The majority of consumers are prepared to pay more for products produced in a sustainable way (EY Future Consumer Index). They now expect transparency in operations and leading organizations are offering this risk alienating risk – balancing risk management and risk mitigation to create competitive advantage. In the last few months, the industry has continued to invest in redesigning packaging responsibly, redesigning products, reducing energy consumption, recovering and recycling water usage during manufacturing and carbon-neutral factories.
As you move up the net-zero ladder, irrespective of your maturity and complexity, you need to understand your business’ energy use. To illustrate this, let’s deep dive into the hot topics of these two key focus areas for nearly every COO: Energy Management and Hydrogen.
Smart Energy Management. Knowledge is power
Energy consumption is generally well understood at a high level, but manufacturers need to more clearly understand its origin, destination, distribution, and potential to reuse. There is a renewed focus on energy management and when it comes to smart factories, it’s time to get out of pilot mode and deliver real change at scale in this area. Smart Energy Management solutions treat energy, air, and waste as a part of the production bill of materials and respond to energy waste in real-time. This helps to optimize energy use, reduce costs (especially valuable in times of increasing rates), harness new revenue streams (reducing payback time of investments), improves operational resilience (by cutting unplanned downtime of critical assets caused by energy power outages) and helps to reach decarbonization goals.
As a critical first step towards energy management, start by mapping out the current state of energy consumption and establish a baseline (at category or regional level) from which to improve performance. Next, define your vision and mission and set targets. To support decisions about the future roadmap, perform a cost-benefit analysis and develop a business case that includes incentives and opportunities.
Green Hydrogen. From net-zero to net-positive
The importance of hydrogen in the transition to decarbonization is no longer in doubt. Its ability to store large amounts of energy over long periods of time at competitive costs (compared with current battery technology) provides a cost-effective solution to seasonal imbalances between renewable generation and energy consumption. Despite remaining challenges to achieve its full potential, new technology, the right incentives and accelerated reduction of energy bills up to ~45% help to unlock profit in EBITDA and top-line growth.
As technology advances and costs come down, green hydrogen has an enormous potential to play a huge role in reaching your net-zero goals. Leading manufacturers have therefore created an ‘hydrogen ecosystem’ with its stakeholders, and its investors in particular. Their combined efforts to research, develop, and produce the technologies needed will be instrumental in reducing the cost and increasing the efficiency of hydrogen applications.
As a COO, you should monitor this market closely. Continuous regulatory developments and technological advances could quickly lead to opportunities to seize a competitive advantage. This is an important reason to consider green hydrogen now versus five to ten years from now. Bringing several opportunities for investments in this unlimited resource, we advise to start with a pilot implementation before scaling up. Start with a feasibility study to work out the future set-up with a concrete business case and value proposition. This may include scenario modeling for a partner ecosystem and planning for the pilot project.