How Deep Tech Can Drive Sustainability and Profitability in Manufacturing

How Deep Tech Can Drive Sustainability and Profitability in Manufacturing

By Matt Dallisson, 06/10/2023

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.

Consider Geno, a San Diego-based company that has developed plant-based alternatives for palm oil and fossil-based beauty, cleaning, and apparel ingredients based on its synthetic biology platform. The carbon footprint of Geno’s synthetic biology–based palm oil is up to 50% lower than conventional palm-derived ingredients. By offering traceability and lowering the reliance on traditional palm-oil supply chains, its use also drives supply chain transparency and resiliency. Similarly, Modern Meadow has developed a synthetic biology–derived collagen with unique bioactive effects. Specialty ingredients supplier Evonik has partnered with Modern Meadow to bring this to scale across the personal care and cosmetics sector.

Deep tech can contribute to both supply and price stability of raw materials, which are key for a manufacturer. Switching to renewable or more abundant materials answers both of those needs and can even shorten supply chains, reducing the complexity and carbon footprint of their logistics network. Niron Magnetics, for instance, has developed and is scaling up production of high-performance magnets. Their magnets are made from widely abundant nitrogen and iron, a viable alternative to alleviate the rare earth metals supply chain, which is concentrated in a few sources and processed in only a few plants worldwide. While initially targeting applications such as sensors or loudspeakers, these magnets could soon contribute to making EV motors, such as those from Tesla, rare earth-free.

Another way to enhance the profitability-sustainability profile is to change the performance profile of a product, for example by extending its life or endowing sustainable product properties that aren’t possible with conventional materials.

Basilisk, for instance, has developed a bio-based drop-in treatment, made of engineered microorganisms using syn-bio techniques, that can be mixed in with mortar or applied to existing concrete structures. This repair system uses limestone-producing microorganisms to eliminate the need for crack repair and maintenance. Depending on the product, this can lower CO2 emissions by 30–50% versus conventional concrete by extending the lifetime of the concrete and reducing the amount of steel needed for reinforcement. If applied at scale, this could mean a reduction of global CO2 emissions by more than 1.5%, since currently more than 6% of global CO2 emissions come from concrete.

Deep Tech Can Make Sustainable Process Economics More Compelling

It’s not just the products themselves that create constraints, but also the processes used to make them.

Boston Metal reimagined the conventional carbon-intensive steelmaking process by inventing a new electrolytic process and associated apparatus able to run on 100% renewable electricity and emitting no CO2. The molten-oxide electrolysis technique, made possible by new electrode materials that can withstand high temperatures and are stable in the presence of oxygen, has the potential to reduce the carbon footprint of the steel industry, currently responsible for as much as 8% of global GHG emissions.

Deep tech can enable innovation on processes to deliver step-changes in energy efficiency. Combined with new production enablers — like a shift from linear assembly lines to small, cellular factories — manufacturers can increase flexibility, introduce optionality for local manufacturing, and transition to a lower carbon footprint production network.

For instance, Syzygy Plasmonics’ scalable photoreactor combines LED light and photocatalytic nanoparticles to conduct chemical reactions, made possible by combining advancements in architected materials and innovation in photonics. Because the reactor focuses the energy from light exactly where it is needed, conversions become much more efficient and sustainable than a conventional reaction. By removing the need for combustion in the emissions-heavy chemical industry, Syzygy Plasmonics aims to avoid one gigaton of CO2 emissions by 2040.

Lastly, manufacturers can develop and use entirely new processes, like new additive manufacturing or precision fermentation techniques, that enable the realization of conventionally unmanufacturable sustainable products. With deep tech, manufacturers can engineer processes that reduce the number of energy-requiring transformations by building from the atom up.

Geno has successfully scaled their synthetic biology technology and farm-based supply chain to tackle large ingredients markets like butanediol (BDO), an industrial chemical, and nylon critical to the sustainability goals of its brand partners like Unilever, L’Oréal, and Lululemon.

Operations executives should look for incentives, subsidies, and other opportunities created by recent government policies. In the United States, the IRA alone covers $71 billion in stimulus for advanced manufacturing, industrial facilities, and energy efficiency.

Build an Innovation Ecosystem

Deep tech operates at the intersection of several emerging technologies, such as synthetic biology and 3D printing. It addresses complex issues that cross different scientific fields. It needs to serve real market needs, while often demanding significant funding and extended development periods.

Traditional companies may find it difficult to navigate this swiftly changing landscape. And few, if any, will have the tools and capabilities to do it alone.

To start making progress, manufacturers should seek to collaborate with partners — through commercial alliances, incubators, or ecosystems that can even include governments and academia, for example. Counterintuitive as it might seem, younger deep tech firms and incumbent manufacturers should not compete but rather collaborate. Established manufacturers can expect to get access to novel technologies and specific know-how that enables them to apply deep tech in their products and processes. When partnering with deep tech startups, manufacturers should look for solutions that are most compatible with their domain and build on the unique assets and capabilities they can leverage to create value for their joint efforts.

Chicago-based biotech company LanzaTech, for instance, has developed a microbe-based technology that uses residual gases containing carbon monoxide and hydrogen as feedstock to produce bioethanol. In partnerships such as with BASF, the world’s largest chemicals manufacturer, LanzaTech is working to convert the carbon in the exhaust gases from industrial processes, such as steel making, into sustainable raw materials for various industries. By capturing and utilizing carbon in this way, the technology can help reduce the carbon emissions of many manufacturers and associated supply chains. BASF thus improves the sustainability of their customer’s resource use and helps create demand for LanzaTech’s technology.

This example is just one of many. When looking to collaborate with deep tech startups, manufacturers can consider partnerships, joint ventures, or M&A approaches. The optimal engagement strategy and suitable partner will depend on the specific constraints a manufacturer faces in their domain, the need to complement missing in-house capabilities, and desired ambition level or scale.

To achieve commercial success activated by deep tech at scale, manufacturers should combine their product or process innovation with foundationally different value chains. Our extensive research on business ecosystems shows that value chain transformations, while challenging and often requiring extensive collaboration, will unlock enormous value. Manufacturers can leverage their unique capabilities and existing relationships to influence suppliers and distributors to transition to solutions or infrastructure that will support the new processes and products or help navigate the regulatory environment.

Consider the fashion industry, which accounts for around 4% of greenhouse gas emissions globally. Sustainability innovation efforts, which need to be effective throughout complex global fashion value chains, are particularly challenged in the current economic environment. Companies are pooling risk by collaborating cross-industry through a consortium like Fashion for Good. Fashion for Good has established an innovation program that connects brands, retailers, manufacturers, and investors to develop and scale disruptive solutions within the textile industry.

The members of this industry-wide initiative are looking to realize collective goals of making sustainable change happen in areas such as materials, processing, or end of use — but are unable to do it individually. The group has, for example, launched the Renewable Carbon Textiles Project, focusing on producing fibers from polyhydroxyalkanoates (PHA) polymer fibers, which could offer a sustainable, biodegradable alternative to traditional, fossil-based fibers, with the potential to significantly cut emissions in fashion’s value chain while simultaneously allowing manufacturers to fine-tune fabric properties. The project combines expertise of innovators like Danimer Scientific, Bio Craft Innovation, Paques Biomaterials, Helian Polymers, and Newlight Technologies with other players in the industry who will test the solutions, provide funding, and help scale the solution.

The examples of deep tech ventures and collaborations with manufacturing incumbents show that deep tech can already help companies deliver on the operations paradigm, advancing a common sustainability agenda without sacrificing long-term profitability. The real challenge is not the technology itself, but the inertia of long-established capital investments and time-tested manufacturing approaches — overcoming this is no small feat.

Given the pressing urgency for sustainability, manufacturers need to act swiftly and decisively. Manufacturers that leverage their unique capabilities and succeed in identifying the right engagement models can use deep tech as their critical driver of competitive advantage — and now is the time to get started.

This content was originally published here.