By Pragasen Moodley Regional Director - Rest of Africa & Middle East at Sage

Sustainability has emerged as an imperative for South African businesses of all sizes. With customers, regulators and government increasingly concerned about environmental degradation, companies are under pressure to implement sustainable processes and practices. 

Sustainable businesses can get an edge by improving efficiencies, gaining a better reputation in the market, and reducing regulatory risks. 

The SME Climate Impact Report commissioned by Sage finds that over half (53%) of South African and UK SMEs stated that sustainability was a top priority for them or central to their operations. South African SMEs do not see becoming greener as conflicting with business growth: lowering costs is the biggest potential benefit of becoming more sustainable.

The manufacturing sector, especially, has a major role in helping address climate change. This is prompting many South African manufacturers to shift into the circular economy, focusing on building products designed for low environmental impact, from how they are manufactured, packaged, and used to how their components can be reused.

The circular economy defined

In traditional manufacturing, products are manufactured from primary commodities and finite resources and have no value once they stop working. Companies profit from encouraging consumption through regular product replacement. The circular economy seeks to create value for businesses, people, and the environment through a more sustainable approach. 

The circular economy focuses on eliminating waste by keeping products and components in use for as long as possible and creating new resources from discarded materials. The ultimate goal is to grow while minimising the consumption of finite resources. A cyclical model flows from make to use, return, recycle, reuse, and back to make.

For manufacturers, participating in the circular economy helps to build trust and a good reputation with customers. By giving your customers what they want – namely sustainably manufactured products – an enterprise can gain a substantial competitive advantage to ensure its brand relevance and resilience into the future. 

It can also futureproof a business from the reality that many resources will become increasingly scarce, regulated, and expensive to procure. According to the Ellen MacArthur Foundation, a charity working to accelerate the transition to a circular economy, the manufacturing industry could achieve between 10% and 15% cost savings on direct materials required for production.

Industry 4.0 and the circular economy

Industry 4.0 technologies are key to enabling a high-functioning circular economy. These modern technologies can shift the manufacturing industry from centralised, linear, costly, and inefficient processes to decentralised, smart, sustainable, and innovative production. In other words, digital transformation goes hand-in-hand with the shift to the circular economy.

High-performing digital infrastructure enables manufacturers to design products with built-in recyclability, reusability, and remanufacturing potential to run more efficiently. 

Some examples of smart and sustainable tech that allow a company to accelerate the move to a sustainable Industry 4.0 model include:

• Cloud computing: Manufacturers may be able to reduce their carbon emissions by leveraging public cloud resources rather than maintaining their own data centres. 
• Internet of Things (IoT): The IoT can connect products to the cloud for real-time analysis at any location along the supply chain. Advanced connectivity enhances how data is gathered, analysed, shared, and used to design, manufacture, and deliver durable and returnable products for reuse or remanufacturing.
• AI and automation: Artificial intelligence and automation can assist the manufacturing industry’s transition to the circular economy by accelerating the development of sustainable product designs and operational processes. 
• Robotics: The use of robots across various applications can help boost productivity, improve efficiency, reduce waste, and extend products’ lifespans.
• 3D printing: 3D printing produces spare parts on-demand with low environmental impact. This ability to extend a product’s usability as and when required reduces manufacturing and operational expenses such as energy and storage costs.

How digital transformation supports sustainable, smart manufacturing

Outdated legacy IT infrastructure cannot support Industry 4.0 and its advanced technologies. If a business is straddled with old tech, it will not be able to transition to more sustainable manufacturing operations. As a result, savvy manufacturers are embracing digital transformation to shift their operations into the circular economy.

Consumers, shareholders, and regulators are pushing manufacturers to shift into the circular economy, highlighting the benefits for all involved. The future of manufacturing is inextricably linked with digitisation and Industry 4.0. Now that the technologies exist to enable a new production and consumption model, a business can do better business that is both financially and environmentally rewarding.