Dynamics Matters Podcast Ep 93: The link between sustainability and profitability

Welcome to episode 93 of the HSO Dynamics matters podcast.

Your regular sonic dive into the world of Microsoft technology related matters and much more besides.

And I’m your host, Michael Lonnon.

54% of the world's energy consumption is from manufacturing.

That’s significant. But what can manufacturers do about it, and how can they take a more sustainable approach that delivers value for them? The good news it is possible. And here to explain how is Microsoft’s Director of Manufacturing Energy and Resources, Clare Brown.

So, grab a brew, sit back, relax, and enjoy the show.

Michael Lonnon
I’ve been picking through one of your presentations, I really liked a few stats in there that I pulled out that would be great to talk about. So, one of them in particular is 54% of the world's energy consumption is from manufacturing. Now that's seems like an obscene number to me and clearly cannot be sustained, but what's the challenge if that number isn't addressed in some way?

Clare Brown
It's the fact that we're in a climate crisis, everybody's talking about the climate crisis. It's not just on the carbon aspect, it's actually also on the water aspect, we've got a real water scarcity issue. If we don't do something about that, then we're not going to hit that 1.5% challenge, manufacturing a core component of that 1.5% Chinese manufacturers don't start looking at sustainability. I actually believe there's going to be some government legislation that will eventually have to come in in order to try and help us hit that 1.5%. But that actually looks at it from a negative point of view. From a positive point of view for manufacturers sustainability is really good for business and if they look at it in a positive way, they can start to make a change to their business. So, from our perspective, sustainability is just the next step on a digital transformation. So, it's digital transformation in a sustainable manner and that's what every organisation has been looking at trying to do for the last 10/15 years.

Michael Lonnon
Why then from a business, for somebody from a manufacturer who's listening to this podcast, why would you say then it is good for business tactics to think about this more in a more sustainable way?

Clare Brown
Probably three key aspects. The first one is it builds brand trust. So everywhere you look now customers, banks, financial organisations, venture capitalists are actually looking at what each brand is doing and ESG is a key component of that. There's been research that says 74% of consumers believe ethical corporate activities and practices are an important reason to choose a brand. So, from that aspect, it's critical if you want to be successful that 74% of consumers are looking at whether you've got that ethical brand. Second areas around enhancing efficiencies. So, if you look at the work that we've done as Microsoft, the amount of efficiency we've got both in water and an energy, and the savings we've made is astronomical, but it reduces costs, reduces materials, consumption, it also reduces your Co2 emissions, so you can enhance your efficiencies and that affects your bottom line, which is the third element, around improving your margin and your revenue. You reduce your operating costs; you can create new revenue streams with new sustainable products and services. Then, because of all that, I think I mentioned earlier about venture capitalist, it's advantageous for you to be able to get access to capital, if you're more of a small SME.

Michael Lonnon
Do you think manufacturers generally understand the benefits then of becoming more sustainable with what they're doing?

Clare Brown
I think they do but they've got all sorts with the way we're living at the moment, you've got supply chain crisis, you've got Brexit, you've got the cost of living crisis, you've got so many other things that they're struggling to actually work out how they can do this with the fact that they've got to really work on how do you get the margins right.

Michael Lonnon
So, from a Microsoft in a technology point of view, what sort of advice might you give to manufacturers that in becoming more sustainable or developing more sustainable practices?

Clare Brown
From the work we've done, not only ourselves, but with the 1000s of customers we've worked with every sustainability journey pretty much follows in the same track and is quite similar. So, we've got a model that we use a sustainability transformation journey, we call it with three different horizons and if you've worked with Microsoft, in the past, you'll have heard around our horizon plan, where we have Horizon one, two, and three. The sustainability horizon one is all about incremental, so, it's do what you do today, but better. Horizon two was around innovation, so do what you do today differently and horizon three is around, do everything differently and create a brand-new way of working. With those three different elements behind those, you can create different projects that you can look through those and behind each of those as a business case and our ROI, to make sure that you're focusing on the key areas. So, we suggest that you actually do that, do some sort of workshop. We're more than happy to work with customers around what that workshop is and help you through it. But looking at that, you can then decide on the discrete projects, and you don't do one, two or three, you don't do one, then two, then three, you can do them all simultaneously and that's how you get the biggest benefit. For us the key element and the biggest success that we've seen with our customers is around just picking one thing, one thing that you think will make the biggest difference and working through that.

Michael Lonnon
Yeah, rather than trying to change everything all at once, which would likely cause chaos just to pick those things so the quick wins, perhaps and then move forward from there. Can you tell me a little bit about the Microsoft circular economy what's that?

Clare Brown
Microsoft circular economy is about creating an ability to work with all our suppliers and with our customers, so that everything is reused. We have within our programme we have what we call the five R's record, report, reduce, replace and remove and what we spent a lot of time doing is working so we've now got these circularity hubs, whereby I mean, we've got 1000s and 1000s of servers in our data centres because of the cloud services that we use and what we've done with these circularity hubs is that we've worked with those and we've looked at reusing all those parts within the service, whereas previously, we'd recycle them. Now we're actually taking them into the hubs and we're using all those parts and we've actually got our best practice one in Amsterdam, and they've actually got to 100%. In some of the other centres where 83% and that not only helps us from an operations perspective, it drastically reduces our costs and we're saving millions by doing that every year.

Michael Lonnon
What does the future hold for manufacturing sustainability? for example, are you seeing a shift to more positive, more sustainable manufacturing, do you think that's the way forward or are you seeing actually there's a bit of reticence as you talked about earlier, what does the future hold?

Clare Brown
I think it varies across the whole industry, it depends on the type of manufacturer you are, what you're looking to achieve. What we have noticed is actually the UK is further ahead than most of the other regions because sustainability is of critical importance here. Germany is probably a year behind us, America, several years behind us and actually, the manufacturers, if we get it right in the UK, we believe we can really leapfrog in terms of efficiency and improving that efficiency. If you look at the G7 from an improved efficiency perspective, manufacturing in the UK, is at the bottom, actually, by taking on these sustainable practices and by doing some of that work, we actually believe we can leapfrog and drastically improve our efficiency, and not only help in the sustainability aspects, but helping make a manufacturer a thought leader across the rest of the globe.

Michael Lonnon
A final question for me is if you were to give advice to any manufacturing customer who wants to improve what they're doing, what might their first steps be?

Clare Brown
So, I'd say do the workshop, come, and talk to us, come, and talk to your partners. Have that workshop to understand where the differences are that you could make, the first step would actually probably be to record. That's where we started it's recording the data; data is at the heart of everything that you do from a sustainability perspective. If you don't have your data properly recorded, then you can't properly analyse, work out where the insights are and work out where you can make the improvement. So, data is absolutely at the heart of everything that you do from a sustainability perspective. So, start with your data, make sure you're recording those sustainability metrics that you need to record, make sure you record in your efficiency metrics and then from there, you can then work out where the gaps are.

Summary

Microsoft delivers workshops built around a sustainability transformation journey model, to keep the mind focused. And this is based on 3 ideas:

• Incremental, doing what you do today just better.
• Innovation, do what you do today differently.
• Change, create a brand-new way of working.

Manufacturers, or any organisation for that matter, can create projects that looks into each of those to build a business case and ROI, to make sure you're focusing on the key areas of sustainability.

Becoming a more sustainable organisation needn’t be to the detriment of the bottom line, in fact, Clare states a valid case for why the opposite is the case. Profit and planet can work hand in hand.

And on that note, thanks for listening, until next time, take care of yourselves.