What will manufacturing look like in 2050? Following a two-year review, involving teams of experts and academics, the Government Office for Science yesterday set out the global trends and technological changes that will shape the factories of tomorrow.
Our economists provide very good overview of the report their blog. But I want to drill down a little deeper into the narrative around sustainability, one of the four key characteristics of future manufacturing identified in the report.
The report outlines a clear vision for sustainable manufacturing in 2050. Products and processes will be sustainable, with built-in reuse, remanufacturing and recycling for products reaching the end of their useful lives. Closed loop systems will be used to eliminate energy and water waste and to recycle physical waste. New revenue streams will be unlocked as firms embrace “servitisation.”
Six trends are identified in driving this behaviour: volatility in the supply and price of materials and inputs; greater supply chain vulnerability resulting from climate change; greater use of regulation and potential ‘pricing' of natural capital; consumer pull for eco-products; design for collaborative consumption; and, the emergence of a more circular economy in which end-of-life products are reused, remanufactured and recycled. Manufacturers that embrace new business models and adapt to global trends will be more resilient, more competitive.
As well as casting a light on what the future might look like and the implications are for manufacturers, it also makes some suggestions on how government should respond.
For example, the report suggests that government should make greater use of well-designed regulation to incensitive product and process efficiency. No argument there. But the report falls short in highlighting some credible policy offerings to encourage action. It suggests drawing from “effective…innovative schemes” such as Japan's ‘Top Runner' scheme and recommends that Government consider the development of top-runner schemes relating to energy usage in factories and also procurement and waste policies. Would this be a better approach than the complex myriad of regulation that is in place to drive carbon reduction and energy efficiency in the sector? Possibly. But the report falls short of explaining how this would fit in with the existing legislative framework and equally doesn't really argue the case for why the current framework isn't effective – which is a shame.
Quite bizarrely the report completely overlooks the transformation that manufacturers will have to make to co-exist in a future of carbon constraint. While it is true that for many sectors the shift to low-carbon is intrinsically linked to the decarbonisation of the electric grid and process and product efficiency, for many manufacturing sectors already subject to carbon constraints on their production, the transformation that is required is more profound. We outlined the challenge for these sectors in our report Tech for Growth, which was published earlier this year. Frankly it is a major omission to overlook the challenges faced by foundation manufacturing sectors.
Furthermore, while briefly touched on in the full report, it feels like the review has largely dodged the issue of the day: the criticality of competitive energy prices for a vibrant manufacturing sector.
There are other recommendations within the sustainability theme which are much easier to get behind.
For example, the report calls on government to target R&D at improving resource efficiency and material substitution. This seems entirely sound and there is no doubt that the UK is lagging behind our competitors on action here. The US, Germany, Japan and Korea are amongst those who are putting in substantial funding for R&D in this area. Earlier this year, I highlighted action that Germany was taking to enhance its capabilities with the launch of the Helmholtz Institute for Resource Technology. In the UK's recent Resource Security Action Plan just £200k was devoted to an accompanying innovation challenge. The week before Eric Pickles launched a £250m fund to encourage local authorities to move to weekly bin collections. This is simply not acceptable.
We also agree with the report's recommendation that more can be done to help support business models based on reuse, remanufacturing and services and that the government should work with industry to achieve this. Many organisations - such as Ellen MacArthur, the Royal Society Arts, the Next Manufacturing Revolution consortium and Green Alliance - have begun to highlight the scale of the opportunity by moving to the circular economy and have begun to articulate the case for doing so. What we need is now is a proper assessment on the prevalence of these business models among British manufacturers. I'm utterly convinced there is already a significant amount of “circular” activity that is already well embedded in manufacturing. The questions we then need to ask is whether it is desirable to extend to other sectors and why those sectors aren't already doing it. Only by understanding the barriers manufacturers face in moving to new business models and we collectively overcome them. The report is quite right in suggesting we need to drill down into sub-sector detail to do this. The role of the Waste and Resources Action Programme is potential vital in delivering this - something we argued strongly for when government reviewed its budget earlier this year.
Finally, the report suggests that there should be a quantification of domestic reserves of critical materials. While we agree that the UK should make the most of domestic supplies of key materials, the report misses a trick by failing to acknowledge the continued need for imports of materials. McKinsey for example estimate that better resource husbandry and efficiency will only meet 30% of future demand. Therefore we need to be realistic about how much our domestic reserves can deliver. The report's call to better understand our reliance on materials by better understanding what's in the semi-finished goods that we import into the UK is a good start in better understanding our material vulnerabilities - at the moment we measure only imports of bulk raw materials. We have called for an Office of Resource Management to align government focus on all three important aspects relating to resources: resource security (access to materials), efficiency (resource productivity) and husbandry (remanufacturing and recycling).