As the industry grapples with its role as a significant contributor to global carbon emissions, the spotlight turns to innovation as the catalyst for change. This article, featuring comments from Sixth Sense Summit’s panel discussion ‘What are the innovations driving manufacturing to net zero?’, explores how innovations, startups in the sector, and VCs play a role in manufacturing’s drive to net zero.

What are the net zero needs of customers?

The net zero needs of customers are increasingly becoming a focal point for businesses across all sectors, reflecting a growing consciousness about climate change and the impacts it is causing. These needs are varied and evolving, driven by the desire for sustainability, transparency, and responsibility in the products and services they choose.

Joni Rautavuori, CEO of Tharsus Group commented: “There are two big themes. One is, of course, the whole energy transformation. How do they use more renewable energy? How do they use energy more efficiently? As well as energy storage systems. If you want to use renewable energy you need to store it, as the generation and consumption are not always one-to-one. [The other theme] How do you use equipment that is based on electricity? So, charging becomes a topic, EV charging is one, how do you electrify your vehicle fleet?

“These are taking a longer time, because many of those depend on infrastructure investments and Government support. Everybody is going in that direction, but while that transformation takes a longer time, there are normal operational efficiency topics where companies have a lot of waste, and they want to reduce that waste.

“Most industrial companies have a dilemma. One is being productive. The competition is getting tougher, so you need to reduce costs and be more productive in the manufacturing industry, with speed typically based on economies of scale. The other thing is you need to be more flexible these days, as consumers, we want individualised products, and companies need to be very, very flexible. So, the traditional ways of being productive, being flexible, are not good enough anymore, and that's where the sustainability aspect comes in.”

From an investor perspective, Sabrina Paseman, General Partner at Omni Ventures, stated: “I think with this next phase of venture capital, it really is up to the funds to change the direction of the industry. There’s a big gap right now in terms of the amount of emissions given off by the industrial industry and the amount of capital deployed into industrials. In fact, it is the most underfunded relative to the amount of emissions that are created. A core part of our fund thesis is investing in processes and materials that can improve the overall sustainability of industrials in general.

“The amount of capital that is required to effectively scale hard tech cleantech companies is often too enormous for small early-stage fund 1s. […] The approach we’re taking with our fund is that we have two halves for the way we invest. We invest 60% into software optimisation that can help improve manufacturing processes, and the other half is going to be more capital-intensive opportunities and materials sector and energy savings.

“And one thing that we encourage, not just the new funds, but also the established funds, is finding a way to be as diligent about sustainability as you are about your financial returns.”

Are we building the ecosystem to achieve net zero in manufacturing and engineering?

“The aspiration is there to build a functional ecosystem, but there are three key challenges: talent, access to capital, and infrastructure. Unless we address those significant challenges, it will be really difficult to build a robust ecosystem.” commented Ana Avaliani, Director of Enterprise at the Royal Academy of Engineering. “We haven’t resolved the funding problem of hard tech deeptech companies, they are having huge problems when it comes to investment all the way from pre-seed to scaleup finance. There are some initiatives that are being put in place, but speed is of essence.

“There are only three VCs in the UK that can lead more than £20 million plus rounds, and that’s very little in comparison to what is needed. On the other hand, when we look at skills, when we look at talent, there is still quite some way to go, so that’s a big challenge in itself that needs to be addressed. And lastly, issues around facilities. Companies are struggling to find wet labs and appropriate facilities, and all of these things are part of a vibrant ecosystem.”

In light of Ana Avaliani's insights, it becomes evident that while the ambition to forge a net zero ecosystem in manufacturing and engineering is robust, significant hurdles remain. The path ahead requires dedicated effort to bypass these challenges, through ensuring funding in these areas, the nurturing of talent, and the development of essential infrastructure.

As the sector stands at this crossroads, the urgency to act and innovate has never been more pronounced. The journey is complex, yet the potential rewards for the environment, economy, and future generations are immense. Now, more than ever, collaboration, investment, and strategic planning are key to unlocking a sustainable, net zero future.