by Nuris Ismail and Reid
GLOBE-Net, August 3, 2012 - The concept
of sustainability is not new for manufacturers, but there is still
a wide disparity between how different companies think about and
implement sustainability programs.
At the highest level, many manufacturing executives believe in
the intangible values of green and sustainability initiatives.
However, few have been able to quantify this value in real dollar
terms and even fewer understand the relationship between
productivity and sustainability.
From February to May 2012, Aberdeen
Group surveyed over 200 manufacturing executives about their
sustainability practices in manufacturing operations. Aberdeen
isolated 105 respondents focused on energy and carbon management to
uncover the best practices that result in top gains in reduced
emissions, energy and improved operating margins
Indeed, the fluctuating cost of energy has challenged
manufactures to find a way to get the most out of their plants
while minimizing energy consumption.
However, in comparison to Aberdeen's 2011 study, "Energy
Intelligence: Driving Optimization with Visibility," the pressure
of cost dropped from 72 per cent (in 2011) to 63 per
This comes as no surprise because over the past three years,
within our research, Aberdeen has seen the trend that ensuring
compliance is increasingly becoming more important.
Aberdeen's July 2012 "Energy and Carbon Management: A Roadmap for
Sustainable Production" focuses on how sustainability has
changed from a 'nice to have' initiative, to one that is becoming a
core of the organization. Sustainable success in manufacturing
operations requires an all-encompassing and integrated concept. The
study uncovers how leading companies are able to address these
To better understand how the most successful companies are
implementing a comprehensive energy and carbon management strategy,
Aberdeen used four key performance criteria to distinguish the
leader and follower organizations.
The criteria were: Reduction in energy consumption (measured as
the year-over-year change in energy consumption); Reduction in
emissions (measured as the year-over-year change in emissions);
Energy consumption goals (measured as energy consumption
performance realized relative to the corporate goals established);
and operating margin vs. corporate plan: measured as the percentage
difference between last year's actual operating margin and bugeted
Respondents were divided into two categories based on their
aggregate performances in these four metrics, Leaders (top 35 per
cent) and Followers (remaining 65 per cent):
Table 1: Maturity class performance
Leaders (top 35% of aggregate performance scorers)
• 7% reduction in energy consumption
• 8% reduction in emissions
• +13% performance vs. energy
• +14% operating margin vs.
Followers (remaining 65% of aggregate performance scorers)
• 3% increase in energy consumption
• 2% increase in emissions
• -10% performance vs. energy
• -2% operating margin vs. corporate plan
Source: Aberdeen Group, May 2012
The Leaders are able to directly impact the cost of
manufacturing operations by reducing energy consumption by 7 per
cent. The Leaders have also established processes to reduce
emissions by 8 per cent.
These metrics not only provide a
basis for measuring internal operations, but also serve to ensure
that manufacturing operations are optimized while satisfying
energy, environmental and business needs.
In addition, the Leaders are exceeding corporate performance
targets by over-achieving operating margin by 14 per cent, while
their peers in contrast experienced a -2 per cent rate. In short,
these industry Leaders are able to reduce their consumption,
outperform their energy and & emission goals, and as a result
enjoy positive operating margins to what is planned.
Leader capabilities and technology enablers
Leader companies are more likely to increase visibility and
control over energy and carbon usage. In addition, the
Leaders are likely to automatically collect energy and carbon data
and store it in a central location. However the real challenge is
collecting the information in a consistent manner.
With all the different kinds of data that can be collected (such
as energy cost, Scope 1, 2, and 3 emissions, energy consumption at
a plant level, energy consumption at the asset level) automating
data collection for manufacturing operations can be an intimidating
task. To enable strategic decision-making, it is important that the
data is collected a granular manner. It is important to gather
information as close as possible to the asset.
Aberdeen's "Energy and Carbon Management: A Roadmap for
Sustainable Production" uncovered that Leaders are gathering
this energy and carbon information through multiple avenues, from
their plant automation (DCs,PLCs, SCADAs), sub-meters, sensors and
a dedicated energy management system to get this drill-down
visibility. With the recent inclusion of energy data over
Ethernet/IP, ODVA have enabled their partners to create their
products to enable seamless transfer of energy data from plant
automation systems to an enterprise system.
This is allowing manufactures to contextualize real-time events
to minimize production, improve energy efficiency and minimize
emissions. On top of that, over the years, technology advances in
sustainability-orientated equipment allow manufactures to have
efficiency 'built in' to their assets. This helps to prolong the
life and improve the performance of these valuable resources.
An important fact to note is that when it comes to collecting
information, there isn't one best method. Manufacturers are
collecting the information in multiple ways. Each facility is
different, and manufacturers need to take the time to access their
plant needs and select a data collection methodology that works
with their current asset base. Sometimes that means leveraging
outside resources, such as third party consultants, to provide a
third party view on how to successfully automate data
When it comes to implementing an energy and carbon management
strategy, this part of the process is critical, therefore
organizations shouldn't rush or find the cheapest solution. Rather,
spend the time and resources to figure out the best approach to
automate data collection and provide a 'single version of the
truth' to the key decision makers.
Even in a challenging economy, leading manufacturers are
committed to their sustainability agenda. Aberdeen's research has
seen companies use an array of methods to manage energy and carbon
efficiently across their facilities. Leaders have truly taken a
holistic approach towards energy and carbon management by
establishing the right strategy and effectively executing the
strategy through changes in business processes, organizational
structure, knowledge and performance management.
To achieve the performance benefits of the Leaders,
organizations need to view energy and carbon management as more
than just a cost cutting and compliance exercise but instead find
the ability to take the organization to the next step of improved
productivity and financial benefits. To find out more about how the
Leaders are successfully implementing an integrated safety system,
read Aberdeen's "Energy and Carbon Management: A Roadmap for
Nuris Ismail is a research analyst with the Aberdeen Group.
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