How is the Drive for Sustainability Impacting Appliance OEMs in terms of Strategy, Technology Readiness and Regulatory Compliance?

By Matthew Chang, Global Market Strategy Manager for Appliances

Sustainability — it really is the current buzzword that features almost everywhere you look. And so it should be, as the effects of climate change are manifesting across every corner of the globe, with frightening speed and devastation. Thus, sustainability has to be something we are thinking about — both individually and collectively in every area of our lives — from the products (and packaging) that we consume to how we operate, contribute and perform in our professional lives as well as our political choices.

The sector where I have the clearest view on this issue is the one in which I am connected to through my work, that of home appliances. Here the drive for sustainable appliances is considerable and has multiple facets. There are specific strategies and goals being developed and implemented to produce energy saving appliances with design and, notably, re-design initiatives to embrace bio-degradable materials that support effective recycling programs that reduce waste and pollution – promoting a more circular economy.

The corporate responsibility of the global OEMs manufacturing home appliances is an essential element of the drive for sustainability in this sector. In this article I will consider the sustainable strategies of some of the leading appliance companies, and how this is being implemented across the entire value chain of an organization. This will be within the context of the EU Corporate Sustainability Reporting Directive (CSRD), which was released earlier this year (April) and will change regulatory compliance rules from 2024. The standards will be mandatory for large companies, while SMEs will benefit from a simplified reporting regime. Of particular interest within this directive is the application of dual materiality which will require an organization to disclose how its entire value chain impacts on the environment, as well as how sustainability issues affect the organization. This effectively means that companies have to consider sustainability both internally and externally (hence the dual approach) and provide visible reports — and accounts — that enable them to be held accountable.

This broadens the context considerably — because it is not just about producing sustainable, energy saving appliances that will appeal to consumers. That is important, vital even, but it is also about how companies operate in every aspect of their organization and across all of its facilities in terms of the affect (footprint) it has.

Here I will look at just two core sustainability issues within this wider context, namely the drive to save energy and working towards a more circular economy.

  • Energy Saving
    The continued consumption of fossil fuels continues to have the biggest impact on the environment and climate change, while these resources continue to become scarcer and more costly. These facts are driving the dual approach of sourcing renewable energy while also reducing energy consumption. This is largely true across the home appliance sector too. In terms of renewable energy, more and more consumers are looking at individual small solar electric systems, small wind electric systems or hybrid systems. Reducing energy consumption leaves consumers reliant on the types and versions of appliances that they buy, but those manufacturers focusing on this issue — in terms of water usage and electrical consumption — are increasing market share. Moreover, the European Commission’s latest legislation for energy labelling and has been outlined to improve the energy efficiency of products across the EU with minimum standards that will ultimately eliminate the lowest performing products from the market.

  • Circular economy
    A circular economy is one that seeks sustainable consumption and production patterns while offering new, cleaner and economically viable growth models. This is achieved by adopting the principles of reuse, repair, refurbish, remanufacture and/or recycle to create a circular system that greatly reduces pollution, waste products and carbon emissions. A circular economy is the antithesis of a linear economy that utilizes a valuable natural resource to produce a specific product that at the end of its life will become landfill because of the way it is designed and made.

A number of OEMs within the home appliance sector are embracing these issues and developing medium- and long-term sustainable strategies to achieve compliance with sustainability regulations and net zero CO2 targets.

In March of this year Whirlpool released its 2020 Sustainability Report, including a (self-marked) scorecard which highlighted some key progress in reducing emissions and waste to landfill. The latter saw a reduction to zero in 25 of 35 of its global facilities. Moreover, it a forward-looking statement about climate related opportunities for innovative and efficient products, the company says: “As global leaders and technology drivers in the home appliances industry, we are continually improving product efficiency on a voluntary basis… We continue to make investments in both the efficiency and innovation of our products to improve lives at home and in our communities. Over the last several years, we have invested over $300M in products with increased energy and/or water efficiency and have planned investments of over $70M to significantly reduce high global warming refrigerants and blowing agents in the next three years. In addition to driving individual product efficiency, we will begin to drive efficiencies through more dynamic interactions with the grid through connected appliances.”

Electrolux also released its sustainability report for 2020 in the same month. The dual materiality approach is already very much in evidence here — both for internal corporate targets and exterior impacts. The company reported a significant upswing in energy and water efficient products: a -70% absolute reduction of its CO2 emissions across its operations (since 2015); the use of 6,800 metric tons of recycled plastic in its products to “offer circular products,” and that 74% of the company’s top direct material suppliers have committed to disclose their carbon emissions and set targets. Looking ahead, the company launched its new sustainability framework, For the Better 2030. The overall goal is to achieve climate neutral operations by 2030, and climate neutral status across the entire value chain by 2050.

Looking into the sustainability strategy of B-S-H, the approach is two-fold, namely minimizing the company’s carbon footprint and “using resources more efficiently by implementing a circular economy.” Expanding out on the latter point the company states its beliefs “in the three principles of a circular economy: design out waste and pollution, keep products and materials in use and regenerate ecosystems,” with the aim of reducing emissions and energy consumption and minimizing its use of resources along the entire value chain “from sourcing and production to usage and the return, refurbishment, recycling and reuse of appliances.” To this end, B-S-H has stablished a global environmental management system that ensures environmentally compatible and efficient production, this includes the product development stages of product life-cycle, where a design change cannot give rise to any additional environmental impact during manufacture.

The most recent sustainability report from LG is from 2019-2020 and, in a consistent theme, has a dedicated section on achieving zero carbon promoting a circular economy throughout its value chain. Notably, LG also provides a roadmap for intelligent future technology, including AI and automation to support its medium and long-term goals.

This “technology readiness” approach is an interesting one, because technology — especially so-called ‘clean technology’ can support sustainability strategies now and well into the future, I believe. But this all has to be done within the current and future regulatory framework. Clean technology refers to any process or product that combats negative environmental impacts. This can be achieved through energy efficiency capabilities, the sustainable use of resources or environmental protection. Clean technology is being developed in many areas, especially for manufacturing and production activities, to deliver improved business models, and appliance manufacturers are among the adopters. One of the most successful clean technologies to date has been the transition to LED lighting — both in the home and industrial settings. Across manufacturing operations clean technologies are becoming more visible in terms of optimizing processes, increasing efficiency, reducing waste and conserving energy and raw materials.

AI, IIoT and automation are among the top technologies that OEMs are embracing to deliver on their sustainability strategies. For instance, by increasing automation across production sites, the amount of manual work across the assembly line is reduced, simultaneously reducing CO2. Within a more automated assembly line, material selection is also a vital consideration. This is where a reliable and certified materials partner can support. Henkel provides a range of appliance adhesives related to automation that can demonstrably improve effectiveness and efficiency. Henkel can also demonstrate other key sustainability initiatives for appliance OEMs, namely bonding systems that contribute to a more circular economy, with materials that are easily recyclable.

If you would like to discuss any of the key initiatives for sustainability discussed in this article please feel free to comment below or reach out to me to set up a meeting. You can also catch up on Henkel’s own sustainability report here to see how it aligns with other OEMs.

 

About the Author

Matthew Chang

Matthew Chang currently serves as Global Market Strategy Manager for Appliance and HVAC within company's Adhesive technology business group, where he is focused on developing segment strategy, portfolio innovations and marketing guidance to capture purposeful revenue growth.

In 2018, Matthew joined Henkel as Head of Product Management lead the regional PM team strategically drive the operational efficiency and then moved to Global Market Strategy team in 2020. Prior to Henkel, he is with extensive cross functional experience from supply chain, global/regional marketing, business development and sales in various markets including Semiconductor, Display, Consumer Electronics and Commercial security at both 3M and Honeywell dedicated to provide the best-in-class solutions to customer through strategic marketing and innovations. Based in Taiwan, Matthew holds the Master degree in Industrial Engineering from University of Southern California and Bachelor degree in Bio-Mechanical Engineering from National Taiwan University.

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