Sustainable production & manufacturing - SUM: Sustainability Management Wiki

Authors: Melanie Fitschen, Luise Leitsch, Jasmin Rehmeier, Madeleine Steeb
Edited by: Tom Glaeseker, Jens Holzkämper, Luca Thost, Tammo Resener
Last updated: December 29, 2022

1 Definition

1.1 Sustainable manufacturing

In 1992 at the United Nations Conference on Environment and Development, it was already recognized that new perceptions of the way people produce, consume, and work are necessary for sustainable development.¹ Today, one of the Sustainable Development Goals (SDG 12) established by the UN in 2015 also addresses sustainable consumption and production. Still, definitions of sustainable manufacturing are various² and inconclusive, and a common definition does not exist.³ Some define sustainable manufacturing as a system (e.g., production system) or as a paradigm, while others describe it as an approach or a strategy. The main domains however are process, product, customer, community, and employees. Overall, the definition proposed by the U.S. Department of Commerce is the most widely used and corresponds to the modern understanding of sustainability by addressing all three dimensions (economic, social, and environmental). It defines sustainable manufacturing as “the creation of manufactured products that use processes that minimize negative environmental impacts, conserve energy and natural resources, are safe for employees, communities, and consumers and are economically sound.”⁴⁵ Additionally, the U.S. Environmental Protection Agency (EPA) provides a Glossary of Sustainable Manufacturing Terms. This can be helpful for getting an overview as sustainable manufacturing is also referred to as sustainable design or green design, and several terms can be subsumed under or are part of the sustainable manufacturing definition, such as cradle-to-cradle manufacturing.⁶

1.2 Sustainable production

What can be challenging for organizations are the many intersections, synonyms, and subsumable terms in relation to sustainable production. Organizations must deal with all sorts of definitions and concepts, such as closed-loop production, which interrelate with sustainable production. Also, corporate functions, such as supply chain management or technology and innovation management, are closely linked to a sustainable production system.
A recognized approach of sustainable production many authors refer to has been developed by the Lowell Center of Sustainable Production (LCSP).²⁷ It refers to the triple-bottom-line concept of sustainable development. The LCSP describes sustainable production as “the creation of goods and services using processes and systems that are:

Non-polluting
Conserving of energy and natural resources
Economically viable
Safe and healthful for workers, communities, and consumers
Socially and creatively rewarding for all working people.”

Thus, to produce sustainably, the environmental effects and interactions, as well as social responsibility from a multi-stakeholder perspective and economic feasibility, must be considered within the production processes and systems.

2 Sustainability impact

2.1 Impact

Manufacturing and production can be considered both a threat as well as a solution to sustainable development.⁸ On the one hand, manufacturing contributes to the need for shelter, food, healthcare, and various other elements. It also helps in addressing global challenges, such as the need for green buildings and renewable energy sources, or it can contribute to sustainable development with the manufacturing of sustainable products. On the other hand, it has a negative impact on the environment⁴ as it promotes resource extraction and land conversion, as well as contributing to air pollution and water pollution by releasing different emissions. Thus, every production and manufacturing activity has an environmental impact based on the resources and services that are used.⁹ According to the World Research Institute, energy usage is the largest source of human-caused greenhouse gas emissions and is responsible for around 76% of these worldwide. Manufacturing and construction contribute to 12.6% of these total emissions within the energy sector. The industrial processes associated with cement, chemicals, and other such products also contribute significantly to worldwide greenhouse gas emissions as well as waste. Production and manufacturing are therefore substantially accountable with regard to climate change and global warming. Introducing more sustainable production practices to reduce energy consumption and generate less waste is key in averting the climate crisis.¹⁰
Production systems and processes not only influence the environment, but also affect the social dimension in terms of numerous aspects, such as psychological and physiological effects on employees, public perception, customer loyalty, and community engagement.⁴ Therefore, manufacturing production processes play a major role in promoting social responsibility. They can impact social risks and promote positive social impacts.¹¹ Avoiding risks and implementing sustainability in the process can, for example, improve employee commitment and the work culture and lay the focus on occupational safety issues.¹² Overall, production and manufacturing play an important role in sustainable development. As a result, environmental and social conscious production becomes fundamental to maintaining competitive advantages, averting risks, maintaining one’s reputation, and being able to operate globally.¹³ As the abundance of energy and materials is decreasing,¹⁴ the necessities of mitigating and eliminating emissions as well as minimizing resource extraction are major tasks within production processes. This ensures that nature can regenerate and that resources are preserved in the long term.¹⁵ Sustainable technologies and sustainable innovation management can be helpful tools in the process of making production more sustainable.¹⁶ The German “Umweltbundesamt” (UBA) provides the Cleaner Production Germany portal, which informs about different sustainable technologies and services, such as the circular economy. One aim of sustainable production is to modernize the economy from a linear to a circular one.¹⁷ A circular economy redefines growth and entails decoupling economic activity from the consumption of finite resources. It is underpinned by a transition to renewable energy sources and based on three principles: keeping products and materials in use, designing out waste and pollution, and regenerating natural systems.¹⁸

2.2 Indicators

To be able to measure sustainability in production, it is necessary to have benchmarks that can evaluate a company’s sustainability performance based on several factors. These benchmarks are called indicators and are internationally comparable numbers to measure the performance of organizations (e.g., the sustainability performance of production facilities of any country, size, or sector).¹⁰ Amongst others, companies use indicators to monitor developments or progress towards sustainability in manufacturing.¹⁹ Indicators of sustainable production are provided by many institutions. They are published in sets and have different priorities. Some indicators focus on specific areas of sustainability; others address specific business areas or sectors.

2.2.1 Sources and providers

Global Reporting Initiative

The most important initiative for assessing corporate sustainability is the Global Reporting Initiative (GRI),²⁰ focusing on voluntary sustainability reporting. It comprises 70 indicators, which are divided into the main dimensions of sustainability: the economy, environment, and society. These indicators are explained in detail in the indicator protocols, where the methodology, the scope of the indicator use, and other technical references are clarified.²¹²²

The Accton Technology Corporation, a company that designs and manufactures computer networking equipment, used several GRI indicators in its CSR Report 2019. It published, for example, its manufacturing operating costs (GRI 201) for the years 2017, 2018, and 2019 and the average number of training hours completed by employees during the reporting period (GRI 404). These include training courses on the topics of professional knowledge and skills, quality management, and environmental safety and occupational health, which are especially relevant to manufacturing processes.²³

Organization for Economic Cooperation and Development (OECD)

The international Organization for Economic Cooperation and Development (OECD) aims to develop better policies for improved living conditions by shaping a program that promotes wealth, equity, chances, and well-being for all.¹⁰²⁴ A guide provided by the OECD is the Toolkit for Sustainable Production. It includes 18 of the most important and widely applicable environmental performance indicators for organizational production. These indicators can be used to evaluate and promote the performance of facilities and support internal management in decision-making.¹⁰²⁵

Dow Jones Sustainability Indexes (DJSI)

The financial and sustainability performance of the top 10% of firms in the Dow Jones Global Total Stock Market Index are evaluated by DJSI. The indexes’ results represent benchmarks for investment firms and shareholders. Based on 12 criteria, the indexes mainly assess the economic performance of companies but also consider some aspects of the environmental and social dimensions.²⁶²⁷

NISTEP

The Japanese National Institute of Science and Technology Policy (NISTEP) conducts research and surveys to support government policies on science and technology. The indicators included in the NISTEP report are focused on corporate technological capability.²⁸²⁹

International Organization for Standardization – ISO 14031

The International Organization for Standardization provides several standards for sustainability management, including ISO 14031, an international environmental performance evaluation (EPE) standard. It gives suggestions for organizations looking to develop their own indicators of environmental performance and of how to practically use them. The standard addresses three EPE categories that are relevant for manufacturing: environmental condition, operational performance, and management performance.²³³⁰³¹

Ford Product Sustainability Index (Ford PSI)

The Ford PSI includes indicators from the three sustainability dimensions of economy, environment, and society, which are specifically adapted to automotive manufacturing. The guide covers different areas throughout the entire product life cycle and addresses sustainable production in its Green Operations Strategy for product creation and distribution.³²

Country-specific indicators

Country-related indicators show the sustainability of an entire country or region and serve as a decision-making tool by tracking indicators, such as ecosystem quality or policy performance, and the degree of sustainable development. These indicators are also relevant for sustainable production as they correlate with common indicators in this field and can provide guidance for organizations. Well-known country-related indicators are the 2005 Environmental Sustainability Indicators (ESI), the Environmental Performance Index (EPI) 2020, and the United Nations – CSD Indicators of Sustainable Development.

2.2.2 Indicators and measurement

Indicators of sustainable production provided by organizations do not only address the economic performance but also the environmental and social effects of production. Therefore, consideration of the triple bottom line is covered. In the area of sustainable production, technology and performance are additional indicator categories.³¹ Figure 1 shows a structure based on the different indicator categories in sustainable production with their subcategories. Based on the categorization of possible indicators, companies can choose key performance indicators (KPIs) to evaluate the sustainability of their processes and products linked to manufacturing.

Figure 1: Indicator categorization structure (own illustration based on ³¹)

Environmental stewardship

Environmental stewardship refers to the protection, preservation, and responsible use of natural resources through sustainable practices to improve the resilience of the ecosystem and human well-being. ³³ In this category, emissions into the environment, such as greenhouse gases in the form of carbon dioxide and methane, and solid waste as well as pollution by hazardous substances through production are relevant.³⁴ Resource consumption covers factors such as water, material, and energy and the land use associated with a production process. Preservation, habitat management, and biodiversity address flora and fauna species in a certain habitat. In order to measure the effects of a production process on these factors, natural habitat conservation presents the fourth subcategory of environmental stewardship.³¹

Indicator Category	Indicator	Interpretation	Source
Emissions	O4. Greenhouse gas intensity	GHGs produced during production per unit of output.	OECD Toolkit for Sustainable Manufacturing
Pollution	O7. Intensity of residual releases to surface water	Release of effluents per unit of output.	OECD Toolkit for Sustainable Manufacturing
	Life cycle air quality	Ethane and equivalent emissions released.	FORD PSI
Resource Consumption	O1: Water intensity	Consumption of water per unit of output.	OECD Toolkit for Sustainable Manufacturing
	Energy use	Share of renewable energy sources in total energy use.	UN-CSD
Natural Habitat Conservation	Ecoregion protection	Efforts spent on the protection of ecoregions.	2005 EPI

Table 1: Exemplary selected KPIs of environmental stewardship in sustainable production

The OECD Toolkit for Sustainable Production, in particular, includes the area of environmental stewardship in production, but the 2005 ESI, the 2020 EPI, the United Nations – CSD Indicators of Sustainable Development, and the FORD PSI also cover this area. Therefore, this category is covered by most of the indicator sets, especially in the field of sustainable production.

Economic growth

Cost, profit, and investment indicators are used to measure the economic growth of an organization. Not only do they measure the net profit or turnover values of a company or the costs of the different production steps, they also calculate the impact of investments,the most severe subcategory of an organization’s economic growth. Here, general finance-related investments as well as green investments that promote environmentally friendly investments are included in the calculation of the indicators.³¹The economic growth perspective of sustainable manufacturing is covered by the GRI and the DJSI.

Indicator Category	Indicator	Interpretation	Source
Profit	Net total return	Of the calendar year performance.	DJSI
Costs	Operating costs	Cash payments made outside the organization for materials, product components, facilities, and services purchased.	GRI 201: Economic Performance
Investments	Community investments	Voluntary donations plus the investment of funds in the broader community where the target beneficiaries are external to the organization.	GRI 201: Economic Performance

Table 2: Exemplary selected KPIs of economic growth in sustainable production

Social well-being

The social impacts of production processes and products are measured by social well-being indicators. The groups to which these aspects relate are employees, customers, and the surrounding community. They are directly and indirectly affected by the actions of a company, and taking these impacts into account is a prerequisite for an organization’s socially sustainable behavior. Employee indicators cover employee satisfaction and their personal development, as well as occupational health and safety aspects in the production process. Due to human rights matters and the connection between employee satisfaction and the quality of outputs, employee-related indicators are necessary for sustainable manufacturing. Health and safety, satisfaction, and the inclusion of human rights also play a role in product use by customers. Related indicators measure the ability of a company to meet its customers’ demands and desires regarding the manufacturing process and are vital for measuring customer satisfaction levels, which are essential for the existence of a company. Community indicators relate to justice and product responsibility aspects with regard to the different actors that are affected by a company’s actions. Through the measurement of fairness, equity, human rights, and corruption levels, the relationship between an organization and its community is rated.³¹ The GRI indicator sets provide social indicators that refer to manufacturing processes.

Indicator Category	Indicator	Interpretation	Source
Employee	Average hours of training per year per employee	Average hours of training that the organization’s employees have undertaken during the reporting period.	GRI 404: Training and Education 2016
	Employee training on human rights policies or procedures	Total number of hours devoted to or the percentage of employees trained in human rights policies or procedures concerning aspects of human rights that are relevant to operations.	GRI 412: Human Rights Assessment
Customer	Substantiated complaints concerning breaches of customer privacy and losses of customer data	Total number of substantiated complaints received concerning breaches of customer privacy connected to the total number of identified leaks, thefts, or losses of customer data.	GRI 418: Customer Privacy
Community	Community investments	Voluntary donations plus the investment of funds in the broader community where the target beneficiaries are external to the organization.	GRI 201: Economic Performance

Table 3: Exemplary selected KPIs of social well-being in sustainable production

Technological advancement

Even though categorical technological advancement indicators are not a typical component of the three sustainability dimensions, they can support sustainable production. They measure the usage of progressive technologies in manufacturing processes, where they focus on the ability to encourage technological advancement in the company. For sustainable production processes, technological advancement is beneficial as it improves not only the economic growth of an organization through innovative products, but also environmental stewardship through limiting emissions and increasing social acceptance. Research and development (R&D) indicators include an organization’s monetary investments and the duration of R&D projects within the company and for manufacturing processes. Moreover, an employee’s experience within the R&D department regarding the advantage of innovation in process and product development is included in the calculations. Factors such as the quantity of technology used, sold, and purchased by the organization to improve production processes are clustered into high-tech product indicators.³¹ The NISTEP indicator set serves as a base for the technological advancement category as it assesses the promotion of new and advanced technologies.

Research & Development (R&D)	R&D expenditure	Nominal value of R&D expenditures.	NISTEP
	Education and human resource development for science and technology	Amount of personnel educated and developed in science and technology.	NISTEP
High-Tech Products	High-tech product output	Quantity of high-tech products produced.	NISTEP

Table 4: Exemplary selected KPIs of social well-being in sustainable production

Performance management

Performance management indicators are not a part of the three traditional sustainability dimensions but do measure them indirectly. An organization’s capability to meet or surpass guidelines for manufacturing products and processes is evaluated with the help of conformance indicators. They ensure the maintenance of high-level performance values but also help sustain the business by adhering to manufacturing guidelines and safety regulations. Program and policy performance indicators examine the management of the policies and goals of a company. The development of sustainability indicators through the introduction of specific programs and policies in a company is also assessed.³¹ The ISO 14031 indicator set establishes the sustainable performance management category of manufacturing.

Indicator Category	Indicator	Interpretation	Source
Conformance	Government regulation compliance	Ability to adhere to production regulations.	ISO 14031
Program and Policy	Development of garbage disposal system	Effectiveness of the development.	ISO 14031

Table 5: Exemplary selected KPIs of performance management in sustainable production

2.3 Advantages and disadvantages of indicators

Using indicators and key figures for sustainable production offers many advantages, but the challenges and disadvantages should not be ignored. The main advantage of using indicators is that the results of the measurements help companies to identify the main problem areas and focus on areas where improvements regarding sustainability can be made. This is helpful for management decisions and the monitoring of the desired development goal.²³³¹ In addition, customers, investors, and other external groups benefit from the use and publication of corporate key figures through increased transparency and the resulting comparability, as well as assistance in decision-making. The GRI standard stands out here because it makes companies and their performance internationally comparable and generates transparency across their production processes.²³

In contrast, a disadvantage is that the use of sustainable production indicators means that companies focus too much on external factors and their external impact and appearance. This is accompanied by the concern that the indicators applied are only used to improve the external impact of the production process and to engage in so-called greenwashing.³⁵ Therefore, a major challenge for companies is to choose appropriate performance indicators to support operational decision-making and not to get distracted by their external appearance. The GRI guidelines are particularly affected by this as they focus on external reporting.²³³¹ Not only is the selection of suitable indicators from the numerous sets available challenging, but also their interpretability is often not entirely clear, as the complex interrelationships within the production process can lead to conflicting conclusions about indicator calculations and, as a result, steps towards improving sustainability cannot clearly be defined and distinguished.³⁶³⁷

2.4 Development of and trends in sustainable production indicators

The number of indicators of and key figures regarding sustainable production has increased in recent years as a result of the issue of sustainability becoming progressively important in politics and society and the fact that companies are under pressure to adapt to these developments. In particular, the number of indicators in the social area has increased significantly. This shows development towards responsible production conditions but also raises the question of the constancy of social sustainability indicators. Further, these indicators are mainly organization-based, and the development of more product, and especially process, indicators is desirable.³¹ Additionally, with the publication of the UN Sustainable Development Goals, the focus has shifted to the area of sustainable production, which has led to a further increase in the development of environmental indicators.³⁸

Technological indicators in production are also becoming increasingly more important. Soon, indicators from areas such as data management, technological transparency and connectivity, and product management will play a more significant role. These include parameters like IT efficiency, the correctness and completeness of data, and digital coverage and virtually controllable resources.³⁹ In particular, more research on the effects of technological indicators on the environmental, social, and economic sustainability dimensions will be of increasing importance.³¹

3 Tools

Various methods and tools can support the development from traditional to sustainable production. Lean and green management is an encompassing approach that aims to reduce waste and improve efficiency in production processes. Lean aspects mainly intend to achieve economic profit and success in competition through increased efficiency. Specific tools for implementation are Six Sigma and Industry 4.0. Green tools can either be end-of-pipe measures or the life cycle inventory, which focus on environmental aspects in production processes. Lean manufacturing as part of the lean and green approach is used to eliminate waste in the manufacturing and service industry. According to Wahab, this means that “half of the human effort in the factory, half of the manufacturing space, half of the investment in tools and half of the engineering hours (are required) to develop a new product in half the time,” with the same or higher quality.⁴⁰ Studies have shown that lean manufacturing is also tightly bound to employee development and their sustainable awareness.⁴¹ The most important aspects of lean manufacturing are the achievement of maximum quality, error proof systems, as little inventory as possible, regular maintenance, and flexibility in production chains.⁴² To use capacities most effectively, the lead time, meaning the time span between production dispatching to the delivery of the completed products, and possible downtimes must be reduced.⁴³ This is strongly dependent on an appropriate product design, a functioning supply chain, workers’ participation, and sustainable marketing, including taking care of customer relationships.⁴⁴⁴⁵

3.1 Value Stream Mapping

Value stream mapping (VSM) is essential for the redesign of current manufacturing processes according to lean aspects.⁴⁶ It is the visualization of current and future production lines, including the required materials and information from each production step. According to the frequency in the production process, a certain value is assigned to the waste to analyze it numerically.⁴⁷ For this purpose, overproduction, waiting times, transport, inappropriate processing, and unnecessary inventory, motions, or defects are looked at in detail.⁴⁵ According to Hines and Rich (1997), several tools can be applied to improve the detected issues. To eliminate unnecessary activities, process activity mapping can be used. Herein, each item that is required in each area of the production chain is monitored and commented on. The supply chain response matrix demonstrates the lead time between the distribution company and its suppliers and can thus help to reduce the timespan. In order to find inventory reduction possibilities, the production variety funnel analyzes the complexity of production and the need for material availability. Within quality filter mapping, the output is tested regarding its quality, which, in turn, leads to a decrease in defects. Overproduction can be eliminated with demand amplification mapping since it illustrates the fluctuation of demand at several time spots. Decision point analysis also contributes to this aspect. Therewithin, a specific product quantity that is necessary to cover demand is analyzed.⁴⁵ Companies do not need to implement all the tools. After using general VSM, an overview of the most critical issues exists. Based on this, appropriate tools can be chosen to find a well-founded solution.⁴⁸

VSM and its follow-up tools offer the advantage of reducing extra output through an improvement in performance.⁴⁹ It has been observed that costs also tend to decrease since a higher output can be achieved, and resources are used more responsibly due to waste reduction. Further, companies that apply VSM achieve a better reputation. Due to their better functioning systems, they can flexibly react to demand in a shorter period of time.⁴⁹ Still, companies should be aware that implementation takes a long time since several areas are to be analyzed in detail, and on top of that, new processes must be created and integrated into the systems.⁴⁴ Additionally, VSM is an ongoing process, which needs to be adapted regularly since general digitalization requires constant changes and improvements.⁴¹

3.2 Six Sigma

Six Sigma is a method that measures and evaluates the quality of a process and a product. This approach was developed by the company Motorola in the 1980s as a result of the intention of integrating a quality management concept. The expression stems from sigma, which refers to deviation in statistics. Six Sigma therefore represents 99.999666%, which is a claim relating to the product’s quality.⁵⁰ Six Sigma, as part of the lean manufacturing approach, can be useful in terms of fully meeting customers’ expectations and requirements by reducing defects, overproduction, or the excessive use of resources.⁴⁸ With regard to its implementation, five different phases are considered separately. First, the goals and scope of the project, such as the manufacturing of the product, are described in detail. Therewithin, the necessary KPIs, but also the interests and expectations of customers, are identified. The measuring stage then includes the data collection and presentation. Any created figures are useful in determining how the input relates to the output. Third, during the analyzation step, the data and diagrams need to be elaborated on to find possible gaps or issues in any production process. In this phase, it is necessary to find the specific reasons for the identified issues. During the improvement phase, solutions for these issues need to be created. All the solutions are analyzed based on their possible costs, value, risks, and feasibility. The best option then needs to be implemented. The last step is essential for future success: The controlling stage means that the defined improvements have to be monitored regularly to make sure that the identified issues will not occur again.⁵¹⁵²⁵³

Boeing implemented the Six Sigma tool in 2005, when its management was facing a technical problem with the Boeing 777. During a test run on the functioning of the components, the recirculating air fans were rejected.⁵⁴ Boeing’s aircrafts are assembled from millions of single components. Previously, to find the specific cause of a problem, several parts had to be removed to be tested in terms of their functionality. This process not only took a long time but was also very cost intensive. Also, the participation of several departments, such as engineering, quality, manufacturing, and supply management, was required.⁵⁵ Using the Six Sigma approach, foreign object debris could be detected. Specialists further investigated the main processes during which the problem occurred. Several other issues, such as damaged electrical test equipment and marginal electrical connections, were found. The subsequent redesign of the installation work instructions was necessary to prevent repeated occurrences of such issues.⁵⁴ Since then, Boeing uses the lean Six Sigma approach in all its production stages and is the owner of several hundred certificates. Nevertheless, the approach is not officially ordered by top management but has been accepted and voluntarily implemented on an operating basis.⁵¹

3.3 Industry 4.0

The connotation of Industry 4.0 stems from the fourth revolution, building on steam engines, assembly lines, and computers in the form of smart factories.¹⁷ By making factories and production processes more flexible and reconfigurable through the latest digital possibilities, it contributes to the lean aspect of the lean and green management approach and can also be seen as part of integrated environmental protection. High production efficiency, lower costs, reduced resource consumption, and no sacrifices in terms of product quality are the main economic drivers of Industry 4.0.⁵⁶ Drivers of the fourth industrial revolution are, amongst others, the availability of several broadband connections, very small computers and sensors, and a decrease in the prices of technology, leading to the faster and more efficient processing of data.¹⁷ Technologies, such as the Internet of Things (IoT), cloud computing, big data, robotics, simulations, modeling, and 3D printing enable machines to interact with each other or even with their human operators.⁵⁷⁵²

Industry 4.0 offers the decisive advantage of being able to quickly react to changes or individual customer requests.¹⁷ Simple interface updates as well as an automatic error detection and correction system enable a frictionless and instantaneous production flow.⁵⁷ As support for manual work, data processing technologies can reorder materials independently, thus preventing supply bottlenecks. Heavy goods can also be processed automatically with the use of robots and no longer need to be transported by manpower.¹⁷ This contrasts with the consequence of declining jobs in the manufacturing industry and the challenge for smaller and medium-sized enterprises (SMEs) and for those companies located in less developed countries of keeping up with technological progress.⁵²⁵³ Another critical aspect concerns data security and thus the handling of confidential information in terms of competition. Industry 4.0 aims for global networking rather than isolated connections within individual companies. In the case of the establishment of a smart factory, companies should therefore consider a comprehensive IT and data security concept.¹⁷

The implementation of Industry 4.0 is still in its infancy. In Germany, around 26 funded 4.0 competence centers offer SMEs programs on sensitization, information, testing, and training.¹⁷] An additional €40 billion has been spent every year up until 2020 to support the development of Industry 4.0. In 2020, 20% of companies in the automotive sector were already using self-controlled systems.¹⁷ Daimler is one of the pioneers with the opening of its Factory 56 in September 2020 in Sindelfingen, Germany. Its digital ecosystem MO360 (Mercedes Benz Cars Operations 360) consists of several software applications that are connected by common gateways and uniform user interfaces, supporting the worldwide vehicle production of their 30 Mercedes Benz car sites with real-time data. Up to now, only the factory in Sindelfingen is completely modernized, but the digital progress will be gradually established in all the other locations as well. The size and distribution of the production halls were chosen so that all sizes of Mercedes models can be produced. With respect to technical standards, all the equipment is based on the IoT, smart devices, and big data algorithms that operate as part of a high-performance internet and 5G mobile network. Digital services, such as tracking and tracing, enable automatic communication with suppliers to control a fluent material and production process. Due to the tracking function, important information, such as the current production status or any error messages, can be displayed directly at the appropriate point in the production chain. If necessary, manual operation can be used to react immediately without spending time searching for the cause. Robots are also used to enable ergonomic working by bringing the vehicle that is to be assembled to a comfortable working height.⁵⁸

3.4 End-of-pipe technologies

End-of-pipe (EOP) technologies serve the green aspect within lean and green management. Included here are all disposal processes and recycling technologies that are retrospectively added to production processes. The aim is to clean or modify raw emissions and residuals so that they are less polluting, easier to store, and reusable or recyclable. As a result, environmental damage should be reduced.⁵⁵ Measures, such as filters, scrubbers, cyclones, and centrifuges, can be used to transform conventional polluting systems into more sustainable and environmentally friendly production processes.⁵⁹

Alongside their compliance with governmental regulations, EOP technologies offer several environmental advantages. Most importantly, fewer emissions are released into nature and the atmosphere. Since such measures do not necessarily have a direct impact on the production processes themselves, they are easier and less expensive to adapt than a complete re-equipping.⁵⁵ Consideration should be given, however, to the timeliness of the EOP measures. Integrated environmental protection is slowly becoming more established, so EOP technologies are becoming more obsolete.⁵⁹ Further, this tool is criticized due to its lack of efficiency and innovative strength. Since only output is considered in environmental improvement measures, the input does not change, and thus, the ecological dimension is only included to a limited extent. The approach also offers less incentive for innovation, since only smaller parts for specific processes must be added rather than thinking through the entire production cycle.⁵⁶ Any added parts cause additional capital as well, and as a result, the capital equipment increases while output remains the same.⁵⁹ Considering the increase in capital, the prices of the final products are also likely to increase, making the company less attractive in terms of retaining its customers.⁶⁰ Lastly, studies found that climate change mitigation is likely to only be postponed, meaning that the amount of filtered waste material, and thus the amount of specific waste, increases, leading to a bottleneck in hazardous waste disposal.⁵⁹

3.5 Life cycle inventory

Life cycle inventory (LCI) is part of the life cycle assessment (LCA) approach, which examines the environmental and social impacts of a product or service during its life cycle.⁶¹ The life cycle starts with the extraction of the required raw materials and continues with their processing, the distribution to end customers, including use, repair, and maintenance, and ends with their recycling or disposal.⁶¹ Generally, LCA supports the idea of the circular economy since it analyzes several improvement possibilities, especially with respect to the negative impacts.⁶²A measure to specifically improve sustainable production is the LCI gate-to-gate approach, wherein the impacts are analyzed from the point in time that the raw materials arrive at the manufacturing site until the finished product is delivered to end users.⁶³ It therefore deals with the essential flows and their combinations from all the processes that concern the manufacturing.⁶⁴

Regarding implementation, two different flows must be considered separately: First, materials, energy, and other necessary resources form the input flow. Second, output flows include the product itself but also waste and emissions.⁶⁴ According to Hauschild (2018), six steps are necessary for successful implementation. The first step concerns the identification of any processes that are related to the intended output. Such processes are separated into several levels, depending on their physical contribution (flows that will be physically embodied) and service performance (operating and auxiliary materials, as well as sales activities). Once all the necessary processes are identified, the required data can be collected. Such data can either be measured in units, weight, temperature, or sales quantities and can be collected from internal and external experts. The next step is to narrow down all the data to the amount that is required to produce one predefined product. All the processes of step one can now be brought together in a flow diagram, where the output of one process should equal the input of the following process. In the following step, all the results are aggregated and checked for possible miscalculations. Lastly, all the steps and findings must be properly reported.⁶⁴

LCI is a costly and time-intensive measure. The detailed identification of processes in the first step leads to an even more detailed list of required data.⁶¹ In some cases, not all the data are available, which can further distort the result.⁶⁴ However, the approach offers a solid basis for decision-making. It highlights trade-offs and can flexibly be used for any type of output.⁶³ The added value of LCI lies in the representation of all the environmental impacts for each single production step, offering concrete recommendations for more sustainable production. The implementation of LCI can also be outsourced to external consultants and can be certified according to ISO 14040:2006.⁶⁰

In 2016, the German Fraunhofer Institute supported Fairphone, a Dutch mobile phone producer, in implementing the entire LCA approach for its product Fairphone 2. Therewithin, the impact on climate change, resource depletion, human toxicity, and ecotoxicity were addressed in the LCI section. Beforehand, all the components of the mobile phone were determined, and their emissions caused at procurement were calculated. The main drivers of the emissions were packaging and transportation during manufacturing. As a result, the LCI turned out to have the most negative environmental impact of the entire LCA due to its high use of electricity. The processing of certain components, such as the core module with the mainboard, proved to be particular damaging.⁶⁵ In 2020, another LCA was conducted on the product Fairphone 3. Compared to the 2016 findings, the processes and product details had improved. More specifically, transport routes were deliberately shortened, and instead of shipping freight, trains were used. Care was also taken to consume as little as possible in the processing of individual components. For example, the surface area of PCBs was reduced due to a new connector design.⁶⁶ The repeated execution of the LCA therefore offers the possibility to uncover potential hazards and to continuously improve production.

4 Drivers and barriers

Whether a company succeeds in implementing sustainable production measures depends on the various drivers and barriers that the organization faces. These drivers and barriers can either be internal, meaning that they lie within the company itself, or external, which is the case when the company must deal with factors that lie outside the firm’s scope.

4.1 Drivers

4.1.1 Internal drivers

Operational efficiency

One of the most important drivers when it comes to almost all economic decisions is the aspect of decreasing costs. If it is more profitable for a company to manufacture in a sustainable rather than an unsustainable way, most companies will have the incentive to use sustainable production practices. In the field of sustainable manufacturing and production, this mostly focuses on the efficient use of resources and the reduction of waste within the production line. In 2012, Despeisse et al. prioritized the key improvement opportunities as follows:

“Prevention by avoiding resource use: eliminate unnecessary elements to avoid usage at the source […]
Reduction of waste generation: good housekeeping practice, repair and maintain equipment
Reduction of resource use by improving efficiency: optimise production schedule […], match demand and supply level to reach best efficiency point of use […], replace technology and resource for less polluting or more efficient ones
Reuse of waste as resource: look for compatible waste output and demand […]
Substitution by changing supply or process: renewable and non-toxic inputs […].”⁶³

A study conducted by the Fraunhofer Institute points out concrete potential savings in the area of mechanical manufacturing. Up to now, many materials have had to be heated to be formed, which requires a high energy consumption. New technologies for cold or semi-hot forming reduce the required energy, which can increase resource efficiency by up to 25%.⁶⁷ Thus, sustainable changes in production processes can lead to significant cost savings for a company.

Motivation of top management

Top management is involved in all of a company’s major decisions; thus, it can be one of the key drivers for improving the sustainability of production processes. This can be prompted by various factors that lead to sustainable management. One option is the personal value and commitment of the owners of a company.⁶⁸ If sustainability is particularly important to them, they will most likely also align the company and its production processes with sustainability. One example is TOMS, founded in 2006 by Blake Mycoskie. During his holidays in Argentina, the founder noticed many children not wearing shoes, of which the consequences may include diseases from soil-transmitted infections, discrimination, and being prohibited from entering schools. This resulted in the idea of creating a one-for-one business: For every pair of shoes sold, one pair should be given to people in need. By the end of 2019, 95 million pairs of shoes had already been distributed.⁶⁹ This demonstrates how important the intrinsic motivation of the owners and top management is in aligning all the processes in a company with sustainability.

Employee satisfaction

Sustainable production that includes measures in the area of occupational health and safety can lead to higher employee satisfaction and increased productivity. This can be explained not only by the fact that better working conditions lead to fewer work-related accidents that cause employees to be absent for a period of time,⁷⁰ but also in that the feeling of being appreciated also increases the motivation and commitment regarding one’s work and lowers the fluctuation rate. This ensures that the employee know-how remains within the company and does not migrate to competitors.⁷¹ Another factor to consider is that good working conditions attract an increased number of applicants who want to work for the company. All these aspects contribute to a successful workforce and can be seen as a part of sustainable HR management.

4.1.2 External drivers

Government (regulations)

In the EU, the European Commission implemented the Circular Economy Action Plan (CEAP) in March 2020.⁷² This action plan is one of the main parts of the European Green Deal, whose overarching goals are climate neutrality by 2050 and the decoupling of economic growth from resource use.⁷³ The CEAP includes 35 actions that will be implemented within the next few years and targets the entire life cycle of products with the aim of achieving a circular economy, leading to waste prevention and the reuse of resources. In terms of sustainable production, the action plan focuses on sectors with the highest resource consumption, where the potential for circularity is therefore particularly high. This includes, for example, electronics, packaging, and textiles, as well as construction and buildings.⁷²Additionally, these measures are supported by the Ecodesign Directive as well as the Energy Labeling Regulation. These provide EU-wide regulations to improve the environmental performance of products by establishing mandatory (labeling) requirements.⁷⁴

The cement industry represents a suitable example for implementation. Causing 8% of the global greenhouse gas emissions at present, “cement production is one of the most emission intensive industrial processes.”⁷⁵ As indicated by Cembureau, the European Cement Association, in 1990, each ton of cement produced resulted in emissions of 783 kg of CO2. Therefore, as an interim target for becoming less pollutant and for reaching the goal of the European Green Deal of zero net emissions by 2050, emissions are supposed to be reduced to 472 kg CO2/ton by 2030. The main measures in this case are the use of alternative fuels and decarbonated raw materials, as well as the substitution of clinkers, the efficient use of (renewable) electricity, and the capture of CO2.⁷⁶ This example shows that government regulations can put pressure on companies, leading to increased efforts to achieve the set target.

Labels and certificates

In contrast to regulations that come with a mandatory compulsion to comply, another driver of sustainable production can be voluntary compliance with certain standards in order to be awarded with a particular sustainability label or certificate. A helpful tool for companies in Germany looking to find the labels or certificates that are the most suitable for them is the Sustainability Compass website, which was launched on behalf of the German Federal Ministry for Economic Cooperation and Development. This evolving project offers the opportunity to find not only certification marks that meet the legal requirements of individual federal states, but also ones that comply with stricter, voluntary guidelines. The website also includes an analysis tool that can be used to compare the labels with each other. In addition, the goal of this project is to facilitate sustainable public procurement processes. This is to be achieved by providing a platform to connect these procurement processes with companies that operate sustainably.⁷⁷ In terms of production, this website can facilitate the shift to sustainable production methods by providing appropriate incentives and enabling companies to acquire public contracts by adapting a more sustainable approach to their production.

In addition, the European Commission has developed the EU Eco-Management and Audit Scheme (EMAS), a voluntary management instrument that companies can use to “evaluate, report, and improve their environmental performance.”⁷⁸ When reporting on a company’s environmental performance, six core indicators are used: energy efficiency, material efficiency, water, waste, biodiversity, and emissions. These standardized indicators are designed to ensure that reports are comparable and easy to apply.⁷⁹ A key advantage of the EMAS is the external verification of the reports. This increases their credibility and can thus be used by a company to improve its public reputation.⁸⁰

ISO 14001 is an international globally accepted standard for defining an environmental management system. This is divided into four main steps. First, step 1 involves the planning of environmental goals and possible measures. This is followed by the implementation of the defined measures. The third step is the control of the objectives. In some circumstances, there is step 4: this is where improvements to the strategy can be made. An essential component is the integration of environmental management into business processes as well as production and manufacturing.¹⁰¹ A practical example of the use of this standard in a corporate context is the Oldenburg company CEWE Stiftung & Co. KGaA. Ten CEWE production sites and their subsidiaries are certified according to this standard. The measures within the scope of this certificate make a major contribution to combating climate change. Furthermore, the social goal of creating a peaceful and sustainable development of society is also promoted.¹⁰²

Consumers and public attention

In addition, consumers are a key factor in encouraging companies to produce their products more sustainably. This becomes particularly noticeable when looking at the trend in recent years. For example, a study that was recently conducted by the World Wildlife Fund (WWF) shows that there has been a 71% increase in Google searches for sustainable products over the last 5 years.¹⁰³ Due to this increasing interest, sustainability-conscious consumers offer an attractive market that can be used to differentiate from competitors. Moreover, these customers often show an increased willingness to pay higher prices for a product if a company produces it in a sustainable manner.¹⁰⁴

Another factor to consider is the market power of consumers. If a company has very unsustainable production practices that exploit the environment or people and these are revealed, it must expect reputational damage that can result in a loss of sales and revenues. A well-known example in this context is the incident at the Rana Plaza textile factory in Bangladesh in 2013, where the employees had to continue working even though cracks were detected in the building the day before. When the building collapsed, at least 1,132 people died. This event led to global public attention on practices in the textile industry, during which consumers also put pressure on companies to improve the working conditions of their suppliers.¹⁰⁵

4.2 Barriers

4.2.1 Internal barriers

Increased production costs and a lack of organizational resources

Sustainable production can lead to savings in terms of production costs. This is particularly the case at the beginning of the transition to sustainable production processes, as companies can choose options that are easy to implement and save costs, such as switching to more resource-efficient practices. Subsequently, however, implementing sustainability can also lead to increased costs in some areas (e.g., due to the additional effort required for sustainability-related projects).¹⁰⁶ One barrier in this regard is the high short-term costs necessary to purchase newer efficient technologies and integrate them into the production process.¹⁰⁷

However, there are ways for companies to overcome this barrier. One option is through financial support from investors focused on promoting innovative sustainability practices. Sustainable banks, such as Triodos Bank, “only lend and invest money into companies that contribute to a more sustainable society.”¹⁰⁸ Therefore, this is a possibility when looking to support the purchase of more expensive but also more sustainable and efficient technologies necessary to enhance sustainable production.

Low management commitment and a lack of awareness

In contrast to management and owners that pursue a whole business strategy of a company focused on sustainability, there are other management teams that are either not committed to sustainability or are not aware of why or how they should produce in a more sustainable way. This can also be the case if they do not have access to information about the current technologies available.⁸⁴ A possible way to overcome this barrier could be through awareness campaigns carried out by either governmental or nongovernmental organizations. By approaching a company and highlighting opportunities for improvement, the information gaining process for a company can be facilitated. Material information that can be used in the area of mechanical manufacturing is, for example, a study performed by the Fraunhofer Institute, which points out energy saving potential in this sector.⁶⁷ Contrary to that, there is also the option of initiating protest campaigns, with the goal of uncovering unsustainable business practices and therefore raising public attention regarding certain conditions.¹⁰⁹

4.2.2 External barriers

Value-action gap of customers

On the one hand, sustainably manufactured products attract a certain group of customers that is willing to pay more money for sustainable products. On the other hand, not everyone is willing or able to pay higher prices. A term that also needs to be addressed in this context is the “value-action gap.” This term describes the discrepancy between what people say and what they do, meaning the gap between people’s stated values and their actual observed behavior.¹¹⁰ This is particularly common with environmental issues, as acting sustainably can be costly for individuals, and positive benefits can only be seen in the long term and mostly for the collective. This social dilemma increases the risk of free-riding because individuals may feel that their own actions are negligible in relation to the overall goal of sustainability.¹¹¹ One way to counteract this problem can be information campaigns that highlight the importance of sustainable choices and, in addition, the targeted marketing of sustainable products, which is an important part of sustainable marketing.

Weak legislation and enforcement

Two barriers that can prevent companies from implementing sustainable production are the lack of appropriate environmental laws affecting a company’s production processes and the ineffective enforcement of existing regulations.⁸⁴ The number of effective laws concerning sustainable production also depends on the respective country. A study by Daniel Esty and Michael Porter in 2011 compared the quality of environmental regulations in 71 countries. When divided into low-, middle-, and high-income countries, the countries with the highest environmental regulatory quality are Jordan (low-income), Singapore (middle-income), and Finland (high-income). The countries in the last positions, respectively, are Paraguay, Greece, and the United States.¹¹² This comparison demonstrates that there are still serious differences in the regulation of sustainable practices that need to be addressed. Globally valid agreements would therefore enhance sustainability laws worldwide. The 2015 Paris Agreement, which was adopted by almost 190 parties, is one of the first legally binding worldwide climate protection agreements. With its goal of keeping global warming well below 2°C, it is focusing on fighting climate change.¹¹³ This agreement can be taken as a role model for the future to further enact regulations on a global level, rather than separately.

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