Efficiency in Manufacturing Could Ramp Up Greenhouse Gas Savings

Businesses today are competing in a dynamic marketplace, constantly trying to keep pace with new technology and rapidly changing consumer expectations. They are being asked to deliver goods and services at a faster pace than before and at lower costs to remain competitive. At the same time, it has become critical for companies to minimize the environmental impact of their operations. This is important not only in view of rising consumer consciousness but it also makes great business sense; energy efficiency spells reduced costs and lower dependence on fossil fuels.

Manufacturing, which accounts for about 35 per cent of the global electricity use and over 20 per cent of CO2 emissions, has a sizable opportunity to reduce its carbon footprint. According to International Energy Agency (IEA) estimates, the challenge of rising greenhouse gas (GHG) emissions could be handled through the global application of best available technologies in the five most intensive manufacturing industries – chemicals, iron and steel, cement, pulp and paper, and aluminum. In doing so, energy consumption could be reduced by between 13 percent and 29 percent.

With this large potential to cut down GHG emissions, why don’t we see widespread adoption of energy efficient measures by manufacturers? The key reason is that many companies remain concerned that this would involve significant changes to their production techniques that will not only increase costs but also impact product quality and time-to-market. Such concerns are not really true. A 2009 report by consulting firm McKinsey showed that the manufacturing sector can set the ball rolling through a large number of no-cost or low-cost opportunities. In fact, the sector could reduce its emissions by over 30 percent through such opportunities.

More importantly, manufacturers can bring down their GHG emissions while improving their efficiency and productivity. There are several ways they can realize these twin benefits – by improving the energy efficiency of existing processes, by adopting new eco-friendly processes and technologies, by using renewable sources of energy and finally, by reducing the amount of waste and hazardous byproducts generated by their operations.

One example of a technology that helps manufacturers increase their efficiency and reduce emissions is co-generation or combined heat and power (CHP) technology. It captures waste heat and converts it into energy and therefore, requires less fuel than equivalent separate heat and power systems to produce the same amount of energy. It also eliminates the transmission and distribution losses involved in electricity transfer due to its being located at or near the point of use. Still, there are other ways to generate “green” electricity for manufacturing industry. Let me give you an example for Project & Structured Finance unit of Siemens Financial in Belgium: The Tessenderlo power-station is a gas fired combined cycle power station in strict compliance with the latest environmental regulations. Indeed, because of their low carbon dioxide emissions, combined cycle power plants are currently the most environmentally compatible fossil-fueled generating stations. Furthermore, with an efficiency of well over 58 percent the gas-fired plant is one of Europe’s most efficient power stations in operation making it more environmentally compatible than most other fossil fueled power stations. Thus the T-Power plant supports Belgian manufacturers in their efforts to reduce their GHG emissions by consuming eco-friendly energy.

Besides drawing on green energy, manufacturers have another opportunity to minimize their carbon footprint in remanufacturing. This is particularly relevant in areas such as motor vehicle components, aircraft parts, electrical and data communications equipment, compressors, office furniture and vending machines. Recognizing the opportunity, some companies have already introduced specialized collection, sorting and dismantling plants around the world, either to save spare parts or to produce low-cost versions of their high-end products.

Over and above the positive effect of energy efficient manufacturing on society, clean energy policies can revive the sector as a whole by creating new jobs. At a time when the world economy continues to suffer the impact of the recession and unemployment poses a growing challenge for most of Europe and the US, improving manufacturing efficiency and reducing GHG emissions offer a viable solution to the challenge. A renewed focus on efficiency in manufacturing can not only conserve the environment but also help jump start the economy.

Roland W. Chalons-Browne is President and CEO of  Siemens Financial Services GmbH; Munich. Based in Munich, he is responsible for leading Siemens Financial Services business worldwide. Roland has been CEO of Siemens Financial Services Inc. in the U.S. since October 2005. Based in Iselin, New Jersey, he was responsible for leading commercial finance and leasing business across North America. Prior to joining Siemens, Roland served as Managing Director of WestLB in the Americas from 1989 through 2004, including securitizations of future cash flows, project and structured finance deals, and transactions in natural resources. The Financial Services unit of Siemens is an international provider of financial solutions in the business-to-business area. The international network of financial companies coordinated by Siemens Financial Services GmbH in Munich, comprises more than 2,500 employees worldwide. Financial Services supports Siemens as well as other companies, with a particular focus on the Sectors of Energy, Industry and Healthcare. The unit finances infrastructure, equipment and working capital and acts as an expert manager of financial risks within Siemens. End of June 2011 the total assets amounted to EUR 12.8 billion. For more information see: www.siemens.com/finance.