More than 75% of the world’s 50 largest OEMs[1] are actively promoting ways their machines can deliver increased sustainability to the manufacturers they supply. This new study from Siemens Financial Services reveals how these leading OEMs define sustainability.
There's no doubt that manufacturers are investing more in sustainable practices around the world. Five key factors are driving this transformation.
First, many companies are taking ethical stances on sustainability, with more than 60% of executives and 70% of manufacturers considering environmental sustainability a very or extremely important part of their business strategy.
Second, regulators are imposing sustainability reporting requirements on large companies. This requires continuous improvement throughout the supply chain to meet climate targets. Manufacturing companies must promote sustainability in the industries they supply (such as retail, electronics, fashion, transportation, etc.). And in turn, suppliers of manufacturing technologies and machinery must offer sustainability-enabling features to their manufacturing customers.
Third, digitalization (or Industry 4.0) is now more closely associated with the efficient deployment of more sustainable manufacturing. Moreover, sustainability gains
often result in financial gains, such as waste reduction and cost savings
costs, and offer a competitive advantage. 76% of investors believe that the
climate change and decarbonization are quite important elements for
influence their investment strategy. At the same time, 54% of investors plan
to use impact investing or social impact investing[2].
Finally, corporate fundraising in public markets also focuses on attracting investor funds through "green" and "sustainable" bonds. Independent analysts assess a company's sustainability claims, and the price of the funds is sometimes subject to a "green premium"—in the form of a marginally lower interest rate demanded by investors. Raising capital in this way enhances a company's profile and sustainability credentials.
Why Sustainable Transformation Can't Wait
The urgency to invest in sustainable manufacturing is therefore driven by both financial benefits and competitive positioning. Early adopters simply begin to reap the financial benefits and savings more quickly—lower costs of energy, raw materials, water, consumables, catalysts, lubricants, and so on.
In addition to the opportunity mentioned above, manufacturers can also gain a competitive advantage by integrating sustainability while the market is still developing.
For companies that adopt these sustainable technologies first, sustainability claims can help them differentiate themselves from the competition and outpace rivals in sales or winning contracts.
Indeed, more and more calls for tenders launched by manufacturers now include requirements related to the sustainability of products and processes. Being among the first to respond to these new market expectations can therefore confer a significant competitive advantage[3].
Sustainability technologies almost always go hand in hand with digital transformation. The market for digital and more sustainable manufacturing reaches a “tipping point” when approximately half of manufacturers have invested “significantly” in digital transformation. Research predicts this “tipping point” will occur around 4 for large manufacturers and 5 for small and medium-sized enterprises. Those who invest in the first half of the cycle should gain a competitive advantage. Those who wait until the second half will simply be playing catch-up.
Currently, between 25 and 30% of manufacturers of all sizes worldwide have already adopted digital technologies, which constitute an essential basis for more sustainable manufacturing[6].
In other words, while many companies have yet to fully embrace sustainable technologies, those that do so quickly can gain a significant competitive advantage. But you have to act quickly, because this niche won't stay open for long.
What technologies are at the heart of sustainable transformation?
A new study from Siemens Financial Services shows that manufacturers are under pressure to invest in sustainability. In turn, machine builders are
also encouraged to enable their manufacturing customers to have a more sustainable production footprint, whether from a technological or financial point of view.
To provide insight into priority areas for sustainable investment, this study analyzes the sustainability characteristics of equipment and machinery promoted by the world's 50 largest production machinery manufacturers.
Although building a production machine generates some carbon, the majority of the machine's lifecycle emissions come from its use in a manufacturing facility. Therefore, machine builders are seeking to develop machines that help their manufacturing customers reduce emissions and improve production line efficiency.
The most significant sustainability gain is decarbonization and more efficient use of resources, particularly energy efficiency, which applies to most production machinery. The benefits of digitalization are almost as popular, in the form of productivity gains achieved through Industry 4.0, which allow manufacturers to do more with the same or less.
Circularity is also a major opportunity for most machine manufacturers. More than half offer refurbishment and retrofit options to their industrial customers to save natural resources in machine construction (which reduces carbon dioxide emissions, which can be included in the customer's indirect emissions calculation). Many manufacturers remanufacture used parts, sometimes using additive manufacturing or 3D printing, while digital twin technology enables the rapid development of new, more sustainable machines.
Water efficiency and the use of alternative or recycled raw materials are relevant only for certain machine technologies, primarily in the food and beverage (where water is a key raw material) and semiconductor manufacturing (which uses a lot of water for cooling) sectors. Other sustainability features, such as waste reduction, recycled materials, and flexible and modular designs, do not show significant industry trends.
Obstacles to investing in sustainability
Although manufacturers recognize the need to invest in sustainability and machine builders are developing more sustainable equipment, investment challenges persist. Globally, the economic and manufacturing outlook is subdued, despite occasional positive upturns. Inflation has driven up manufacturing input prices, putting additional pressure on manufacturing margins. In this environment, most companies prioritize cash availability to respond nimbly to changing or emerging market opportunities. Third-party financing is essential to advance sustainability in the manufacturing sector. Financing tools help machinery and equipment vendors sell their more sustainable solutions by facilitating manufacturers' investment through monthly payments, without the need to source and tie up large sums of capital. These financing solutions are typically offered by specialists who are familiar with the underlying technology and its benefits in terms of sustainability and business performance.
The main categories of funding include:
- Integrated Finance: Spreads costs over multiple years, aligning payments with cash flow while enabling immediate supplier payments. Operates independently of existing bank lines of credit and covers total costs of ownership through subscription models.
- Flexible Structures: Financing specialists are tailoring terms to make options affordable, offering low upfront or deferred payments aligned with operational benefits. Emerging models include managed services and “as-a-service” options tied to outcomes such as uptime or production.
- Retrofit Financing: Covers the modernization of existing machines, thus reducing costs and carbon footprint.
- Deferred Payment: Machine builders benefit significantly from being able to defer payment for components for up to six months. This flexibility allows them to align payment deadlines with machine order and delivery times, thereby optimizing their cash flow management.
Prioritizing sustainability in machine building
This article shows how machine manufacturers are enabling their industrial customers to be more sustainable. It describes areas of resource efficiency offered through new models or upgrades. These improvements reflect the sustainability needs expressed by industrial customers.
Looking at the importance machine manufacturers place on each of these sustainability areas, we see that energy efficiency and productivity gains from digitalization are the most widely applicable across all industrial sectors. However, areas such as water efficiency or the use of recycled raw materials are not always as relevant.
It's clear that nearly all manufacturing machinery manufacturers are focusing on improving the sustainability of their machines. However, in a challenging economic climate, the transformation to more sustainable production can only be optimized and accelerated when technology is combined with specialized financing tools that make the conversion affordable and compatible with companies' cash flows.
Tribune by Zakaria Jghab, President of Siemens Financial Services France (LinkedIn).
[1] Original equipment manufacturer
Selection of products
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