Use Case – Green Production
The push toward environmentally friendly production processes has become as a real issue in your industry. Your company has responded through voluntarily actions, which have had limited success in the past. Now, there are signs that regulations will be tightening up. It looks as if pollution emissions from production will be subject to higher fines in an attempt to meet EU emission targets. The initial talks between industry representatives and the Ministry of Environment have given you a good idea of the added costs based on your current production technologies.
It doesn’t look good. The higher production costs would create significant gap in your mid-term planning. Aside from the direct effects of the regulations, you are also concerned that your company will be singled out as a polluter, which can damage its image among new and potential customers. You can roughly guess how many customers you would lose and calculate with a 5% to 10% drop in sales.
A few years back, however, you started development on a new technology to recirculate exhaust gases. The system could be ready to use within the next year. Since the manufacturing processes would need to be switched, this would result in a short-term drop in productivity. You could probably close the productivity gap within 3 years. What other short-term savings potential do you have to compensate the higher short-term manufacturing costs?
Can the new technology even help you build up your market position? You know that few competitors can use a similar technology and estimate the churn rate for higher environmental sustainability. You would need to make significant new investments. With the current situation as it is, however, you don’t want to go to the bank just yet. The scenario with the new technology sounds more promising. You will first need to thoroughly calculate an integrated view of your finances and profitability.