The EU Green Deal and Industrial Products: A huge industry wrestling with diverse issues – but leading the way on decarbonisation in some segments

If you spend a lot of time – as I do – working with industrial products companies, you’ll know they have one key characteristic that shines through every day: their sheer diversity. The industry encompasses a vast array of businesses, from shipping and ports to manufacturing and industrial automation to carmakers. 

These wide differences make it difficult to identify consistent trends across all industrial products businesses. But one thing that they all share is that the green agenda – especially driving down carbon emissions – is a very pressing issue. This makes it vital that they understand and comply with the EU Green Deal: the EU’s new strategy for improved competitiveness and growth, ushering in many measures to make resource usage more efficient and less polluting. 

Varying degrees of maturity across the industry…

To me, the overall takeaway from the EU Green Deal Survey is that while most European companies are striving to operate more sustainably, they’re struggling to create coherent strategies that coordinate their responses to different environmental challenges. And when we zero in on industrial products companies, we find a similarly fragmented picture – with some segments of the industry far more advanced than others in addressing their environmental impacts.

Take shipping. This sector is ahead of the game, having invested in having the right-sized vessels to reduce emissions and switching to biofuels – or potentially even hydrogen – to support the “Power-to-X” agenda. And looking across transportation and logistics more broadly, there’s a widespread reinvention underway, with – for instance – land-based distribution companies looking to deploy fleets of electric vehicles, including trucks. 

An especially interesting development is that some companies are responding to the challenge of battery recharging in resourceful ways, like having the same goods carried in a relay by different electric vehicles. This is not only better for the environment, but can also support compliance with employment regulations. Green-focused innovations are also emerging in parcel deliveries, with approaches ranging from drones to smart parcel lockers to avoid unnecessary trips. 

…as manufacturers’ products shape their approaches

Turning to the manufacturing subsector, I find that companies’ appetite to “go green” is often linked to the product they’re selling. For example, if a business is making products that improve insulation or reduce energy usage in transportation, it’ll probably also be more eager to make its manufacturing sites greener. This makes a lot of sense: if you’re making a product that’s energy inefficient and will soon be redundant, there’s little point investing in sustainability.

Another aspect of manufacturing that’s heavily impacted by the green agenda is the supply chain – where its effects have been compounded by COVID-19. For a lot of manufacturers, the disruptions triggered by the pandemic sounded like a wake-up call about their over-dependence on China. They shifted their focus away from having a lean supply chain, and towards having one that’s robust and resilient. Combined with the need to reduce emissions, this has seen many companies relocate their manufacturing sites closer to the markets they serve – such as from Asia to Central and Eastern Europe.

At the same time, companies have also invested in robotics and automation to reduce their reliance on low-cost labour arbitrage. This in turn increases the importance of recruiting and developing young local talent like engineers and developers, and creating an environmentally responsible workplace where they’ll want to work.

Keys to the future: staying relevant – and harmonising regulation 

As the EU Green Deal takes effect, these are some of the major trends I’m seeing across industrial products. But there are also interesting developments among individual companies. 

One business I know produces cables for connecting wind turbines to transformation stations on land. Two years ago, it was seriously struggling; today, the roll-out of wind turbine energy islands has helped it thrive. Another thriving company is building one of Europe’s biggest solar generation fields. But these success sorties are balanced by a big downside for those that “get green wrong”. A case in point: some automakers have failed to develop a strategy for producing electric cars – and now find they’re losing market share and relevance.

But across all industrial products companies, a key factor influencing their responses to the EU Green Deal is the continued fragmentation of environmental regulation across Europe – a point also highlighted by my colleague Susann in her blog. In my view, the regulators need to gain a deeper, more practical understanding of how different businesses and industries operate, and of what incentives will help align them around green goals.