Efficiency can net manufacturers £10bn

12th August 2013

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UK manufacturing could increase annual profits by £10 billion and reduce carbon emissions by 27 million tonnes a year if companies adopted widely proven resource efficiency measures, say researchers at Next Manufacturing Revolution (NMR)

According to NMR, a not-for-profit initiative run by Cambridge University's Institute for Manufacturing, the online sustainability network 2degrees and consultancy firm Lavery Pennell, manufacturers could add billions to their bottom line through greater energy efficiency, better collaboration with suppliers, cutting operational waste and adopting circular-economy business models.

After a 12-month study of the sector, the researchers concluded that, although manufacturers in the UK had improved resource efficiency by 10%-15% over the past 10 years, leading firms had achieved a 50% improvement.

According to the report, if all UK manufacturers reduced their energy intensity by 4% a year, in line with best practice in the chemical and automotive companies, the sector could save £1.9 billion and cut annual greenhouse-gas emissions by 19 million tonnes.

However, the greatest opportunities for increased profits and productivity lie in a circular-economy approach to materials, concludes the report. "While recycling rates are high in the UK, there is minimal activity in higher value circular resource flows.

For example, remanufacturing accounts for just 1% of the UK manufacturing sector's turnover," it states. NMR estimates that remanufacturing could generate an additional £5.6-£8 billion of value each year for companies making electronics, machinery and transport equipment. But it warns that a lack of skills and infrastructure, as well as difficulties in gaining senior executive buy-in and collaboration along supply chains, is hampering such efforts.

The report was supported by business secretary Vince Cable, who said: "In recent years we have seen increasing volatility in global commodity prices and concerns about security of supply.

"A greater focus on efficiency in manufacturing processes looking at use of materials, energy and water, as well as a greater focus on recycling in production and at the end of product life, will help firms reduce costs and increase resilience."

In a separate report, the Circular Economy Taskforce warns that companies wanting to switch to more resource-efficient business models need more support from the government.

In its first report, the taskforce, whose members include BASF, Boots and Unilever, urges ministers to clarify competition laws to enable firms to work together to retrieve materials and to implement the Ecodesign Directive more rigorously to ensure that products are designed with resource recovery in mind.

"Requiring products and materials to be manufactured so they are easier to reuse, remanufacture and recycle rewards innovation in design [and] creates the opportunity for businesses to develop new, circular business models without telling them how to do so," states the report.

The taskforce recommends establishing a "feebate" system, which would financially penalise products less able to be circular, and use the income to reward products that are more able to be circular.

Meanwhile, the latest government figures confirmed that the UK's low-carbon and environmental goods sector continued to outperform the rest of the economy in 2011/12, with sales up 4.8% year on year.

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