As climate change continues to pose significant risks worldwide, businesses in the industrial sector are taking proactive steps toward sustainability, aiming to reduce their carbon footprints and achieve net-zero emissions. Our 2024 B2B Sustainability Study reveals how leading companies are turning environmental challenges into profitable growth opportunities.
Here are the key takeaways and strategic insights for businesses aiming to lead the charge toward a sustainable future.
The rise of sustainability leaders
The study highlights that a substantial number of industrial companies have adopted the Science-Based Targets initiative (SBTi) to build a zero-emissions economy aligned with climate science. European companies lead the charge, with 74% committing to net-zero targets by 2030, compared to 59% in North America. This regional disparity underscores Europe's higher emphasis on emission reduction.
Emission scopes: Prioritizing comprehensive reductions
Globally, the focus has been on reducing Scope 1 emissions – direct greenhouse gas emissions from company-owned sources. However, there is a growing trend toward tackling Scope 3 emissions, which occur across a company's value chain and often represent the majority of an organization’s total greenhouse gas emissions. More than 40% of companies are now prioritizing Scope 3 emission management, recognizing its significant impact and the competitive edge it offers.
Driving forces behind sustainability efforts
Customer demand and the desire to gain or maintain market share are the primary drivers of sustainability efforts across both Europe and North America. European companies are particularly focused on setting industry standards for sustainable products, while North American companies emphasize cost savings from efficient energy use and waste reduction.
Challenges in achieving sustainability targets
Despite the commitment, many companies struggle to meet their SBTi goals. European companies are generally more successful, with 61% on track or ahead of their targets, compared to 42% in North America. The high cost of green solutions, substantial investment needs, and difficulties in finding the right partners are common barriers.
Preparing for the green transition
To effectively prepare for the green transition, companies must adopt a comprehensive strategy that addresses both opportunities and risks associated with the new green norm. This involves several key steps:
1. Refresh your commercial strategy
- Reallocate investments toward sustainable growth sectors, considering market sustainability constraints and your company’s decarbonization goals.
- Identify and assess sustainable growth areas and size the market opportunities driven by the substitution of fossil-based products.
Case study: Green chemistry opportunities
Green chemistry involves sustainable chemical activities that reduce GHG emissions, replace fossil inputs with bio-based substitutes, and use raw materials, energy, and water more efficiently. We supported a green feedstock processor by analyzing 15 green chemistry markets, prioritizing opportunities, and developing various investment options. Our client derived a 10-year investment strategy focusing on markets such as PLA for bags and bottles, bio-sourced ethylene for packaging, and butadiene for automotive parts. Read the case study here.
2. Create a green offering
- Develop a green offer to foster transition investments and strengthen market positioning.
- Conduct a risk assessment of your customer portfolio and existing markets, segment customers based on their sustainability commitments, and understand their willingness to pay for green products.
- Bundle value features into several offer levels with increasing added value, considering aspects like regenerative farming practices and CO2 emissions.
- Develop a go-to-market plan, refine commitment trajectories, and establish a commercial setup with entry plans, negotiation guidelines, and communication materials.
Case study: Hydro Aluminum
Hydro Aluminum offers CO2-reduced production routes with products like Reduxa and Circal, which use renewable energy and recycled raw materials. They also provide consulting packages to help customers reduce emissions. This comprehensive approach showcases how companies can secure competitive advantages and strengthen market positioning by responding to customer demand for greener innovations
3. Foster partnerships along the value chain
- Establish strong collaborations between raw material suppliers and brand owners to drive sustainability initiatives.
- Engage in joint ventures, long-term agreements, and cooperative projects to ensure a steady supply of sustainable materials and foster innovation in product development.
Case study: Yara and PepsiCo
In a recent agreement, Yara and PepsiCo have joined forces to enhance sustainable agricultural practices across PepsiCo's supply chain. This collaboration focuses on reducing carbon emissions and improving soil health through advanced fertilizers and agronomic practices. By integrating sustainable solutions throughout the value chain, both companies aim to meet their environmental goals while boosting productivity and profitability.
Case Study: Fibrant and Didriksons
Fibrant has partnered with Didriksons to provide sustainable raw materials for Didriksons' range of outdoor clothing. By using bio-based caprolactam from Fibrant, Didriksons can produce high-quality, eco-friendly products that appeal to environmentally conscious consumers. This collaboration highlights the importance of sustainable material sourcing in achieving overall sustainability targets and demonstrates the power of partnerships in driving green innovation.
Conclusion: Strategic paths to sustainable growth
Whether choosing to lead or follow, companies must align their sustainability efforts with commercial goals to achieve profitable green growth. By translating engineering advancements into superior customer value and capitalizing on digital synergies, businesses can secure their future in both sustainability and profitability.
Our study provides a comprehensive roadmap for industrial companies navigating the green transition, offering practical steps and real-world examples to guide their sustainability journey.
Act now to secure your business’s future in sustainability and profitability. Reach out to our industrials experts at Simon-Kucher.
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