Why Shifting to Renewables Is the Key to Manufacturers Reducing Their Carbon Footprint

Article Highlights:

• The largest source of emissions for many manufacturers and their production facilities comes from energy consumption. Because of this, transitioning to renewable energy sources is one of the most direct paths organizations can take to reduce their carbon footprint.
• Fortunately, transitioning to renewable energies is not as daunting of a prospect as it was 10 or even five years ago. To cite two key examples, solar and wind power costs have fallen dramatically over the past decade, making two of our most practical forms of renewable energy fairly accessible for many businesses. 
• Another important shift happening across manufacturing relates to how sustainability is perceived. Whereas efforts to reduce energy consumption were once seen as objectives entirely independent of the rest of a company’s goals, organizations now often interpret sustainability in the context of supply chain risk management (SCRM).

Manufacturers across nearly every industry are facing growing pressure to become more sustainable. This pressure is coming from a myriad of sources: regulators are introducing stricter emissions requirements, investors are evaluating companies based on their ESG performance, and customers increasingly expect their direct and sub-tier suppliers to demonstrate more energy efficiency.

Because of all these new variables—and the growing expectations imposed by various critical stakeholders—reducing one’s carbon footprint in manufacturing is now emerging as a major strategic priority for businesses. And while manufacturers have worked for years to strengthen their energy efficiency, some are beginning to realize that optimizing operations may not be sufficient to meaningfully reduce emissions. 

The largest source of emissions for many companies and their production facilities, after all, still comes from energy consumption—particularly the electricity generated from fossil fuels. Because of this, transitioning to renewable energy sources is one of the most direct paths organizations can take to reduce their carbon footprint.

Why Energy Consumption Remains a Major Manufacturing Challenge

Manufacturing is inherently energy-intensive. Production lines, industrial heating systems, clean rooms, data centers, and large-scale automation workflows all require substantial amounts of electricity and fuel to operate consistently. And industries like auto manufacturing, semiconductor fabrication, chemical production, and heavy industry are more reliant on these processes than most other sectors, making them even more energy-intensive.

Historically, manufacturers in these and other industries prioritized reliability and cost when evaluating energy sources. Sustainability was often a secondary consideration—one that could be pushed to the side if it did not align with other, higher priorities. That dynamic is gradually changing, however, as carbon reporting requirements expand globally and companies are facing emerging expectations to quantify their Scope 1, Scope 2, and even Scope 3 emissions.

For many businesses, electricity consumption represents one of the largest contributors to operational emissions. Even facilities that have optimized their efficiency may still rely heavily on power grids dominated by coal or natural gas. This creates a difficult reality: operational improvements can reduce energy usage, but only up to a finite point. To achieve more significant emissions reductions, businesses must start turning to cleaner energy.

Because of this, adopting renewable energies can serve as a powerful avenue for manufacturers determined to reduce their carbon footprint.

Renewable Energy Is Becoming More Accessible for Manufacturers

Fortunately, transitioning to renewable energies is not as daunting of a prospect as it was 10 or even five years ago. To cite two key examples, solar and wind power costs have fallen dramatically over the past decade, making two of our most practical forms of renewable energy fairly accessible for many businesses. 

One of the other challenges businesses have historically faced is finding the appropriate framework for setting up renewable energy at their facilities. Manufacturers now have several avenues for incorporating renewable energy into their operations, paths that give them flexibility and optionality when carrying out this consequential transition:

• On-site solar panel installation
• Wind energy procurement agreements
• Renewable energy credits (RECs)
• Utility green energy programs
• Battery storage systems
• Microgrid infrastructure
• Long-term power purchase agreements (PPAs)

Some large global manufacturers have already made major commitments to using renewable energies. Automotive companies, semiconductor manufacturers, and consumer electronics companies are increasingly investing in renewables as part of broader sustainability initiatives. 

The Initiative Accelerating the Path to Renewables

This transition is best exemplified by the RE100. The RE100 is an initiative led by the Climate Group and the Carbon Disclosure Project (CDP) seeking to encourage global businesses to actively pursue a path to carbon neutrality. Since the project’s initial launch in 2014, hundreds of businesses have committed to RE100’s staggered goals: participants agree to shift to 100% renewable energy by 2050, with interim targets of 60% renewables by 2030 and 90% by 2040.

Among RE100 members are some of the largest, most recognizable manufacturers in the world, including: 

• Apple
• Google
• DuPont
• General Motors
• Kia Corporation
• Samsung Electronics
• BMW Group
• Acer
• Applied Materials

Initiatives like RE100 demonstrate that there’s both a desire and viable path for large, energy-intensive organizations to reduce their manufacturing carbon footprint by moving to renewable energy sources. 

Renewable Energy Supports Both Sustainability and Resilience

Another important shift happening across manufacturing relates to how sustainability is perceived. Whereas efforts to reduce energy consumption were once seen as objectives entirely independent of the rest of a company’s goals, organizations now often interpret sustainability in the context of supply chain risk management (SCRM). Concerns over energy volatility, geopolitical instability, and grid reliability have all highlighted the degree to which operational resilience can often depend on an organization’s energy sources. 

To that end, renewable infrastructure can help manufacturers improve that resilience in several ways. First and perhaps most importantly for cost-conscious businesses, on-site renewable energy generation can reduce a company’s dependence on unstable utility pricing. In an era dominated by geopolitical conflict and supply chain disruptions (see the Strait of Hormuz and its global energy ramifications), manufacturers with significant renewable energy capacity can often insulate themselves from the price surges that accompany trade wars, armed conflicts, and the supply chain events that increasingly stem from asymmetrical warfare. 

In addition, when renewable systems are paired with battery storage, businesses can improve their continuity during periods of disruptions to the electricity grid. Manufacturing downtime can be extremely expensive—particularly for highly automated facilities and semiconductor fabs that rely on high production yields. Companies that produce energy via renewables and store that energy in batteries are protected from the costly volatility ushered in by power outages.

Finally, companies that adopt renewable energy sources strengthen their ability to navigate future carbon-based regulations. Governments around the world are continuing to introduce stricter carbon reporting standards and emissions targets, and those manufacturers that start their decarbonization efforts now will almost certainly be better positioned to adapt to the compliance requirements imposed by those ESG-related directives.

Companies that produce energy via renewables and store that energy in batteries are protected from the costly volatility ushered in by power outages.

Challenges Manufacturers Face When Moving to Renewables

Although renewable energy adoption offers significant benefits to those businesses able to make a full or partial transition, exchanging fossil fuels for wind, solar, and other renewable energy sources is rarely seamless. One of the largest challenges—and a stumbling block right out of the gate for companies concerned about capital investments—is infrastructure cost. 

Renewable installations, battery systems, and other large-scale infrastructure projects often require substantial upfront investments—a proposition that can scare away smaller manufacturers concerned with their ability to justify the initial expenditure. Establishing the means necessary to utilize renewable energy sources can cost millions of dollars, and small and midsized businesses (SMBs) need to find a way to finance these sustainability efforts—projects with clear, rational goals, but also with longer time horizons on financial returns. 

A second challenge involves energy consistency. Some manufacturing operations require uninterrupted high-load power delivery, and renewable generation can fluctuate based on weather conditions. This is why many organizations adopt hybrid models, combining renewable sourcing with electricity sourced from the grid.

Finally, geographic limitations may restrict access to renewable energy for companies based in locations where government regulations or weather conditions make wind and solar infrastructure a less viable option. In these cases, organizations need to rely on resourcefulness and ingenuity, looking for alternative paths to leveraging the renewable energy infrastructure increasingly prominent throughout the globe. 

One of the largest challenges—and a stumbling block right out of the gate for companies concerned about capital investments—is infrastructure cost.

The Future of Decarbonization in Manufacturing

Over the remainder of the 2020s, renewable energy will likely become a core operational strategy for many manufacturers. Whether it’s because of the cost-effectiveness, the regulatory advantages, or the value it can provide from a reputational standpoint, companies are in the early stages of a long-term exodus away from fossil fuels and toward renewables. 

Businesses interested in adapting to a regulatory environment that’s evolving to incorporate more ESG principles—including energy efficiency and carbon neutrality—can strengthen their positioning with compliance tool Z2. Z2 works with companies to achieve compliance with over 180 global regulations that span ESG, chemical, product, and trade, including REACH, RoHS, EUDR, SCIP, California Proposition 65, and PFAS. By partnering with Z2, businesses are able to:

• Understand their full regulatory data requirements.
• Rely on a team of experts to carry out supply chain due diligence.
• Participate in a full compliance risk analysis.
• Receive reports and declarations for all their compliance obligations.

To learn more about Z2Data’s compliance services, schedule a free trial with one of our product experts.