Introduction

PwC has conducted research into the automotive industry, specifically in this instance focusing on the manufacturing sector and the ways they can tackle cost, skill, and carbon challenges to provide a competitive advantage and sustainable business practices.

In this POV, Responsiv will summarise and interpret key findings based on research done by PwC into the Automotive Manufacturing industry and how they believe they can tackle costs by turning to sustainable practices.

PwC suggests there is a key strategy that can help automotive manufacturers tackle all these challenges: going green.

The pressure for organisations to focus on environmental, social, and governance (ESG) reporting is external. It is exerted primarily by government policy makers and customers (43%) looking for credentials in the area of sustainability through their suppliers and supply chain partners.

This focus on ESG and decarbonisation means automotive manufacturers need to start reporting their efforts so that they can attract new investors and customers. The Effort Sharing Regulation (ESR) introduced in 2018 adds to this by making whole supply chains responsible for activity that happens up and down the chain in regard to emissions and human rights.

PwC find that 43% of manufacturers have increased their focus on ESG, and a further 51% have invested in a board led ESG strategy.

New market opportunities and the need to attract investment has created a new sense of urgency for industrial decarbonisation. Having access to supply chain ESG data can be the difference between winning and losing a contract. For internal and external development, manufacturers will need to clearly understand their supply chains for valuable insight into inefficiencies that can be improved upon.

Key Findings

In this section, Responsiv will be exploring and interpreting what we believe are key findings from the PwC report on ‘How Manufacturers can Tackle Cost, Skills, and Carbon Challenges All At Once.’

1. Digitisation and green tech in manufacturing is creating positive change
2. Retaining and retraining talent with the introduction of green technology
3. Moving towards decarbonisation now puts organisations ahead of the curve

Digitisaton and green tech in manufacturing is creating positive change:

Data is a powerful tool. Data insight allows organisations to identify areas of inefficiency and improvement, digitisation makes this data consumable for effective decision making.

Making this data available and interpretable is the first step in fulfilling ESG reporting responsibility.

PwC research found that 33% of manufacturers said ‘digital adoption’ progressed their energy efficiency, and another 33% stated that reduction of emissions was attributed to process improvement.

Process improvement is the streamlining of existing processes (or creating new ones if necessary) to remove any bottlenecks that are not serving the completion of the process. Streamlining processes can start before even considering automation and digitisation, but requires this data insight to understand where the issues are and why they are happening.

Utilising advanced technology allows manufacturers to make strategic decisions, decarbonise their value chain, and report this to the market.

In their aim to improve efficiency and reduce carbon emissions, PwC found that three quarters of manufacturing CEOs are investing in technologies like machine learning, AI, and cloud to collect real-time data about the use of energy in their processes.

Applying these technologies allows them to move towards their goal of reducing carbon emissions by using real-time data to make decisions across the value chain.

Technology can support many business goals, including becoming more sustainable. Organisations should be taking advantage of what is available to support short and long-term goals. With technology enabling innovation, replacing traditional processes with more sustainable ones, optimising the use of resources and tracking sustainability progress.

Retaining and retraining talent with the introduction of green technology:

Skills shortages are a global issue that effect all industries and organisations. Labour is available, but necessary skills have been in high demand with low supply.

Green technology includes solar panels, carbon capture and storage methods, and electric vehicles. Expert knowledge on these technologies is required to ensure they run as expected and are maintained for return on investment.

With these new technologies (specifically carbon capture and storage methods) on the rise, new job roles are being created. PwC research found that 52% of manufacturing companies are in the process of upskilling their workforces. Employers should be ready to give employees the skills they need as these green jobs grow; 2.2% of all new jobs are being classed as ‘green.’

As these new roles develop, the skills gap is growing.

Organisations can address the skills shortage with retraining programmes to give employees the necessary skills to work with these new technologies. Taking this step can further an organisation’s progress to net zero as they now have the resources to monitor, measure, and manage these actions and outcomes.

Organisations can also partner with technical experts to mentor staff on relevant processes and make use of technologies like machine learning to move towards sustainability. Outsourcing technical or hard to find skills is a solution that saves cost whilst providing the resources so sought after to achieve strategic goals.

PwC found that 86% of employees want to work for companies that share their values, so focusing on decarbonisation may be seen as attractive to those seeking these specific green jobs. Sustainability goals could be the decision between employees choosing to work with a company or not, so focusing on this in a time where attracting new talent is an industry wide challenge is key may have a multi-faceted return on investment.

Moving towards decarbonisation now puts organisations ahead of the curve:

Due to the high demand of customers and investors wanting sustainability credentials, there is no better time than now for organisations to start their decarbonisation journey.

Organisations can start with small steps like migrating to cloud or ensuring existing cloud platforms are optimised for efficiency. With an optimised cloud environment, organisations can use data management tools to track metrics for sustainability and understand where changes can be made for efficiency, whilst also fulfilling their ESG requirements.

PwC see the industry leaders as those who are taking steps towards decarbonisation before clear regulations are imposed. Putting the groundwork in place based on organisational strategy and existing regulation will allow companies to get ahead of the curve and thus the competition, and make it easier to adapt as regulation is defined.

Choosing a scalable solution/platform will allow organisations to fit the solution into their overall strategy and have the two growing simultaneously alongside each other as regulations and processes change.

Conclusion

Manufacturing organisations need to work together to take steps towards decarbonisation, focusing on acting now to see long term benefits.

This will be driven by external factors for a lot of organisations, with pressure from the economy (cost increases), skills shortages, and ESG reporting responsibility. Investing in technology to address these pressures may cost now, but will pay dividends in the long term.

Data is the most powerful means organisations can utilise in achieving their goals. Investing in data optimisation and visibility tools will provide organisations with the ability to make evidence-based decisions to improve operations in line with business strategies.

Read the PwC report and find out how industrial organisations can take steps towards decarbonisation here: Decarbonisation: How manufacturers can tackle cost, skills and carbon challenges and drive competitive advantage – PwC UK