CEO dialogue: Perspectives on productivity and sustainability

| Article

The role digital technologies can play in manufacturing’s future is increasingly clear. The challenge—which too many companies have yet to overcome—is how to capture the strategic advantages.

In late September, hundreds of thousands of viewers tuned in to hear 11 CEOs from around the world discuss how Fourth Industrial Revolution (4IR) technologies are accelerating environmental sustainability, igniting transformation across business ecosystems, and putting people at the center of innovation—all while boosting productivity. These CEOs represent new members of the Global Lighthouse Network (GLN), a community of world-leading manufacturing facilities and value chains using 4IR technologies to improve processes and develop workforce skills that can be scaled across the production chain. Launched in 2018, the GLN is a World Economic Forum (WEF) initiative in collaboration with McKinsey & Company.

“Increased global concern for environmental impact has made sustainability a must-have to maintain business viability,” said Francisco Betti, head of the WEF’s platform for Shaping the Future of Advanced Manufacturing and Value Chains. “The GLN has shown us how to use technology to power productivity across individual sites and value chains. And we are now learning how leaders are using technology to power environmental sustainability.” Betti noted that these imperatives were also discussed at the WEF’s Sustainability Development Impact Summit, in September.

The conversation has been edited for clarity and intelligibility.

Accelerating environmental sustainability

At the WEF’s annual meeting in 2020, leaders from industrial companies asked the GLN to investigate how technology could make sites and end-to-end value chains more sustainable. An independent expert panel has designated three existing lighthouse sites (out of 90) as the first sustainability lighthouses: factories and value chains that have achieved sustainability and productivity breakthroughs. These sites are: Ericsson (Lewisville, Texas, United States), Henkel (Düsseldorf, Germany), and Schneider Electric (Lexington, Kentucky, United States). Besides achieving the impressive level of 4IR maturity characteristic of other lighthouses, sustainability lighthouses have shown their commitment to environmental sustainability through the intent, impact, and scale of the advanced use cases they have deployed.

To capture more detail on energy consumption (such as precisely when and where it happens in the plant), Schneider Electric’s smart factory used Internet of Things (IoT) connectivity with power meters and predictive analytics. Energy use fell by 26 percent, CO₂ emissions by 30 percent, and water use by 20 percent.

Jean-Pascal Tricoire, Schneider Electric’s chairman and CEO, said that sustainability and profitability should not be in opposition. When both occur at the same time, competitiveness improves.

“It’s much more than energy consumption; it’s about reducing any consumption of resources by making everything much more efficient and, at the same time, organizing circularity all over the life cycle of our products,” Tricoire said. “This occurs within and beyond the factory and organizes the whole chain of services so that everything gets recycled. We apply digital technology all the time to everything we do, and every three years we gain 10 to 12 percent in energy efficiency. But we want to raise the bar as we go forward—and that’s coming from our operational teams on the shop floor.”

It’s much more than energy consumption; it’s about reducing any consumption of resources by making everything much more efficient.

Jean-Pascal Tricoire, Chairman and CEO, Schneider Electric

How does Schneider Electric use digital technologies? “We believe that everything should be connected on the shop floor,” Tricoire continued. “We want to be zero carbon everywhere. Now we are really developing a deep journey in circularity, where, again, digitization is key.”

The GLN’s 90 manufacturing sites have collectively established themselves as beacons of the Fourth Industrial Revolution, challenging the notion that environmental responsibility is inherently at odds with productivity and, by extension, profitability. They show that companies no longer have to choose between competitiveness and sustainability: smart manufacturing helps them achieve both. In fact, our recent data show that 64 percent of the lighthouses improved their sustainability by reducing consumption, resource waste, and carbon emissions.

For example, confronted with increasingly complex manufacturing processes and insistent demand for high product quality, Contemporary Amperex Technology, in Ningde, China, combined AI, advanced analytics, and edge and cloud computing. Within three years, the company had dramatically reduced its defect rates. It also increased labor productivity by 75 percent while reducing energy consumption by 10 percent a year.

“The most important thing here is that you must have an overall view of the whole carbon footprint, from the mining of the material—the supply material—to the battery manufacturing, the battery usage, and in future, battery recycling, so you can put everything in your mind as a whole system,” said Robin Zeng, founder and chairman of Amperex.

Another company—AU Optronics (AUO)—invested in customized automation at a newly designated lighthouse site in Taichung and built a digital-analytics and AI development platform to improve productivity and cut energy use. “4IR technologies play a leading role in our development of a sustainable environment,” said Paul Peng, AUO’s CEO. “The application, optimization, and use of real-time intelligence-control technology can improve environmental sustainability—it significantly reduces water consumption, electricity consumption, and the usage of raw materials. On average, we find that energy savings of more than 1.5 percent can be achieved every year.”

Igniting transformation across the ecosystem

For executives, it’s crucial that 4IR is about not only the production process but also the entire operating model. In 2020, industry-leading sites used technology within the four walls of a single manufacturing facility. In 2021, companies have been accelerating their efforts on a bigger scale: connecting value chains, using new business models, and creating whole ecosystems with a more acute focus on productivity and environmental sustainability.

For the GLN’s members, lighthouses are the critical scale-up vehicle, serving as a sort of minimum viable product (MVP) for a new company-wide operating system. By connecting ecosystems, lighthouses can unlock new opportunities that build on what they have already achieved. For example, Innolux, which produces consumer-electronics equipment, responded to constantly increasing quality requirements from customers by investing in advanced automation, IoT technology, and advanced analytics at its new lighthouse site, in Kaohsiung. The transformation improved the company’s process capabilities by 40 percent, reduced its yield losses by 33 percent, and unlocked new production opportunities for niche products.

“Innolux achieves digital transformation through a systematic approach, advancing in three dimensions: automation, data, and intelligent technology. We have also realized worry-free production through smart manufacturing with intensively educated Industry 4.0 talent,” said Jin-Yang Hung, the company’s chairman and CEO. “The imperative, in a manufacturing business of this size, is production at scale. Now, with intelligent data, I think we can also achieve great production for niche products.”

Robert Bodor, CEO of digital-native manufacturer Protolabs, which has its first lighthouse location in Plymouth, Minnesota (United States), also stressed the importance of activating 4IR technology across the broader organization. “Our mission was to automate traditional manufacturing—to provide molded parts in days, at a fraction of the price of traditional molders,” Bodor said. The company embarked on a transformation journey that took it from a prototype-only provider to a production supplier by leveraging its digital thread to connect customers to its injection-molding production services. “Over time, we extended this digitization approach to other services, including CNC [computerized numerical control] machining, sheet-metal fabrication, and 3-D printing.”

What’s next? The company is expanding its internal transformation to include its digital network of premium partners, creating a larger ecosystem of digital manufacturers that “expands our offerings for our customers and broadens how we can serve them,” Bodor said.

Putting people’s capabilities at the center of innovation

Since the GLN’s launch, the blueprint for scaling up tech-enabled operations within factories—and then across end-to-end value chains—has come into sharp focus. From consumer packaged goods to process industries and from global blue chips to businesses with fewer than 100 employees, a common denominator has emerged: the most viable way to turn a 4IR blueprint into reality is to put an empowered workforce, with the ability to use all of the technologies fully, at the center of digital transformation.

“It’s our responsibility to equip and empower our teams, for both short- and long-term success,” said David Goeckeler, CEO of Western Digital, which has two new lighthouses, in Malaysia and in Thailand. “We have thousands of engineers designing the products of the future, which will enable the digital economy. So making sure we have a workforce that’s ready to build that technology is just critically important to us.”

Another facility that focused on a broad program to up- and reskill its workforce and on investments in digital and analytics was the De’Longhi plant in Treviso, Italy, which makes bean-to-cup automated coffee machines. When it transformed itself from a relatively uncompetitive site into a manufacturing lighthouse, its lead times fell by 82 percent and its labor productivity rose by 33 percent.

The first lighthouse of US-based manufacturer Flex is its site in Althofen, Austria. The critical moves were keeping people at the center of the transformation, prioritizing upskilling, and building a future-ready workforce, said Revathi Advaithi, Flex’s CEO. Confronted by strong competition from lower-cost regions, the factory raised its quality standards and generated new revenue streams through digital transparency and advanced analytics, both deployed not only on the shop floor but also across the supply chain. This effort raised revenue by 50 percent within the same physical footprint.

“I’m a big believer that culture is at the forefront of everything we do. Great manufacturing comes because you have a great culture—and it’s not just the operations team; it’s everyone in the company,” Advaithi said. “I envision a world where using information and technology becomes seamless in manufacturing, and connectivity really improves productivity and efficiency.”

I’m a big believer that culture is at the forefront of everything we do. Great manufacturing comes because you have a great culture—and it’s not just the operations team; it’s everyone in the company.

Revathi Advaithi, CEO, Flex

We hope you were inspired by these stories of Global Lighthouse Network leaders. The international mandate for climate action is clear. Meeting it will take innovation, resolve, and cooperation—and the strength of the GLN lies in just these characteristics. Should you be part of this ecosystem of influential innovators? Find out more about how to join the network here.

Explore a career with us