Current challenges and barriers to progress

The widely varied field of UK manufacturing continues to feel the impact of not only the cost-of-living crisis, which is dampening sales of consumer goods in particular. Companies across different segments, including food and drink, heavy industry and precious metals, are also grappling with rising energy prices, fluctuating commodity costs and supply chain disruption, all fuelled by political tension around the world. In our survey, 67% of manufacturers mentioned political instability, armed conflict, the energy price crisis or cost of living concerns as the key macro trends presenting the biggest challenges to their sustainability strategy right now.

During the roundtable conversation, the panel of manufacturing sustainability professionals, each with their own ambitious – and in some cases, science-based – carbon reduction targets, raised numerous potential barriers to progress. Most agreed that enhanced reporting and disclosure demands were eating into internal resources, with one participant arguing that the “tsunami of disclosures and requests for information is, in and of itself, a full-time role for multiple employees with consultant support.” The fact that different frameworks require different information, using different timelines, is not helping matters. A convergence of different frameworks in the future will be helpful. In the meantime, there is a real focus on upskilling members of other functions on sustainability so they can help with the reporting demands. “The accounting rules are changing; it’s a bumpy time in terms of sustainability reporting and disclosures. It would be nice to see that smooth out so that we can turn resources back to actually decarbonising.”

While funding for low-carbon manufacturing trickles through to UK firms (including the Government’s package of £45bn in grants which comes in 2025), investing in major innovation and ground-breaking technology remains a challenge. Trialling new pieces of kit can be very costly initially and the return on the investment longer than expected. While plenty of low-hanging fruit projects have been completed in facilities and factories, the “big, uncomfortable stuff” remains. Yes, companies can seek out grants and incentives, but when they operate in multiple countries, accessing funding is tough.

Uncertainty about legislation was a big topic of conversation too. In our survey, 75% of manufacturers said they disagree with the assessment that the UK government already has the policies in place to achieve net zero by 2050, and many around the table are frustrated by delays in regulation which would really drive action. For example, the UK’s deposit return scheme which could really boost recycling rates has been “going round and round in circles”. “We have a huge element of our footprint tied to the end of use of products, which is tied to recycling rates. So having infrastructure in place to help that take place is super important,” said one participant.

Tougher targets are driving innovation and board-level oversight

But the conversation wasn’t all doom and gloom, with most participants excited about their latest projects, investments and moves to ramp up action internally. Ambitious goals are helping to foster innovation, not just within sustainability functions, but across manufacturing businesses. One company pointed to its new internal carbon price which has enabled some schemes to be agreed and completed because of their environmental credentials, not just on based on the return-on-investment numbers.

Of course, reducing Scope 3 emissions is a big problem for all companies. But some manufacturers are homing in on where they can have the biggest impact, particularly in the food sector. “It’s not just about spending money on the things that are most carbon impactful; it’s also about balancing the long-term benefits from a nature perspective,” said one participant.

Many of the comments reflected an apparent shift in senior level engagement with sustainability issues. Internal restructuring, the introduction of ‘sustainability councils’ and the deeper integration of sustainability teams are all starting to have an impact. “I received an email a few weeks ago from somebody on the board wanting a KPI specifically on sustainability, which just brought a huge smile to my face,” according to one company where the “vast majority of people have sustainability related KPIs and their bonuses are directly linked to how the company is performing. That's really exciting.” Another participant pointed to the involvement of finance thanks to the introduction of Task Force on Climate-related Financial Disclosure (TCFD) requirements as being key to progress.

Collaboration is key, yet cumbersome

The commonly used buzzword of collaboration was commonly used throughout the conversation. It's clear the sector knows it must work with others if it’s to tackle some of the hardest challenges in earnest. Supplier collaboration is the only way to address – and pay for – Scope 3 reductions, everybody agreed. Working with suppliers can also yield innovation, as one participant explained, highlighting how those within the value chain can help to push for new products that use more recycled content, for example.

Dealing with the end of life of our products is another classic example of where going it alone is no good. But proper collaboration is not easy, as one panellist indicated: “Over the last year or so, I’ve been working with some of our competitors to try and establish an industry-wide program [for end of life of products]. It has failed because the collaboration between competitors has just proved too much of a challenge legally to create something that everyone’s happy with.” Recent rule changes by the Competition and Markets Authority – allowing more collaboration if there is an environmental advantage – will hopefully make it easier for manufacturers to work together.

Looking ahead

Many of the leading manufacturers have already picked the low hanging fruit. It’s time for innovation, and it’s coming. “Sustainability is gradually and incrementally getting popped up the priority list and there’s a huge optimism towards the cultivation of innovation in companies. That’s going to accelerate and hopefully enable companies to decarbonise more,” said one participant.

Others were more realistic, arguing the need to still figure out how to better articulate the balance needed between short-term investment rate requirements for the longer-term carbon benefits. “Getting people to understand that the payback or the benefit doesn’t come through for 5-10 years is a difficult sell.”