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Manufacturers leading on sustainability, says new report from Microsoft

Manufacturing firms are some of Australia’s best performers on sustainability, according to a new report from Microsoft ANZ and a research team led by Dr Chris Brauer, Director of Innovation at Goldsmiths, University of London.

These findings stand in stark contrast to public perceptions, with the report also revealing that Australians nominate manufacturing as one of the nation’s least sustainable sectors along with agriculture, energy, transport and resources.

To the contrary, 82 per cent of manufacturing firms use renewable energy to power their premises, well above the cross-industry average of 66 per cent. The manufacturing sector also leads on decarbonisation, with 77 per cent of firms setting specific carbon reduction goals, compared to a 58 per cent average across industries.

In procurement, manufacturing performs better than all other industries.

Over half of manufacturing firms are monitoring the sustainability impacts of their supply chains and introducing new technologies to mitigate these impacts. Another 70 per cent are working with their own suppliers on emissions-reduction initiatives.

For Australia to achieve net zero, it needs smart technologies working together with a motivated and energised community of corporate citizens,” he says. “The research reveals that innovation and technology are at the forefront of the leading Australian organisations’ approach to tackling sustainability. – Dr Chris Brauer, Director of Innovation at Goldsmiths, University of London

Manufacturers lead on tech adoption

The Accelerating the journey to net zero report found that technological adoption is a key obstacle on the road to net zero for most Australian businesses. Only half of organisations across industries, for instance, currently have the solutions they need to measure greenhouse gas emissions across their products, services and operations.

Again, however, manufacturers are faring better than their counterparts in other industries.

The sector outperforms most others, including IT, when it comes to incorporating technology and innovation into sustainability strategies. And a full 86 per cent of manufacturing decision makers believe their firm’s profitability over the next decade will depend on sustainability-driven innovation.

This puts the industry in good stead, according to the report’s lead researcher, Dr Brauer.

“For Australia to achieve net zero, it needs smart technologies working together with a motivated and energised community of corporate citizens,” he says. “The research reveals that innovation and technology are at the forefront of the leading Australian organisations’ approach to tackling sustainability.”

A major skills gap

While manufacturing performs well on tech adoption, it’s suffering from a challenge that’s common to all sectors: the sustainability skills gap.

Close to half of manufacturing firms struggle to find environmental engineers, sustainability consultants and others with similar skillsets. In fact, 75 per cent of manufacturing business leaders believe the shortage of sustainability skills will be a major barrier to their organisation achieving its sustainability goals, including net zero targets.

According to LinkedIn’s Global Green Skills Report 2022, the global manufacturing industry is second only to corporate services in its ‘green skills intensity’ ­– that is, the extent to which it relies on ecosystem management, environmental policy, pollution prevention and other sustainability-related skills.

This dependency is likely to present a major challenge for our local manufacturing sector, with the pre-existing skills shortage exacerbated by the lack of skilled migrants to Australia over the course of COVID-19.

How well they deal with this challenge will be a key determinant of their sustainability success, says Brett Shoemaker, Sustainability Director for Microsoft ANZ.

“Pledges and commitments are a critical first step,” says Shoemaker. “But the more significant, long-term impact will come from our ability to overcome the challenges that will inevitably arise as we act on those commitments.”

The report offers several steps organisations can take to tackle the skills gap, including reskilling their existing workforces and expanding their talent pools.

These steps form part of a broader, seven-step blueprint for net zero Microsoft has developed based on survey findings, insights from the organisations leading on sustainability and interviews with experts including Dr Alan Finkel, Special Adviser to the Australian Government on Low Emissions Technology.

“Our study shows that leaders are struggling to operationalise their sustainability plans, so we have created a blueprint using insights from leading experts, academics and Australian organisations to help others accelerate their progress.”

On board but off track

The manufacturing industry isn’t alone in facing roadblocks on its sustainability journey. The report found that over a third of large Australian organisations (200+ employees), across industries, including manufacturing, expect to miss their 2050 net zero targets.

“Australian organisations are on board, but off track,” says Shoemaker.

To reach net zero by 2050, manufacturers, like all industries, have their work cut out.

Access the Accelerating the journey to net zero report here.

Accelerating the journey to net zero: A blueprint for Australia is based on a survey of 686 business leaders and 1,030 full-time employees of large enterprises in nine sectors, including manufacturing. To extrapolate results to the Australian economy, findings were weighted by the share of organisations in the total economy. The results are within statistical confidence and have been rounded for simplicity.