How sustainable manufacturing supports a clean, circular economy—and vice versa

During the stillness and silence of shutdowns, when factories closed and supply chains began backing up and breaking, the world took a brief break from growth. It was a moment that highlighted the massive impact manufacturing and production have on the environment.

Linchpins of the global economic order, production and manufacturing are also major sources of pollution and environmental excess. Heavy industry alone requires around 149 million terajoules of energy every year, roughly 700 times more power than the most powerful nuclear weapon ever detonated, and it’s on the rise. An Accenture study found that inefficient manufacturing contributed to an annual 8-ton gap between the supply and demand of natural resources; narrowing that gap could create $4.5 trillion in economic growth over a decade.

Unchecked growth has been straining Earth’s finite resources for a long time. The world needs a new model for manufacturing, driven by macro trends such as addressing wealth inequality and climate change—practices that can do more while improving equity, reducing harm to the environment, reducing waste, and generating better opportunities for workers and consumers alike.

One benchmark for a more holistic and planet-healthy manufacturing industry can be found within the United Nations Sustainable Development goals, a widely respected measure of environmental and social progress. The sustainable consumption goal outlines the shifts needed to create a greener economy: By 2030, the framework calls for sustainable management of natural resources, halving food waste, a substantial reduction in waste production, and increased awareness of the benefits and potential of circular economy principles.

Additional targets encourage corporations to act in kind, updating public procurement programs to reflect sustainability goals, developing tools to monitor and document these changes, ending subsidies to harmful industries like fossil fuel, and transferring technology and financing to countries in the developing world. Other frameworks, such as the Lowell Center for Sustainable Products, takes this a step further, adding a sharper focus on social and economic justice, calling for fair wages and support for local community development.

This represents a paradigmatic change in economic thinking, moving away from the long-followed gospel of growth. Thomas Roulet and Joel Bothello, writing in the Harvard Business Review, questioned whether growth itself is a necessary condition for general prosperity. They propose that firms should redirect their strategies to add value to existing products or nudge product designs toward standardized components to thrive as competitors in finite markets.

A trend toward alternative methodologies to measure economic gain and performance—for example, The Genuine Progress Indicator, Better Life Index, Doughnut Economics, Ecological Footprint, GDP 2.0, and the Wellbeing Economy Alliance—suggest that traditional manufacturing has simply never dealt with the many negative externalities it creates. It may have to soon; in the United States, the SEC is expected to finalize a rule requiring climate risk disclosures for public companies, creating transparency about their climate impact to buyers and investors. The EU is currently finalizing a new Corporate Sustainability Reporting Directive as well.

Jeffrey Hollender, a social entrepreneur who founded Seventh Generation eco-friendly household cleaning products, agrees that, “all growth is not created equal, and what we need is called ‘net-positive’ or regenerative growth.” Businesses, he argues, and their manufacturing methodologies, should adapt to offer Earth and its inhabitants a future with the best chance for common well-being. By creating sustainable production systems, companies can help consumers engage in sustainable consumption.

Just as the term “manufacturing” applies to a seemingly endless array of products, there are also endless ways to adjust, alter, and rework the process of making goods to lessen their environmental footprint.

Sustainable supply chain management

First, firms can look at how they shift and move goods, and leverage logistics. Sustainable supply chain management, which addresses everything from sourcing goods to how they’re stored and shipped, can radically cut carbon emissions and widen the circle of sustainably minded companies. Supply chain emissions are typically over 11 times higher than operational emissions. Important steps include setting sustainability goals and enforcing those among suppliers via individual firms or collective industry-wide agreements. Companies can also focus on better methods of delivery and shipping, investing in electrified delivery trucks and more sustainable packaging.

Carbon footprinting

Looking at supply chains is one part of a wider carbon footprinting effort, which measures the overall carbon emissions impact of a company. This kind of analysis can identify other numerous places for positive change, such as making buildings more energy efficient, so factories create fewers emissions and cost less to operate.

Adopting circular economy practices

Embracing the circular economy—extending the lifecycle of products and their parts by eschewing a “take, make, toss” approach and designing products to focus on durability, reusability, repairability, and recyclability—has also been a popular path toward green manufacturing systems.

This can be accomplished by focusing on materials, like Levi’s Jeans, which offers recycled blue jeans and features repair and recycling stations in some store locations. It can also be done using a more holistic look at the product lifecycle, enlisting customer to treat the product as something to be leased, returned, or reused. Patagonia’s famous pledge to repair clothing for life creates more brand loyalty through responsible manufacturing and repair, while Interface, a flooring company, has used leasing and recycling models to grow its business and keep old flooring out of landfills. A Dutch firm, New Horizon, is even experimenting with recycling multi-story buildings, repurposing what’s typically a vast array of building waste into new homes, offices, and hospitals.

Lifecycle assessments and analysis

As a complement to the circular economy approach, lifecycle assessments look at the cradle-to-grave impact of a product. This type of analysis, which covers everything from source materials to transportation to waste disposal, can inform new ways of extending the useability of a product, or cutting waste from its creation. A somewhat related methodology, the Eco-Efficiency Analysis, created by BASF, calculates the environmental impact for six discrete categories: raw materials consumption, energy consumption, land use, potential toxicity, potential risks, and air and water emissions and solid waste. Researchers at the Ellen MacArthur Foundation found 45% of CO2 emissions can be eliminated by transforming the way goods are made and used.

The bottom line

Beyond the environmental benefits, the financial gains of these shifts can be significant for companies:

Many large multinational firms are investing significantly in large-scale sustainable manufacturing sites. Renault, the French carmaker, is building a Re-Factory that will make, retrofit, and recycle vehicles. The company aims to achieve net-zero emissions while creating 3,000 jobs.

In addition, the UN Millennium Development Goals (MDGs) view embracing sustainability in developing countries as a “leapfrog opportunity.” By skipping resource-intensive manufacturing and going straight to more competitive technologies, sustainable manufacturing can cut out an inefficient, polluting stage of growth.

Embracing sustainable production can yield significant dividends in businesses of all sizes, from consumer products and niche brands to massive industries as diverse as steel and sneakers.

Green steel, a seeming misnomer due to the incredible energy demands of smokestack-laden mills, is becoming a reality. Companies across the globe such as SSAB, ArcelorMittal, Midrex, and U.S. Steel are creating lower-carbon products and processes that promise to be cost-competitive in the near future.

Workspace-design company Steelcase embraces the circular economy by creating new materials and products made of completely or partially recycled content; its Phase 2 Program advises companies on reusing or recycling unwanted office furniture with a “zero landfill” goal. In the high-tech world, Fairphone has adopted the circularity concept as well. The Dutch firm makes more sustainable smartphones built to be modular, user-repairable, recyclable, and longer-lasting, with users keeping them for five years rather than the two-year industry average. The firm’s own lifecycle analysis found that by increasing the longevity of a smartphone by two years, it reduces the CO2 footprint of that product over its lifecycle by 30%.

“Fairphone’s first phone attracted ‘dark-green’ consumers, drawn to what they considered a change maker in the industry,” says Miquel Ballester Salvà, Fairphone’s circular innovation lead. “Now, we appeal to ‘light-green,’ or conscientious, consumers who don’t want to compromise on functionality.”

Government policies and incentives are also driving a shift toward sustainable production:

• In the United States, several new laws and government initiatives are incentivizing sustainable production. The Inflation Reduction Act allocates nearly $6 billion for projects aimed at reducing emissions from industrial or manufacturing facilities, which can be used to purchase, install, or implement advanced industrial technology. It also includes $250 million for an Environmental Product Declaration (EPD) Assistance program to provide grants and technical assistance for measuring, reporting, and steadily reducing the quantity of embodied carbon of constructions materials and products. As examples, the General Services Administration and the Department of Transportation are working to promote using low-carbon materials in construction projects funded by the Bipartisan Infrastructure Law.

• The European Union has several ongoing initiatives to drive carbon reduction and promote sustainability, including the ongoing Sustainable Products Initiative, along with funds available through the European Green Deal.

Perhaps the best role for governments is that of a catalyst driving technological evolution, which would include grants, tax benefits, and other incentives that encourage the private sector develop and consumers to adopt green technology, funding for sustainable infrastructure investments, using the power of procurement to support sustainable firms, and seeding basic science and R&D to accelerate new ideas.

Massive investments in battery technology and purchasing electric vehicles for government-controlled transit agencies has helped China sprint ahead in the EV and battery market. Now the US is looking to catch up through incentives and the Inflation Reduction Act. It’s vitally important that governments think long-term, providing a runway for startups and market certainty that allows funding and regulatory systems to catch up to tech advances.

Political challenges, especially short-term thinking, can stand in the way. Technology can struggle to find an audience and scale while maturing and becoming profitable. Powerful constituencies can push back against change. But proper government encouragement and support can overcome these obstacles.

Embracing sustainable production and consumption protects and preserves resources for future generations. It’s not surprising that, while significant momentum already exists, a deeper disruption is likely among the younger generations.

“It’s really Generation Z that’s likely to bring about broad changes at work and in the way we consume,” says Wendy Amstutz, director of thought leadership at educational publisher McGraw-Hill. “My 17-year-old is shaping his thinking about how society works during this pandemic, and so are his friends. This shift in thinking is likely to be profound.”

The present crop of economic thought leaders, government officials, and advocates has spawned resiliency strategies such as circularity and degrowth. But the next generation will likely provide the customer demand that ultimately drives their adoption—revising what “business as usual” means or doing away with the concept altogether.

This article has been updated. It originally published May 2020.