It is easy to visualize the contribution of innovation from manufacturing. One only has to consider the power of the computer revolution and the preponderance of a range of new manufacturing process technologies. From additive manufacturing to the Internet of Things, to advanced robotics, it’s easy to see the effects of innovation well beyond specific industries, and beyond the manufacturing sector itself. Computers have fundamentally changed the workplace for everyone. Robotics, artificial intelligence, and 3D printing may do the same.
Data certainly confirm this view of the manufacturing sector as being a powerful innovation generator. Two accepted metrics, 1) R&D spending on the input side, and, 2) patents on the output side, tell the story. R&D is not, by any means, a complete measure of innovation investment. But, it arguably demonstrates a company’s commitment to a strong innovation outcome. Nonetheless, patent growth correlates to innovation. Manufacturing R&D investment has been 4 to 5 times greater than nonmanufacturing R&D.
With dominance in R&D and patents, the manufacturing contribution to future economic growth and competitiveness is clear. At an active time of manufacturing policy consideration, it is important for the public, business leaders, and policymakers, to move away from the stereotypical view of outdated manufacturing and see the light of innovation generation that comes from manufacturing companies.
Myth No. 4: Manufacturing is Unduly Harmful to the Environment
The commonplace picture of U.S. manufacturing as a smokestack industry underlies a longstanding concern about the environmental damage that can arise from manufacturing processes. In reality, manufacturing profitability and environmental outcomes aren’t mutually exclusive.
Market Incentives Support Environmental Stewardship
Regulations and new technologies have made a difference to the environmental footprint of the U.S. factory sector. Further, public-private partnership efforts have proven to be wise investments. Such programs include Building Better Plants, a U.S. Department of Energy program that collaborates with leading manufacturers and water utilities to improve energy efficiency and competitiveness. Other effective programs include the Environmental Defense Fund and the Carbon Disclosure Project, the latter producing reports on how companies rate in their carbon footprint. However, the source of positive change is broader and deeper. The fundamental economic model that governs the thinking about the economy and the environment has been rapidly evolving. No longer is strong economic growth and environmental stewardship seen as being an unfortunate tradeoff. Resource efficiency is not only good for the environment, but also ultimately for companies’ earnings. As a result, there is now a consensus that environmental soundness is fully consistent with business soundness.
Lean Means Green
Lean manufacturing can be a key driver of the win-win relationship between profits and positive environmental outcomes. The ultimate goal of a lean journey is to merge quality with speed and low costs. One way in which this happens is a change in the operation of the supply chain. In the lean model, forecasted customer demands yield more responsive and more precise order delivery systems. By operating in the lean environment with its higher efficiency and greater emphasis on cost-cutting, U.S. manufacturers are positively impacting their bottom line. At the same time, lean companies are cutting down on raw material consumption, energy usage, waste, and pollution.
Measuring Company Environmental Results: The Carbon Footprint
The measurement of both environmental investments and environmental outcomes for an individual company remains a young science. Thus far, the carbon footprint remains the gold standard for gauging progress on the company level. Even carbon remains a difficult problem. The carbon footprint of manufactured products goes well beyond carbon emissions and consumption.xii It must also take into account the embodied carbon within the product. Thus, there needs to be a carbon output metric that aggregates carbon through the life cycle.
While firm answers have yet to appear on the carbon life cycle measurement challenge, there is anecdotal evidence of market-leading companies and key manufacturing industries thinking in a holistic sense about carbon emissions. A 2015 Fortune Magazine article, for example, discussed the efforts of Siemens, the automation giant. xiii Siemens planned to spend $110 million to reduce carbon emissions. The company’s goal is to cut its emissions in half by 2020 and to become carbon neutral by 2030. As one way of achieving such a challenging goal, Siemens has invested in more energy efficient manufacturing technologies. Dell, another company that is making a focused effort with its carbon footprint, is using information technology, such as big data and analytics, to reduce energy consumption in the manufacturing process.
European nations have demonstrated that the public sector can play a constructive role in carbon emissions reduction if it works within a framework that recognizes the growing tendency of markets to support environmental progress. In 2012, for example, the European Commission set targets for manufacturers of new cars and light commercial vehicles to reduce carbon emissions. Fines were enforced for non-compliance, but there were also productive innovation incentives. The EU incentivized member states to introduce measures to encourage consumers to purchase more fuel-efficient cars.