By François Candelon, Daniel Küpper, Max Männig, John Paschkewitz, and Vinit Patel, Harvard Business Review, September 28, 2023
The days of operations that pursue speed, quality, and cost efficiency above all else have come to an end. Today, the objectives that manufacturers must pursue to ensure competitiveness have evolved. Sustainability, long seen as incompatible with these traditional goals, is now a strategic imperative.
This raises a question for manufacturers: How can they make products and production processes more sustainable while remaining profitable?
There is a vibrant ecosystem of companies that have started to break this trade-off with deep tech: the innovative use of emerging physical technologies enabled by digital technologies to solve large-scale problems. As they try to increase profitability and sustainability, it’s time for manufacturers to use deep tech more widely and at scale.
A confluence of factors is converging to make this possible. First, the urgency to deliver sustainability is on the rise, driven by net-zero commitments and stakeholder demands. Second, financial and regulatory support for developing green technologies has never been greater. The Inflation Reduction Act in the United States and the European Green Deal in the EU are prime examples of this. And third, potentially transforming technologies are moving out of the lab and into the real world, with many demonstrating success at scale. These shifting dynamics present opportunities for manufacturers such as creating or moving to new markets or securing a head start in addressing supply scarcities, especially for green materials.
To capture these opportunities, break their trade-offs, and deliver sustainability, leaders should apply deep tech across their products as well as their processes. They will also need to consider how to collaborate with the innovation ecosystem, especially with younger deep tech firms.
Deep Tech Can Enhance the Profitability-Sustainability Profile of Products
With deep tech, manufacturing companies can reimagine the very essence of their products. Instead of offering incremental enhancements or partial substitutions — which often don’t yield significant benefits and may even be counterproductive — it’s essential for businesses to consider more fundamental product updates.
Manufacturers can develop and use new materials that are delinked from legacy materials’ supply chains or environmental footprints. Synthetically produced biological materials can act as sustainable building blocks or as drop-in substitutes. Market segments in which a sustainable manufactured product translates into a new relevant product claim are more likely to command a green premium, for example in the personal beauty space.
