comes from, and documents how you access and gather it today. You can then look for opportunities to automate data collection.

For example, if you need utility information for many locations, create an app that pulls in the necessary information rather than having someone collect it via email. Such improvements are simple solutions that don’t require a substantial amount of time or new investment.

Data governance is also critical, and often overlooked. It’s focused on managing data assets and is critical around sustainability-related data sets such as energy or supplier data to enable data-driven decision-making. This is particularly important because you can’t improve what you can’t measure.

We believe a common set of governance principles such as the Data Management Association (DAMA) framework help organize the function and enables it to understand sustainability goals, identify data sources, and build the right framework for automation.

Begin looking at how to use analytics to increase impact and progress toward goals as data capabilities mature. Keep it simple, but know that the potential is vast. For example, Vestas Wind Systems, a Danish wind turbine manufacturer, used data and analytics and modeling grids with weather data to pinpoint the optimal placement of each turbine. The analysis not only helped reduce the time required for site development, it also reduced energy costs for utilities and consumers.

Begin looking at how to use analytics to increase impact and progress toward goals as data capabilities mature. Keep it simple, but know that the potential is vast.

More mature data capabilities will also enable you to reap sustainability benefits from smart products. For example, John Deere is connecting their farm equipment, such as tractors and combines, to help farmers make the right choices on fertilizer and pesticide usage and conserve water during irrigation.

People and leadership: Being digital is not just about technology. It is equal parts people and processes. In the 2021 MLC Sustainability survey, more than 60% of organizations said they have a dedicated sustainability team, up from 51% in 2019.

Elevated leadership, with a senior executive designated to oversee reporting and progress — if not specific initiatives — is also critical. Many large organizations have an established senior leader, such as a chief sustainability officer, but it’s still common to see responsibility for action embedded in different functions such as IT or procurement. A senior leader must have the influence and authority to generate support from various department heads.

Don’t underestimate the organizational change management required. Employees should understand the “why” associated with changes — for example, how new automation is not only driving efficiency but also reducing waste or emissions. Effective change and communication initiatives can also help engage interested employees in driving awareness and action among colleagues.

Supply chain: Increasing visibility into the supply chain has become a top priority for many organizations in light of recent disruptions. The same steps your organization is taking to engage suppliers in a digital supply chain can also provide a platform for gathering the data you need to measure overall corporate environmental impact. While the focus today is on improving capabilities for tracking and reporting supplier data, that will change. We expect that the standard will soon be demonstrating how you’re reducing environmental impact with preferred suppliers with strong sustainability metrics.

If you aren’t doing so today, it is time to begin working with Tier 2 and Tier 3 suppliers to track and report against sustainability targets. Don’t leave it up to them to determine what to report. Set out your requirements, and then provide guidance and support in fulfilling those requirements.

Effective change and communication initiatives can also help engage interested employees in driving awareness and action among colleagues.

Tools such as a portal for entering information can help reduce effort on both sides—without significant investment. As you progress in establishing methods for tracking and reporting, consider incentives, such as preferred status, for good reporting practices and/or metrics. As you enter new supplier relationships, do so with an eye toward building reporting and metrics into new agreements. Procurement should move beyond cost-benefit analysis for sourcing to include sustainability-related metrics such as embedded emissions and year-over-year change — as well as third-party rating/certification on labor use for manufacturing.

Finally, if your organization is a supply partner to larger manufacturers, be open to dialogue and willing to collaborate to meet mutual goals.

Keep Going

While economic pressures on costs are understandable, pausing efforts will impede progress, and demonstrating progress will be even more critical than it is now when the economy returns to a growth mode. Look for opportunities to continue delivering small wins, working in tandem with efforts to become digital across all aspects of the business. If your focus is scattered due to too many priorities or you’re unsure where to begin, find outside expertise to help advance areas that may be holding you back — such as your ability to gather and use data to manage and measure against goals.  M

About the authors:

Randal Kenworthy is a Senior Partner, Consumer & Industrial Products, at West Monroe

Durgesh Patel is a Senior Manager, Consumer & Industrial Products, at West Monroe

Manufacturers have a huge opportunity to create products that will drive global sustainability and make their businesses stronger, says Intel CSO, Todd Brady.    

“I strongly believe that good business and sustainability practices go hand in hand.” 

Todd Brady, Chief Sustainability Officer and Vice President, Global Public Affairs, Intel Corporation 

Co-founded in 1968 by semiconductor pioneers Gordon Moore and Robert Noyce, and later led by the company’s third original employee, Andy Grove, during the high-growth 1980s and 90s, Intel Corporation is now the world’s largest semiconductor manufacturer with revenues of $79 billion and supported by 121,000 employees around the world. 

Intel’s long tradition of focusing on and reporting its own sustainability performance over the last few decades has seen the company consistently ranked as a corporate environmental leader in industrial sustainability by numerous organizations, from Forbes to Dow Jones. In addition to successfully adopting its own internal sustainability programs, Intel has also become a leading initiator in numerous non-competitive coalitions aimed at driving more sustainable practices across broader industrial ecosystems.

In our latest interview with an industry thought-leader, Intel’s Chief Sustainability Officer, Todd Brady, talks to the MLC’s Executive Editor Paul Tate about the company’s own internal progress on environmental targets, the critical importance of harnessing digital technologies and AI in its sustainability efforts, engaging employees, suppliers, and even competitors in the process, and the pivotal role manufacturing can play in developing the products the world needs to meet urgent climate goals and create a more sustainable future. 

Q: What excites you most about your role as Chief Sustainability Officer at Intel?
A: I strongly believe that good business and sustainability practices go hand in hand. The most rewarding part of that is making a difference in our day-to-day operations, our impact on the world, and our bottom line and the viability of the business. I truly believe that by making our operations more sustainable, we are making our business stronger. That’s something that really incentivizes me and gets me moving forward.

Q: What’s driving Intel’s sustainability initiatives?
A: Intel has been setting sustainability goals for several decades now, since around 1994. We set our latest round of goals and initiatives in 2020 with a 10-year vision of where we want to be by 2030. These cover key themes such as net zero greenhouse gas emissions, which we aim to achieve by 2040, net positive water, and zero waste to landfill. So, as we manufacture and make our products, how can we have a net zero or even net positive impact on the environment and the communities in which we operate? That’s the overall vision that we’re trying to achieve with these goals.

Q: What progress have you made so far?
A: We want to achieve net zero greenhouse gases by 2040 in our Scope 1 and 2 emissions. To do that, we’ve set a number of milestones. The first is to use 100% renewable energy globally by 2030. We’re a little over 80% today and we anticipate we’ll be about 90% by the end of this year. We’re already 100% renewable in the US, Europe, Israel, and Malaysia.

“We’ve set a number of milestones. The first is to use 100% renewable energy globally by 2030. We’re a little over 80% today and we anticipate we’ll be about 90% by the end of this year.”

We also have a goal for Scope 3 greenhouse gas emissions for our supply chain that is a 30% reduction. We’ve taken a number of steps with our suppliers to engage and collectively work towards that goal. We see these sustainability issues as non-competitive and that we all need to work on collectively, both with our supply chain and with our competitors, at times.

Another goal is around water and our water use. Our goal is to be net positive water, so for every gallon of water we bring in and use in our manufacturing process, we’re returning a gallon or more water back to the community. We do that in two ways. One is by recycling, reclaiming, and reusing our water internally, and we’ve invested upwards of a billion dollars in that over the past decade. The second is by doing projects outside of Intel in the community, with NGOs, with government agencies, with farmers, and others, to support water conservation measures that put more water back into local streams and aquifers where we operate. This year we have just achieved net positive water in three locations where we operate ­– the US, India and Costa Rica.

Q: Does meeting some of these targets also involve adopting new circular economy approaches?
A: Yes. The circular economy is a big focus for us. We have goals as part of our 2030 framework, for example, to be zero waste to landfill and to upcycle over 60% of our manufacturing waste. The reason for that, again, goes back to the concept of tying together sustainability and the business. We need to look at our waste streams not as waste, but as something of value and not to look at them as something that we need to discard or get rid of. So, we’ve created a number of circular economy type solutions for a variety of different waste streams. Some of our fluoride waste streams are repurposed into cement. Some of our phosphorous waste streams are repurposed into fertilizer. Some of our solvents are recovered and either reused or resold as high value materials. Copper is another example. We use a lot of copper in semiconductors, so we have an extensive copper reclamation process and then we sell that for a profit into the reclaim market to be reused.

I think it’s about a change of mindset – not looking at waste as something that’s discarded, but instead looking at what value we can we get from it. That reduces our costs, and in some cases, generates a new revenue stream. And the more we look at it, the more we find new opportunities to create those circular loops.

Q: You mentioned that working closely with partners and competitors in broader, industry-wide ecosystems is important to making change happen. What role has Intel played in instigating these initiatives?
A: We’ve initiated a number of different coalitions over the years. Again, we have a history of doing this because we see these sustainability topics as non-competitive where collectively we need to work as an industry to solve some of the biggest challenges we face.

A couple of examples. Way back in 1998, we pulled the industry together to start working on reducing chemicals called perfluorocarbons, one of the greenhouse gases. As an industry, we committed voluntarily to reduce the overall emissions of those gases over time. For one company alone, it’s impossible to do. But working together, we have  made significant reductions and even exceeded the goals we all set.

“It really is endless when you start thinking about all the different ways companies can use digital technologies to monitor, control, and then optimize their equipment, their operations, and how they are doing business.”

Another example is removing the lead from our products. When the European Union established the RoHS directive restricting hazardous substances, like lead, cadmium, chromium, and other heavy metals, again, that required us to come together as an industry and we helped form various coalitions looking to develop alternative solders to the traditional tin lead solder that was used in electronic products.

And last month, we launched the Semiconductor Climate Consortium across the industry, a new carbon initiative with 60 other companies where we’re working with all of our supply chain to tackle the remaining carbon emissions that we have as an industry and how we can go about doing that. So again, collectively we can accomplish much, much more by working together as an industry than we can independently.

Q: Do these groups deliver practical outcomes for their members, like new sustainability methodologies or tools?
A: Yes. For example, another industry group we’re involved in with MIT and many other IT companies, big OEMs, is called PAIA – Product Attribute to Impact Algorithm. It’s a carbon footprint methodology for calculating the lifecycle carbon footprint of electronic products. From there, companies can then figure out how to reduce that carbon footprint further. We’re strong believers in having that kind of open architecture so that we can all use the same standards and methodologies as we go forward.

Q: How important are digital technologies to driving the future of sustainability, both for companies and globally?
A: I believe digital technologies are a critical tool to help make the industry, and the world, more efficient and reduce its carbon emissions. While we’ve focused a lot on the carbon footprint of the company and the broader semiconductor industry, at the same time, we need to look at what we call the handprint, which is what we can actually do with our products to make the world more sustainable. I think that’s where IT industry is in a very unique situation because digital products can, and will, help make the world much more energy efficient and reduce carbon emissions.

A report out of Europe by GeSI a few years ago called SMARTer2030 estimated that for every ton of carbon emissions produced by the IT industry, there was the opportunity to reduce the world’s emissions by 10 tons, almost a 10 to one return, by enabling smarter manufacturing, smarter buildings, smarter infrastructure, smarter transportation, smarter agriculture, you name it. All of those are enormous opportunities. We can already see it happening by applying digital technologies in both our own operations and in many of our customers.

Q: Which digital technologies are making the most sustainable impact at Intel?
A: There are many, many different examples. Take some of the new office buildings that we’ve built. These have been designed from the ground up to be smart buildings, integrating sensors throughout to monitor and control everything from lighting to HVAC and all the facility systems. Many of these are now LEED Platinum certified buildings, achieving anywhere from 30 to 50% reductions in the amount of energy being used, as well as reductions in water consumption. By monitoring the building in real time and understanding where the people are, where you need lighting, where you need cooling, heating, etc., you can make significant savings.

“Tapping into our people and their innovation is critical, because the engineers and technicians on the ground are the ones that know what’s going on within the business, within our operations.”

Another example would be in our manufacturing process. We have some big industrial equipment in use, and again, we’ve added additional sensors and monitoring and networking to optimize the performance. In our manufacturing and fabrication facilities we have a number of large industrial chillers which provide essential cooling, with maybe 20 or 30 chillers in a particular location. They are most efficient when they’re running near capacity, as opposed to very low load, and traditionally each of those chillers operated independently. Now we can link them all together and make them virtual, and by using AI and algorithms, we can optimize those chillers by changing the load depending on demand and monitor that in real time. Again, we’re seeing 20 to 30% less energy usage by integrating digital technology.

And as we dig into more and more sustainability opportunities using smart technologies including AI, we have been able to achieve very fast returns on investment of five years or less, often three years or less, and sometimes within a year. It really is endless when you start thinking about all the different ways companies can use digital technologies to monitor, control, and then optimize their equipment, their operations, and how they are doing business. Again, it’s that link between sustainability and good business.

Q: How are you engaging Intel’s workforce in this smart sustainability strategy?
A: Let me give you one example. When we started our energy efficiency program over a decade ago now, we did a call out to all our engineers around the world and said, “If you have an idea about how to make us more efficient, save money, and reduce our environmental impact, send it to us. We’ll fund it and take it from there. But it’s got to have a positive ROI and it’s got to have a positive environmental impact.”

I was blown away by how many ideas came forward. I think in the first year our budget was a million dollars – and we used it all up, just like that! Fast forward to today, and we’re now investing $30 million dollars a year on various energy efficiency projects, which are driven by our people, and by the engineers and the technicians who bring forward those ideas. Tapping into our people and their innovation is critical, because the engineers and technicians on the ground are the ones that know what’s going on within the business, within your operations.

The second example is that we’ve tied our employees’ bonuses to sustainability for over a decade. Everyone in the company is directly linked to our sustainability performance as a company. No matter what their role, whether it’s an attorney, a technician, a marketing person, whatever, there’s an incentive to think, “How can I help drive forward Intel’s sustainability agenda?” At the end of the day, everyone’s bonus is tied to how we do it and what we achieve. That’s another way we’ve been able to engage our people across the company.

Q: So, what level of priority do you think other manufacturing leadership teams should now be putting on sustainability for the years ahead?
A: There are many things driving the business case for sustainability today. One is simply driving efficiency in your own operations. They have a direct RoI and deliver cost savings and performance improvements in many areas.

But broadening the lens, our customers today absolutely expect us to be working on sustainability. And we also expect our own suppliers to be focused on sustainability too. It’s part of our supplier report card. When we judge our suppliers on how they’re doing, we look at their cost, we look at quality, we look at schedules, and whether they are meeting all of those core business aspects. But we also rate them and judge them on their sustainability performance. And we see the same from our own customers as well. So, for most manufacturers now, whatever product you’re producing, your customer wants a sustainable product to sell to their end customer, the consumer of that product. That’s becoming increasingly more evident as we talk on a regular basis with all our customers.

“I think the biggest challenge for the future is how do we continue to grow, both as Intel and as an industry, but continue to be more sustainable?”

The third area is with investors. I’ve been meeting with socially responsible investors, ESG investors, for almost 20 years now and I’ve seen a definite shift from a couple of decades ago. Back then there were only a handful of companies focused on socially responsible investing. Today it’s a who’s who of the investment community. You can’t find a big investment company that does not have an ESG research team. Increasingly, investors want to know that they are investing money in a company that is sustainable, is improving, and is thinking about how they can take actions to do so.

Lastly, governments. Sustainability regulations are increasing all around the world. We have many different proposals both in the US and the EU around climate reporting, CSR reporting, and so on. These are all raising the expectation that we are transparent as companies in terms of what our climate impact is, and what we’re doing to reduce that impact over time.

So, with all of those drivers, it is very clear that sustainability is not simply the issue of the day, but it’s becoming the norm and an expectation for all companies on how they will operate in the future.

Q: You mentioned scoring your suppliers on sustainability, increasingly important for Scope 3 reporting in the future. Does Intel actively help supplier companies, especially the smaller and medium sized suppliers who may not have the budgets or skills, to improve their own sustainability footprints?
A: It’s a great point because it’s easy to look to Intel or other multi-billion-dollar companies and say, ‘Well, you can induce sustainability because you have the resources.’ So, one of the things that we’ve done is to create supply chain summits and sustainability summits. We’ve held those for several years in Asia where we have a lot of our supply chain and a number of smaller companies and development companies who have asked for our help. At these summits we sit down and talk through what our expectations are, and what the various challenges are. It’s also a great opportunity for our suppliers to network together and learn what each other is doing. We’ve also held seminars and webinars on a variety of different topics to help our supply chain, and we’ve formed coalitions around supply chain improvements too.

“As we look forward to 2030, 2040, 2050, we as manufacturers now need to be looking ahead at where the world is going and produce the products that the world needs to address the planet’s sustainability challenges for the future.”

As we look at our own supply chain, renewable energy is a big opportunity. As a company, over half of our supply chain emissions are associated with energy use. So, I think driving more renewable energy sources and making those more readily available, are a significant opportunity and one that we, as manufacturers, should take advantage of.

Q: Looking ahead, what would you highlight as the greatest business challenges and opportunities for the manufacturing industry over the next five years?
A: I think the biggest challenge for the future is how do we continue to grow, both as Intel and as an industry, but continue to be more sustainable? We need manufacturing. Manufacturing is critical for the world and for global economic development. But how do we decouple that growth from increased resource usage? The expectation is certainly that we need to do that. We’ve got to all collectively get our greenhouse gas emissions down to zero. The issue is, how do we not grow our footprint as rapidly as we grow our businesses, and then continue to drive that at speed?

On the flip side, I think the big opportunity for the IT sector, and other manufacturing sectors as well, is that our innovation and products can be used to help make the world more sustainable. Look at renewable energy: we need renewable energy to achieve climate goals. But that renewable energy needs to be run on a smart grid because renewables are produced intermittently. You can’t have the same grid and controls that you have for a traditional coal fire power plant or natural gas plant that’s running 24/7. You need smarter technology to be able to route that green energy where it’s needed, and how it’s needed. So, there’s a big opportunity for new products and new services to get us there.

As we look forward to 2030, 2040, 2050, we as manufacturers now need to be looking ahead at where the world is going and produce the products that the world needs to address the planet’s sustainability challenges for the future.

Q: Finally, if you had to focus on one thing as a watchword or catchphrase for the future of manufacturing, what would that be?
A: For me, there are two things: sustainable manufacturing to make the business stronger and decoupling growth from an organization’s environmental footprint.

As an industry, we need to grow our businesses, and grow economically, but we need to decouple the environmental impact of economic growth. To do that, leaders have got to think out of the box. They have to think differently. By spending a little bit of money outside the company and partnering with key organizations or companies to create more sustainable approaches, organizations can achieve far more than they ever could by themselves in their own operations.

That out of the box thinking is really what’s needed as we go forward into the future.  M

FACT FILE: Intel Corporation

HQ: Santa Clara, CA
Industry Sector: Semiconductors, computing, automation, AI
Sales: $79.02 Billion (2021)
Net Income: $19.87 Billion (2021)
Employees: 121,000 Employees
Presence: Global
Production Sites: 10 Primary Manufacturing Sites
Website: www.intel.com

EXECUTIVE PROFILE: Todd Brady

Title: Chief Sustainability Officer and Vice President, Global Public Affairs, Intel Corporation
Nationality: American
Education: BSc degree in chemical engineering, Brigham Young University; Masters’ degree in environmental engineering, University of Illinois, Urbana-Champaign.
Languages: English, Italian

Previous Roles Include:
– Global Public Affairs Director, Intel Corporation
– Corporate Sustainability Director, Intel Corporation
– Global Environmental, Health and Safety Director, Intel Corporation
– Corporate Environmental Director, Intel Corporation
– Product Ecology Manager, Intel Corporation
– Environmental Engineer and Manager, Intel Corporation

Other Industry Roles/Awards/Board Memberships
– Top 20 Sustainability Leaders, Sustainability Magazine
– Top 10 Outstanding Leaders, Advancing Science and Technology in Research/Business/Policy Pursuits, –
  Scientific American
– #1 Most Sustainable Company, Barrons
– America’s Most Responsible Companies, Newsweek
– CDP “A” Ranking for Climate and Water
– Corporate Knights, Global 100 Most Sustainable Corporate Citizens
– Dow Jones Sustainability Index, North America Index
– Just Capital, Just 100

About the author:

Paul Tate is Co-founding Executive Editor and Senior Content Director of the NAM’s Manufacturing Leadership Council.

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Manufacturing Leadership Journal content and MLC resources are exclusively available to MLC members. Please sign up for an account or log in to view this content.

Manufacturing Leadership Journal content and MLC resources are exclusively available to MLC members. Please sign up for an account or log in to view this content.

Manufacturing Leadership Journal content and MLC resources are exclusively available to MLC members. Please sign up for an account or log in to view this content.

Manufacturing Leadership Journal content and MLC resources are exclusively available to MLC members. Please sign up for an account or log in to view this content.

Manufacturing Leadership Journal content and MLC resources are exclusively available to MLC members. Please sign up for an account or log in to view this content.

Though once considered a radical concept in the eyes of some, the necessity of digital transformation is now embraced by most organizations. The question is no longer whether to digitally transform — it’s now how to do it. But often, those discussions focus myopically upon the technologies involved.

That’s a mistake.

People, after all, are the ones driving change. Technology is the tool they use to do so. If the attitudes, behaviors and goals of your organization’s people — your culture — are not on board with your digital transformation goals, your transformation will likely fail even if you have the right technology in place. Having clear alignment between your technical objectives and your company’s culture is essential for success — in fact, organizations that take a human-centric approach to digital transformation are 2.6 times more likely to see success.¹

Five common business blockers to cultural change

There are several common stumbling blocks that may significantly impede your progress along the path to digital transformation. The most vexing challenges revolve around five key cultural issues:

• Organizational data isolated in functional or hierarchical silos.
• A lack of the skills needed to enable digital transformation.
• The breakdown of inter-team communication and collaboration.
• Cultural resistance to change rooted in lack of understanding of transformation goals.
• Fear and worry about job insecurity, or a lack of psychological safety, among employees.

Any one of these cultural barriers presents a significant speed bump to the transformation process. The presence of all five within a single organization — not an uncommon scenario — wreaks havoc upon an organization’s efforts to transform.

Stepping over those stumbling blocks

Transformation undeniably involves change — and change and human nature often have a stormy relationship. People tend to resist change, particularly when it makes them feel isolated or left behind. How can companies overcome these stumbling blocks to enable and encourage cultural change in support of digital transformation? The answer involves a mix of technology and people-centric management.

To eliminate data and skillset silos without disrupting your key business processes, you need to gradually build cross-functionality across teams. Consider using tools and techniques such as Kaizen (a management strategy that supports ongoing, incremental change), which many organizations have found to be crucial for success. A top-down commitment to opening silos is equally important; however, the true key to breaking down silos is about understanding, engaging and promoting collaboration across both the formal structures and the informal networks that exist across the organization.

Recently, research has found that the key to identifying and engaging these informal networks is by identifying influencers across an organization and engaging with them. Each silo represents a comfort zone for the group of employees that operates within that silo, and employees may be reluctant to move away from those comfort zones. By activating networks across the organization, company leadership can promote collaboration without incentivization.

Similarly, it’s essential to nurture teamwide collaboration and communication in ways that are nonthreatening to individuals and team cultures. While specialized skillsets and knowledge specific to a team (or even a single task) is valuable to the entire organization, individuals who hold that knowledge often consider themselves the owners of that knowledge — an ownership that they may be reluctant to surrender for fear of diminishing their own value. Commending employees for exceptional knowledge sharing and skill development creates a culture of collaboration while promoting candid communication.

Innovation culture and success factors for digital transformation

Leadership should also be sensitive to the language used in communicating transformation initiatives. Phrases such as “breaking down silos” can feel threatening to people working in those so-called silos. Functional areas with their own domains of expertise and knowledge exist for important reasons — and will continue to exist — so leaders should instead talk about “weaving silos together” to achieve cross-functional integration while preserving the benefits of domain expertise.

Adopting agile approaches serves to foster the evolution of cultural shifts across teams, enabling them to be more cross functional. Another tool that can be highly effective in breaking down a range of barriers to collaboration and communication — including differences in age, gender and ethnicity — is reverse mentoring, where younger employees are paired with executive team members to help those executives connect with a younger demographic. Creativity, too, is important when it comes to breaking down cultural cliques. Even discouraging teams from keeping to themselves in settings like company cafeterias can be effective.

Finally, executive leadership, like all other members of the organization, must also evolve. They must embrace the goals of transformation and become comfortable with the higher levels of ambiguity that characterize today’s marketplace.

That said, technology does play a major role in supporting digital transformation initiatives. The right technology can make all the difference in fostering the cultural shift necessary for successful digital transformation. Today’s digital tools can guide effective collaboration, enhance efficiencies, enable standardization and encourage innovation. For example, Hitachi designed a cross-functional 2-day Smart Manufacturing Solution Envisioning Workshop for Logan Aluminum that helped key employees better understand the benefits of specific digital transformation initiatives.

Transformation is really about people

Business organizations are often perceived as lifeless, faceless entities. But in truth, each organization is a collection of people — people who must work together to make the business successful. That’s why it’s so important that everyone in your organization is on board with both the processes and goals of transformation.

Ultimately, fostering positive cultural shifts among your people is the best way — and, realistically, the only way — to ensure that your digital transformation goals can be achieved. Because, in the end, digital transformation is all about your people; a journey begun for your people and achieved by your people.

Hitachi’s Social Innovation imperative is all about unlocking value for society through the power of technology and people. For more tips about getting ahead by thinking ahead, visit our Social Innovation page.

About the authors:

John Brinegar, Director, IoT Solution Architecture, Hitachi Vantara

John Brinegar leads the Solution Architecture team at Hitachi Vantara, and has been leading IIoT projects at Hitachi customer sites for eight years. In addition, Brinegar led the architecture, development, and launch of Lumada Manufacturing Insights, an analytics platform for optimizing performance, maintenance and quality operations. He has extensive background deploying analytics systems into a variety of manufacturing sub-verticals, including electronics, pharma/biotech, metals, automotive, and others, along with IIoT software development and integration in telecommunications, health care, and enterprise markets.

David R. Brousell, Co-Founder, Vice President and Executive Director Manufacturing Leadership Council

David R. Brousell is the Co-Founder, Vice President and Executive Director of the Manufacturing Leadership Council, the digital manufacturing arm of the National Association of Manufacturing, the largest association of manufacturers in the United States.

In his role as head of the MLC, Brousell sets the strategic direction of the organization and oversees day-to-day activities across the MLC’s portfolio of live and virtual events and thought-leadership content generation. Brousell is a member of the NAM Leadership Team and is also a member of the MLC’s Board of Governors. In his more than 40-year career, Brousell has served in numerous leadership positions in companies large and small.

¹Errol Gardner, Norman Lonergan, Liz Fealy, “How transformations with humans at the center can double your success,” EY, June 24, 2022, https://www.ey.com/en_gl/consulting/how-transformations-with-humans-at-the-center-can-double-your-success.

In his introduction to MLC’s recent Master Class session, Harnessing Digital Technology for a Sustainable Future, Paul Tate laid out the high stakes involved in sustainable manufacturing.

“This is one of the most existential challenges and sources of opportunity for the manufacturing industry over the next decade,” said Tate, MLC’s Co-Founding Executive Editor and Senior Content Director.

To get to a sustainable, net-zero future, application of both data and analytics are critical. During the Master Class, expert speakers Baskar Radhakrishnan of NTT DATA and Rebecca Christiansen of Microsoft defined the challenges and described how digital technology can help manufacturers accelerate decarbonization.

According to Christiansen, Microsoft’s Americas Azure IoT Specialist Director, nearly one-third of the world’s energy consumption and roughly 20% of CO₂ emissions are attributable to the manufacturing industry. To help combat climate issues, she pointed to the 5,000 companies that have committed to net zero as part of the United Nations Race to Zero Campaign.

“While a lot of companies have made commitments, building the strategy, backing it with detailed plans and execution methodologies has been really tough,” Christiansen stated. “It’s really up to all of us, collectively, to figure out what technologies and what strategies should be implemented to go after this.”

Further, Baskar Radhakrishnan shared this must be looked at not only through the strategic lens, but also from a tactical, operational technology perspective.

“From a technology perspective, there is a lot of data available coming from the supply chain, coming from your OT systems, coming from all over your networks,” said Radhakrishnan, NTT DATA’s Strategic Advisor for Manufacturing. “But how you derive some meaningful insight out of that is a huge challenge.”

To show how sustainability investments can provide value, NTT DATA and Microsoft have partnered together to demonstrate quick return on investment for their customers. They have designed a production-level pilot that can be set up in a small-scale production environment at a customer site in less than 12 weeks. This allows the implementation team to show its organizational leaders the opportunity, value and positive ROI associated with investing in an energy management or a waste reduction system.

Beyond demonstrating ROI with this pilot, it is important to also look at sustainability from a business objectives perspective.

“There is a gamut of technologies involved,” Radhakrishnan said, “so technology is an enabler. It’s not going to solve your problem unless you have the process straightened out and unless you identify the range of possible options for transitioning towards the net-zero targets.”

In part because organizations cannot improve things they can’t measure, NTT DATA and Microsoft are using the Azure digital twin to help companies meet their sustainability goals.

“We tackle the problem of data by connecting directly to energy data sources – be it power meters, submeters on equipment, or utilizing building management systems. From there we create both real-time visibility to energy usage and provide analytics about the energy usage, trends, and patterns,” said Radhakrishnan.

According to the Master Class speakers, manufacturers shouldn’t be afraid or overwhelmed with the prospect of using digital twins in this process. While they can seem complex, they are simply virtual replicas of physical assets, or “high-fidelity digital representations of the physical world,” as Christiansen called them.

“Once you’ve got [the physical world] modeled, you can garner insights, you can look at consumption, you can look at interaction, you can think about how you can manipulate or even identify fault detection or anomalies in advance, which help you really optimize keeping your manufacturing line healthy, runtime up, and throughput maximized,” she said.

The outcomes from using digital twins are clear, including improved production capacity and inspection efficiency with reduced energy usage and CO₂ emissions. Plus, the twin allows the user to look at energy management on many level: at the product, factory, or even supply chain levels. That includes progress toward net-zero goals.

“That’s extremely important because you’re completely taking the guesswork out of this,” said Radhakrishnan. “You need a systematic way of tracking, reporting, recording, and being able to model and show progress not only to your board but also to your external stakeholders as well as investors.”

In fact, he said, if you are not making progress, the digital twin in combination with artificial intelligence allows you to model and fix problems and see how you are progressing toward your vision.

Beyond the technology itself, the final piece to the puzzle is creating an organizational culture with proper funding, training, and resources.

“We’re seeing a lot of organizations hire chief sustainability officers,” said Christiansen. “That’s an incredible start, but that’s a single person. It has to come through the entire culture of a company.”

If the culture is not there, she warns, it will be a challenge to implement these changes.

As the Master Class demonstrated, net-zero goals are challenging, but they are also achievable. Digital technologies like NTT DATA and Microsoft’s production-level pilot can build a case to create sustainability programs that create substantial results. Establishing goals and a strategy, utilizing digital twins, analyzing the data and analytics, and creating an organizational culture where the entire company is behind the mission are all key to accelerating a decarbonization effort.

Visit NTT DATA’s sustainable manufacturing page to learn more about this topic.