As COP26 begins, ‘finance’ is undoubtedly a critical component to mobilising manufacturing’s net zero future.

Greenifying the manufacturing sector’s entire process is critical to reducing the sector’s carbon emissions. Manufacturers have shown significant drive to achieve this with two-thirds identifying the green skills needed to manufacture more sustainably, and two-fifths planning to invest in green technologies, and 70% in digital skills within the next 12 months.

However, this huge transformation requires significant investment.

1. Firstly through investing in physical improvements to ensure efficiency- with around 40% of carbon emission reductions from the manufacturing sector expected to come purely from the deployment of efficient and best available technologies. These include enhanced equipment, digital technologies, to detect and reduce waste and renewable power infrastructure.

2. Secondly through investing in a green workforce, not only upskilling the millions of current workers in digital and green skills but providing green opportunities for future generations.

3. Thirdly, through investing in innovation to develop and adopt new green products and ways of working.

The Government’s recently unveiled Net Zero Strategy outlined commitments to increase government investment in R&D to £22 billion, and utilise the UK Infrastructure Bank (UKIB) to support more than £40 billion of investment.

But Government could do more including: 

• Incentivising green investment projects. This includes financing the replacement of old inefficient equipment (before or at its end of life) or the installation of energy/heat waste and water/gas leak detection systems qualify as measures/projects to help business with the decarbonisation of their industrial processes.
• Ensuring green infrastructure. Government should ensure manufacturing is equipped with the major infrastructure such as power generation, transport, and carbon capture and sequestration.
• Simplifying the funding landscape. Manufacturers find themselves stalling at the scale-up phase due to a lack of funds or stopped by an overly complicated funding landscape when it comes to green innovation. While manufacturers can sometimes obtain funding for the first stages of development of their innovations, funding complications ensure a significant inefficiency of the whole process, discouraging further innovation in the UK.
• Personalising funding for manufacturer’s needs. Fiscal measures should be are adapted to the manufacturing sector’s setting/needs (e.g., longer capital investment cycles) and new financial instruments which avoid long pay-back times (e.g., loans with terms based on pay-back of the investment and not a standard term).

Visit our net-zero hub to find out more.