Background:

At FINN Partners, I penned a byline for sustainability consulting firm, ENGIE Impact, that was attributed to a Business Director at the firm as part of a comprehensive media strategy to grow the brand's share of voice in the APAC region. This piece examined the state of the region's manufacturing sector, and provided a strategic roadmap that aligns with global sustainability goals and actionable insights for holistic decarbonization.

Format: 

Media byline

Outcome:

This byline was picked up by South China Morning Post and published on 4 December 2022.

Asia’s Net-Zero Countdown

The Asia-Pacific has become a global hub for manufacturing, accounting for some 48 per cent of the world’s output. But with the growth of manufacturing comes its share of climate-harming emissions. The sector, which requires an immense amount of thermal energy, power and water, has been a major contributor to waste and carbon emissions. In the Asia-Pacific, this sector accounts for an estimated 40 per cent of greenhouse gases.

To keep within the carbon budget to limit global warming to 1.5 degrees Celsius over pre-industrial levels, the sector’s emissions have to fall by 4-6 per cent annually by 2030 – reversing the 1.8 per cent annual increase from 2010-2019.

In light of renewed pledges from eight of 10 Southeast Asian governments to achieve net-zero carbon emissions by 2050, high emissions from the sector are no longer just a growing concern but a direct obstacle to the Asia-Pacific’s net-zero goals and ability to fulfil international commitments. Given the Asia-Pacific’s ambitions to grow and diversify its manufacturing sector, manufacturers must correct the course of their operations and establish a more sustainable growth trajectory.

From ensuring raw materials are sourced responsibly, to maintaining reduced levels of energy and water consumption, manufacturers face increasing pressure to adapt processes and resources to align with sustainability goals and mandates.

Through our work with manufacturing companies, it is clear there is no lack of awareness of the urgency to reduce emissions, nor a lack of ambition to do so. But business leaders are under pressure to balance short-term output and productivity goals while investing in longer-term decarbonisation initiatives.

Often, well-meaning initiatives are not holistic enough, leading to siloed approaches addressing immediate regulatory requirements or short-term cost or energy savings. Taking isolated action, typically on low-hanging fruit, can create an illusion of progress. There needs to be a fundamental shift in how companies think about their pathway to net zero. From engineering and operations, to finance and procurement functions, many stakeholders make independent decarbonisation decisions according to differing timelines.

But setting and achieving effective decarbonisation goals require a customised whole-system approach. Companies must secure a broad base of stakeholder collaboration and alignment as early as possible.

To develop the least-cost pathway to emissions reduction, manufacturers must create a road map that involves technology-agnostic optimisation.

Lowering energy consumption is the most effective and efficient way for companies to reduce emissions. Manufacturers can increase efficiency by cutting final energy demand or optimising utilities production. Many countries have set regulatory standards and grants to help manufacturers, a recent example being Singapore’s Energy Efficiency Grant. But leaders must ensure the energy efficiency lever is not a one-off exercise – it requires continuous improvement.

Companies must also decarbonise heat – often their biggest challenge. There are proven solutions such as geothermal solutions, biomass, electric boilers, solar thermal and heat pumps, as well as biogas and biomethane for higher temperature needs, with further promising innovative solutions on the radar. Leaders need to identify the relevant solutions by assessing availability, regulatory constraints or incentives, and physical, technical and operational requirements.

Manufacturers also need to consider renewable energy options. While the region is still largely dependent on fossil fuels, many renewable procurement models are already available. Decision-makers must consider feasibility, quality and the economics of these options, develop a flexible strategy and be open to innovative solutions when seeking the most advantageous mix.

But to decarbonise the emissions-heavy manufacturing sector, large capital investment is often needed. Moreover, energy efficiency investments often compete for corporate funds and may include difficult recommendations such as replacing functional assets. Too often, investments in technologies are made using very traditional capital allocation guidelines that prioritise returns on investment or a payback cut-off in a relatively short time frame, without consideration for a long-term investment framework.

The better approach is to consider the total cost of ownership that includes future technologies and sourcing, and perform risk assessments through an analysis of key parameters – to make clear the full budgetary impact of a long-term strategy.

Setting and achieving decarbonisation goals in the manufacturing sector requires a customised, organisation-wide approach and site-by-site understanding to establish the best way to transform for long-lasting benefits. A bottom-up approach – scaling up from the factory floor to organisational strategy – lets companies customise decarbonisation solutions at a facility level and consider operational issues through techno-economic optimisation. In this way, companies can focus on required investments, costs and emissions abatement.

Manufacturers in the Asia-Pacific must capitalise on green opportunities to decarbonise operations as an integral part of their competitive strategy. As regulators and markets take bold measures to implement net-zero goals, manufacturers have never been in a better position to accelerate their decarbonisation journey.