With less than 10 years left for achieving the 2030 Agenda for sustainable development, there has been a drastic increase in number of companies investing on sustainability. On one hand there is pressure from economies which wants to become climate neutral. Meanwhile increasing number of appliance manufacturers have expressed their commitment to the UN Sustainability Development Goals (SDG) and have pledged funds to achieve their bold targets.
The win-win synergy that is accelerating the green revolution
In the consumer appliances industry, sustainability is viewed as a differentiator due to millennial focus on environment. There is a win-win collaboration between the consumers and manufacturers which is accelerating this green revolution. As per recent surveys, sustainability development has become a vital factor influencing the purchase decision among the millennial and gen-Z consumer segment. With every green purchase, the consumer forms a bond with the product and the brand as it creates a positive emotional impact. Also, with the younger generation willing to pay a premium for a reliable and eco-friendly product, sustainability adoption has drastically increased across the appliances industry. Companies are trying to leverage the disruption to increase their global competitiveness.
The fragmented focus
The sustainability development initiatives across the appliances industry are very compartmentalized, with majority of them focused on waste reduction, recycling, and packaging.
- A leading American home appliances manufacturer is redesigning their product to include 32% recycled material and targeting zero waste to landfill in their factories
- A Europe-based appliances manufacturer is using recycled plastics and materials in production of their new appliances
- Another European appliance major is focusing on reducing the waste in factories and using recycled materials in their products and packaging
- A multinational appliances and electronics conglomerate is working toward reusable packaging to reduce pollution
There are several other manufacturers whose sustainability strategy is also around waste reduction and using recycled/eco-friendly materials in manufacturing and packaging.
Unlocking the full potential
Even with the increased focus on sustainability, consumer appliances industry still has a long way to go for achieving their sustainability goals. Integration of sustainability across value chain is the key step to reap full benefits. Sustainability goals must be an organization-wide strategy which is integrated across the value chain right from product conceptualization to manufacturing to distribution, including services such as IT, marketing, aftermarket, etc., to maximize the benefit.
The clean start: The sustainability integration should start right from the stage of purchasing energy. Clean energy purchase will help organizations reduce their Scope 2 emissions (indirect emissions from the generation of purchased electricity, steam, heating, or cooling consumed by the company”).
Sustainable R&D: Sustainability in R&D is an important step as it lays the foundation for the product’s performance throughout its life cycle. Design for sustainability encompasses various aspects in designing the product to be more reliable, energy efficient, consume less water, use biodegradable materials, etc. Other elements of sustainability in the R&D includes using digital technologies such as digital twin/AR/VR to create a digital prototype during the design validation phase to reduce the plastic use, wastage, and emission.
Sustainable Manufacturing: Sustainable manufacturing includes sustainable sourcing, inclusion of LEAN concepts to reduce waste, optimizing logistics, warehousing, and inventory management to improve productivity and cut emission. Implementing digital technologies like process twin can help in optimize material flow, plant layout, etc. to reduce waste and emission.
Sustainable Packaging: Sustainable packaging is the most explored segment in the appliances industry. Even small change can provide exponential benefits as it moves along the value chain. For example by making small optimization like reducing the extra packaging on the product can result in reduction of plastic use and waste. It also reduces the overall size of packed product resulting in more units being shipped in one trip which in turn reduces the logistics cost and cuts down on the associated indirect emissions. Various other sustainable packaging enhancements include optimizing the design to reduce material use, using recycled/biodegradable material, returnable/reusable packaging, etc.
Sustainable IT: With IT being the backbone of almost everything we do; it becomes a critical part of the value chain. Ignoring IT in the overall sustainability strategy could potentially negate most of benefits achieved through sustainability initiatives. With so many IT assets and digital technology and services, sustainable IT is a must for any sustainability strategy. Migrating to cloud would be most essential step for sustainable IT as it provides significant reduction in emission. But that should not be the only step, it must be augmented with other initiatives like purchasing devices with higher energy efficiency, promoting reuse, recycle, and safe disposal of IT assets, etc. to maximize the benefits.
The peripheral ecosystem
The final element for unlocking the full potential is extending sustainability strategy to the peripheral ecosystem to reduce the Scope-3 emission (“all indirect emissions that occur from sources not owned or controlled by the company”). This involves a two-pronged approach
1. Extending the sustainability strategy to peripheral ecosystem participants such as suppliers, service providers, vendors, distributors, retailers, partners, etc. The ecosystem covers both the upstream activities such as purchased goods and services, capital goods, travel, etc. and the downstream activities such as transportation and distribution, stores, franchises, service centers, etc. Manufacturer should ensure that their upstream and downstream supplier/vendor network has a sustainability strategy in place and contribute to the overall emission reduction.
2. The second part is bending the linear value chain to close the loop, forming a circular economy. This key step is a disruption on its own, on the ‘take-make-waste’ linear value chain. Circular economy model promotes reintroduction of the product back in the value chain to optimize the value extraction and reduce the waste generation. The circular economy model impacts the value chain at multiple instances like repair and recirculation of used product extending its lifespan, recycling materials from end-of-life product, reintroducing it back to the manufacturing, and improving performance and efficiency to reduce waste and energy consumption, etc. Also, with an increase in smart appliances and proactive maintenance, sharing of usage-based insights for improving efficiency and reduce waste have become effortless. Some manufacturers have already started to experiment with the circular economy models. For example a European small household appliances manufacturer is revamping their R&D process to design products that can be easily disassembled and re-assembled to encourage repair and reduce discard. There are also multiple startups providing platforms and initiatives to promote sharing and pay-per-use contracts for appliances, increasing reuse and reducing waste.
The consumer appliances industry has successfully started their journey toward a sustainable future. Some manufacturers have even gone one step further and set a few bold targets to achieve. Now to accelerate this journey and take it to the next phase, sustainability must become an organization wide strategy and be integrated across the value chain including suppliers and vendors. The wheel is already in motion, manufacturers should now leverage the disruption to create a differentiator.
