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Women in UK Manufacturing 2024:Addressing labour shortages and bridging the gender gapA review of best practices for diversity and inclusion1 About this report The Women in UK Manufacturing 2024 report presents an overview of the progress and challenges encountered by women participating in UK manufacturing over the past year.This edition specifically addresses two of the most pressing challenges faced by the industry:labour shortages and the gender gap.It offers evidence-based insights into how diversity and inclusion initiatives can help to tackle these issues,providing a framework for fostering a more inclusive and diverse industry.This report was funded by IfM Engage and Cambridge Industrial Innovation Policy in support of the Women in Manufacturing UK initiative.Contributors Authors:Jennifer Castaeda-Navarrete,Zoi Roupakia,Viktria Dme and Guendalina Anzolin IfM Engage,Institute for Manufacturing,University of Cambridge Copy-editing by Amanda George,Perfect Words Stakeholder management:Ella Whellams,Kate Willsher,IfM Engage,Institute for Manufacturing,University of Cambridge;and Lorelei Gherman,Innovate UK Business Connect Cover design by Ella Whellams,IfM Engage,Institute for Manufacturing,University of Cambridge Images and Women in Manufacturing Conference 2023 Acknowledgements The work presented in this report would not have been possible without the generous support of many people who facilitated and participated in the interviews and online survey.We acknowledge their participation in Appendix A.Cambridge,United Kingdom|2024 2 Contents Foreword.3 Executive summary.4 Introduction.9 1.Annual review:womens participation in UK manufacturing.10 2.Tackling labour shortages and employee retention.17 3.Driving equality,diversity and inclusion in manufacturing.22 3.1 Principles for companies.24 3.2 Principles for industry associations.41 3.3 Recommendations for a gender-responsive industrial strategy.47 4.A call to action:from principles to pledges.51 Appendix A.Organisations consulted.52 Appendix B.Review of best practices.53 3 Foreword The manufacturing sector is experiencing times of great uncertainty and challenge,driven by digitalisation,the skills shortage,and the need to become a net-zero economy.Amidst these changes,the role of women in manufacturing presents a timely opportunity and solution.We hope this report inspires meaningful actions and dialogue,encouraging all stakeholders to actively engage in changing the perception of womens roles in manufacturing,and building a more inclusive and equitable future for the manufacturing industry.In this context,the Women in Manufacturing UK Initiative(WiM UK),launched in 2022,has emerged as an important force for advancing an inclusive manufacturing environment.WiM UK is committed to increasing womens participation in manufacturing to 35%by 2035.Achieving this goal would unlock the potential of over 200,000 women,helping to address labour shortages and drive the growth of the industry.As the manufacturing industry navigates this new era,it is crucial to recognise that diversity and inclusion are not just ethical considerations but also business and societal imperatives.Although significant strides have been made toward creating more inclusive and diverse work environments,the underrepresentation of women remains a pressing challenge.Women bring unique perspectives,innovative ideas,and valuable skills that are vital to driving the future of manufacturing.Cultivating an inclusive culture that embraces gender diversity enhances productivity,resilience,creativity,and growth.Commitment to inclusion is crucial for unlocking the sectors full potential.This report offers a comprehensive overview of the experiences of women in UK manufacturing over the past year.It uses enlightening case studies to highlight a framework for promoting equality,diversity,and inclusion within the industry,encompassing businesses of all sizes,industry trade associations,and broader industrial strategies.The report serves as a call to action for all stakeholders and provides tangible examples of best practices for manufacturers to implement.We extend our gratitude to all contributors and stakeholders whose insights and experiences have contributed to this report and have been instrumental in shaping this comprehensive understanding.As we move forward,let us commit to fostering an inclusive,dynamic and sustainable manufacturing sector where everyone,regardless of gender,can thrive and contribute to our collective success.Women in Manufacturing Industry Advisory Board 4 Executive summary Gender disparities persist in the participation of women in manufacturing,with little change observed over the past year.Despite women making up approximately half of the UKs working population,they represent only 26.1%of the manufacturing workforce.1 Recognising this gap,the Institute for Manufacturing(IfM),the High Value Manufacturing Catapult,and Innovate UK established the Women in Manufacturing UK initiative(WiM UK).WiM UK is a network of professionals united by a shared commitment to increasing diversity and inclusion in the manufacturing sector.Established in 2022,WiM UK aims to raise womens participation in manufacturing to 35%by 2035.This report forms part of our efforts to raise awareness of the gender gaps in manufacturing and to offer actionable insights for businesses,industry associations and the government to improve diversity and inclusion within the sector.The Women in UK Manufacturing 2024 report presents an overview of the progress and challenges encountered by women participating in UK manufacturing over the past year.This edition specifically addresses two of the most pressing challenges faced by the industry:labour shortages and the gender gap.It offers evidence-based insights into how diversity and inclusion initiatives can help to tackle these issues,providing a framework for fostering a more inclusive and diverse industry.Key findings of the annual review Little progress made in womens representation in the past year.Between December 2022 and December 2023,minimal progress was observed,with a slight increase in womens participation from 25.9%to 26.1%.2 Mixed progress by occupation.While small gains were made in skilled trades,and managerial and senior official roles,there was a significant decline in womens representation in professional occupations.In 2023 womens presence in skilled trades,including roles such as electricians,welders and upholsterers,increased by 1.5 percentage points,and among managers and senior officials it increased by 1.3 percentage points.However,their participation in professional occupations,such as engineering,IT,marketing and finance professionals,fell by 4.4 percentage points,and in process,plant and machine operative roles,it decreased by 1.9 percentage points(Figure ES1).3 Rising part-time roles highlight a persistent gender divide in unpaid work.In March 2024 women spent 50%more time on unpaid childcare,adult care and household work than men a pattern unchanged in recent years.4 This traditional gender-based division of unpaid work makes women more likely to work part-time than men.In December 2023,26.2%of women in manufacturing worked part-time,compared to only 6%of men,marking a 2-percentage-point increase from December 2022.5 Narrowing the gender pay gap.While the gender pay gap in manufacturing is narrowing,women still earn 15.9%less than men.This is an improvement from the 16.7%gap observed 1 Office for National Statistics,ONS(2024).Workforce jobs by industry(SIC 2007)and sex unadjusted.2 Ibid.3 ONS(2024).Annual population survey.Workplace analysis.These occupations are based on ONS Standard Occupational Classification(SOC)2020.4 ONS(2024).Online Time-Use Survey(OTUS).5 ONS(2024).Workforce jobs by industry(SIC 2007)and sex unadjusted.5 in 2022 but remains higher than the 14.3%gap across the entire UK economy.6 Among full-time roles,the gender pay gap stood at 13.4%,nearly double the 7.7%gap seen across all sectors,although lower than the 14.8%gap in 2022.7 The UK lags behind other leading manufacturing countries in womens participation.Among the top 15 global manufacturing leaders,the UK ranks last,with countries such as Indonesia,Mexico and China leading in this area,and India experiencing significant improvements in womens participation in the sector.8 FIGURE ES1.WOMENS SHARE IN MANUFACTURING BY OCCUPATION,2022 AND 2023 Source:Office for National Statistics(2024).Annual population survey.Workplace analysis.Occupations based on ONS Standard Occupational Classification(SOC)2020.Tackling labour shortages and employee retention In the last quarter of 2023,the number of vacancies in manufacturing stood at 65,000,a notable decrease from the peak of over 90,000 vacancies observed in 2022.9 Despite this improvement,manufacturers continue to face challenges finding workers with both traditional and advanced skills.A critical aspect of this challenge is the sectors difficulty both attracting and retaining women.Womens participation rates tend to decline after their 30s,10 when they also encounter wider gender pay gaps(Figure ES2).11 6 Difference between average hourly earnings(excluding overtime)of men and women as a proportion of mens average hourly earnings(excluding overtime),based on median values.7 ONS(2024).Annual Survey of Hours and Earnings.8 International Labour Organization(2024).ILOSTAT explorer;National Bureau of Statistics of China(2023).China Population and Employment Statistics Yearbook.9 ONS(2024).VACS02 Vacancies by industry.10 ONS(2024).Census 2021.11 ONS(2024).Annual Survey of Hours and Earnings.6 FIGURE ES2.THE LEAKING PIPELINE OF WOMEN IN MANUFACTURING Note:Womens shares in the manufacturing workforce by age correspond to March 2021,while data on pay gap corresponds to 2023.Source:Authors,based on data from Office for National Statistics,ONS(2024).Annual Survey of Hours and Earnings;Office for National Statistics,ONS(2024).Census 2021.While information on workers who have left the manufacturing sector is limited,data reveals that the largest opportunities for improving retention are found in shop-floor-related roles and associate professional and professional roles.These are also the roles where gender pay gaps tend to be larger.12 Between 2011 and 2022 women most frequently left manufacturing from administrative roles,sales and marketing positions,assemblers and routine operatives and related roles,functional managers,and science,engineering and production technician positions.For men,common transitions occurred from shop-floor-related roles,production management,and positions in engineering and information and technology.13 In terms of sectors,women were more likely to transition from manufacturing to activities such as wholesale and retail trade,human health and social work activities,professional,scientific and technical activities,and education.Men also tended to move to wholesale and retail trade and professional,scientific and technical activities,in addition to construction and transportation and storage.14 12 Ibid.13 University of Essex,Institute for Social and Economic Research(2023).Understanding Society:Waves 113,20092022.18th Edition.UK Data Service.SN:6614,http:/doi.org/10.5255/UKDA-SN-6614-19.14 Ibid.7 Driving equality,diversity and inclusion in manufacturing Drawing on consultations with more than thirty organisations,through interviews and an online survey,and an extensive review of best practices in the UK and internationally,we propose a framework for fostering an inclusive manufacturing industry with equal opportunities and a diverse workforce.The framework includes five equality,diversity and inclusion(EDI)principles for manufacturing companies,four principles for industry associations,and five specific recommendations for gender-responsive industrial strategies.It is further enriched by 14 case studies showcasing best practices across UK manufacturing organisations of various sizes and sectors(Figure ES3).FIGURE ES3.PRINCIPLES FOR DIVERSITY AND INCLUSION IN MANUFACTURING Source:Authors,based on consultations and review of best practices.8 A call to action:from principles to pledges The business case for Equality,Diversity,and Inclusion(EDI)initiatives in UK manufacturing is clear as businesses face ongoing challenges related to skills shortages,driven by demographic shifts,technological advancements,and climate change action.Embracing diversity is key to attracting and retaining the skilled talent needed to maintain competitiveness and foster innovation.According to Make UK,addressing the current vacancies in the manufacturing sector could boost the UKs GDP by an estimated 7 billion annually.15 Although the impact of EDI initiatives is not always measured,a global survey by the International Labour Organization16,covering nearly 13,000 enterprises,found that 57%reported improvements in business outcomes from such initiatives.The Women in UK Manufacturing initiative invites all stakeholders whether you are a large multinational corporation or a small enterprise to engage with these principles,provide feedback and share your insights.Your input is invaluable in refining these guidelines to ensure they are practical,relevant and effective across the diverse landscape of UK manufacturing.How to get involved:Provide feedback:Review the principles proposed in this report and share your thoughts on how they can be improved or adapted to better suit your organisations needs.Express interest in pledges:If you are interested in developing tailored EDI pledges based on these principles,please reach out to us.We are eager to collaborate and support you in this endeavour.Commit to action:Once your pledges have been established,publicly commit to them and share your progress.This transparency will inspire others and help to build momentum towards a more inclusive and diverse manufacturing sector.Together,we can turn these principles into actionable pledges that will shape the future of UK manufacturing.Lets work collaboratively to ensure that every company,regardless of size or sector,has the opportunity to contribute to and benefit from a more equitable and inclusive industry.15 Make UK(2023).Industrial Strategy:A Manufacturing Ambition.London:Make UK.The Manufacturers Organisation.16 International Labour Organization,ILO(2019).The business case for change.Geneva.Please use this QR code to provide your feedback and express your interest in sharing EDI pledges aligned with these principles.9 Introduction Gender disparities persist in the participation of women in manufacturing,with little change observed over the past year.Despite women making up approximately half of the UKs working population,they represent only 26.1%of the manufacturing workforce.Recognising this gap,the Institute for Manufacturing(IfM),the High Value Manufacturing Catapult,and Innovate UK established the Women in Manufacturing UK initiative(WiM UK).17 WiM UK is a network of professionals united by a shared commitment to increasing diversity and inclusion in the manufacturing sector.Established in 2022,WiM UK aims to raise womens participation in manufacturing to 35%by 2035.This report forms part of our efforts to raise awareness of the gender gaps in manufacturing and to offer actionable insights for businesses,industry associations and the government to improve diversity and inclusion within the sector.The Women in UK Manufacturing 2024 report focuses on two of the most pressing challenges faced by the industry:labour shortages and the gender gap.This report provides evidence on how manufacturing struggles both to attract and retain women and other under-represented groups,and how improving diversity and inclusion can help to address these challenges.Drawing on consultations,with more than thirty organisations,through interviews and an online survey,and an extensive review of best practices in the UK and internationally,we propose a framework for fostering an inclusive manufacturing industry with equal opportunities and a diverse workforce.The framework includes five equality,diversity and inclusion(EDI)principles for manufacturing companies,four principles for industry associations,and five specific recommendations for gender-responsive industrial strategies.It is further enriched by 14 case studies showcasing best practices across UK manufacturing organisations of various sizes and sectors.This report is structured as follows:Section 1 reviews the changes in womens participation in UK manufacturing over the past year,offering insights across regions,occupations,industries,ethnicity and disability.It examines the impact of the gender-based division of unpaid work on womens participation in part-time roles and pay gaps and compares the UK with leading manufacturing countries.Section 2 discusses the labour shortages in the manufacturing sector and how improving employee retention could help to mitigate these issues.It provides information on the population groups and roles most likely to leave manufacturing and identifies the sectors to which these workers typically move.Section 3 presents the framework for creating an inclusive manufacturing industry with equal opportunities and a diverse workforce,offering recommendations and examples for implementing these principles.Section 4 concludes with a call to action,inviting stakeholders to refine these principles and use them as a foundation for actionable pledges tailored to the unique contexts of individual companies and industry associations.17 Office for National Statistics,ONS(2024).Workforce jobs by industry(SIC 2007)and sex unadjusted.10 1.Annual review:womens participation in UK manufacturing Women represent 26.1%of the manufacturing workforce,with little progress made in the past year Although women constitute approximately half of the UKs working population,they account for only 26.1%of the manufacturing workforce,around 680,000 in December 2023.Between December 2022 and December 2023,minimal progress was observed,with a slight increase in womens participation from 25.9%to 26.1%.However,since 2012 we have observed an upward trend.18 Across the UKs nations and regions,the most significant progress in womens participation occurred in the South West of England,where their share in the manufacturing workforce rose by 2.9 percentage points.This was followed by the East of England,with an increase of 1.8 percentage points,and the North East of England,with a rise of 1.7 percentage points.In contrast,the largest setbacks were seen in the South East of England,where womens participation fell by 3.4 percentage points,and in London,where it decreased by 2.8 percentage points(Figure 1).19 The South East of England and London are also the regions with the lowest shares of manufacturing value added in the UK.20 FIGURE 1.THE UKS NATIONS AND REGIONS:WOMENS SHARE IN MANUFACTURING WORKFORCE,2022 AND 2023 Source:Office for National Statistics(2024).Workforce jobs by industry(SIC 2007)and sex unadjusted.18 Office for National Statistics,ONS(2024).Workforce jobs by industry(SIC 2007)and sex unadjusted.19 Ibid.20 Castaeda-Navarrete,J.(2023).Women in manufacturing:the case for a gender-transformative digitalisation.11 Mixed progress in womens participation by occupation:small gains in skilled trades,managers and senior officials,but a large decline in professional occupations for women In 2023 we observed progress in womens participation in some of the most male-dominated occupations within manufacturing.Womens representation in skilled trade occupations,including roles such as electricians,welders and upholsterers,increased by 1.5 percentage points in 2023 compared to 2022,while their presence among managers and senior officials rose by 1.3 percentage points.21 However,there is also a concerning decline in other areas.Womens participation in professional occupations,such as engineering,IT,marketing and finance professionals,fell by 4.4 percentage points,and in process,plant and machine operative roles it decreased by 1.9 percentage points.22 These findings align with those of a report published earlier this year by EngineeringUK,which highlighted a worrying decline in the percentage of women working in engineering and technology occupations,from 16.5%in 2022 to 15.7%in 2023.The report noted that while more women are entering these fields,organisations are struggling to retain them,particularly those aged 35 to 64.23 We examine this issue further in Section 2.FIGURE 2.WOMENS SHARE IN MANUFACTURING BY OCCUPATION,2022 AND 2023 Source:Office for National Statistics(2024).Annual population survey.Workplace analysis.Occupations based on ONS Standard Occupational Classification(SOC)2020.21 ONS(2024).Annual population survey.Workplace analysis.These occupations are based on ONS Standard Occupational Classification(SOC)2020.22 Ibid.23 EngineeringUK(2024).Women in Engineering and Technology.12 Women from non-White backgrounds and women with disabilities have not seen any progress in their representation in UK manufacturing In 2023 less than 10%of women working in manufacturing were from a non-White ethnic group,a figure that was largely unchanged from 2022(Figure 3).24 Similarly,women with disabilities,as defined in the Equality Act 2010,represented 4.7%of the overall manufacturing workforce and 19.4%of the women in the sector,figures that did not change from 2022(Figure 4).FIGURE 3.WOMEN IN MANUFACTURING BY ETHNIC GROUP,2022 AND 2023 Source:Office for National Statistics(2024).Annual Population Survey,January-December,2023 data collection.UK Data Service.SN:9248,DOI:http:/doi.org/10.5255/UKDA-SN-9248-1 FIGURE 4.WOMEN IN MANUFACTURING BY DISABILITY,2022 AND 2023 Source:Office for National Statistics(2024).Annual Population Survey,January-December,2023 data collection.UK Data Service.SN:9248,DOI:http:/doi.org/10.5255/UKDA-SN-9248-1 24 ONS(2024).Annual Population Survey,January-December,2023 data collection.UK Data Service.SN:9248,DOI:http:/doi.org/10.5255/UKDA-SN-9248-1 13 Traditional gendered division of labour persists across UK manufacturing industries Little change has been observed in the participation of women across manufacturing industries over the past year.The lowest representation of women is found in:motor vehicles(12.6%),basic metals(15.6%),the repair and installation of machinery and equipment(16.1%),fabricated metal products,excluding machinery and equipment(16.9%)and other transport equipment(17.5%).In contrast,industries with near-equal gender participation include:wearing apparel(48.6%),textiles(44.5%),food products(37.6%),chemicals(40.3%)and pharmaceuticals(37.6%)(Figure 5).FIGURE 5.PARTICIPATION OF WOMEN BY MANUFACTURING INDUSTRY,2022 AND 2023 Note:Womens shares in total workforce.Source:ILOSTAT.Employees by sex and economic activity ISIC level 2.14 Rising part-time roles highlight persistent gender divide in unpaid work In March 2024 women spent 50%more time on unpaid childcare,adult care and household work than men,a pattern that has not changed in the last couple of years.25 This traditional gender-based division of unpaid work makes women more likely to work part-time than men.In December 2023,26.2%of the women in manufacturing worked part-time,compared to only 6%of men.This represents a 2-percentage-point increase in the proportion of women working part-time compared to December 2022.26 The gender pay gap in manufacturing is narrowing,but women still earn 15.9%less than men In 2023 women in the manufacturing sector earned 15.9%less than men,an improvement from the 16.7%gender pay gap observed in 2022.27 This value,however,is higher than the 14.3%gender pay gap across the entire UK economy.As discussed above,this is partly explained by an over-representation of women in part-time roles;however,pay gaps are also observed among full-time manufacturing workers.In 2023 the gender pay gap among full-time roles stood at 13.4%,nearly double the 7.7%gap observed across all sectors but lower than the 14.8%gap observed in 2022.28 Manufacturing industries with the largest gender pay gaps(where data is available)include:the manufacture of computer,electronic and optical products(30.3%);the repair and installation of machinery and equipment(19.2%);the manufacture of chemicals(19%);the manufacture of 25 ONS(2024).Online Time-Use Survey(OTUS).26 ONS(2024).Workforce jobs by industry(SIC 2007)and sex unadjusted.27 Difference between average hourly earnings(excluding overtime)of men and women as a proportion of mens average hourly earnings(excluding overtime),based on median values.28 ONS(2024).Annual Survey of Hours and Earnings.15 electrical equipment(19%);and the manufacture of motor vehicles,trailers and semitrailers(16.6%).29 By occupation,the largest gender pay gaps(where data is available)are observed in:business and public service associate professionals(24.3%);skilled trade occupations(20%);sales occupations(17.7%);and science,engineering and technology associate professionals(15.7%).30 Across UK industries the largest gender pay gaps are seen among workers aged 40 and above:17%for those aged 4049,19.7%for those aged 5059,and 18.1%for those aged 60 and above.In manufacturing the pay gaps are particularly pronounced for women aged 5059(21.2%)and those aged 60 and above(23.8%).31 The UK lags behind:Womens participation in manufacturing is the lowest among the top 15 global leaders Comparing womens participation in manufacturing in the UK with that of the top 15 manufacturing countries globally,where data is available,the UK ranks last.In contrast,Indonesia,Mexico and China lead in this area(Figure 6).India has seen significant improvements in womens participation in this sector,with their share of the workforce rising from 28.2%in 2022 to 31.4%in 2023.Although womens overall participation in 29 Ibid.30 Ibid.31 Ibid.16 Indias labour market remains among the lowest in Asia and globally,they have played a crucial role in the recent expansion of the manufacturing sector,particularly on factory floors.32 Initiatives driving this change in India include:flexible work arrangements,dedicated transportation services,and on-site daycare facilities and training support,alongside.33 FIGURE 6.PARTICIPATION OF WOMEN IN MANUFACTURING IN TOP MANUFACTURING COUNTRIES,2022 AND 2023 Note:Data for China is based on 2022 figures for both years,as it is the most recent data available.Source:Authors based on International Labour Organization(2024).ILOSTAT explorer.Employment by sex and economic activity;National Bureau of Statistics of China(2023).China Population and Employment Statistics Yearbook.Employed Persons at Year-end in Urban Units Excluding Private Units by Sector;Office for National Statistics(2024).Workforce jobs by industry(SIC 2007)and sex unadjusted.32 Rao,A.(2024).More Women Are Now Part of Indias Expanding Manufacturing Workforce.India Briefing.33 Jaipuria,A.(2024).Closing Gender Gap in Manufacturing.Cosmo First Limited.17 2.Tackling labour shortages and employee retention In the last quarter of 2023,the number of vacancies in manufacturing stood at 65,000,a notable decrease from the peak of over 90,000 vacancies observed in 2022.34 Despite this improvement,manufacturers continue to face challenges finding workers with both traditional and advanced skills.Without effective policies,this issue is likely to worsen as trends like environmental sustainability and technological advancements reshape the industrys skill requirements.35,36 Manual skills continue to be among the main shortages faced by UK manufacturers.As of September 2024,32.6%of the manufacturing business that participated in the ONS Business Insights and Conditions Survey mentioned manual skills as an area of high demand in the last 12 months.37 This was followed by customer service skills(11.9%),basic digital skills(11.5%),and management skills(9.8%).As shown in Figure 7,a critical aspect of this challenge is the sectors difficulty both attracting and retaining women.Womens participation rates tend to decline after their 30s,38 a period when they also encounter wider gender pay gaps.39 FIGURE 7.THE LEAKING PIPELINE OF WOMEN IN MANUFACTURING Note:Womens shares in the manufacturing workforce by age correspond to March 2021,while data on the pay gap corresponds to 2023.Source:Authors,based on data from Office for National Statistics,ONS(2024).Annual Survey of Hours and Earnings;Office for National Statistics,ONS(2024).Census 2021.34 ONS(2024).VACS02 Vacancies by industry.35 The Institution of Engineering and Technology(2023).IET sustainability skills survey.36 World Skills UK(2023).Manufacturing excellence.37 ONS(2023).Business Insights and Conditions Survey,Wave 115,September 2024.38 ONS(2024).Census 2021.39 ONS(2024).Annual Survey of Hours and Earnings.18 While information on workers who have left the manufacturing sector is limited,some evidence highlights the roles that are particularly challenging to retain.In 2021 Randstad surveyed over 6,000 workers across the UK about their intention to leave their current industry within the next 5 years.The survey revealed that nearly half of the women in manufacturing,production or warehouse roles were considering a move to a different sector,with only a quarter certain they wanted to stay.40 Data from the Annual Population Survey indicates that in 2023,women in associate professional roles in manufacturing were more likely to look for a new or additional job,while the same trend was observed among men in professional occupations.41 The longitudinal survey Understanding Society,42 which tracks the same individuals over time,provides insights into the sectors people transitioned to after leaving manufacturing.Figure 8 illustrates the industries to which individuals moved between 2011 and 2022.Women were more likely to transition to wholesale and retail trade(26%),services such as human health and social work activities(23%),professional,scientific and technical activities(10%)and education(5%).Men also tended to move to wholesale and retail trade(23%)and professional,scientific and technical activities(14%),as well as construction(16%)and transportation and storage(10%).Although this data is not specifically designed to track manufacturing employment,it helps to identify certain gendered patterns.For example,among women,those aged 30 39 are more likely to leave manufacturing,whereas for men,the age group most likely to do so is 50 59.Among women,the roles most likely to transition to a different industry included administrative occupations;sales,marketing,and related associates;assemblers and routine operatives and related roles;functional managers and directors;and science,engineering and production technicians.For men,roles that commonly shifted industries included shop-floor-related positions,along with production managers and directors,and engineering and IT professionals.43 This data reveals a significant opportunity to improve diversity and inclusion on the shop floor by creating environments that encourage workers to remain in the sector.During the consultations for this report,we interviewed Sue Johnson,Managing Partner for Inclusion at Odgers Berndtson.Sue brings extensive experience helping manufacturers to enhance diversity and inclusion,particularly on the shop floor.Box 1 presents some of Sues key insights.Another crucial opportunity lies in attracting individuals back to manufacturing,especially those who have left the sector or moved out from relevant roles in other industries.This is the mission of STEM Returners,an organisation dedicated to supporting employers and professionals returning to STEM fields after a career break.Women represent nearly half of the STEM returners,despite accounting for only 12%of professional engineers.Box 2 provides further details about the STEM Returners programme and the Aerospace and Automotive STEM Returners Project,a collaboration with Enginuity,the Society of Motor Manufacturers and Traders(SMMT)and ADS Group.40 Randstad(2021).More than just a job:recruiting women in the manufacturing industry.41 Office for National Statistics(2024).Annual Population Survey,January-December,2023 data collection.UK Data Service.SN:9248,DOI:http:/doi.org/10.5255/UKDA-SN-9248-1 42 University of Essex,Institute for Social and Economic Research(2023).Understanding Society:Waves 113,20092022.18th Edition.UK Data Service.SN:6614,http:/doi.org/10.5255/UKDA-SN-6614-19.43 Ibid.19 FIGURE 8.MEN AND WOMEN ARE LEAVING MANUFACTURING TO WORK IN WHOLESALE AND RETAIL TRADE AND PROFESSIONAL,SCIENTIFIC AND TECHNICAL ACTIVITIES,2011 2022 Note:No sampling weights applied.Source:Authors,based on data from University of Essex,Institute for Social and Economic Research(2023).Understanding Society:Waves 113,20092022.18th Edition.UK Data Service.SN:6614,http:/doi.org/10.5255/UKDA-SN-6614-19.20 BOX 1.ODGERS BERNDTSON:A FOUR-STEP GUIDE TO DIVERSITY AND INCLUSION ON THE SHOP FLOOR Sue Johnson,Managing Partner in Inclusion at Odgers Berndtson,has extensive experience helping manufacturers to enhance diversity and inclusion within their organisations,particularly on the shop floor,where she identifies the largest opportunity.In an interview with the Women in Manufacturing initiative,Sue shared her valuable insights.Why should businesses care about diversity and inclusion?Throughout her work Sue has witnessed how gender balance and diversity enable companies to perform better.From attracting top talent and improving occupational health and safety to increasing operational efficiency,the benefits are clear:Gender balance and diversity within a business is a proven no-brainer,enabling companies to be more innovative,understand their consumer,attract the best talent,achieve higher performance,and the list goes on.(Sue Johnson)A four-step guide Sue follows a four-step approach to help companies in their inclusion and diversity journey:1.The facts Where are you today?Assess the current state of workforce diversity,as well as the prevailing culture,mindset and attitudes within your organisation.This can be achieved through,for example,structured conversations with employees,surveys,focus groups and interviews.For instance,analysing employee demographics by hierarchical level and department can reveal critical points where disparities tend to deepen.2.Make a plan Where do you want to go?This includes:Clear vision and elevator pitch.Create a simple and bespoke vision for your organisation.Accountability.Define everyones role in achieving the vision,set objectives and reward progress.Solution focused.Identify and eliminate roadblocks to progress.Communication.Use an omni-channel approach to ensure everyone is informed.3.Upskill for success.Identify the key skills and behaviours required to be inclusive and embed them into upskilling opportunities.This is not a“one and done”effort regularly refresh and update knowledge.4.Make it stick embed it within the DNA.Examples of embedding inclusive practices into the organisations DNA include:Shift from consultative to participative decision-making,focusing on team tasks in all action planning sessions.During factory visits,replace formal presentations with Q&A sessions to ensure everyone has a voice.Empower operators to implement suggestions for operational improvements.Become a role model of inclusive behaviour.Source:Interview with Sue Johnson;Johnson(2023).Diversity in the Shopfloor Manufacturing Workforce is Great for Business;Johnson(2021).Gender Balancing the Manufacturing Shop Floor.21 BOX 2.THE AEROSPACE AND AUTOMOTIVE STEM RETURNERS PROJECT Founded in 2017,STEM Returners emerged in response to the growing skills gap within the UKs STEM industries,providing a supported pathway for professionals to re-enter their careers.In April 2024 the STEM Returners programme joined forces with Enginuity,the Society of Motor Manufacturers and Traders(SMMT)and ADS Group to launch the Aerospace and Automotive STEM Returners Project:Were on a mission to make it easier for highly qualified STEM professionals to return to work,creating the fairer,more diverse industry we all deserve.Why is it important to focus on STEM returners?Many STEM professionals are overlooked when attempting to return from a career break.In a market suffering from skills shortages,it is vital that skilled professionals are not disregarded.Several factors contribute to this situation,including unconscious bias at the shortlisting stage,hiring pressures that lead to assumptions based on limited information,and the common misconception that a“CV gap”indicates a deterioration of skills.Supporting STEM returners is also crucial for enhancing diversity within the industry.While women represent 46%of STEM returners Programme participants,they account for only 12%of professional engineers.Caring responsibilities,for both children and other family members,are the primary reason women take career breaks.According to the 2023 STEM Returners Index survey,47%of women cited caregiving as their primary reason for a career break,compared to 17%of men,who are more likely to take a break for health or illness-related reasons(30%).A holistic approach The STEM Returners programme supports highly skilled professionals to return to work through a comprehensive approach that includes:Partnering with STEM organisations to run paid,12-week returner programmes Providing dedicated career coaching and mentoring in areas including upskilling and certification updates Raising awareness of the barriers within organisational culture that affect STEM returners,including providing training to hiring managers about the value of returners,inclusive hiring practices,and unconscious bias Enhancing employers branding through inclusion in social media campaigns.The Aerospace and Automotive STEM Returners Project offers funding support for SMEs,with Enginuity covering over 70%of the programme cost per returner.In an era where companies are struggling to attract STEM talent,STEM Returners provides a vital pathway to tapping into an often-overlooked talent pool:96%of those who do join a placement are offered a long-term role at the end of their placement.If you are interested in participating in this programme,please contact STEM Returners:https:/ Source:Interview with Anouska Carling,Equity&Inclusion Lead,STEM Returners;STEM Returners(2023).The STEM Returners Index 2023.22 3.Driving equality,diversity and inclusion in manufacturingThe business case for Equality,Diversity,and Inclusion(EDI)initiatives in UK manufacturing is clear as businesses face ongoing challenges related to skills shortages,driven by demographic shifts,technological advancements,and climate change action.Embracing diversity is key to attracting and retaining the skilled talent needed to maintain competitiveness and foster innovation.According to Make UK,addressing the current vacancies in the manufacturing sector could boost the UKs GDP by an estimated 7 billion annually.44 Although the impact of EDI initiatives is not always measured,a global survey by the International Labour Organization45,covering nearly 13,000 enterprises,found that 57%reported improvements in business outcomes from such initiatives.These benefits include:increased profitability and productivity;increased ability to attract and retain talent;enhanced company reputation;greater creativity,innovation and openness;and better ability to gauge consumer interest and demand.See for instance Box 8 which describes how Stellantis,a global leader in the automotive industry,has driven diversity and inclusion as a core brand value,attracting a broader and diverse customer base.Based on consultations with over 30 organisations and a review of UK and international best practices(see Appendices and Annex 1),we developed a framework for driving an inclusive manufacturing industry with equal opportunities and a diverse workforce.As illustrated in Figure 9,this framework encompasses five equality,diversity and inclusion(EDI)principles for manufacturing companies,four principles for industry associations,and five specific recommendations for gender-responsive industrial strategies.Through our review of various approaches to EDI,we identified five steps for successful implementation:1.Securing commitment from leaders.Leadership commitment is essential for driving EDIinitiatives and ensuring they are embedded in the organisations culture.2.Assessing the current state of workforce diversity and inclusion.Conducting a thoroughassessment of the organisations current diversity and inclusion landscape to identify gaps and opportunities.3.Defining the organisations EDI vision and targets through participation.Engaging employeesand other stakeholders in a participatory process to define a clear EDI vision and set measurable targets that align with the organisations goals.4.Identifying key initiatives and engaging employees.Developing targeted initiatives to achieve the EDI vision and goals,ensuring active employee engagement.5.Monitoring progress and reviewing strategies.Establishing mechanisms for regular monitoring and reporting of progress,and periodically reviewing and adjusting strategies and initiatives to ensure continued relevance and effectiveness.44 Make UK(2023).Industrial Strategy:A Manufacturing Ambition.London:Make UK.The Manufacturers Organisation.45 International Labour Organization,ILO(2019).The business case for change.Geneva.23 FIGURE 9.PRINCIPLES FOR DIVERSITY AND INCLUSION IN MANUFACTURING Source:Authors,based on consultations and review of best practices.24 3.1 Principles for companies We propose five principles for improving diversity and inclusion among manufacturing companies:Principle 1.Champion equality,diversity and inclusion in leadership.Principle 2.Assess,track and report progress on equality,diversity and inclusion.Principle 3.Foster an inclusive culture within the company and throughout the supply chain.Principle 4.Promote a diverse talent pool and inclusive recruitment.Principle 5.Adopt an inclusive approach to retention and promotion.The aim of these principles is to offer guidance while giving companies the flexibility to develop initiatives tailored to their specific needs.Throughout this section we present examples of various initiatives and approaches adopted by companies of different sizes across diverse sectors,including metal,food equipment,electronics,biotechnology and automotive.Principle 1.Champion equality,diversity and inclusion in leadership Why is this important?Committed and inclusive leadership is key to driving equality,diversity and inclusion(EDI).This ensures a consistent approach across all areas and functions of the company and signals commitment to both internal and external stakeholders.Box 3 presents the case of the Centre for Process Innovation(CPI),detailing how the CPI integrated a senior leadership team sponsor for EDI and adopted an employee-driven approach.Box 4 shares Katy Davies perspective on EDI as Managing Director at CapAir Systems and Box 6 describes how leadership at Nissan Sunderland has committed to EDI through their Diversity,Equity,and Inclusion(DE&I)Manifesto and the DE&I Council.Suggested actions:Ensure that a dedicated board-or senior-level leader is responsible for driving and monitoring EDI initiatives across the organisation.Provide managers with unconscious-bias training and other EDI-focused programmes to develop an inclusive leadership team.Embed gender equality into your core business values,strategic plans and overall organisational culture.Develop and regularly review an EDI strategy that sets specific targets and provides a clear roadmap across all areas of the business.Allocate financial and human resources to EDI initiatives.Regularly assess the composition of your leadership team,identify any biases or discriminatory practices,and set clear goals and actions to address them.Participate in industry-wide initiatives to improve EDI,such as diversity and inclusion and gender equality charters.25 BOX 3.CREATING A CULTURE OF INCLUSION AT CPI CPI is a UK based,technology innovation catalyst,that brings together academia,businesses,government and investors to translate bright ideas and research into the marketplace.They enable this by giving their customers access to the right experts,equipment,networks,funding and more connecting the dots for effective innovation.Established in 2004 as a centre of excellence through the UK regional development agency One North East,today,CPI has over 700 employees,based across locations in the North of England and Scotland,focusing on key markets including AgriFoodTech,Materials,Energy Storage,HealthTech and Pharma.Setting up and signing the Catapult Networks Inclusivity in Innovation Charter CPIs ED&I journey started a few years ago,but accelerated in February 2022 when CEO,Frank Millar,signed the Catapult Networks Inclusivity in Innovation Charter.The Charter was a joint effort set up and signed by the Catapult Networks CEOs committing to a shared vision for diverse and inclusive workplaces in innovation;underlining that more diversity across experiences and thinking enables better science and innovation.The Charter calls for key ED&I actions such as:having a strategy,policy and roadmap document collecting and reporting data setting up and monitoring targets identifying a member of the senior executive team responsible and accountable for reporting monitoring at board level creating local ED&I champions The commitment of the senior leadership team at CPI to the Charter demonstrates to the entire organisation that ED&I is a priority.It drives accountability and monitoring,enables resources,provides role models,impacts work culture,and promotes visibility.The ED&I senior leadership team sponsors key role is to analyse and present both quantitative and qualitative data,monitor progress,bring ED&I to executive board meetings related to a variety of topics,provide related guidance and support among others.Making a commitment to inclusivity at CPI Following this,CPI refreshed their company values,ensuring that their commitment to inclusivity was captured and embedded into the culture of the business.Based on an analysis of different ED&I standards and external experts,in spring 2022,CPI began working with Inclusive Employers on a membership basis,supporting CPIs ED&I journey through access to resources,expertise,consulting and training.In early 2023,CPI received formal accreditation with a silver award identifying further actions that can be taken.Empowering their people In the summer of 2022,a group of CPI employees established ED&I affinity groups.These employee-led groups provide a safe space for staff to discuss and share their lived experiences.Employees are empowered to bring their whole selves to the workplace and the affinity groups are critical to removing any bias by raising awareness of all backgrounds,cultures,and experiences.(continued on the next page)26 The four affinity groups focus on areas that employees felt were underrepresented at CPI:Disabilities,hidden conditions,and carers(DHCC)LGBTQ (PRISM)Race,religion,culture,and ethnicity(EmbRACE)Women in CPI(WICPI)The creation of dedicated affinity groups to focus on specific ED&I initiatives has led to increased engagement,as employees could more easily identify with the cause and the community.It also gives them a sense of understanding in terms of where they can get involved.Having such structure could help to overcome the difficulties of early engagement,when outcomes are not yet visible.The employee led groups self-manage their activities;meeting monthly,running campaigns and awareness sessions for the wider business.Their affinity group members take part in external learning sessions and use this to inform policy at CPI,such as their Menopause policy and Transitioning at Work policy.This ensures that the people have a direct impact on the way they work.CPIs affinity groups use a range of qualitative and quantitative data to measure engagement.In addition to relying on wider CPI statistics such as gender pay gap and diversity data,the groups also define group specific initiatives to enable progress monitoring over time.This includes more qualitative data monitoring such as engagement with related CPI articles(e.g.on International Womens Day and National Inclusion Week)or email/face-to-face engagement with ED&I groups and subgroups.Make UK is the largest manufacturers organisation in the United Kingdom,dedicated to fostering a supportive environment where UK manufacturers can thrive,innovate,and compete.A cornerstone of Make UKs mission is promoting equality,diversity,and inclusion(EDI)within the manufacturing sector.Women in CPI(WICPI)group as a support network to empower women One of the four ED&I groups,the WICPI group has been set up with an aim to provide a support network to empower women to achieve their potential.It also aims to support men in understanding some of the challenges that women face,and making sure that all genders work collectively on these issues.Its three subgroups are:1.Pregnancy and maternity subgroup.Its key initiative currently focuses on the development of a handbook to help navigate workplace policies,understand available support,manage maternity leave and returning to work.2.Career development subgroup,which is currently piloting a development course for women,they focus on themes such as mentorship,networking events,confidence training and self-promotion.3.Womens health and wellbeing subgroup aims to provide resources and facilitate discussions on potentially challenging topics such as domestic abuse,menopause,perimenopause and hormonal and physical changes in the workplace,for example,periods.One of its initiatives involves developing an informational booklet on menopause and perimenopause.Looking ahead,CPI plans to grow all of their affinity groups over the next few years;continuing to empower their people to establish the groups they feel they need to help drive CPIs inclusive culture.Source:Interview with Amy Smith,Chief People Officer within CPIs Strategic Leadership team,and Katie Richardson,chair of the Women in CPI affinity group.27 BOX 4.KATY DAVIES SHARES HER FOUR-STEP RECIPE TO EDI I think as a leader,it starts with you to say,right,actually,weve got to make people feel included and this is what it would look like.Four-step recipe to EDI:supportive environment,flexibility,leadership commitment and openness 1.The foundation is creating a supportive environment and a safe space for employees,where people feel they have equity and they are included.This ranges from offering personal protective equipment in various sizes all the way to building and fostering a respectful and non-judgmental work culture.2.The next most important thing is offering employees flexibility of working patterns in a way that helps them accommodate other aspects of their life.Examples of having a real impact include an older employee preferring to work 5 short days instead of 4 long days,or a young male caregiver needing to leave work unexpectedly but making up the time as soon as possible.3.The next step is to ensure that the senior team is fully on board and committed,as change needs to come from the leadership and will only work if they want to do it,not because they need to do it.4.Being open and making space for employees with personal needs,who tend to change jobs often for personal reasons and because of inflexible work arrangements.Understanding personal needs and circumstances can help to establish work patterns that suit both employee and employer.Katy shared that,in her experience,trust and care allowed through flexibility are returned undoubtedly and diligently.She also said that flexibility does not inconvenience the manufacturing process;instead,it creates an environment where people are more productive.It also helps to make retention and recruitment easier.Challenges faced when implementing EDI initiatives:Cultural change and shifting mindsets away from stereotypes Accepting flexibility and promoting respect does not mean less productivity A collective responsibility to change the perception of manufacturing.The biggest challenge described by Katy centres around stereotypes and the struggle to be taken seriously as a woman,even in a leading position,when discussing or addressing issues related to EDI.Source:Interview with Katy Davies.Katy Davies is the Managing Director of CapAir Systems,an SME manufacturer of printed circuit boards,cable assemblies and box builders.She has extensive experience with both smaller and larger teams as a female managing director implementing EDI practices in the workplace.Katy shared her valuable insights in an interview with the Women in Manufacturing initiative:Katy Davies,Managing Director,CapAir Systems 28 Principle 2.Assess,track and report progress on equality,diversity and inclusion Why is this important?Improvement begins with understanding.A starting point in the EDI journey is to collect and analyse data to determine the current status of the company.This foundation allows informed goals and actions to be set.A robust monitoring and evaluation framework is then essential to regularly assess progress,ensuring transparency and accountability in fulfilling EDI commitments.Suggested actions:Develop a confidential EDI form to gather information on applicants gender,ethnicity and other diversity characteristics during the application process.Establish EDI targets Box 5 presents examples of EDI targets that Hobart Equipment UK has adopted in recruitment and leadership.Implement a system for continuous monitoring and reporting of EDI metrics.Examples of these metrics include:workforce demographics across different levels and functions of the organisation,employee satisfaction and sense of inclusion by demographic,turnover rates by demographic,pay gaps among different demographic groups,promotions by demographic.Wherever possible,analyse how different identities(e.g.gender,age,ethnicity)shape the observed gaps.ISO 538000:2024 and other diversity and equality frameworks and certifications provide examples of EDI indicators.46 Use the collected data to track progress,inform EDI strategies,and measure the effectiveness of initiatives.Publicly report progress on EDI targets and initiatives,showcasing achievements and identifying areas for further improvement.Participate in industry-wide initiatives to assess EDI.46 ISO 538000:2024;Economic Dividends for Gender Equality Certification(EDGE);UN Women Private Sector Accountability Framework(UNW-PSAF)29 Hobart Equipment UK is a business unit operating within the Food Equipment Division of the leading global industrial manufacturer ITW(Illinois Tool Works Inc).Hobart Equipment employs 63 staff members,80%of which are aligned to sales and marketing services.Gender balance varies,with a lower representation of women in sales roles,indicative of the industry norm;however,four out of five of the senior leadership positions are represented by women.We had the opportunity to talk to Tracy Southwell,Managing Director,who shared Hobart Equipments success in increasing female participation and the initiatives driving this change.BOX 5.HOBART UK EQUIPMENT:SHIFTING THE GENDER BALANCE IN MANAGEMENT Equality,diversity and inclusion initiatives Hobart UK Equipment has implemented several EDI initiatives to promote a more inclusive environment:Early career programme.This 3-year programme targets individuals who are new or early in their career and unsure of their own potential or career pathway,but who demonstrate behavioural potential that could be harnessed and enriched through a structured and supported learning programme.Leadership development and coaching programme.This 6-month programme is designed for potential leaders,developing the essential skills,knowledge and behaviours required to build their understanding of leadership qualities.Monitoring and reporting.Regular monitoring occurs during the spring and autumn business cycles,with a clear focus on gender and diversity within business units.Parental policy.Improvements in the policy,including greater flexibility in applying the benefits,enables more choice for parents.Employment Resource Group(ERG).Established 10 years ago,the network includes 7 ERG and 55 global chapters.Employee-led,they bring together diverse groups of people to ally,share experiences,grow professionally and network.Directly supports the companys talent strategy,focusing on attracting,retaining and developing future leaders and promoting cultural diversity and community;Pride,Young Professional Network(YPN),ITW Womens Network(IWN)and Multicultural Network(MCN)are just four of the seven ERGs available.Recruitment process.A deliberate effort to ensure gender and racial diversity in recruitment.Where possible,the company tries to achieve a 50/50 gender balance and diverse racial representation in candidate shortlists,recognising that effective recruitment is the foundation of broader diversity efforts.Hobart adopts a decentralised entrepreneurial approach within ITW frameworks,tailoring policies to meet the specific needs of individual business units.Lessons learned and future goals Tracy identified three crucial factors for driving change:Lead by example.Embrace the role of a value leader and set a positive example.Make difficult but necessary decisions.Address issues promptly and decisively.If something is not working,fix it.Challenge behaviours.Address problematic behaviour directly,through formal processes or informal conversations.For the future,ITW as a group aims to achieve 30male representation among their top 1,000 leaders globally,Hobart UK Equipment has achieved 100%in the last 3 years in the appointment of female directors.While gender diversity targets have been met in the UK Equipment business,increasing the representation of ethnically and culturally diverse people remains a significant challenge,with current figures at less than 3%.Source:Interview with Tracy Southwell,Managing Director at Hobart UK.Tracy Southwell,Managing Director,Hobart Equipment UK 30 Principle 3.Foster an inclusive culture within the company and throughout the supply chain Why is this important?An inclusive company culture is vital for ensuring that all employees feel valued,respected and empowered.An inclusive environment enhances employee satisfaction and strengthens talent attraction and retention.By fostering such a culture,companies can harness diverse perspectives,drive innovation and enhance overall organisational success.Suggested actions:Introduce and communicate inclusive policies,including a zero-tolerance protocol for sexual harassment in compliance with the Worker Protection Act 2023,effective from 26 October 2024.47,48 Other relevant policies include support for employees with caring responsibilities(e.g.paid leave,subsidised childcare,breastfeeding facilities,return to work),flexible working arrangements and menopause policies.Box 7 shows examples of these initiatives implemented by Amari Metals Limited.Conduct EDI awareness-raising campaigns and provide training to contribute to shifting perceptions and behaviours towards greater inclusivity.Promote inclusive communication by providing guidelines for the use of inclusive language in all communications,49 and embed EDI principles in all corporate communications,including documentation,email signatures and notice boards.Clearly communicate the available channels for raising concerns and ensure timely resolution of issues.Encourage the formation of employee resource groups to drive EDI initiatives and allyship.This is one of the most popular initiatives among the companies we interviewed.See Boxes 3,5,6,8 and 9 for examples of employee resource groups.Promote diversity and inclusion within your supply chain by encouraging engagement with businesses owned by under-represented groups,fostering partnerships with companies that cultivate an inclusive culture,and ensuring that both direct and indirect employees experience fair working conditions.For example,Box 6 shows how Nissans approach to EDI includes extending best practices to their partners.Leverage assistive and adaptive technologies to enhance workplace inclusion,and ensure that technologies developed by and adopted in manufacturing are inclusive.50 47 Worker Protection(Amendment of Equality Act 2010)Act 2023.Available at:https:/www.legislation.gov.uk/ukpga/2023/51/section/1 48 ISO 538000:2024 includes a guideline for the development of a grievance mechanism to prevent,detect and respond to gender-based violence(GBV).49 Examples of inclusive language include the Council of Europes Guidelines for the use of language as a driver of inclusivity,the United Nations gender-and disability-inclusive language guidelines,and the United Nations Global Compacts gender-inclusive language toolkit.50 ISO 538000:2024 provides guidelines for the provision of gender responsive goods and services,while University of Stanfords gendered innovations provides guidelines for research and innovation.31 BOX 6.NISSAN SUNDERLAND(NMUK)&NISSAN AMIEO REGIONS DIVERSITY,EQUITY AND INCLUSION(DE&I)JOURNEY Nissan Motor Manufacturing UK Ltd(NMUK)was established in 1984 in Sunderland,UK.It is predominantly a manufacturing plant employing about 6,000 people producing the Nissan Leaf,Juke and Qashqai models.Nissan Sunderland plays an important role in Nissans wider ambitions of carbon neutrality with plans to transform Sunderland into a flagship electric vehicle(EV)hub,bringing together EVs,renewable energy and battery production.An interview with Rachel Brown from Nissan Sunderland sheds light on its local DE&I initiatives as well as the wider AMIEO regional DE&I initiatives.Nissan Sunderland prides itself on building a proud and engaged workforce,with a focus on Belonging NMUK where employees can bring their true selves to work.Belonging is the foundation of the plants DE&I initiative that underpins everything that they do.Nissan encourages employees to challenge the norm and come forward with ideas on how to improve daily life at the plant.This has led to some fundamental adaptions to training courses for neuro-diverse employees,sign language training for deaf operators,multi faith rooms to name a few.The creation of ally networks has also been borne under the Belonging umbrella including:Sunderland Womens Network,the Pride Network,and Disabilities Network.The Womens Network was established in March 2024 to acknowledge that certain experiences are unique to women,which may require different approaches,including tailored policies.The network was inaugurated by a flagship event with inspirational keynote speakers such as Sarah Noble,founder of the Women at the Wheel network driving DE&I across the automotive sector,and Michelle Breffitt from Women Drive Electric UK.Information on the Womens Network is disseminated through a newsletter,which includes news,upcoming events,and information on training courses such as their upcoming management leadership seminar.The wider Nissan AMIEO region and its four key pillars Nissan Sunderland is part of the Nissan AMIEO region Nissans recently created largest region spanning Africa,Middle East,India,Europe,and Oceania.Since its establishment,it has developed a DE&I Manifesto along with a DE&I Council.These efforts are championed by the AMIEO regions chairperson,Guillaume Cartier,who also chairs the DE&I steering committee.In 2023,Nissan AMIEO published its first DE&I Report detailing its four key pillars:These initiatives underscore Nissans commitment to fostering diversity,equity,and inclusion not just within the Sunderland plant,but across its entire AMIEO region.Nissan Global also makes its key DE&I figures publicly available,demonstrating its dedication to transparency and commitment to creating an inclusive environment for all employees.Source:Interview with Rachel Brown,champion of Nissans Sunderland Womens Network and DE&I Ambassador;Nissan Sunderland(2022).Welcome to Nissan Sunderland:Your Guide to Settling In;Nissan Europe(2023).Fostering a safe space for everyone:Nissan AMIEO.32 BOX 7.IMPROVING EQUALITY,DIVERSITY AND INCLUSION IN METAL MANUFACTURING At Amari,Morags responsibilities encompass legal aspects contracts,disputes and related matters insurance and the human resource function.The company employs approximately 1,500 people,with women under-represented on the shop floor,in management and in senior positions:Im passionate about getting more women into metals.Its a fabulous career,which no longer means working heavy machinery in oily overalls.Equality,diversity and inclusion initiatives Amaris journey towards promoting equality,diversity and inclusion(EDI)gained momentum in 2022,with its first significant effort to collect diversity data.This marked the beginning of a series of initiatives aimed at fostering an inclusive workplace.Key initiatives include:Data collection.Gathering diversity data was a critical first step in understanding the demographic make-up of the organisation.EDI training for managers.As well as several development courses tailored for women,the company implemented EDI training for managers.This type of training is crucial in addressing both conscious and unconscious biases and promoting inclusive behaviours.Establishing an EDI policy.In March 2023 Amari introduced an Equality,Diversity,and Inclusion policy,outlining the companys commitments,initiatives and the responsibilities of managers and employees.This policy complements other company policies,including those on hybrid working,home working,menopause,neurodiversity and wellness.Womens Day Conference.Launched in 2023,this initiative brings together women within the company to discuss prevalent challenges and to network.As a result,systemic issues have been identified and addressed,including challenges faced by women returning from maternity leave and looking to progress within the business.Family-friendly leave.The company is exploring ways to offer more flexible working arrangements for parents and for those with other caring responsibilities.(continued on the next page)We had the opportunity to speak with Morag Hale,the Company Secretary and Head of Human Resources at Amari Metals Limited.Morag has worked in the metal sector since the 1980s and describes Amari as a special company in terms of its high standards and values,and opportunities for progression.With an English literature degree and a professional qualification in business law and HR,Morag began her career in heavy engineering as an administrative assistant.After working in a couple of manufacturing companies,both private and listed,she developed a passion for the metals industry,remarking:“Im proud to work in a sector at the heart of industrial manufacturing,past,present and future.”Morag Hale,Company Secretary and Head of HR,Amari Metals Limited 33 Principle 4.Promote a diverse talent pool and inclusive recruitment Why is this important?Ensuring a diverse talent pool and inclusive recruitment processes is essential to enhancing the representation of women,people from non-White backgrounds,and individuals with disabilities in manufacturing.This approach helps to better reflect the diverse communities the industry serves.Suggested actions:Employ inclusive language in job advertisements to appeal to a diverse audience.Ensure that job recruitment and promotion tools do not embed bias against certain populations.Review job descriptions to focus on skills rather than experience to widen the candidate pool.Anonymise application forms by removing personal identifiers to prevent bias during the selection process.Aim for gender-balanced applicant shortlists and include diverse interview panels to ensure fair evaluation.Showcase careers in the industry to young people through targeted outreach efforts.Box 8 shows examples of Stellantis outreach activities supporting a diverse workforce for the future.Make apprenticeships more accessible to under-represented groups by adapting materials and ensuring inclusive training environments.Participate in industry-wide initiatives to change the public perception of manufacturing.Box 9 describes examples of initiatives Johnson Matthey to attract,retain and promote the advancement of women in the company.Key challenges Despite the progress achieved,Morag has also identified several challenges implementing EDI initiatives,including:Building trust.Ensuring the workforce understands that EDI initiatives are designed to enhance,not undermine,everyones jobs or positions.Recruitment practices.Determining how to adapt recruitment processes to better align with EDI goals.Changing perceptions of manufacturing.Overcoming outdated views of manufacturing as dirty,labour-intensive work,which still prevails in the minds of many.Awareness of different types of gap.Raising awareness of disparities,not only between men and women but also across different generations in the workforce.Source:Interview with Morag Hale,Company Secretary and Head of HR at Amari Metals.34 BOX 8.STELLANTIS:DRIVING DIVERSITY AND INCLUSION AS A CORE BRAND VALUE Stellantis is a global leader in the automotive industry,comprising 14 iconic brands and two mobility divisions.With a workforce representing over 160 nationalities,industrial operations in more than 30 countries,and customers across 130 markets,Stellantis stands as one of the most diverse companies worldwide.This diversity extends beyond its teams,attracting a broader and diverse customer base.“Our passionate,talented,and diverse teams support our iconic brands in providing freedom of mobility tailored to every need.”In the UK,Stellantis employs approximately 5,000 people across a number of locations,including two manufacturing plants,a parts distribution warehouse,a retail network,head office operations,and financial services divisions.To gain insights into Stellantis commitment to equality,diversity,and inclusion(EDI),we spoke with Louise Gardner,Head of Talent,Diversity,and Inclusion,who has been with the company for 30 years,holding various roles throughout her tenure.An approach focused on inclusion and wellbeing Stellantis EDI approach encompasses a wide range of initiatives aimed at fostering inclusion and supporting employee wellbeing.These initiatives include wellbeing events,employee resource groups,a global leadership training programme for women,an emerging talent course,community outreach activities,and flexible working arrangements,among others.Stellantis employee resource groups,which focus on topics such as womens issues,LGBTQ inclusion,and menopause support,together with Armed Forces,were established in response to employee feedback.These groups,led and managed by employees,meet regularly throughout the year to address concerns and create a sense of community.These efforts,along with employee recognition programmes and open communication with staff returning from parental leave,have helped Stellantis attract and retain female talent.Globally,the company has achieved 30male representation in leadership roles and 21.3ross all positions.While there is room for improvement,these figures exceed the 2023 industry average for female participation in the automotive sector,which stands at 12.6%.Additionally,Stellantis places a strong emphasis on diversity in recruitment,ensuring that processes are designed to attract diverse talent.Particular attention is given to the use of inclusive language and diverse imagery.To minimise bias,the company employs a gender decoder to ensure job advertisements are free from gendered language.(continued on the next page)35 Supporting a diverse workforce for the future Stellantis is committed to developing the workforce of tomorrow by promoting diversity in STEM fields.In celebration of Women in Engineering Day,the company invites local schools to visit its manufacturing plants,organising a series of activities for girls studying in the area.These initiatives highlight career opportunities in STEM and support the companys recruitment efforts through apprenticeships.Another impactful outreach effort is a programme in collaboration with a STEM training provider.This partnership delivers interactive STEM sessions to Year 8 students,helping them explore their options before making key academic decisions.Stellantis plans to support the expansion of this programme to underprivileged areas and to involve current apprentices in these sessions,further enhancing its reach and impact.Stellantis comprehensive approach to EDI is creating a more inclusive and supportive work environment.Through employee-led initiatives,outreach programmes,and a focus on employee wellbeing,the company is both fostering diversity within its current workforce and shaping the future generation of talent.Source:Interview with Louise Gardner,Head of Talent,Diversity,and Inclusion at Stellantis;Stellantis website.About us.36 BOX 9.JOHNSON MATTHEYS JOURNEY TO DIVERSITY,INCLUSION AND BELONGING In 2017,Johnson Matthey(JM)celebrated 200 years of its history,marking the establishment of its precious metals business in the UK.With roots in gold assaying,JM has evolved through the recovery,recycling,and refining of precious metals,expanding into catalysis for the automotive and pharmaceutical industry,as well as entering the sustainable technologies market,including hydrogen solutions.Today,JM operates in over 30 countries,employing more than 11,600 people worldwide.In the UK,women represent about 29%of their workforce 3 percentage points higher than the national average for the manufacturing sector.Women hold 33%of board positions,25%of group leadership team positions,and 31%of management roles.However,manufacturing roles are still predominantly held by men.Although JMs 2023 median gender pay gap increased to 7.6%compared to the level from previous year,it remains well below the UK manufacturing sectors median pay gap of 15.9%.Diversity,Inclusion and Belonging(DI&B)DI&B initiatives have become an integral part of JMs journey towards becoming an organisation where everyone thrives,can bring their full self to work and feel a sense of belonging also represented by the addition of the letter B for belonging.Organically formed,employee-led Employee Resource Groups represent a variety of networks including the Asian,Black Employee,DiversAbility,Enhance(early career employees),Family,Gender Equality,Hispanic/Latinx,Pride,and Veterans network.Each of the Employee Resource Groups is led and supported by the members of the executive team.Furthermore,JM sites are represented by local DI&B ambassadors.Their key role is arranging local events,spreading awareness of global events,actively educating colleagues and identifying local DI&B challenges.Global events celebrating DI&B and bringing together different Employee Resource Groups JM annually celebrates DI&B through events that bring together a variety of Employee Resource Groups.These events usually include talks by internal guest speakers and panel discussions of experiences,which are available globally,as well as local site celebrations.Annually its five Platinum events celebrate International Womens Day,LGBT Pride Month,Inclusion Day,Ethnicity Inclusion,and Disability&Neurodiversity.Women at JM JM initiatives promoting DI&B include activities such as reverse mentoring,early career support,flexible working hours and shared parental leave.There are several initiatives that aim to eliminate the gender pay gap and support womens recruitment and talent management,including:Partnering with organisations like the Society of Women in Engineering and Women in Chemicals to attract the best talent Attracting and recruiting women into JMs global graduate programmes Offering development courses for women for career development,confidence and resilience building(through the LHH Elevating Women in Leadership programme)Embedding diversity data into the application process and using gender neutral recruitment practices Source:Interview with Martin Hayes,Global Technology Manager for the Life Science Technologies business at JM,and Stephen Rouse,Development Chemist II and DI&B Ambassador at JM;Johnson Matthey(2023).Gender Pay Gap Report 2023.37 Principle 5.Adopt an inclusive approach to retention and promotion Why is this important?Adopting an inclusive approach to retention and promotion helps to create a supportive work environment where all employees can thrive.It also prevents companies from losing talented employees because of unconscious bias and unequal opportunities.As discussed in Section 2 of this report,and highlighted in previous studies,51 the most significant opportunity to improve the gender balance in manufacturing is through inclusive retention and promotion.Suggested actions:Establish a flexible working policy offering options such as working from home,job sharing,reduced hours and term-time working to accommodate diverse needs.Box 10 presents the case of Almond Engineering and how they started implementing flexible working,while Box 11 presents more information on flexible working and advice from the consultancy Flexibility Works.Collect information on employee leavers and review exit interviews to refine strategies and improve retention practices.Provide comprehensive support for employees returning from maternity leave and other career breaks.Introduce and communicate a carers policy,including leveraging partnerships to provide subsidised child and adult care,encouraging the formation of employee resource groups for carers,and establishing returnship programmes.Box 3 presents the example of CPIs pregnancy and maternity employee resource group.Establish mentoring programmes to help the career progression of employees from under-represented backgrounds.Use promotion panels to reduce bias in selection processes.Develop clear career-progression pathways,including transparent promotion criteria,accessible to all employees.Increase the visibility of role models from diverse backgrounds to inspire and support under-represented groups.51 Made Smarter Innovation Network(2021).Making Manufacturing Smarter.A guide for improving diversity and inclusion in UK manufacturing.London:Knowledge Transfer Network.38 BOX 10.ALMOND ENGINEERING:LEADING THE WAY IN FLEXIBLE WORKING Located in Livingston,Scotland,Almond Engineering has a broad offering,including design,precision machining,repairs,fabrication and welding,catering to both one-off prototypes and small-to-medium-volume batch work.Originally established in 1979 as a mould-maker,the company gradually expanded its expertise to encompass a wider array of solutions.In January 2020 Almond Engineering embarked on its journey into flexible working,shortly before the onset of the COVID-19 pandemic.The primary objective was to create an optimal work environment and adaptable arrangements for its staff.The changing work patterns of its customers also acted as a driving force for embracing flexible working practices,especially with companies finishing earlier on Fridays.Leading the way for other businesses In its search for flexible working examples in the industry,Almond could not find any.But that did not stop the company exploring different options.Finally,Almond settled on a flexi-time arrangement:employees would work their core hours from 9 AM to 3 PM between Monday and Thursday,and until 12.30 PM on Fridays,completing a total of 39 hours per week.This lets employees start anytime between 7 AM and 9 AM and finish between 3 PM and 5 PM,giving them more flexibility in their schedules.The transition involved modifying organisational rules;and,although there was some initial resistance,the results after a year were overwhelmingly positive.Michelle Quinn,Managing Director of Almond Engineering,explains:“It worked really well;now everyone utilises it in some way,and it has only improved over the years.”The introduction of flexible working positively impacted the worklife balance among staff:We have lots of people who want to get an early start,so theyll be here working at seven,and we have others who prefer to drop their kids off at school and arrive at nine.Some need to pick up their children after school or manage their commutes,so they leave at three.We even have golfers who enjoy the sunny days,finish early,and head out for a game.Almond Engineerings experience with flexible working has been so successful that it eagerly shares its story with others in the industry.Michelle Quinn confidently states:“People who believe that flexible working does not work in manufacturing,we have tried it for the past three years and it has worked great.”To hear first-hand experiences from Michelle Quinn,Managing Director,and Darren Jamieson,CNC Five Axis Miller,about their journey with flexible working hours,watch the video prepared by Flexibility Works.Almond Engineering is a remarkable model of how flexi-time can attract talented people and foster a more enjoyable work environment in the manufacturing sector.Source:Interview with Michelle Quinn,July 2023;Almond Engineering.About;Flexibility Works(2023).Employer Case Study:Almond Engineering.39 BOX 11.FLEXIBLE WORKING IS THE FUTURE OF WORK Flexible working is here to stay and will continue to change working places in the future as digital technologies enable remote work and task automation.Previously,it was believed that flexible working was incompatible with jobs involving machine operatives and production lines.However,manufacturing environments are undergoing transformative changes,offering greater flexibility to workers.This change is contributing to improved work environments and enhancing the ability to attract and retain talented individuals.The COVID-19 pandemic acted as a catalyst for positive change in flexible working practices.While some employees may currently experience reduced flexibility compared to the pandemic period,overall there has been an upswing in the adoption of flexible working arrangements.According to the Flex for Life 2023 report,a survey analysis of flexible working in Scotland,82%of Scottish adults have,or want to have,flexible working,compared to 73fore the pandemic.In addition,most Scottish employers(70%)expect to maintain or increase flexible working opportunities in the next 12 months.What is flexible working?For shift workers or frontline,on-site or customer-facing roles,this might include:the ability to swap shifts,self-rostering,the ability to adjust hours occasionally,and making small adjustments to start and finish times.It might also include having predictable shifts and input into shift patterns.It can be informal or formal(in a contract),or a mix of both,and it does not include things like zero-hours contracts,over which you have no control.What are the benefits of flexible working According to research conducted by Flexibility Works in Scotland,the benefits of flexible working for employers include:employee retention,increased diversity,productivity growth,improved employee engagement,reduced sickness absence,and attraction of a wider pool of talent.Flexible working is the second most important factor in a job search,after salary.In Scotland,four in ten people who are thinking about changing jobs consider worklife balance to be important.(continued on the next page)Flexible working looks different depending on the person(and their life stage),their role and the organisation where they work.However,overall,it involves providing employees with some choice and control over where,when or how much someone works.For example:being able to choose to work from home or a location other than your employers premises,varying the length of your working day within the week or month,varying start or finish times,taking breaks for personal reasons during working hours without needing to ask permission or using your employers hybrid working policy.40 For employees,the benefits of flexible working include:a better worklife balance,improved wellbeing(mental and physical),reduced costs in care services and transportation,increased opportunities to participate in the labour market,and the ability to progress in their careers.Flexible working has a significant impact on certain population groups who would otherwise face the choice of leaving work or accepting precarious arrangements.This is particularly true for individuals with disabilities or long-term health conditions,as well as mothers,single parents and couples raising children.In Scotland being a father increases mens desire for greater flexibility around location.Fathers are more likely to prefer working from home and hybrid working.Mothers,in comparison,are more likely to seek part-time hours,flexible start and finish times,and term-time working.However,for women,opting for reduced hours is often influenced by gendered divisions of care and domestic work.This suggests that women encounter greater trade-offs between family obligations and career advancement than men.Five practical tips for manufacturers Flexibility Works,a consultancy firm that supports employers to develop more flexible workplaces,has five practical tips for manufacturers to create more flexible ways of working:1.Advance notice,reliable and predictable shifts.If you can plan ahead and give people more notice about their shifts,including specifics about location if this varies,and have some regular patterns,this will give employees more control over the rest of their life.They can book medical appointments,arrange childcare or simply know when they can go for a swim or take the dog for a walk.2.Direct rota input for employees,including swaps.Make it simple for people to select and change shifts.There are good apps that can help teams to communicate clearly,view rotas and swap shifts quickly,as well as email and group messaging.3.Flexible hours and locations.By offering flexibility in working hours and locations,you create opportunities for a wider range of individuals to participate,including parents,caregivers and people with disabilities.Flexible arrangements may involve part-time roles,compressed hours(doing fewer,longer days)or a twilight shift,among others.Even a small amount of remote work,where feasible,can greatly benefit individuals with busy schedules.4.Know your team.Take the time to understand the personal circumstances of your team members.This knowledge allows you to create shift patterns that align better with their needs,even if it might not be possible to accommodate everyones preferences all of the time.By considering individual circumstances,you demonstrate a commitment to supporting your team members in achieving a healthy worklife balance.5.Communicate effectively and empathetically.Ensure that employees are aware of the support and benefits available to them within the company.Encourage and facilitate the use of leave entitlements and provide clear information on the available resources.Managers who communicate effectively and empathetically with their teams foster a positive work environment and encourage open dialogue.For more information about Flexibility Works,please visit:flexibilityworks.org Source:Flexibility Works(2023).Flex for Life 2023.Gallagher,L.(2023).Why flexible working is part of the future of work for manufacturers.InterAct Blog.41 3.2 Principles for industry associations We propose four key principles to enhance diversity and inclusion within manufacturing associations,empowering them to lead and inspire positive change across their member organisations:Principle 1.Promote diversity and inclusion on boards.Principle 2.Assess,track and report on the industrys progress on equality,diversity and inclusion.Principle 3.Promote and champion EDI best practices.Principle 4.Promote a diverse and inclusive image of manufacturing.Principle 1.Promote diversity and inclusion on boards Why is this important?Boards that reflect a variety of perspectives,experience and backgrounds are better equipped to understand and address the needs of a diverse workforce and customer base.Inclusive boards also set a strong example for the entire industry,signalling a commitment to fostering a culture that values diverse voices.Box 12 highlights how Kirsty Davies-Chinnock,Founder of Women With Metal,has championed women on boards and directorates.Suggested actions:Establish clear and measurable diversity targets for board composition.Publicly commit to these targets and regularly report on progress.Actively seek board candidates from under-represented groups by expanding recruitment efforts beyond traditional networks.Partner with organisations that focus on diversity and inclusion,such as womens organisations and networks.Encourage member organisations within the association to nominate diverse candidates for board positions.Review and revise board membership criteria to ensure they are inclusive and do not unintentionally exclude diverse candidates.Consider whether traditional requirements,such as specific industry experience or previous board service,may limit the pool of potential candidates.Adjust these criteria to focus on broader competencies,such as leadership skills,strategic thinking and a commitment to diversity and inclusion.Foster an inclusive culture within the board by providing diversity and inclusion training to current board members,encouraging open dialogue and creating an environment where diverse perspectives are respected and valued.42 However,she recognises that many diversity and inclusion challenges remain in the industry:“The sector is still predominantly White and middle class”.Championing women in the metal sector Women are not only under-represented in the sector,but the few who are present often face numerous barriers to joining senior leadership roles.To address this,Kirsty has championed women in the metal sector by inviting other outstanding women to join boards and directorates and founding the Women in Industry Podcast to increase the visibility of women in the industry.Kirsty also founded the Women With Metal Conference,an annual event that provides a platform for women and allies to connect and help them flourish in their careers.In 2024 she partnered with RX Global to launch the Aluminium Awards,to be held at the Aluminium Show in Dusseldorf,Germany,in October 2024.They will showcase and celebrate diversity and sustainability in the aluminium sector in five categories,including:Role model,the best example of what women can achieve in the industry and how she can inspire the sector Young leader,a young woman who pursues or develops unusual ideas and creative approaches,with outstanding communication skills and an inspiring innovative spirit Male ally,a committed champion who supports,drives,encourages,motivates and celebrates the women in the industry.Recommendations for SMEs As a managing director of an SME,Kirsty knows that SMEs face different conditions to larger companies but can still make changes to improve diversity and inclusion.Some of her recommendations include:Championing a diverse and inclusive culture Ensuring that the language and photos used in recruitment are inclusive Being open to changing your leadership style,making it inclusive and flexible to address the needs of all your staff Ensuring that flexible working policies do not reinforce gender roles and deepen gaps between women and men in the workplace Promoting gender balance of childcare and supporting access and affordability Making adjustments to provide women-only facilities when needed,such as changing rooms and breastfeeding spaces,and providing sanitary products.Source:Interview with Kirsty Davies-Chinnock,https:/ 12.WOMEN WITH METAL:MAKING THE METAL SECTOR MORE DIVERSE AND INCLUSIVE We had the opportunity to chat with Kirsty Davies-Chinnock,Founder of Women With Metal and the Women in Industry Podcast,and Managing Director of Professional Polishing Services.Kirsty has worked in the metal sector for 35 years,during which she has been a key driver of positive change,celebrating and championing women.In a male-dominated sector,she has acted as a board member and director of various industry associations,including the British Stainless Steel Association.Kirsty has experienced first-hand how the metal sector has transformed from having just a few women in the room to now accounting for around a third of the sectors leaders.Kirsty Davies-Chinnock,Founder of Women With Metal 43 Principle 2.Assess,track and report on the industrys progress on equality,diversity and inclusion Why is this important?For industry associations,as with individual companies,the foundation of a successful EDI journey lies in gathering and analysing data to identify key areas for improvement.Understanding the current state of EDI within the industry allows critical issues to be prioritised and targeted strategies to be developed.By setting SMART(specific,measurable,achievable,relevant,time-bound)targets and consistently monitoring and reporting on progress,industry associations can drive sustained improvements and demonstrate accountability to their stakeholders.Suggested actions:Partner with research organisations and EDI consultancies to conduct industry-wide EDI assessments and track progress over time.Box 13 presents how the BioIndustry Association partnered with Diversio to produce a benchmark report on diversity and inclusion in the bioindustry.Include specific EDI modules in regular industry-wide surveys to gather relevant data and insights.Use the collected data to inform EDI strategies,assess the effectiveness of initiatives,and make informed decisions for future actions.Establish clear,measurable diversity and inclusion targets to drive continuous improvement across the sector.For instance,the WiM UK initiative aims to increase the participation of women in the sector to 35%by 2035.Similarly,the Automotive Council has committed to increasing the participation of women in the automotive sector to 30%by 2030.52 Publicly report on the progress of EDI targets and initiatives,showcasing achievements and identifying areas for improvement.52 Automotive Council(2023).UK Auto Industry pledges to address diversity shortfall.44 BOX 13.BIOINDUSTRY ASSOCIATION:EVIDENCE-BASED ACTION Insights from the report The benchmark report was conducted in collaboration with Diversio,leveraging their expertise and proprietary methodologies in diversity data analytics.Key insights from the report include:Gender representation.UK life sciences and biotech is at parity with the overall representation of men and women.However,this is not seen equally through job roles and drops significantly at C-suite and CEO levels.Ethnic representation.Black employees are notably under-represented,particularly in leadership and digital and computational roles.Inclusion.There is a meaningful difference in inclusion experiences among different demographic groups within the UK life sciences and biotech sector.Women,people of colour,LGBTQ2 individuals,and those with physical/cognitive/mental health conditions report lower inclusion metrics across all areas except career development,where all employees score low regardless of identity.Key recommendations Key recommendations from the report include:For companies:(i)Collect and benchmark diversity and inclusion data;(ii)develop and encourage inclusive leadership;(iii)pursue inclusive recruiting and hiring practices;and(iv)provide career mentoring and sponsorship among other programmes and policies.For industry associations:(i)Provide benchmark data;(ii)signpost partnerships;(iii)share best practices;and(iv)provide mentoring and sponsorship opportunities.From data to action The findings from the report have informed the BIAs diversity and inclusion activities.Examples include:Workshops on inclusive recruitment and hiring Partnership with Future Black Leaders to host a panel Women in Biotech network,offering in-person events and an online forum Women in Biotech mentoring programme,connecting,supporting and inspiring women across the biotech and life sciences sector.Source:Interview with Kate Barclay,Skills Strategy Consultant at the BIA;BIA and Diversio(2023).Diversity and Inclusion in UK Biotech.Established in 1989,the BioIndustry Association(BIA)represents over 600 members in the life sciences and biotech industry,ranging from universities and research centres to start-ups and pharmaceutical companies.In 2023 the BIA published a benchmark report on diversity,equity and inclusion to encourage other organisations in the sector to track their diversity and inclusion objectives as they innovate and scale.Kate Barclay,Skills Strategy Consultant at the BIA 45 Principle 3.Promote and champion EDI best practices Why is this important?Promoting and championing best practices in EDI initiatives can inspire other organisations to adopt similar practices,fostering a culture of continuous improvement.Sharing best practices helps to accelerate progress by providing proven strategies and tools that others can replicate,enhancing the inclusion and diversity of the entire industry.Suggested actions:Organise workshops,webinars and forums to facilitate the exchange of EDI best practices and encourage collaboration among industry members.Establish awards or recognition programmes to celebrate organisations that demonstrate outstanding commitment to EDI.Provide members with EDI-related services to enhance their capacity to implement best practices.Consider leveraging strategic partnerships for this.Box 14 presents the example of Make UK and the EDI services they offer to their members.Share relevant EDI resources with your members,such as those being developed by the Women in Manufacturing initiative.Principle 4.Promote a diverse and inclusive image of manufacturing Why is this important?The manufacturing industry has long been a cornerstone of economic growth and innovation,yet it often struggles with outdated perceptions that fail to reflect its evolving and dynamic nature.Promoting a diverse and inclusive image of manufacturing is essential to attracting a wider talent pool,fostering innovation and ensuring the long-term sustainability of the industry.By actively shaping public perceptions,the industry can showcase itself as a progressive and welcoming environment for individuals of all backgrounds,ultimately driving growth and competitiveness in the global marketplace.Suggested actions:Lead by example,adopting EDI best practices within the association(see section 3.1).Engage in policy advocacy to promote diversity and inclusion in manufacturing and in public awareness efforts to disseminate the benefits of diversity and inclusion.Build trust through active community engagement,positioning the industry as an inclusive and welcoming career choice.Support initiatives that provide exposure to manufacturing careers for under-represented groups through internships,apprenticeships and mentoring programmes.Participate in efforts to improve the public perception of manufacturing,such as media campaigns and educational outreach.For example,the Institute of the Motor Industry launched the campaign“Theres more to motor”to promote a more positive and exciting image of the sector and to showcase the diversity of jobs that the sector offers.53 53 https:/moretomotor.org.uk/46 BOX 14.MAKE UK:BEYOND COMPLIANCE INTO CULTURE Make UK is the largest manufacturers organisation in the United Kingdom,dedicated to fostering a supportive environment where UK manufacturers can thrive,innovate and compete.A cornerstone of Make UKs mission is promoting equality,diversity and inclusion(EDI)within the manufacturing sector.Five key components of a successful EDI strategy Whether organisations are just beginning their EDI journey or aiming to embed deep cultural change,the Make UK EDI t
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A N N U A L R E P O R TIndian Textile&Apparel Industry 20232Contents Global Sector Overview03 Indian Sector Overview10 Indian Industry Structure and Supply Scenario17 Leading Indian Companies 30DISCLAIMERThis document is a copyright of Wazir Advisors Private Limited,India.No part of this publication may be reproduced,stored in,or introduced into a retrieval system,ortransmitted in any form or by any means(electronic,mechanical,photocopying,recording or otherwise),without the prior written permission of Wazir Advisors.We have madeevery effort to ensure the accuracy of information presented in this document.However,neither Wazir Advisors nor any of its office bearers or employees can be heldresponsible for any financial consequences arising out of the use of information provided herein.In case of any discrepancy,error,etc.,same may please be brought to thenotice of Wazir Advisors for appropriate corrections.Global Sector OverviewGlobal Sector Overview4Global Apparel Market SizeData Source-Euratex,US Census Bureau,HKTDC,METI Japan,TEXBRASIL,Statistics Canada,IMF,and Wazir AnalysisTheglobalapparelmarketshrunkfromUS$1.6 trillion in 2019to US$1.3 trillion in2020 due to COVID-19.Since then,the markethas grown consistentlyand in 2022,it reachedUS$1.7 trillion.The market is expectedto cross US$2.3 trillionby 2030,growing at aCAGR of 4%from 2022.Values in US$bn.Region2019202020212022CAGR 2019-22CAGR2022-30(P)2030(P)United States2351772512766%350 EU-27264220211246-2%310 China18416618824410%8E0 India785580926%90 Japan101817864-14%3 UK696078742%3 Brazil48343939-7%5 Canada28172124-6%55 RoW6214575226401%30 World1,6281,2671,4681,6991%4%2,370 Note:Sharp decline in Japanese market in 2022 is mainly due to its currency depreciation against the US Dollar.In Yen terms,the market has grown 2%in 20225Global Textile and Apparel TradeData Source-UN Comtrade and Wazir AnalysisIn2021,theglobaltextileandappareltrade was US$871 bn.having grown at approx.3GR since 2017.Itis expected to reachUS$1.2 trillion by 2030,growing at a CAGR of4%.Apparel was the largesttraded category in 2021witha57%share,followedbyfabrics,with a share of 17%.343437 4045525258 6575148150152 175200455482494 575715505160 7085507071 7580789840871100012002017201920212025(P)2030(P)FiberYarnFabricApparelHome TextilesOtherTotalCAGR 4GR 3%8%7W%7%4%ShareValues in US$bn.6Leading Textile and Apparel ExportersData Source-UN ComtradeChina was the largestexporter in 2021 with aglobal trade share ofapprox.37%followedby Bangladesh with ashare of approx.5%.India was the 2ndlargesttextile exporter in 2021withUS$26.3bn.textile exports.RankCountryExports(2021)ShareTextileApparelTotal1China153.5164.9318.337+angladesh2.440.142.55%3India26.315.241.55%4Germany15.125.240.35%5Vietnam9.128.737.84%6Italy12.324.736.94%7Turkey15.818.334.14%8USA20.45.225.53%9Spain5.315.420.72Netherlands6.113.819.92%RoW110.9142.2253.029%Total377.0493.6870.6Values in US$bn.7Category-wise Leading ExportersData Source-UN ComtradeChina was the leadingexporter of manmadestaple fibre,MMF spunyarn and MMF filamentyarn in 2021,with amarket share of 19%,37%and38%,respectively.USA was the leadingexporterofnaturalfibres with a share of23%while India was thelargestexporterofnatural spun yarn witha share of 29%.5%(1.1)8%(0.9)10%(1.6)9%(1.0)14%(3.5)6%(1.4)10%(1.1)18%(3.0)11%(1.2)15%(3.8)38%(8.5)37%(3.9)29%(4.9)19%(2.1)23%(5.8)Filament Yarn-Man MadeSpun Yarn-Man MadeSpun Yarn-NaturalMan MadeStaple FibreNatural FibresAUSTRALIAINDIACHINAREP.OF KOREABRAZILUSAVIETNAMINDONESIAINDIACHINACHINAINDONESIACHINAREP.OF KOREAINDIA2021 Share(Values in US$bn.)8Category-wise Leading ExportersData Source-UN ComtradeChina was the leadingexporteroffabrics(bothknittedandwoven),apparelandhome textiles in 2021.In the apparel category,China was the leadingexporter,withBangladeshandVietnam in the 2ndand3rdspots,respectively.9%(5.2)6%(28.7)5%(2.2)5%(3.7)12%(7.1)8%(40.1)6%(2.5)5%(3.8)40%(24.0)33%(164.9)62%(24.7)57%(40.1)Home TextilesApparelKnitted FabricWoven FabricINDIACHINACHINATAIWANITALYTURKEYBANGLADESHVIETNAMTURKEYINDIACHINACHINA2021 Share(Values in US$bn.)9Key HappeningsSoft Global Demand due to High Inflation and Economy Slowdown High inflationary conditions and recessionary trends in key markets of US and EU kept the textile and apparel demand subdued in2022,especially the later half.Volume growth in most of the markets remained in negative to nil zone,with market size increasehappening due to higher product costs.Raw Material Price Volatility 2022 was marked with unprecedented raw material price volatility.The daily Cotlook index reported highest value of 173 in May(highest value in more than a decade),which then almost halved down to 89 in November.Manmade fibre price variation duringthe year also remained high,although not as sharp as cotton.This volatility caused uncertainties in the downstream value chain,which was exacerbated by buyers wait and watch approach in wake of low consumer confidence.Chinas Loss Became Bangladesh and Vietnams Gain China continued to lose its share in the global textile and apparel exports because of rising cost of manufacturing and geopolitical shifts.Bangladesh and Vietnam emerged the highest gainers of Chinas lost share,successfully catering to global fashionbuyers looking for supply base diversification.EUs Sustainability Legislation Announcement In March 2022,the European Commission published“EU Strategy for Sustainable and Circular Textiles”with a vision to produce,distribute and consume textile and apparel products sustainably by 2030.The alignment with this legislation will be important formanufacturers and brands alike,to keep up and stay competitive.Indian Sector OverviewIndian Sector Overview11Indias Textile and Apparel Market SizeData Source-DGCI&S,Wazir AnalysisIndiantextileandapparel market size isestimated to be US$165 bn.in 2022-23.Domesticmarketcontributes 76%to themarketsizewhileexports have a share ofrest 24%Withindomesticmarket,apparelaccountsfor74%sharefollowedbytechnical textiles with ashare of 20%.Indian T&A Market Size(2022-23 estimates)US$165 BnDomestic Market US$125 BnApparelUS$92 BnHome TextilesUS$9 BnTechnical TextilesUS$24 BnExportsUS$40 BnApparelUS$16.5 BnTextilesUS$23.5 Bn123578809212018011202224345448891116501061101251652502010-112019-202021-222022-23(E)2025-26(P)2030-31(P)ApparelTechnical TextilesHome TextilesTotalIndias Domestic Textile and Apparel MarketData Source-DGCI&S,Wazir AnalysisTheIndiandomesticT&A market has grownfromUS$50bnin2010-11 to US$110 bnin 2021-22,registeringa growth of 7%.The market is furtherexpected togrowat10GR from 2021-22 to reach US$250 bn.by 2030-31.CAGR 7%Values in US$bn.CAGR 104243574586111745669141216161728 4545779 1212233 529 34 43 40 65 100 2010-112019-202021-222022-23(E)2025-26(P)2030-31(P)FibreYarnFabricApparelHome TextilesOthersTotalIndias Textile and Apparel ExportsData Source-DGCI&S,Wazir AnalysisIndiasT&AexportshavegrownwithaCAGR of 4%since 2010-11 to reach US$43 bn.in 2021-22Theexportsareexpected to grow at aCAGRof10%from2021-22 to reach US$100 bn.in 2030-31.Apparelformsthelargestshareoftheexports accounting forapprox.37%in 2021-22.CAGR 10%Values in US$bn.CAGR 41.52.41.53.13.54.20.30.51.92.32.73.21.62.32.52.73.03.40.21.11.31.82.02.50.21.50.20.2 0.40.80.30.80.81.11.52.04.18.68.311.1 13.1 16.1 2010-112019-202021-222022-23(E)2025-26(P)2030-31(P)FiberYarnFabricApparelHome TextilesOthersTotalIndias Textile and Apparel ImportsData Source-DGCI&S,Wazir AnalysisIndiasT&AimportshavegrownwithaCAGR of 7%since 2010-11 to reach US$8.3 bn.in 2021-22Theimportsareexpected to grow at aCAGR of 8%from 2021-22 to cross US$16 bn.in 2030-31.Values in US$bn.CAGR 8GR 7Indias Position in Global TradeData Source-UN ComtradeIndiaistheleadingexporterofnaturalspunyarn(mainlycotton based).In several categories,itfeatures among the top5globalexportersnaturalfibre,MMFspunyarn,filamentyarn and home textiles.MMFstaplefibres,knittedfabricandapparelarethecategories where Indialags in global rankings.Indias Category-wise Global PositionFibreUS$3.9 bn2nd/11%NaturalUS$3.3 bn4th/13%ManmadeUS$0.6 bn7th/6%YarnUS$7.4 bn2nd/13%SpunUS$5.9 bn2nd/19%NaturalUS$5.0 bn1st/24%ManmadeUS$0.9 bn3rd/61%FilamentUS$1.5 bn2nd/6bricUS$5.5 bn5th/4%KnitUS$0.8 bn8th/2%WovenUS$4.7 bn4th/4%ApparelUS$15.2 bn8th/3%KnitUS$7.9 bn8th/3%WovenUS$7.3 bn8th/3%Home TextilesUS$7.1 bn2nd/12tegory2021 Exports ValueGlobal Rank/Global Trade shareKey16Key HappeningsExports Went for a Rollercoaster Ride Indian textile and apparel exports started the year on a strong note.In the first half of 2022,they crossed US$20 bn.(12%higherover same period in 2021)hinting at all time highest exports,but in the later half they declined dramatically.T&A exports in 2022are expected to be 8-10%lower than the last year.FTA Signing and Discussions India concluded two FTAs in 2022;with UAE and Australia.The most anticipated one,with the UK,however,could not be signedand is on cards for 2023.Also,India and Canada resumed FTA negotiations after a gap of almost five years and discussing aninterim trade deal first.New State Textile Policies In 2022,Bihar joined the list of Indian states that have dedicated textile sector policies.The states of UP and Odisha releasedtheir new textile policies,after expiry of the previous ones.Central Government Initiatives 64 projects in manmade value chain(fabrics,garments an technical textiles)were approved under Production Linked Incentive(PLI)Scheme with a cumulative investment of approx.US$2.5 bn.In October,Ministry of Textiles released a draft of theProduction Linked Incentive 2.0 scheme.Under National Textile Technology Mission(NTTM),63 new projects were approved in 2022 with a total project cost of approx.US$20 mn.Indian Industry Structure and Supply ScenarioIndian Industry Structure and Supply Scenario18FibreProduction2021-22Share(%)CAGR2015-162021-22Cotton5,6445,30557%-1%Silk2935 1%4%Wool4437*1%-3%Others(Jute,Mesta)1,8941,62018%-3%Natural Fibre7,6106,99676%-2%Viscose Staple Fibre364554*6%9%Polyester Staple Fibre1,3751,59017%3rylic Staple Fibre107831%-5%Others520%-16%Manmade Fibre1,8502,22924%4%Total Fibre9,4609,225-1%Staple Fibre ProductionData Source-Cotton Corporation of India,Central Silk Board,Ministry of Textiles,Department of Agriculture,ASFI Handbook and Wazir EstimatesTotalproductionofstaple fibre in India was9,225 mn.kg.in 2021-22,with cotton havingthe highest share.Staple fibre productionhas declined at a CAGRof 1%from 2015-16.Values in mn.kg.*Values of 2020-21,data for 2021-22 is yet to be reported.19FibreExports2021-22 Share(%)CAGR2015-162021-22Cotton1,939 2,816 70%6%Silk14 31 1%Wool49 15 0.4%-18%Others206 473 12%Natural Fibre2,208 3,335 83%7%Viscose Staple Fibre274 205 5%-5%Polyester Staple Fibre197 443 11rylic Staple Fibre54 9 0.2%-26%Others16 23 1%6%Manmade Fibre541 680 17%4%Total Fibre2,748 4,015 7%Staple Fibre ExportsData Source-DGCI&SIndiaexportedstaplefibre worth US$4 bn.in2021-22.Cotton is the largeststaplefibrebeingexported with a shareof 70%in 2021-22.Exportsofviscosestaplefibrehavedeclined despite higherproductionindicatinghigh domestic demand.Values in US$mn.20FibreImports2021-22 Share(%)CAGR2015-162021-22Cotton39456036%6%Silk1591117%-6%Wool32424415%-5%Others8618011%Natural Fibre9631,09469%2%Viscose Staple Fibre731429%Polyester Staple Fibre1131057%-1rylic Staple Fibre71886%4%Others951479%8%Manmade Fibre35148231%5%Total Fibre1,3141,5753%Staple Fibre ImportsData Source-DGCI&SIndiaimportedstaplefibre worth US$1.6 bn.in 2021-22,which hasgrown at a CAGR of 3%since 2015-16.Cottonremainedthehighest imported staplefibre with a share ofapprox.36%.Values in US$mn.21YarnProduction2021-22 Share(%)CAGR2019-202021-22Cotton yarn3,9624,09270%1.6%Blended&100%Non-cotton yarn1,7021,75430%1.5%Total Spun Yarn5,6645,8461.6%Manmade filament yarn(MMFY)1,6882,0119.2%Yarn ProductionData Source-Ministry of Textiles,Government of IndiaIndias total spun yarnproduction was 5,846million kg while that ofmanmade filament yarnwas 2,011 million kg in2021-22.Cotton yarn productionand MMFY productionhave grown at a CAGRof2%and9%,respectively since 2019-20Values in mn.kg.22YarnExports2021-22 Share(%)CAGR2015-162021-22Cotton spun yarn3,5725,51868%8%Manmade spun yarn67197312%6%Other spun yarn(Silk,Jute)122127 1.6%1%Spun Yarn4,3666,619 81%7%Viscose filament yarn52340.4%-7%Polyester filamentyarn9141,40618%8%Nylon filament yarn10400.5&%Others30955 1%-25%Manmade Filament Yarn1,2851,535 19%3%Total Yarn5,6518,154 6%Yarn ExportsData Source-DGCI&SIn 2021-22,Indias totalyarn exports stood atUS$8,154 mn.ExportsofNylonfilamentyarnhasincreased at a CAGR of26%since2015-16while that of viscosefilament yarn declinedat 7%.Values in US$mn.23YarnImports2021-22 Share(%)CAGR2015-162021-22Cotton spun yarn42201%-12%Manmade spun yarn17743523%Other spun yarn(Silk,Jute)2391397.5%-9%Spun Yarn45959432%4%Viscose filament yarn5825914(%Polyester filamentyarn12745124$%Nylon filament yarn76804%1%Others32248226%7%Manmade Filament Yarn5831,27168%Total Yarn1,0421,86510%Yarn ImportsData Source-DGCI&SIndiaimportedUS$1,865mn.worthofyarn in 2021-22.ImportsofViscosefilamentyarnhasincreased at a CAGR of28%since2015-16followed by Polyesterfilament yarn with aCAGR of 24%.Values in US$mn.24FabricProduction2020-21 Share(%)CAGR2018-192020-21100%Cotton42,20436,34452%-7.2%Blended11,89610,51315%-6.00%Non cotton15,97023,58833!.5%Total70,07070,445100%0.3bric ProductionData Source-Ministry of Textiles,Government of IndiaTotal fabric productionin 2020-21 was 70,445mn.sq.mtrs.which hasgrown at a CAGR of0.3%since 2018-19Cottonfabricproduction had a shareof 52%and its outputhas declined at a CAGRof 7%since 2018-19.Values in mn.sq.mtrsData for 2021-22 is yet to bereported.25FabricExports2021-22 Share(%)CAGR2015-162021-22Cotton Woven1,7502,45349%6%Synthetic Woven2,0881,58231%-5%Other Woven7131,01520%6%Woven Fabric4,5515,05086%2%Knitted Fabric24085014#%Total Fabric4,7915,9004bric ExportsData Source-DGCI&SIndiaexportedfabricworth US$5.9 bn.in2021-22whichhasgrownat4GRsince 2015-16.Wovenfabriccomprised 86%of thetotal fabric exports in2021-22.However,exportsofknitted fabric has grownat23GRsince2015-16.Values in US$mn.26FabricImports2021-22 Share(%)CAGR2015-162021-22Cotton Woven1631609%0%Synthetic Woven712101054%6%Other Woven63069737%2%Woven Fabric1,5051,86773%4%Knitted Fabric39467427%9%Total Fabric1,8992,5415bric ImportsData Source-DGCI&SIndia imported fabric inyear2021-22worthUS$2,541 mn.whichhasincreasedat5GR since 2015-16.Imports of total wovenfabric has increased at4GR since 2015-16.Importsofknittedfabric have increased at9GR since 2015-16.Values in US$mn.27Exports2021-22 Share(%)CAGR2015-162021-22Cotton Garments8,3598,64954%1%Synthetic Garments3,9943,15620%-4%Other Garments4,6374,21626%-2%Garments16,99016,021100%-1%Made-ups6,4949,3486%Grand Total23,48425,3691%Garments and Made-ups ExportsData Source-DGCI&SIndiaexportedgarments worth US$16bn.in year2020-21,declining at a CAGR of1%since 2015-16.Made-ups exports,onthe contrary,grew at a6GR in the sameperiodto cross US$9bn.Values in US$mn.28Imports2021-22 Share(%)CAGR2015-162021-22Cotton Garments23956545%Synthetic Garments15037229%Other Garments19132726%9%Garments5801,265100%Made-ups8811,0904%Grand Total1,4612,3568%Garments and Made-ups ImportsData Source-DGCI&SIndia imported US$1.2bn.worth of garmentsand US$1 bn.worth ofmade ups in 2021-22.Importsofsyntheticgarments has increasedat16GRsince2015-16.Values in US$mn.29Technical Textiles Exports and ImportsData Source-DGCI&S and Wazir AnalysisIndiasexportsoftechnicaltextilesin2021-22wasapprox.US$3 bn.,which hasgrown at a CAGR of 6%since 2010-11.Theimportsoftechnicaltextilesin2021-22wasapprox.US$2 bn.,which hasgrown at a CAGR of 5%since 2010-11.1,581 2,4232,3702,9781,191 1,7031,3952,0342010-112019-202020-212021-22ExportsImportsCAGR 6GR 5%Values in US$mn.Leading Indian CompaniesLeading Indian Companies31Leading Indian CompaniesValues in US$mn.S.No.Company NameProductsHeadquarters2021-22 Sales1Reliance Industries Ltd.Polyester chips,fibre,filament and fabricsMumbai,Maharashtra2,300*2Grasim Industries Ltd.Viscose staple fibre,filament and fabricsMumbai,Maharashtra1,5653Vardhman Textiles Ltd.Fibre,yarn,fabrics,apparelLudhiana,Punjab1,2034Arvind Ltd.Fabrics,apparelAhmedabad,Gujarat9565Alok Industries Ltd.Yarn,fabrics,apparel,home textilesMumbai,Maharashtra9176Trident GroupYarn,home textilesLudhiana,Punjab8877Welspun India Ltd.Home textilesMumbai,Maharashtra8598Raymond Ltd.Fabrics,apparelMumbai,Maharashtra5469KPR Mill Ltd.Yarn,fabrics,apparelCoimbatore,Tamil Nadu52210Indo Rama Synthetics(I)Ltd.Polyester chips,polyester fibre,polyester yarnGurgaon,Haryana50011Page Industries Ltd.Innerwear,leisurewear&socksBangalore,Karnataka49812Filatex India Ltd.Polyester chips,yarns,fabrics,specialty productsDelhi49113RSWM Ltd.Yarn,fabricsNoida,Uttar Pradesh48914Nahar Spinning Mills Ltd.YarnLudhiana,Punjab46115JBF Industries Ltd.Polyester chips,yarnMumbai,Maharashtra420Conversion Rate:US$1=Rs.78*EstimatedData Source ,Only public listed companies have been considered32Leading Indian CompaniesValues in US$mn.S.No.Company NameProductsHeadquarters2021-22 Sales16Sintex Industries Ltd.FabricKalol,Gujarat40117Sutlej Textiles and Industries Ltd.Yarn,home textilesMumbai,Maharashtra39018Garden Silk Mills Pvt.Ltd.Polyester chips,yarn,fabricsMumbai,Maharashtra36919Himatsingka Seide Ltd.Yarn,home textilesBangalore,Karnataka36720Indo Count Industries Ltd.Home textilesMumbai,Maharashtra36021Nitin Spinners Ltd.Yarn,fabricsRajasthan,Bhilwara34522Jindal Worldwide Ltd.Fabrics,home textilesAhmedabad,Gujarat33123Sangam India Ltd.Yarn,fabrics,seamless garmentMumbai,Maharashtra31324Lux IndustriesInnerwear,apparelKolkata,West Bengal29125Nandan DenimYarn,fabrics,apparelAhmedabad,Gujarat27926Sportking India Ltd.Yarn,fabrics,apparelLudhiana,Punjab27627Century Enka Ltd.Yarn,fabricsMumbai,Maharashtra26928SRF Ltd.Technical textilesGurgaon,Haryana267*29Nahar Industrial Enterprises Ltd.Fabrics,apparelLudhiana,Punjab25730Bombay Dyeing Polyester chips,fibre,yarn,home textileMumbai,Maharashtra257Conversion Rate:US$1=Rs.78Data Source ,Only public listed companies have been considered*Only technical textile segment revenue33Leading Indian CompaniesValues in US$mn.S.No.Company NameProductsHeadquarters2021-22 Sales31Siyaram Silk MillsYarn,fabrics,apparel,home furnishingMumbai,Maharashtra24432Gokaldas Export Ltd.ApparelBangalore,Karnataka22933Loyal Textiles Mills Ltd.Yarn,fabrics,apparel,home textilesChennai,Tamil Nadu22734Vishal Fabrics Ltd.Yarn,fabricsAhmedabad,Gujarat19835AYM SyntexYarn,fabrics,apparel,home textileMumbai,Maharashtra19136Rupa and Company Ltd.Innerwear,apparelKolkata,West Bengal18337Dollar IndustriesInnerwearsKolkata,West Bengal17338Bannari Amman Spinning Mills Ltd.Yarn,fabrics,apparelCoimbatore,Tamil Nadu16539Banswara Syntex Ltd.Yarn,fabrics,apparelMumbai,Maharashtra15340Garware Technical Fibres Ltd.Technical textilesPune,Maharashtra15141Ginni Filaments Ltd.Yarn,fabrics,apparelNoida,Uttar Pradesh13942Maral Overseas Ltd.Yarn,fabrics,apparelNoida,Uttar Pradesh13943Flexituff Ventures International Ltd.Technical textilesPithampur,Madhya Pradesh13344Ganesha Ecosphere Ltd.Recycled polyester fibre,yarnKanpur,Uttar Pradesh13145Mafatlal Industries Ltd.Fabrics,apparelMumbai,Maharashtra127Conversion Rate:US$1=Rs.78Data Source ,Only public listed companies have been considered34Leading Indian CompaniesValues in US$mn.S.No.Company NameProductsHeadquarters2021-22 Sales46Precot Ltd.Yarn,hygiene textilesCoimbatore,Tamil Nadu12747Winsome Textile Industries Ltd.Yarn,fabricsChandigarh12348Pearl Global Industries Ltd.ApparelGurgaon,Haryana12049Vardhman Polytex Ltd.YarnLudhiana,Punjab11950Ambika Cotton Mills Ltd.Yarn,apparelCoimbatore,Tamil Nadu11851DCM Nouvelle Ltd.YarnHisar,Haryana11752Damodar Industries LtdYarnMumbai,Maharashtra11653Monte Carlo Fashions Ltd.ApparelLudhiana,Punjab11654Sumeet Industries Ltd.Chips,yarnSurat,Gujarat11555TCNS Clothing Company Ltd.ApparelDelhi115Conversion Rate:US$1=Rs.78Data Source ,Only public listed companies have been consideredAbout Wazir AdvisorsAbout Wazir Advisors Wazir Advisors is a management consulting firm assistingits clients in strategy formulation and implementation,forming alliances and joint ventures,investments andmarket understanding,sector analysis and due diligence-thereby providing end to end solutions spanning thecomplete business cycle in the textile value chain.Having worked with leading Indian and internationalcompanies,public sector organizations,governmentdepartments,development agencies,trade bodies,etc.Wazir has a deep understanding of global textile sectordynamics and right connect with the decision makers.Wazir team has worked on strategy and implementationassignments in all major textile&apparel manufacturingand consumption base.Wazir leverages its body ofknowledge,connects and combined expertise of its teamto deliver value to clients.Our services span the entire breadth of textilemanufacturing value chain from fibre to finishedgoods.We cover the following segments:Fibres and FilamentsYarnsFabricsGarmentsMade-upsTechnical TextilesTextile Machinery and EquipmentHandlooms and HandicraftsOur ServicesOur ServicesStrategyWazir delivers practical,implementablestrategiesforclientstomeettheirobjectivesBe it corporate strategy intending toenhance profitability or new marketopportunityidentificationorsectorgrowth strategy to support MSMRs,wearegearedtoadviseourclientsefficiently and effectively.Corporate StrategyMarket Opportunity AssessmentMarket Entry StrategyLocation AnalysisBusiness Performance EnhancementProduct DiversificationMarketing and Distribution StrategySector Mapping and Growth StrategyPolicy Formulation SupportGovernment Scheme EvaluationImplementationWazir provides implementation servicesto textile and apparel sector entities toconvert the plans into reality.Whether it is to manage a Govt.schemesor to improve productivity in apparelfactories or to identify the most suitabletechnology;wehavein-housecompetence to cover all the criticalelements of implementation.Benchmarking and Gap StudyProcess Re-engineeringProductivity and Profitability ImprovementManagement ContractProject Management and MonitoringSupply Chain OptimizationFeasibility and Techno Economic Viability(TEV)StudyCluster&Industrial Park DevelopmentAlliancesPartnerships and collaborations are waysto achieve accelerated growth,expandmarketreachandattaintechnicaladvancement.Realizing the importance and need ofinter-organization alliances in textile andapparel sector,Wazir has developedbroadrangeofservicestosupportcompanies and organizations looking forinorganic growth globally.Company Due-diligenceJoint VentureMarketing Tie-upTechnology TransferM&A ExecutionStrategic and Financial FundingPrashant Agarwalprashantwazir.in| 91 9871195008Surender Jainsurenderwazir.in| 91 7042101333Sanjay Arorasanjaywazir.in| 91 9971110566Varun Vaidvarunwazir.in| 91 9899985979B.Prakashprakashwazir.in| 91 9810866927Contact UsContact U Advisors Private Limited,3rdFloor,Building No.115,Sector 44,Gurugram 122 002,Haryana,India
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2022:43%*2023:49%*2024:60%*INDUSTRY 4.0 BAROMETER 2024STUDYUKGuy WilliamsonCEO MHP UK Guy.WThe Industry 4.0 Barometer 2024 and the Executive Summary were published by:MHP Management-und IT-Beratung GmbH in cooperation with the Ludwig-Maximilians-University of Munich.All rights reserved!Reproduction,microfilming,storage and processing in electronic systems are not permitted without the prior consent of the publishers.The contents of this publication are intended for the information of our clients and business partners.They correspond to the authors state of knowledge at the time of publication.For solutions to problems connected to the topic in hand,please refer to the sources indicated in the publication or contact the people named.Opinion pieces reflect the views of the individual authors.March 2024Contact partners internationalCHINAThomas MooserCEO MHP ChinaThomas.MLei YaoAssociated PartnerTechnology ConsultingMHP ChinaGERMANYMarkus WambachCOO and Member of the Board of ManagementMarkus.WUSATobias HoffmeisterCEO MHP AmericasTobias.HGreg ReynoldsSales DirectorGreg.R Marcus Bohlemann Senior Account ExecutiveMHP AmericasUSCNUKGER2 Industry 4.0 Barometer 2024Contact partnersAuthorsAuthorMuriel HerfMHPAuthorNora HagerMHPAuthorTobias SchreiberMHPSponsorProf.Dr.Johann KranzLMUHead of the Chair for DigitalServices and SustainabilityKranzlmu.deSponsorDr.Christina Reich MHPChristina.RExpertDr.Walter HeibeyMHPWalter.HSponsorTimo HaugMHPTimo.HExpertDr.Oliver KelkarMHPOliver.KProject ManagerJulian EngelMHPJulian.ESponsorCaspar KoltzeMHPCaspar.K3 ContentForeword 7Summary 8Key results General 10Key results Industrial AI 131.0 Introducing the Industry 4.0 Barometer 2024 141.1 Focus 161.2 Evaluation method 161.3 Interviews and success stories 171.4 Participants 174 Industry 4.0 Barometer 20242.0 Results of the study 202.1 Status quo of Industry 4.0 222.2 Industrial AI Artificial Intelligence in production 33Interview Bentley Motors Ltd.38Interview German AI Association 42Success Story New Dimensions:Sounce 48Interview Knorr-Bremse Rail Vehicle Systems 52Success Story SEW-EURODRIVE DriveRadar IoT Suite 58Success Story New Dimensions:paint_it 62Interview Deutsche Bahn Project”Ideas Train”653.0 Summary and outlook 704.0 Further information 745 6 Industry 4.0 Barometer 2024Foreword Dear readers,In the face of current global affairs,we must take proactive and decisive action.After all,the challenges before us are complex in nature.Among other things,the past year has been shaped by geopolitical tension.As a result,industrialized nations are striving more than ever for economic independence,which is in turn fueling the war for talents.To tackle this new,strained situation,businesses require innovative,pioneering solutions.Now,more than ever,executives are being forced to make decisions that could have ramifications for years to come.Digitalization is crucial for both the development of innovations and a businesss ability to remain competitive.In what is already our sixth issue of the MHP Industry 4.0 Barometer,were going to be looking at how matters relating to digitalization have progressed in the industrial sector.Artificial Intelligence(AI)has garnered much attention in both the media and wider society of late,not least due to the ChatGPT app.This topic is also becoming increasingly important for our customers in the production sec-tor.As such,we have decided to make Artificial Intelligence our main focus for this years Industry 4.0 Barometer.As the examples below show,integrating established AI solutions into their operations,will allow businesses to access a wide range of optimization opportunities.AI data will enable businesses to conduct efficient analyses,identify complex patterns and generate more accurate forecasts,so they can make(semi-)automated decisions based on the data available.Intelligent analyses can use existing sensor data to automatically check quality cri-teria.AI-based smart production management offers the ability to reduce lead times,increase planning stability and make processes more efficient overall.This means AI-assisted solutions can help to boost both quality and efficiency.With the aid of machine learning and advanced algorithms,AI-controlled machines can analyze and interpret tasks independently.This enables businesses to reduce the workload repetitive tasks place on their skilled workers,and offer them support when carrying out complex activities.In order to ensure that businesses can benefit from the integration of AI solutions in the future,they will need a clear vision,innovative minds,a willingness to take risks,and all the necessary resources which they can gener-ate either themselves or with the aid of an experienced partner,like MHP.Before I leave your to read on in peace,Id just like to thank Professor Dr.Johann Kranz of LMU Mnchen Uni-versity,with whom we collaborated for the sixth time to produce this issue of Industry 4.0 Barometer.My special thanks also go to the 856 experts,interviewees and people who answered surveys as part of our study.Together,we strive for pioneering solutions that offer a resistant response to crises and a better,digital future.That is,and remains,our purpose:Enabling You To Shape A Better Tomorrow.I wish you all the best for 2024.Yours,Markus WambachCOO and Member of the Board of Management MHP Management-und IT-Beratung GmbH7 SummaryThe Industry 4.0 Barometer 2024 provides a compre-hensive overview of the current status of Industry 4.0 in various different sectors as of 2023.It has been compiled based on surveys and interviews conducted with businesses in Germany,Austria,Switzerland,the United Kingdom,the USA,and China,which asked questions regarding their initiatives and progress in the digitalization process.The questions focused on the topic of Industrial AI.2023 presented businesses with a number of glob-al challenges,including international tensions,price rises,the ongoing climate change,the skilled labor shortage coming to a head,and the aftermath of the COVID-19 pandemic.As a result,businesses found themselves in an ongoing dilemma,caught between the guarantee of economic security and the resulting pressure to keep outgoings to a minimum on the one hand and,on the other,the need to invest in digitali-zation in order to keep pace with the competition.The Industry 4.0 Barometer 2024s findings show that,in spite of the difficult circumstances,businesses have managed to make progress in terms of their Industry 4.0 development.In fact,the speed of digital progress has clearly increased further compared to the previous year the implementation of automation,the inte-gration of autonomous systems and the introduction of digital twins have all picked up pace,for example.Particularly noteworthy are the high Barometer results relating to data analysis capabilities,which is likely a 8 Industry 4.0 Barometer 2024result of the hype around Artificial Intelligence(AI).This progress provides cause for optimism,as it will lay the foundations for long-term success in the inte-gration of Industrial AI.Most businesses are only at the beginning of this journey,and still some way from capitalizing on the full potential of Artificial Intelli-gence in production processes.Many businesses are at least putting their first use cases into practice,in fields such as visual quality assurance.However,a closer look at the results shows that rates of progress and implementation for both Industry 4.0 technologies and Industrial AI vary greatly from one region to the next.Overall,China and the USA are the clear frontrunners when it comes to establishing digi-tal twins,incorporating location technology into sup-ply chains,and using autonomous systems.China has now significantly pulled ahead of the other regions including the USA in terms of its integration of Industrial AI.Businesses in Europe(Germany,Austria,Switzerland and the UK)are also showing progress;however,they are lagging behind the USA,and espe-cially China,in the use of both Industry 4.0 technolo-gies and Industrial AI.Historically established system landscapes and a lack of technological maturity hinder the introduction of Industry 4.0 technologies and Industrial AI.However,the trend shows that these obstacles are starting to fall away,so there remains how that businesses will overcome these challenges eventually.The shortage of skilled labor presents a more persis-tent obstruction.In particular,there is a lack of quali-fied workers who possess the skills required to identify and integrate the opportunities AI offers in a business context,and to implement the technology in a prof-itable way.Yet at the same time,Industrial AI in par-ticular has the potential to assuage the labor shortage to some extent,as AI-based solutions could be used to handle and automate less complex,repetitive and time-consuming tasks.Despite differences between the regions in terms of the spread of Industry 4.0 and Industrial AI,the glob-al progress provides reason to be confident.As such,it is crucial for businesses in Germany,Austria,Swit-zerland and the UK continue to actively work to keep pace with the international competition.Investments in basic and advanced training initiatives,the promo-tion of partnerships with outside AI experts,and intel-ligent investments in scalable IT infrastructures dont just provide a basis for the efficient use of Industrial AI they also help to shape a promising future for digitalization.9 Key resultsGeneral The expansion of Industry 4.0 technologies is progressing apace:Businesses have been progressing well in their use of Industry 4.0 technologies since 2022,especially in the field of automation.However,European businesses are lagging noticeably behind their global competitors.Data as a USP businesses are recognizing the true value of data:High Barometer results for data analysis capabilities show that businesses have come to recognize how crucial data is in their future.It remains to be seen whether this recognition will lead to tangible strategic action or remain nothing more than an acknowledgement.10 Industry 4.0 Barometer 2024 Chinas Great Firewall obstacle or protective shield?The study indicates that both internal and intercompany data access and exchange is seen as a significant obstacle in China.This raises the question of whether the restrictive data retention policy acts more as a barrier to innovation or a protective shield for sensitive business information.The skilled labor shortage and the advanced training deficit a risk for innovation?Europe is suffering from a striking lack of qualified workers with knowledge of Industry 4.0 technologies.Businesses have stated that they are in significant need of external experts,yet investments in advanced training and relevant courses are insufficient.This raises the question of whether Europe is equipped to ensure its own future survival.China and the USA pioneers with a drive for experimentation:The dynamic growth of China and the USA as the leading markets for Industry 4.0 is illustrative not only of these countries economic ambitions,but also of their willingness to experiment in a way that sets them apart from other nations.European businesses tend to be less strategically nuanced,focusing to an excessive extent on economic feasibility and cost efficiency possibly at the cost of potential for innovation.11 China shows highest use of AI is this impressive progress driven by cultural acceptance or political support?Chinese businesses are far ahead of their global competitors,using AI-based solutions in their production processes up to twice as frequently as the competition.The progress of AI an opportunity for European businesses,or a risk?Businesses in Germany,Austria,Switzerland and the UK are lagging some way behind in their use of AI.It remains to be seen whether they can make up this ground over the next few years.Barriers to AI what stands in the way of progress?The introduction of Artificial Intelligence in the production industry promises to boost efficiency,yet there are a number of obstacles that stand in the way of this progress:insufficient technological maturity,high costs up front,the lack of acceptance among users,and a widespread shortage of skilled labor.12 Industry 4.0 Barometer 2024CIOKey resultsIndustrial AI Dependency on external resources for AI:Around 70 percent of the businesses we surveyed use external AI experts to make up for their current shortfall in AI skills.An innovation-driven partnership between AI experts and company-specific knowledge will be required if the switch to AI is to be successful.Industrial AI is a CIO matter:The study shows that businesses that dont have a Chief Information Officer(CIO)on their Executive Board make slower progress in terms of digitalization and competitiveness this is very important,especially in the era of Industry 4.0 and Industrial AI.13 1.0 Introducing the Industry 4.0 Barometer 202414 Industry 4.0 Barometer 202415 Industry 4.0 continues to grow,and has already become a reality for many businesses.The Industry 4.0 Barom-eter collects information on what this reality looks like in different sectors and regions,how Industry 4.0 is regarded in each area,and the degree of maturity with which they use the various different Industry 4.0 tech-nologies.It acts as a benchmark for the developmental status and use of different technologies and initiatives.As such,the Industry 4.0 Barometer provides inside into the gaps and areas of potential that currently exist in the Industry 4.0 context.In addition to this,it also shows how businesses can cover these gaps,utilize the potential and further extend their advantage over the competition.1.1 FocusIn order to provide businesses with a well-founded overview of the relevant information,MHP has joined together with the Ludwig-Maximilians-Universitt Mnchen(LMU)University for the sixth time to pro-duce this Industry 4.0 Barometer.The results of this benchmark study outline the status quo of Industry 4.0 activities among businesses in the Germany,Austria and Switzerland region(DACH),the United Kingdom(UK),the United States of America(USA)and China.Every year,the survey that acts as the basis for the study comprises four topic clusters:1.Technology:Efficient use of Industry 4.0 tech-nologies(supply chain transparency,digital twins,automation and autonomous systems)2.IT integration:Increase in the performance of businesses internal IT infrastructure(data analysis and IT security)3.Strategy and goals:The strategic focus of Indus-try 4.0 activities4.Obstacles:Factors with a negative impact on the implementation of Industry 4.0 technologiesIn addition to the above,each study also incorporates current digitalization issues for the year in question.In 2024,Industrial AI was chosen as the main focus topic and investigated in more detail.For the purposes of this study,Industrial AI is defined as follows:The term“Industrial AI”refers to the development and use in production processes of systems designed to carry out tasks that would normally be performed by human intelligence,such as learning,problem-solv-ing and decision-making.Industrial AI uses algorithms and data to enable machines to perform human cog-nitive functions and adapt to new information.1.2 Evaluation methodFive and seven-stage Likert scales were used to gather responses to the survey questions.In order to ensure clear evaluation results,the participants responses were clustered.In addition to the distribution of the responses,the weighted mathematical average con-verted into a percentage,which was then used as the Barometer result in the study.Furthermore,for ques-tions on prioritization,the participants were asked to distribute 100 points across the various response options to a statement.For calculation purposes,the five/seven-stage Likert scales were transformed into metric scales with the values 0 to 5 or 0 to 7.The metric scale values were multiplied by the respective frequencies as per the participants question respons-es.After this,the weighted mathematical average was divided by 5 or 7,depending on the scale used,in order to produce a Barometer result of between 0 and 100 percent.Since the Industry 4.0 Barometer is a periodic survey,this Barometer result acts as a benchmark.In addition to this,the results were also compared against various characteristics of the partici-pants and the businesses they represented.Responses were collected and evaluated anonymously.16 Industry 4.0 Barometer 2024SMESize of participating businesses55&U6Fewer than 1,0001,0009,999More than 9,999Fig.2:Distribution of participants by size of business n=856 USA 204 DACH 203 UK 201 China 248Origin of survey participants1.3 Interviews and success storiesIn addition to evaluating the results of the survey,the Industry 4.0 Barometer also contains interviews with industry experts and MHP success stories on the use of Industry 4.0 technologies in practice this year,like the survey itself,including pieces from the DACH region and the UK.In addition to questions on our main focus topic,Industrial AI,the interviewees were asked for their personal assessments of the industrys current developmental status in terms of the digital transforma-tion,and also of use cases and digitalization initiatives within their own organizations.We conducted interviews with the following experts:Julian Follner,“Ideas Train”Project Manager(Deutsche Bahn AG)Daniel Abbou,Managing Director (German AI Association)Dr.Andy Moore,Chief Data Officer (Bentley Motors Ltd.)Bernhard Winkler,Vice President Production Rail(Knorr-Bremse Rail Vehicle Systems)The MHP success stories present successful use cases of Industry 4.0 technologies.This year,the concrete use of AI solutions is our focus for this part of the study.In addition to outlining the initial challenges faced by the business in question,the success stories also explain how the business went about implementing its cho-sen solution and provide details of the key results.The MHP success story paint_it presents a smart solution created by MHP that is already being put into use by German automotive manufacturers.paint_it provides the basis for an AI-assisted quality check in the paint shop that will reduce costs and boost the efficiency of painting processes.The MHP success story Sounce presents an AI solution that uses noises to recognize and interpret acoustic patterns.Porsche AG is already using this solution in its R&D department to aid with quality checks for chassis bearings.Our final success story is DriveRadar,by drive manufacturer SEW-EU-RODRIVE.This tool uses machine learning to detect anomalies in drive and automation solutions.1.4 ParticipantsThe results of the Industry 4.0 Barometer 2024 are based on the responses of 856 participants from Ger-man-speaking regions(Germany,Austria and Switzer-land,203 participants),the United Kingdom(UK,201 participants),the USA(204 participants)and China(248 participants)(Figure 1).Fig.1:Distribution of participants by region n=856The businesses that participated in the survey were het-erogeneous in terms of their size.55 percent of the par-ticipants represented small to medium-sized enterprises(SMEs)with fewer than 1,000 employees,26 percent represented businesses with 1,000 to 9,999 employees,and 17 percent represented businesses with more than 9,999 employees(Figure 2).17 Fig.3:Distribution of participants by sector n=856Fig.4:Distribution of participants by departmentn=856Distribution of participants by sectorDistribution of participants by department13%Information and communications technology20%IT16%Production10%Research and development10%Management and Executive Board10%Logistics8%Sales and aftersalesFinance and accounting11%Automotive OEM and automotive suppliers11%Traffic and transport10%Mechanical engineering8%Consumer goods(food,pharmacy,etc.)6%Retail and wholesale6%Electrics and electronics5%Construction industry5%Energy and water sector4%Metal fabrication and metalworking21%Other17%OtherHuman resources4%5%The participants were selected from all levels of compa-ny hierarchy,from the operative basis to Board level.79 percent of the participants can be classified as working at the third level below the Executive Board or lower.The sector with the strongest representation was infor-mation and communications technology(13 percent),followed by the automotive industry(11 percent,OEMs and suppliers),traffic and transport(11 percent)and mechanical engineering(10 percent)(Figure 3).The departments with the strongest representation were IT(20 percent)and Production(16 percent)(Figure 4).This aligns with the focal points of the Industry 4.0 Barometer.18 Industry 4.0 Barometer 202419 2.0 Results of the study20 Industry 4.0 Barometer 202421 2.1 Status quo of Industry 4.0Technological innovations play a large role in shaping the dynamic of the global economy,and in the age of digitalization,Industry 4.0 heralds a new era of smart production.This extensive paradigm shift in the indus-trial sector combines progressive technologies such as the Internet of Things(IoT),Artificial Intelligence(AI),big data,and cloud computing to increase aspects such as efficiency,flexibility and quality in production.In this context,Industry 4.0 has grown to become a global trend in which more and more businesses are starting to participate.After all,in an era of crises like the climate change,the shortage of skilled labor,geo-political conflicts,inflation,and rising interest rates,businesses are finding that a greater degree of digitali-zation and thus the successful use of Industry 4.0 is a key factor in successfully overcoming the global chal-lenges they face.Every company has their own meth-ods and strategies for ensuring success against their global competition.The Industry 4.0 Barometer 2024 focuses on the DACH region(Germany,Austria and Switzerland),the UK,the USA and China regions that are not only economic heavyweights,but are also pursuing different approaches and facing differ-ent challenges in terms of Industry 4.0.China and the USA are often seen as the pioneers when it comes to the innovative use and implementation of Industry 4.0 technologies on a large scale.This assumption needs to be questioned and verified using the results of this study.The study takes a detailed look at the current status of Industry 4.0 in the aforementioned regions,analyzes the key initiatives and developments,and identifies the challenges and opportunities each of the individual regions will have to navigate on their path toward the digital future.2.1.1 Results of the surveyTopic Cluster 1:TechnologySupply chain transparencyThe ability to locate products and components precisely plays an important role in improving the efficiency and transparency in supply chains.Real-time goods track-ing enables businesses to determine the exact location of the goods,optimize their delivery times,manage their stock more effectively,and respond more quickly to unexpected interruptions in their supply chains.As such,supply chain transparency is seen not just as an efficiency booster,but also as a strategic element that improves agility and resistance at every stage of the supply chain.Realizing this,businesses have started to invest more heavily in improving the transparency of their supply chains.54 percent of the participants stated that,at their business,they were at least partly able to locate both individual parts and end products.This is a sig-nificant improvement on the previous years figure of 12 percentage points.This trend is also reflected in the Barometer result,which has hit 60 percent in this years survey compared to 43 percent(2022)and 49 percent(2023)over the past two years.As such,location tracking technology produced the highest average of all the technologies included in the survey.Sensors for recording and transmitting environmental parameters and status data have also seen an average increase of 18 percent per year since 2022(Figure 5).When comparing individual regions,it becomes clear that the use of location tracking technologies is much more widespread in China and the USA than in Europe.In China,66 percent of participants stated that they could partially or fully track the location of their individual parts and products,with 64 percent in the USA saying the same.By comparison,only 47 percent of UK participants said the same thing,while the number in the DACH region was a mere 36 percent.Furthermore,only two percent of the busi-nesses surveyed in China neither used nor were plan-ning to use location tracking technology at all.In the DACH region,this figure was 30 percent(Figure 6).Digital twinsThe fact that businesses are prepared to invest more heavily in the digitalization of their supply chains can also be seen from their use of digital twins for sim-ulation,management and optimization purposes.The use of this technology in Logistics departments is becoming more commonplace.Since 2022,the implementation level for digital twins has risen by an average of 32 percent per year the largest improve-ment in any of the technologies included in the study in this time period(Figure 7).In China,39 percent of participants stated that their Logistics departments made full use of digital twins.22 Industry 4.0 Barometer 2024At my business,we can track the location of all of the individual parts for our products,and also that of all our end products,at every stage of the value chain.0%000%Industry 4.0 BarometerIndustry 4.0 BarometerSupply chain transparencyAt my business,we can track the location of all of the individual parts for our products,and also that of all our end products,at every stage of the value chain.Our systems and plants in our Production,Warehouse and Logistics departments areequipped with sensors to record and transmit environmental parameters and status data.Fig.5:Technological equipment levels at every stage of the value chain*Barometer result:Weighted mathematical average as a percentage Dont know No usage Future usage planned Practical tests ongoing Partial usage Full usage Dont know No usage Future usage planned Practical tests ongoing Partial usage Full usage60$ 22:43%*2023:49%*2022:38%*2023:44%*2024:53%*2024:60%*5!( %Fig.6:Supply chain transparency by region Partial usage Full usageDACHUSAUKChina75%)9# 00%00%At my business,we use digital twins of the following aspects to map process and status data for simulation,management and optimization purposes:Our production facilities(e.g.factories,machines,vehicles).Our products.Industry 4.0 BarometerIndustry 4.0 Barometer Dont know No usage Future usage planned Practical tests ongoing Partial usage Full usage Dont know No usage Future usage planned Practical tests ongoing Partial usage Full usage9&$ 24:51%*2024:48%*2022:43%*2023:39%*2023:35%*2022:32%*7$%00%Our entire Logistics operations(incoming and outgoing goods).Industry 4.0 Barometer Dont know No usage Future usage planned Practical tests ongoing Partial usage Full usage2024:52%*2023:41%*2022:30%*7#!%Fig.7:Distribution of digital twins*Barometer result:Weighted mathematical average as a percentage 24 Industry 4.0 Barometer 2024At my business,we use digital twins of our entire Logistics operations(incoming and outgoing goods)to map process and status data for simulation,management and optimization purposes.Fig.8:Distribution of digital twin use by region Partial usage Full usageDACHUSAUKChina2039!%5! percent of participants in the USA said the same thing,but only 13 percent of those in the UK and just 5 percent of those in the DACH region(Figure 8).As such,this is another area where businesses in China are a clear distance ahead of the rest of the world.25 Industry 4.0 BarometerIndustry 4.0 BarometerWe use machines and robots that can act autonomously and independently manage and improve themselves.Our systems,plants and devices exchange data automatically,independently and in real time(machine-to-machine communication).Dont know No usage Future usage planned Practical tests ongoing Partial usage Full usage Dont know No usage Future usage planned Practical tests ongoing Partial usage Full usage00%3& 22:33%*2023:38%*2022:49%*2023:50%*2024:57%*2024:46%*00%41!%Fig.9:Degree of maturity with regard to automation and autonomous systems*Barometer result:Weighted mathematical average as a percentage Automation and autonomous systemsCompared to digitalization of the supply chain and the use of digital twins,the use of automation and autonomous systems recorded a lower Barometer result of just 46 percent.However,there has still been huge improvement in this area compared to previous years:Since 2022,the average Barometer result has risen by 18 percent per year(Figure 9).When asked about the use of machines and robots that act autonomously,and manage or improve themselves,41 percent of participants from both the DACH region and the UK stated that such technol-ogies were not used at their business.28 percent of participants in the USA said the same.In China,however,only 2 percent of participants agreed with the above statement.The participants supplied sim-ilar responses when asked about systems and plants that exchange information autonomously and inde-pendently(Figure 10).Once more,China is the front-runner in this area.The implementation of Industry 4.0 technologies clear-ly shows that participants from the USA and China are the leaders in all areas included in the“Technology”topic cluster,while the DACH region and the UK occu-pied the last two places in all areas.These positions are the result of a number of different factors.One of these is political measures:For example,the Chi-nese governments strategic support acts as a driver for innovation,especially for the industrial sector.In turn,this boosts Chinese businesses technological maturity and ability to compete.Legislation in the USA provides a liberal framework,giving businesses plenty of space for technological progress,especially in the field of AI.One example of this can be seen in the market volumes for generative AI,where the USA is the market leader ahead of China and will remain so in the medium term.1Because the use of Industry 4.0 technologies is already widespread and has proven successful as a result of these conditions,businesses in these countries are also more willing to innovate and take risks while doing so.As the leading innovation markets,the USA and 1 Generative AI USA()26 Industry 4.0 Barometer 2024Fig.10:Degree of maturity with regard to automation and autonomous systems by region Our systems,plants and devices do not exchange data automatically,independently and in real time (machine-to-machine communication).We do not use machines and robots that can act autonomously and independently manage and improve themselves.DACH25A%China2%2%of survey participants in China saidthat,at their business,machines and robots that act,manage themselves and improvethemselves arenot used.USA19(%UK41$%ONLYChina are home to two major tech hubs,Silicon Valley and Shenzhen.Both these locations have a high den-sity of start-ups and high-tech companies whose fer-vor for experimentation and fast market launches for new technologies is a driving force for digitalization in these areas.Differences in innovation culture also work in favor of the development of Industry 4.0 technologies.Participative management methods are widespread in Europe,whereas management in China is shaped by the collective.In China,employee management is based on a breakdown of the goals for the planned economy.In order to create an effective culture of innovation,intensive exchanges of information and support for the best ideas are essential.After all,the effects of an innovation strategic can only be seen once it has been implemented.Thanks to its culture of innovation,the Chinese collective enjoys high user acceptance with regard to new technologies.At the same time this model also boosts the specialist knowl-edge of its workers.2Finally,the leapfrogging phenomenon could come into play here.Due to the booming economic growth and the resulting construction of countless new pro-duction facilities,businesses in China are able to opti-mize the design and construction of their new plants from the ground up.In other regions,where the pro-duction facilities already exist,legacy systems need to be either integrated or replaced.This can present a significant challenge,especially for companies in the DACH region,as they may be unable to compete with the benefits their Chinese peers can offer in terms of price and quality,and are thus increasingly losing mar-ket shares to Chinese businesses as a result.2 Cf.Jrg Macht:China&Innovation.Was der deutsche Mit-telstand von China lernen kann What German SMEs can learn from China,FOM-Edition,Stuttgart,Germany:Springer,2023,p.727327 Our business possesses comprehensive and adequate capabilities to defend against cyber attacks.Fig.11:IT security status Generally agree Generally agree Completely agreeDACHUSAUKChina22# B%4$)(%Topic Cluster 2:IT integrationData analysis capabilitiesData and data analysis capabilities are seen as a key factor in remaining successful in a business environ-ment that is in a constant state of flux.This is because the right data and the ability to analyze it in the right ways enable businesses to increase their capacity for innovation,boost their efficiency and thus secure their unique selling point as an advantage over their competitors.With this in mind,an increasing number of businesses are starting to recognize the economic importance of data for their future.In particular,the use of Artificial Intelligence that uses large quantities of data to train algorithms has gener-ated a huge amount of hype,and led to a public dis-course on the benefits and risks this technology poses.This debate is founded in the fact that,while gener-ative and Industrial AI offer unfathomable potential,the increased use of these technologies also opens the door to a number of ethical,social and security con-cerns,such as how such systems will handle sensitive data(e.g.trade secrets,personal data,financial data).Furthermore,AI systems are also highly energy-inten-sive to train and run,as a result of which businesses are being encouraged to invest more in partnerships and ensure an increased level of modularization and compatibility on the side of the provider.For these reasons,the data analysis capabilities of the businesses included in the survey have increased dramatically compared to previous years in all four surveyed areas(personnel skills,technological infra-structure,partially or fully automated production pro-cesses,and systematic data collection),and returned the highest Barometer results in this years study.For example,the participants were asked to rate their businesses data analysis capabilities with regard to production processes with partially and fully automat-ed decision-making(e.g.through use of AI)compared to their direct competition.While the Barometer value for this area was just 36 percent in 2022 and 51 per-cent in 2023,it has risen to 62 percent in this years study(Figure 12).The central importance of data collection and process-ing especially when it comes to the use of Artificial Intelligence is explained in detail in our main focus topic,Industrial AI.IT securityIn the field of IT security,the situation is similar to in previous years.Generally speaking,IT security remains well-established at the businesses that took part in the survey.At the same time,the results show once again that the DACH region is lagging significantly behind the other regions,particularly in terms of the capabilities required to defend against cyber attacks:66 percent of participants in the DACH region stated that their business possessed compre-hensive and adequate capabilities to defend against cyber attacks.75 percent of participants in the USA,81 percent in the UK and 87 percent in China said the same thing(Figure 11).28 Industry 4.0 Barometer 2024Industry 4.0 BarometerIndustry 4.0 BarometerIndustry 4.0 BarometerIndustry 4.0 BarometerPersonnel skills and abilities for advanced data analysis methods(e.g.data preparation,analytical algorithms,APIs).Production processes with partially and fully automated decision-making(e.g.Artificial Intelligence ormachine learning).Systematic and continuous collection,preparation and analysis of data at every stage of the value chain.Technological infrastructure for advanced data analysis(pany-wide data platform,analysis and visualization software,algorithm libraries).Dont know Very bad Worse About the same Better Very good Dont know Very bad Worse About the same Better Very good Dont know Very bad Worse About the same Better Very good Dont know Very bad Worse About the same Better Very good2022:54%*2022:36%*2023:51%*2022:56%*2023:60%*2024:71%*2024:62%*2022:52%*2023:62%*2024:72%*2023:62%*2024:71%*00%00%00%*Barometer result:Weighted mathematical average as a percentage 00&9 9(%7%8%2%2%3%3%5%6!0!&8%6%2%4ta analysis capabilitiesPlease rate your business data analysis capabilities compared to your direct competitors with regard to:Fig.12:Degree of maturity for data analysis capabilities29 Increasing economicefficiencyIncreasing the quality of production and productsAdaptingour production flexibilityTapping into new market and customer segmentsDeveloping new services for existing products0102030405022171614Fig.13:Strategic focus of surveyed businesses in terms of Industry 4.0(The participants were given the ability to assign a total of 100 points.The results shown here are the averages for each possible response.)32Strategic focus of businesses in terms of Industry 4.0PointsPointsPointsPointsPointsTopic Cluster 3:Strategy and goalsUnlike the other three topic clusters,the“Strategy and goals”cluster allowed the participants to rate the stra-tegic focus of their business by allocating 100 points across five possible responses.As in the previous year,increasing economic efficiency was the most import-ant goal for the businesses,with an average points allocation of 32,followed by increasing production/product quality,which was allocated an average of 22 points(Figure 13).Interestingly,the focal points var-ied depending on the industry and region in question.The focus on economic efficiency was much stronger among businesses in the automotive industry than those in other sectors,with a deviation of 13 percent.On the other hand,participants in the automotive industry rated tapping into new market and custom-er segments much lower,with a deviation of 21 per-cent.When comparing between different regions,it became clear that while chinese businesses made increasing economic efficiency their main focus,they also placed much more importance than other regions on tapping into new market and customer segments and adapting their production flexibility.30 Industry 4.0 Barometer 2024Topic Cluster 4:ObstaclesAs Industry 4.0 continues to make strides,employee qualification and expertise levels are both becoming increasingly important and forming an obstacle to progress.This is because specific,specialist knowledge is required in order to implement progressive Indus-try 4.0 technology and data analysis capabilities.As a result,these skills are in high demand among busi-nesses and are becoming a factor in competition.52 percent of the participants in the study named the shortage of skilled labor as the main reason for delays in the implementation of Industry 4.0 technologies.In a nutshell,while further automation reduces the need for skilled workers to carry out repetitive tasks,it also increases the need for qualified personnel in other areas,as these skills are needed to facilitate the introduction of Industry 4.0 technologies.At the same time,the speed at which Industry 4.0 technologies are being integrated could increase,which could lead to even greater qualification gaps.The workload generated by day-to-day business and the resulting lack of resources was the second most common obstacle to be named by the participants,at 47 percent.47 percent also listed established,legacy IT systems as a major obstacle.Uncertainty regarding ROI,which was the most common perceived obstacle last year after being named by 67 percent of partici-pants,is now only seen as an obstacle by 43 percent of those included in the survey(Figure 14).This may be an indication that businesses are increasingly start-ing to recognize that the main challenge presented by these technologies is not their profitability,but rather the availability of qualified human resources.Compared to the previous years,2022 and 2023,all the obstacles named are on a downward trend in terms of their perceived relevance,indicating that businesses are slowly starting to overcome these challenges.This may be the result of improved employee qualifications,adjustments to the businesses capacities,or a more reliable assessment of the ROI.It is important to ensure that employees have access to ongoing advanced training,since established job profiles are changing to keep pace with the latest developments in the industry as digitalization progresses.Another challenge facing businesses is the need to combine the company-spe-cific knowledge of their own employees with the new technological skills the business requires.When comparing between regions,it becomes evident that data exchange and data silos pose significant chal-lenges for China regarding collaboration,both within businesses and with external partners.57 percent of the Chinese businesses surveyed listed data silos as an obstacle,while only 35 percent in the DACH region,33 percent in the UK and 28 percent in the USA did the same.The same applies to the problem of insuffi-cient data exchange with external partners(see Figure 15).Here,the results show that the efforts being made in China to ensure an efficient exchange of data and promote collaboration may be being impeded by legal regulations,principles of data sovereignty,and tech-nological hurdles.Strict data protection regulations,and particularly the Cybersecurity law3,play a key role here.These laws set out strict rules for the handling of personal data,which makes data exchange more dif-ficult.At the same time,China is placing more impor-tance on data sovereignty,which means that data generated in China also needs to be stored and pro-cessed within the countrys borders.This can lead to difficulties in terms of global data exchange and col-laboration between Chinese businesses.Even with the high level of digitalization among Chinese businesses,there are still variations within the country in terms of the technological standards and platforms used.This may also be partly to blame for limiting collaboration and data exchange within the country.Time will tell whether this restrictive approach to data proves a bar-rier to innovation in China,or instead turns out to be a smart move in the battle for important company data on the global stage.3 Creemers,Rogier;Webster,Graham;Triolo,Paul,”Translation:Cybersecurity Law of the Peoples Republic of China(Effective June 1,2017)”(2018).URL:https:/digichina.stanford.edu/work/translation-cybersecurity-law-of-the-peoples-republic-of-china-ef-fective-june-1-2017/(02.02.2024)31 .data silos that make it difficult to implement cross-departmental solutions.30%5CHUSAUKChina.a lack of consistent data exchange with partners at other stages of the value chain.Fig.14:Obstacles to the introduction of Industry 4.0 technologiesThe introduction of Industry 4.0 technologies at our business is being held back by.Generally agree Generally agree Completely agree.uncertainty regarding ROI.supply chain issues.historically established legacy systems.data silos.a lack of data exchange between partners.listed the shortage of skilled labor as their reason.difficulties incorporating them into our day-to-day business.Fig.15:Obstacles to the introduction of Industry 4.0 technologies by regionThe introduction of Industry 4.0 technologies at our business is being held back by.43AGG%3%2%5%4)&%3%4$%5(36WV2 Industry 4.0 Barometer 20242.2 Industrial AI Artificial Intelligence in productionBusinesses are intensifying their efforts to make increased use of Artificial Intelligence(AI)as part of their digital and technological progress.Although the mathematical foundations for AI were laid in the mid-20th century,AI research as we know it today has only become possible thanks to the increasing availability of large quantities of data,increases in processing power and the progress made in the field of complex mathe-matical models and algorithms.As such,AI isnt actu-ally a revolution it is simply evolution.Nevertheless,the current accessibility of AI as good as represents a revolutionary step forward for many businesses.These businesses are increasingly starting to realize that AI technologies such as machine learning and neural networks are not just interesting in theory they also offer untold potential for practical use.The integration of AI into production processes is causing a significant transformation in the way companies operate.This development not only makes it possible to auto-mate repetitive and even complex tasks;it also enables businesses to analyze large volumes of data quickly and recognize patterns with a high degree of precision.The resulting benefits can be felt along the entire value chain.Precise forecasts of demand allow businesses to improve their stock management and respond more flexibly to fluctuations in demand.This makes warehouse management more efficient and reduced storage and logistics costs.At the same time,AI also facilitates early identification of errors and defects,thus significantly reducing waste and scrap.As such,the implementation of AI leads to an increase in product quality,a reduction in production costs,and shorter lead times.AI facilitates a formidable boost in productivity,as it can be in use almost 24/7.This con-stant availability leads to significant increases in a busi-ness automation levels and overall productivity.In addition to the impressive potential it offers in terms of automating the value chain,AI also promises to bring changes to the landscape of work.By taking on human tasks,AI leads to fundamental alterations to job profiles.For instance,offloading repetitive tasks from human workers onto AI frees up skilled workers to focus more on the core activities associated with their role,thus boosting their individual productivity.Many companies that are struggling with the shortage of skilled labor are already noticing the potential AI offers as a means of storing knowledge,and thus com-pensating for the current shortage of skilled workers.In order for businesses to effectively put all these potential benefits of Industrial AI into practical use,careful consideration and significant measures are required.Businesses need to identify the specifics of what they need and require from Industrial AI,while also carefully evaluating the opportunities and added value AI-based solutions have to offer.It is essential to take into account a whole range of aspects,including monetary,ethical,legal and social considerations.In addition to this,there are certain prerequisites that play a key role in the success of AI projects.These include the availability and quality of the data required and the qualification levels and acceptance of the business employees with regard to new AI-based solutions.The following survey results will shed some light on how successful businesses have been in this integration process so far.2.2.1 Results of the surveyIs the DACH region becoming the problem child of Industrial AI?In international comparisons,the DACH region is lagging particularly far behind in terms of successful use of AI in production.The UK is also behind the USA and China in almost every respect.In order to provide a general overview on the use of Industrial AI,the participants were asked about the use of AI-based solutions in their production pro-cesses.50 percent of the participants said that their business used Industrial AI in its production process-es.In the DACH region,only 20 percent of those sur-veyed said that AI-based solutions were used in their businesses production processes.The figure among UK participants was 29 percent.The use of AI-based solutions is much more widespread in the USA,where 46 percent of participants said it was used in produc-tion processes.Meanwhile,the situation in China is truly astounding:94 percent of participants from the Asian country said that their business used AI in its production processes(Figure 16).33 DACHChinaUSAUKFig.16:Use of AI-based solutions by regionNoYesDont know20F)pFX%6%8%0%Does your business use AI-based solutions(e.g.predictive maintenance,detection of anomalies,autonomous robots)in its production processes?Next,the participants rated the success of the AI proj-ects that had been implemented at their business in terms of on-time production,provision of the planned functionality and adherence to budget.The participants in the DACH region and the UK indi-cated that their businesses success in all three of these areas had been significantly lower than their peers in the UK and China.For example,only 26 percent of the participants from the DACH region and 34 percent of those from the UK were of the opinion that their busi-ness completed its AI projects on time.In China,on the other hand,86 percent stated that they believed this to be the case.The other categories produced similar results.89 percent confirmed that AI projects provided the functionality they had been designed for,and 82 stated that AI projects were completed within budget(Figure 17).There were also relevant differences between the regions in terms of how the participants rated the maturity of their businesses AI.While businesses in the DACH region and the UK posted average ratings(Stage 2)businesses in the USA believe they are on the way to establishing AI solutions(Stage 3).Chinese businesses went one step further,stating that their progress in establishing AI was already advanced,and that they were already starting to look at optimization(Stage 4)(Figure 18).34 Industry 4.0 Barometer 2024Fig.17:Satisfaction with the use of AI projects by regionWhen working on Industrial AI projects,our business is very successful at ensuring the project.provides the functionality it was designed for.is completed on time.is completed within the set budget.DACHDACHDACHUSAUSAUSAUKUKUKChinaChinaChina19!89%9%2#%9%5%2#!34%1%9%6%119%9%8%1%2%8%Generally agree Generally agree Completely agree35 How would you rate the level of AI maturity at your business in terms of.4 Alsheiabni,Sulaiman;Cheung,Yen;and Messom,Chris,”Towards An Artificial Intelligence Maturity Model:From Science Fiction To Business Facts”(2019).PACIS 2019 Proceedings.46.https:/aisel.aisnet.org/pacis2019/46Fig.18:Level of AI maturity at businesses by region4DACHUSAUKChinaJust starting out 1.0Still assessing 2.01.52.53.54.51.62.63.64.61.72.73.74.71.82.83.84.81.92.93.94.91.12.13.14.11.22.23.24.21.32.33.34.31.42.43.44.4Still establishing 3.0Still optimizing 4.0Industry leader 5.0.data availability?employee skills?.organizational AI processes?.IT tools and technologies?36 Industry 4.0 Barometer 2024These results paint a concerning picture of Europes status as an industry in terms of its use of Industrial AI.Compared to the USA and China,businesses in the DACH region and the UK seem to be lagging behind signification when it comes to the use,maturity lev-el,perception and acceptance of the technology,as a result of which they are not yet able to benefit from Industrial AI to the same degree as their international competitors.However,there is no cause for alarm just yet.It will still be a long time until we can say for cer-tain what tangible effect a high degree of AI maturity will have on the global competition and the shifting power dynamics between the USA,China and Europe.However,DACH and UK businesses in particular need to start utilizing the manifold potential of Industrial AI to ensure that they do not risk falling into tech-nological dependency and losing their competitive edge.Making up this ground in the medium to long term will be a challenge due to the range of individual requirements different businesses have when it comes to AI-based solutions.This is clear from practical exam-ples such as that provided in our interview with Dr.Andy Moore,Chief Data Officer of Bentley Motors Ltd.Bentley realized that the company was not yet able to use AI-based quality control solutions across the board to replace human quality controllers in finding faults,because its products are produced in small volumes and with a high degree of customization.Bernhard Winkler,Vice President of Production Rail at Knorr-Bremse Rail Vehicle Systems,also reported that his company was facing a similar challenge in its produc-tion of brake systems for rail vehicles.In this case,too,the company has looked into the use of AI technology,but rejected the idea due to its low batch numbers and the high level of variance in its production.On the other hand,the company has already successful-ly implemented AI solutions to handle repetitive tasks outside of Production.In summary,while some busi-nesses are already enjoying the benefits of Industrial AI in selected areas,others still need to assess just how much added value Industrial AI offers them due to their individual requirements and fields of application.Based on the survey results,most businesses in the USA and China seem to have already overcome this hurdle.However,the need to fulfill individual require-ments isnt the only factor impacting on positive ratings of AI maturity levels and the distribution of AI-based solutions political incentives and measures also play a role.Chinas Next Generation Artificial Intelligence Development Plan5,published in 2017,outlines the countrys objective of becoming the lead-ing global center of innovation for AI by 2030.With the Inflation Reduction Act(IRA)6 of 2022,the USA is now also providing businesses with a political incen-tive to establish a positive environment for AI research and development.These initiatives have accelerat-ed the digital transformation,but more than that,they have also proven to be a driving force for the successful integration of AI projects in these regions.This has increased businesses confidence in their AI capabilities and made them more willing to take risks and experiment in the field of Industrial AI.The suc-cess of these political initiatives in China and the USA shows once again that additional political support for AI is also something worth striving for in Europe,as stressed by Daniel Abbou,Managing Director of the German AI Association.5 Full translation:Chinas New Generation Artificial Intelligence Development Plan(2017)(stanford.edu)6 1/23 The USAs Inflation Reduction Act(IRA)Implications for Europe(in German)(bundesfinanzministerium.de)37 Dr.Andy Moore,Chief Data Officer,Bentley Motors Ltd.InterviewBentley Motors Ltd.Bentley Motors Ltd.ProfileBentley Motors,the worlds premier luxury car brand,operates from its Crewe,United Kingdom,headquar-ters,overseeing design,R&D,and production of its five model lines:Continental GT,Continental GT Convert-ible,Flying Spur,Bentayga,and Bentayga EWB.With the combination of fine craftsmanship,engineering expertise,and cutting-edge technology,Bentley exem-plifies high-value British manufacturing and employs approximately 4,000 dedicated colleagues.The Bentley Beyond100 strategy is focused on sustain-ability,aiming to transform the entire business and establish leadership in Sustainable Luxury Mobility.This entails a shift from being the largest producer of 12-cylinder petrol engines to having no combustion engines within a decade,reinventing Bentley as a lead-er in Sustainable Luxury Mobility.Dr.Andy Moore,Chief Data Officer Short vitaAndy has been the inaugural Chief Data Officer at Bentley since November 2022.As part of establishing and delivering the company-wide data strategy,Andy is responsible for data governance,data literacy,the data tech stack,and supporting enablement to get better value from data across the business.Andy has two decades of experience within the auto-motive industry,across data,digital transformation,engineering,and program management.Participants:Dr.Andy Moore(Chief Data Officer,Bentley Motors Ltd.),Dr.Christina Reich(MHP),Kitty Wanke(MHP)Dr.Christina Reich(MHP):Can you please give us a brief overview of your responsibilities as Chief Data Officer at Bentley?Dr.Andy Moore(Bentley):Ive been in the role of Chief Data Officer for just over 12 months now.Its a new role at Bentley,so my first task is to create and embed a data strategy.The strategy covers four pillars:The first pillar is governance:how we can best use,control,and protect our data.The second pillar is the data cloud,which is the tech-nology we use to get the most out of our data with visualisation or machine learning products.The third pillar is data literacy.I strongly believe that we need to upskill the business,and that means upskilling people.The fourth pillar is enablement:how my team can enable Bentley to get more value from data and deliver products that accelerate the use of data across the business.My role also involves building a new team,which is a great opportunity to bring in experienced data scien-tists from other companies,other industries,and our early careers programme.Bentley Motors Ltd.38 Industry 4.0 Barometer 2024Reich:With regard to data literacy,you mentioned your data scientists and your skilled employees.Our results show that 70 percent of companies hire exter-nal AI experts to compensate for the shortage of skilled workers.How is Bentley handling this?Moore:Its important to use a combined approach.We have an early careers programme,and we also focus on upskilling the existing workforce,because nobody knows Bentley like Bentley employees.But its also an opportunity to bring in external experience,which gives us the chance to learn from other indus-tries and gain expertise through our partnerships.A multi-tiered approach is key,because building a team of highly experienced AI experts is very expensive,and they may not understand the business at first.The data experts need to understand the use cases,the auto-motive industry,and Bentleys pain points,in particular.Reich:At the same time,the automotive industry is facing challenges like increasing raw material pric-es,tighter environmental regulations,and changing market conditions.As a luxury vehicle manufacturer,is Bentley affected by these challenges to the same extent as other manufacturers,and how so?Moore:We have certainly seen a lot of external chal-lenges over the past four years,from Brexit to COVID to semiconductor shortages.COVID affected work-force availability,as well.We need to build greater flexibility into our business model than ever before.Regardless of the external challenge,its essential to have the flexibility in your business model to respond to it.And thats where data can come in to help us make data-driven decisions.We could never have pre-dicted COVID,but we can use data to understand how deeply its going to affect us and use that to inform our response plan.Reich:Are you also using some specific industry 4.0 technologies to proactively address these challenges?Moore:One example is 3D printing.Not so much for car parts because they have to go through strin-gent crash testing,of course,but we can use it for jigs and fixtures that might take a while to machine.That allows us to cope with a shorter life cycle;if one gets damaged,we can print a new one very quickly.And obviously the Internet of Things is relevant.A lot of our machinery is more connected than ever before,and we now have the ability to capture data from it.Were using mobile devices more than ever,and thats allowed us to move away from a more paper-driven process.Obviously,robotics has been around for some time in the automotive industry.For a company like Bentley,with a relatively small volume,its always a question of how much we need that.But there are certain pro-cesses like fixing the windscreen that rely on precision and repeatability,so they are an ideal task for a robot.At the other end of the spectrum is the sanding of our wood veneers.Theres such artistry involved that a robot could never do it.It is about finding the right balance.And then ulti-mately cloud computing and data will underpin it all,and well see a lot more use cases.Reich:With regard to the transition from combustion engines to electric drives,how does electrification affect Bentleys operations,and which technologies will be key to achieving your operational goals in the future?Moore:Part of our Beyond 100 strategy is to move to a 100-percent electric vehicle lineup,which well do at the end of the decade.Well introduce a number of new models over the next six or seven years in order to fulfil that promise.We announced a 2.5 billion pound investment into Bentley,into the new models and also into the new factory.Well build an entirely new fac-tory within an existing footprint,which allows us to adopt new technologies and shift from a fixed produc-tion line to an AGV-led production line.That will allow us more flexibility in terms of volume,customisation,and the build process.Reich:And how does the proliferation of AI in the automotive industry affect the competitiveness of Bentley?Moore:There is a lot of hype around AI,and ChatGPT in particular,recently,but we have to be careful that there is a solid business case behind any implementa-tion.As Bentley is low-volume,high-value,high-cus-tomisation,there is a balance to strike.Craftsmanship will always remain a core USP,but we might bring in AI as a cobot where it makes sense.Some things can be truly automated,but many cant.Our quality standards are so high that AI cant do the job.A trained human operator will spot defects that AI would miss.So an AI camera system could reduce the workload,but it will never replace the trained operator.39 Kitty Wanke(MHP):How would you rate the current status of AI at Bentley?Could you share some exam-ples of successes or milestones youve had so far in your role?Moore:Right now at Bentley,were in a“test-and-learn”phase.We dont have widespread AI yet because we cant have an AI strategy without a data strategy.One of my tasks as CDO is to ensure that we have a solid foundation of accurate and authoritative data.We have a number of test cases,but theyre localised to a specific system.The next step will be to scale that up and combine multiple data sources to get more val-uable outcomes.Our study showed that AI is highly relevant for predictive maintenance,especially in the automotive industry.Wanke:What is the status of predictive maintenance right now?Moore:Its starting to demonstrate the benefits more and more as we gain confidence in the machine learn-ing model.As we start to get real results beyond the predictive results,well adopt it further.Maintenance is a good example,because theres plenty of IoT data for machinery,and we can look for historical patterns that help us predict when we might have issues in the future.Wanke:What challenges do you face in integrating industrial AI,and what ways have you found to miti-gate them?Moore:The first challenge is trust and security.We need to trust the security of any environment that we use for AI.For example,weve closed access to ChatGPT on our company systems because of the risk of confidential data getting into a publicly trained model.We also need to trust the accuracy of the mod-el,as well.Close behind that is the cost of AI when moving it to the cloud.For a company the size of Bentley,storage cost is not too much of an issue,but compute cost is.There needs to be an ongoing risk-reward evaluation and a solid business case behind any use of AI.Wanke:When you spoke about the four pillars,you also mentioned enablement and the workforce.From your perspective,what impact is AI having on the automotive labour market in terms of skills and work processes?Moore:This is why Im passionate about rolling out the data literacy programme from the shopfloor right through to management.Data affects everybody,whether theyre fully aware of it or not.So we start with the basics and then build that knowledge accord-ing to role and need,as well as when new technology comes along.What were seeing now is an acceler-ation of technology adoption faster than anything weve ever seen before.Its key to keep our colleagues upskilled and aware and remove concerns that AI might take over everyones job.AI is there to help you be more effective and reduce time spent on repeti-tive,manual jobs.I think that AI will become impor-tant throughout the labour market in the future.Its a challenge to ensure that employees at all levels feel on board with technology.Whilst we will always need craftsmen to add the finishing touches to the Bentley,we also need people that are comfortable using data to make data-enabled decisions.Wanke:Our survey found that predictive maintenance is a topic in the automotive industry,particularly for production leads.How do you work together with the production lead to decide which use case you want to test or establish?Moore:This is always based on business case and impact,and there are many ideas that we can help scale once the basic building blocks are in place.For example,we can join multiple data sources like factory and field quality indications,then use natural language sifting and sentiment analysis to get a more holistic view of our quality status.We can also move towards more effective,efficient supply chains as we look to optimise our production with a fully flexible produc-tion line.Another example is using AI to optimise our inventory levels.Theres a risk to both over-and under-stocking,but we can use data more efficiently to help drive those decisions.Feeding a model with a large volume of data can help to get more accurate stock predictionsfar better than someone with an Excel spreadsheet trying to make a best guess.Wanke:Now looking into the future:How do you see the future role of AI,especially in your industry?What developments do you expect in the next 5 to 10 years?Moore:Elements of AI and natural language process-ing will become more widespread and built into every-day tools.When people can write code using natural language,that will really open up the opportunity to adapt.People will be able to build an AI cobot very easily,and that will create opportunities for almost 40 Industry 4.0 Barometer 2024Bentley Motors Ltd.everyone to become more efficient at their job.But we obviously also pride ourselves on the customer magic and the hyper-personalised journeys for individ-ual customers.And we can use AI to augment that by bringing together multiple data sources and sug-gesting next best actions to customers.And whenever our agents interact with a customer in any way,theyll be able to know a lot more about the customer and personalise the experience.That will make the brand experience much more magical for our customers in the future.Wanke:Is there anything you want to add or some-thing youd like to say on a topic we havent touched on yet?Moore:Yes,going back to the topic of test and learnI dont believe one single solution that solves everything exists anymore,nor should it.We need modular plat-forms and approaches that will remain compatible with new solutions as technology evolves at an une-ven pace.One overarching system that locks in all the data is no longer acceptable in todays world or in the future.Also,the sharing of data is key,whether across systems or between suppliers and retailers.There not only needs to be a value exchange there to enable it to happen but also the barriers to exchanging data need to be much lower than they have been historically.41 InterviewGerman AI AssociationGerman AI Association Profile Artificial intelligence is one of the key technologies of our future.The members of the German AI Associa-tion are committed to ensuring that this technology is applied in the spirit of European and democratic values.The goal is digital sovereignty for Europe.To achieve this,the Federal Republic of Germany and the EU must become attractive AI locations for entrepre-neurs,where a willingness to take risks is appreciat-ed and the spirit of innovation can thrive in the best conditions.The German AI Association supports AI entrepreneurs by representing their interests with regard to policy,business and media.The Associations goal is to create an active,successful,and sustainable AI ecosystem in Germany and Europe.After all,only if the brightest minds and thought leaders decide to teach,conduct research,and base themselves in the European Union will we be able to compete successfully against global competition.The German AI Association enables entrepreneurs to learn from each others experiences and transfer these to their own companies.When ideas and information are exchanged in the Associations network,a con-tribution is made towards strengthening innovative capacity in Germany.Artificial intelligence can only be successful in Germany if it is accepted by the main-stream economy in all sectors.The German AI Associ-ation helps to awaken openness for AI innovations in European companies.Daniel Abbou Short vitaDaniel Abbou has been Managing Director of the German AI Association since May 1,2020.His areas of responsibility include political and press communi-cation as well as support for funding projects.Daniel Abbou previously founded AI-Hub Europe and advised politicians and companies.He was press spokesman in various ministries of finance and economics,including spokesman for Ulrich Nubaum,the former Senator of Finance and State Secretary in the Federal Ministry for Economic Affairs.Mr.Abbou held the position of dep-uty government spokesman in the first Kretschmann cabinet in Baden-Wrttemberg.His enthusiasm for digitalization and innovation stems from his time working as a television and radio journalist focusing on new technologies.Participants:Daniel Abbou(Managing Director,German AI Association),Julian Engel(MHP)Julian Engel(MHP):What does the German AI Asso-ciation stand for and what is your role there?Daniel Abbou(AI Association):The German AI Asso-ciation represents nearly 400 AI companies in Germany.It was founded almost five years ago.As an associa-tion,we hold stakeholder discussions with politicians,primarily the Federal Ministry for Economic Affairs and Climate Action,but also the Federal Ministry for Digital and Transport,the Federal Chancellery,and the Federal Ministry of Labour and Social Affairs.I am the first Man-aging Director of the German AI Association together with Vanessa Kern.Engel:What role will AI play in Europes future?Abbou:I think the implications of AI in business will be huge.AI can take over the repetitive tasks that we all have to do in our areas of work.The aim is to be able to concentrate on the main tasks at work.For example,a nurses job is to have contact with patients,not fill out Excel lists.Daniel Abbou,Managing Director,German AI AssociationKI Bundesverband42 Industry 4.0 Barometer 2024AI makes it possible to concentrate on the core area of an activity.AI will also take over more complex tasks in a particular framework.In the legal field,all recurring points in contract law could be taken over by AI.German tax law,as complex as it is,can also be tackled using AI.Will it replace tax advisers?No.Will there be tax advisers who wont be using AI in five years?Also no,Id say.There will be a change in cer-tain professional fields,and also in professional fields that dont yet think it will affect them.But this disrup-tion will happen,Im convinced of that.In automation,where robots are installed in factory workshops,its also changed the job of the factory worker.And there will also be changes in jobs that are at an educationally higher level.Engel:In our survey,we made a country comparison between the DACH regions,the UK,the USA and Chi-na,with a focus on industrial AI.What are the main challenges that companies currently have when it comes to implementing or integrating AI?Abbou:It has to be said that,unfortunately,many areas of the German economy are not yet finished with the task of digitalization.AI without digitalization and without data in a company is difficult.There is skepticism around technology in traditional SMEs.It varies by region,but is especially prevalent in DACH.Business owners have varying access to digitalization and to data.A further problem we find in corporations is that no data sharing takes place even within the cor-poration itself.I would consider that to be the biggest challenge that AI entrepreneurs have when interacting with SMEs and corporations.Engel:In the survey,we also asked about data avail-ability and data quality.Availability is one thing,but sharing is the real obstacle.What was also interesting in our survey was that qualified employees really are very scarce.Would you also agree with that?Abbou:Yes,definitely.Finding well-qualified staff is a huge problem.Not only for SMEs,but for AI entrepre-neurs too.The lack of qualified employees exists,of course.What makes it particularly complicated is that the need for more and more data scientists is recog-nized within the German education system,but this is still not being addressed by means of any curricu-la or support measures.Its an issue that needs to be tackled.Digital media and knowledge of how to han-dle data,what data actually is,thats something we should learn in school or at university.Unfortunately that has only been happening to a limited extent up to now.Engel:This makes companies dependent on service providers.There is another challenge:data protec-tion.How do you see Europes role regarding data protection?Abbou:The General Data Protection Regulation(GDPR)is not the most popular regulation among AI companies.But its also important to say that most AI companies in Germany dont use the business-to-con-sumer model(B2C)but are mainly in the busi-ness-to-business sector(B2B).Therefore,to a certain extent the data protection problem is not as notice-able as with a B2C business model.But of course,theres still the question of how personal data is used.For example,in health care,a very sensitive area,the GDPR is extremely serious.43 Engel:What impact do climate aspects and sustainabil-ity have on industrial AI?Abbou:One needs to go hand in hand with the other.If I want to do something new,climate calculations will always be part of that.There will be AI models that can minimize the climate impact.Engel:Weve talked a lot about challenges and obsta-cles.Lets look at your success as an association.What milestones would you like to mention?Abbou:Weve made it clear to politicians and parts of the business world how relevant AI is,for example for large language models.I can even remember the first conversation with a federal ministry when someone told us it would be a really crazy idea.And three years later we can see what impact its having,with ChatGPT for example.We were one of the first to make this point clear to stakeholders.Its our aim to highlight the opportunities,as Germany and Austria are quite good at focusing on the risks.There are simply not enough data centers in Germany and Europe that are specif-ically related to AI.We have also made this clear to Europe.In her State of the Union address on Septem-ber 13,2023,Ursula von der Leyen(President of the European Commission)explicitly mentioned AI access capacities for start-ups.You see that if you stick with something long enough,you get something back.That was a wonderful moment for us.Engel:Have there been reports from members report-ing a breakthrough?Abbou:In terms of generative AI,Aleph Alpha and Lengoo obviously need mentioning.They aim to create a large European AI model.They were invited to speak at the German governments closed cabinet meeting in Meseberg.These are our two big success stories.We have few companies in the association that are fil-ing for bankruptcy.For other firms,start-ups,or asso-ciations,a failure rate of 20 to 30 percent is normal.For us,the rate is under 10 percent.And that shows that our companies even if theyre not world-famous yet are doing a good job and managing to establish themselves in this market.Engel:As part of our survey,we noticed that opti-mism in the US and China is greater than in Europe when it comes to the use of AI-based solutions in com-panies.In China there is a different political approach and therefore a very different culture than in Europe.It should not be our goal to catch up with China in terms of speed.Its more about preserving our own values and developing in our own way ethically,sus-tainably,and continuously becoming better.Do you share this view?Abbou:Yes,I completely agree with you.The prob-lem is just that,often,people focus on the potentially negative impacts rather than talking about the oppor-tunities.I think both are okay in equal measure.But Ive been to lots of events where people project their fears into AI.Often along the lines of AI is going to take over the world,and well end up living in a soci-ety where everything is just virtual.So Im saying that we need to demystify the topic of AI.Nobody should use apocalyptic movies as a projection screen for their own fears about a technology that is not understood.But thats exactly what lots of people are doing.Fears arise when people dont understand things.It is our mission to allay peoples fears and make AI tangible as a technology.Engel:Finally,could you give us a brief outlook for the next five years?How do you think Germany and Europe will develop?Do you feel were on the right track?What role will the German AI Association play?Abbou:We are on the right track.I have an insight into nine different EU countries and I can see that there is strong motivation to address this topic.If the premises are correct,we will have integrated AI into large parts of the German and European economy in five years.However,we should be careful not to become more dependent on the large US hyperscal-ers.We provide our economic data for free and also pay the hyperscalers to get the results of the models.We mustnt make this mistake.In the next five years it will be crucial not to become dependent.We want to have our own European systems that are competitive.KI Bundesverband44 Industry 4.0 Barometer 2024KI Bundesverband45 Fig.19:Expectations for the future impact of AI on production processesHow much of an impact do you expect AI to have on production processes in the future(the next 12 years)?NegligibleVery lowLowModerateHighVery highRadical1%4%82%6%Within the next one to two years,businesses expect the introduction of Industrial AI to have a high,perhaps even radical,impact on their production processes.However,there is still no outstanding field of application for the technology.What impact do businesses expect Industrial AI to have in the next one to two years,and what are the most important fields of application and driving forces?The participants answered these questions as follows:60 percent of the businesses included in the survey are expecting AI to have a high,or even radical,impact on their production processes.27 percent forecast a mod-erate impact,while 13 percent expect the impact to be low to negligible(Figure 19).The results of the question regarding the most import-ant fields of application for Industrial AI show that there is no specific field of application that stands out from the rest.This diversity illustrates once again the fact that the benefits and added value Industrial AI has to offer are highly dependent on the existing conditions at and requirements of the business in question.Nevertheless,it is worth noting two fields of application that were rated slightly more import-ant than the others by the participants.14 percent of participants listed quality controls businesses are obviously focusing on using AI to increase the qual-ity of their products.This includes the use of image recognition and sensors and particularly the analy-sis of the resulting data using machine learning to detect errors at an early stage,optimize production processes,and ultimately improve the quality of the end products.In addition to this,twelve percent of the participants listed resource efficiency as important.Companies are aiming to use AI technology to reduce their energy consumption,make more efficient use of materials,and generally make their production less resource-intensive(Figure 20).The results show that there is no clear leader in terms of important fields of application for businesses using AI.In fact,the real challenge lies in the fact that each company needs to assess the potential of AI on its own individual terms,which will help them to identify the best application for their needs.This is the exact prob-lem that makes the use of AI difficult.The theoretical potential of the technology is enormous,but imple-menting it in practice is much more complicated,and requires an in-depth understanding of the subject.46 Industry 4.0 Barometer 2024Most important fields of application for AI in production processesFig.20:Most important fields of application for AI in production processes(The participants were given the ability to assign a total of 100 points.The results shown here are the averages for each possible response.)Quality control Resource efficiency Product design and simulation Employee safety Material flows N/A Supply chain Demand forecasting Assembly/installation Predictive maintenance47 Success Story New Dimensions:SounceIn the continuously developing automotive industry,it is crucial for premium vehicle manufacturers to deliver flawless quality and technical excellence.To this end,the companies conduct rigorous research and development processes(R&D).The integration of top technologies has become a must,which has opened the door for Sounce a product from MHP.Part of the Industrial Cloud Solu-tions portfolio,Sounce uses the information content of acoustic signals to uncover hidden irregularities and devi-ations in examined parts,products,and machines.Sounce allows the identification of anomalies,the creation of clus-ters,and the determination of correlations between data points.This enables a significant enhancement of quality standards using artificial intelligence as a key element.In this success story,we look at the utilization of Sounce as part of the R&D process at Porsche and at its abili-ty to yield valuable insights,which have resulted in the improvement of quality standards.On the one hand,the integration of these technologies has made the R&D pro-cesses at Porsche more efficient.On the other hand,there has been an improvement in quality control standards.Read on to find out how Sounce has become an essen-tial component in the striving for top quality in the automotive industry,redefining quality assurance and setting new benchmarks.Use caseChassis mounts fulfill four essential functions,which often conflict with each other during the design process.Their purpose is to transmit forces,enable defined move-ments,isolate noise,and dampen vibrations.For dealing with each of these requirements,different types of elasto-mer mounts are built into the chassis.Depending on the type there is also a risk of the chassis mounts producing unwanted noise,such as rattling,squeaking,or creaking.With sophisticated options for acoustic analysis,Sounce offers a transformative solution for an evaluation of these noises on the test stand.From the selection of different mount concepts offered by numerous suppliers at the beginning of a project to measures to ensure series-production quality,Sounce supports the vehicle manufac-turer Porsche in making data-based decisions throughout the R&D process.This also means that good noise quality is ensured for the vehicle launch.Initial situation and challengesIn the past,work to mitigate unwanted noise caused by the chassis mounts was mainly conducted during whole-vehicle testing on test tracks with noise and com-fort lanes,with different temperature preconditioning based on the prevalent conditions in the individual sales markets.Ideally,this required prototypes with specific acoustic properties being available at the very beginning of the R&D process;in reality,these dont tend to be sufficiently mature in terms of development until a lat-er phase.Consequently,there was a need for achieving noise mitigation for the affected chassis components by means of testing on a test stand,taking into consider-ation suitable load cases and peripheral components.While the overall vehicle assessment is described using both subjective impressions and objective measurement data,the evaluation,documentation of bench tests and decision on whether the noises are relevant to customers or not are purely subjective.ApproachTo allow acoustic signals to be utilized with precision,the testing equipment of the vehicle manufacturer had to fulfill one essential requirement:a static test setup with a repet-itive procedure.Realistic conditions and load cases needed to be replicated on the test rig.It was therefore crucial to be able to rely on a consistent testing environment where noise detection could be conducted in a controlled man-ner.With the new setup,acceleration sensors pick up the vibrations.Based on the resulting measured data,the sys-tem creates spectrograms,visual representations of the sound frequencies over time.These spectrograms serve as an enhanced data source that facilitates subsequent anal-ysis by means of algorithms.48 Industry 4.0 Barometer 2024Unsupervised learning/machine learning:In this par-ticular use case,unsupervised machine learning is at the core of the approach,a powerful technology that enables the system to autonomously recognize anomalies in the visualized acoustic signals that are produced in the course of the testing.Without identification or intervention by humans,Sounce can detect deviations from the norm in complex data records by itself,thus ensuring a robust and objective evaluation of each tested mount.Another advan-tage of using Sounce in this case is that it allows non-stop operation.Thanks to 24/7 availability,Sounce ensures that the testing process can run without interruption,which makes for maximum efficiency.This non-stop operation enables fast and continuous evaluation of supplied parts,providing the manufacturer with a competitive advantage in a sector characterized by rapid innovation.Faster supplier evaluation:This use case offers great potential with respect to the speed of evaluating the quality of bought-in parts.The system analyzes large cloud-based data volumes very quickly and provides prompt feedback on the quality of parts from different suppliers.This accelerated evaluation enables the man-ufacturer to make well-founded decisions,optimize its supply chain,and maintain long-term partnerships with reliable suppliers.Functionality and solution The integrated machine learning functions excel in the analysis of unstructured data and subsequent detection of patterns and groupings in the produced clusters.In the course of its unsupervised learning,the system auton-omously clusters similar noises,thus enabling efficient classification of normal and abnormal acoustic patterns.In these use cases,Sounce can facilitate cause analysis.When a problem is detected,Sounce provides comprehen-sive information,enabling engineers to determine causes that were not evident previously.This allows customers to address arising problems proactively.In the past,the testing process depended strongly on manual intervention and human hearing to detect anomalies,which entailed the risk of human error.The AI-supported acoustic analysis provided by Sounce has automated the process.Transparent data documentation and web-based visualization:All the data generated during the testing process is fully recorded and documented.This compre-hensive data documentation enables simple checking,which means that the customer can track and investigate all the problems that may occur during the testing.The transparent data path also improves reliability and facil-itates continuous improvement initiatives.The Sounce web app offers an intuitive platform for data visualiza-tion.Engineers can easily retrieve the analysis results via interactive graphics and diagrams for subsequent inter-pretation.In addition,the data generated during testing is analyzed in the cloud,making for speedier processing as well as faster access to the results.The results can also be accessed remotely at any time.Results and outlook With the combination of data recording,documenta-tion,visualization,and analysis by Sounce,Porsche has achieved a substantial optimization of its quality assur-ance processes in Research&Development.Not only has Sounce helped Porsche ensure fast and reliable supplier evaluation,it has also provided a solid basis for collabo-ration with suppliers.WebapplicationCloud ServicesHardwareSounce as a modular solutionIntuitive web application49 Fig.21:Most important fields of application for AI in production processes(The participants were given the ability to assign a total of 100 points.The results shown here are the averages for each possible response.)In your opinion,what factors will be the most important driving forces behind the use of AI in production?19%Operational efficiencyLower costsHigher qualityGreater reliabilityLabor shortageGreater flexibilityImproved lead timesCustomer demandKnowledge transfer(human to machine)Greater resilience19%8%8%6%6%6%5%Shifting the perspective from fields of application to the concrete factors that promote the use of AI,there are two in particular that the participants clearly regard as key driving forces for the introduction of Industrial AI,and that are thus also important criteria when it comes to assessing AI projects:increased operational efficiency and cost reduction.19 percent of the busi-nesses included in the survey named each of these fac-tors as a key driving force for the integration of AI.In this context,the idea of increased operational efficien-cy refers to the automation of production processes and optimum utilization of resources.Cost reduction covers the reduction of labor costs,minimization of errors,and the optimization of energy consumption(Figure 21).These results are also reflected in our inter-view with Julian Follner of Deutsche Bahn.Mr.Follner confirmed that cost reduction was the main objective behind the use of AI.He also said that improving the punctuality of the companys trains played a large role.50 Industry 4.0 Barometer 2024”Courage to implementation then application ideas for I4.0 technologies will become valuable solutions for companies.The time for this is now not tomorrow.GenAI is a good example of this.It is the responsibility of management especially in Europe to create the framework for experimentation and speed in the direction of efficiency and!innovation.Both together will secure the future of the company.”Dr.Christian Fiebig PartnerDigital Factory&Supply Chain 51 Bernhard Winkler,Vice President Production Rail,Knorr-Bremse Rail Vehicle Systems Dr.Christina Reich(MHP):Please can you give us a brief overview of your duties as Vice President Produc-tion Rail at Knorr-Bremse AG?Bernhard Winkler(Knorr-Bremse):I work in the Rail Vehicle Systems division at Knorr-Bremse.Im in charge of the Production Rail central function and have global responsibility for Group-wide production-related activ-ities across all plants.This includes typical projects for standardization,site development,the introduction and ongoing development of our production system,industrialization projects and support for location-spe-cific technology projects.It also includes driving for-ward digitalization issues,as well as division-wide governance tasks like performance management and footprint development.So my area of responsibility covers all the more strategic,production-related topics that are not directly related to the daily output of a plant.Reich:Our survey shows that,in the DACH region,most areas of application for artificial intelligence are to be found in quality control and improving resource efficiency.In which areas of production is your focus on AI-based solutions?Winkler:At Knorr-Bremse Rail,we predominantly operate in a typical high-mix,low-volume business.We also talk about absolutely safety-critical compo-nents.In the direct production area,the quantities and thus also the samples we can use to train AI or an algorithm are small compared to a typical automo-tive supplier.We have found that the algorithms and commonly used tools have not yet been designed for the characteristics of this business with comparative-ly smaller quantities and a huge variance.Thats why we have focused more on processes in administrative Knorr-BremseInterviewKnorr-Bremse Rail Vehicle SystemsKnorr-Bremse Rail Vehicle Systems ProfileKnorr-Bremse is the global market leader in braking systems and a leading provider of other systems for rail and commercial vehicles.Knorr-Bremses products make a significant contribution to greater safety and energy efficiency on roads and rails around the world.Some 32,600 employees at over 100 locations in more than 30 countries use their competence and motiva-tion to satisfy customers worldwide with products and services.In 2022,Knorr-Bremse generated sales of EUR 7.1 billion in its two business divisions worldwide.For more than 115 years,the company has been an indus-try innovator,driving forward developments in mobili-ty and transportation technologies and taking the lead in connected system solutions.As one of Germanys most successful industrial companies,Knorr-Bremse profits from the key global megatrends of urbaniza-tion,sustainability,digitalization,and mobility.Bernhard Winkler Short vitaMr.Winkler joined Knorr-Bremse AG as a trainee after completing his studies in engineering and manage-ment in Munich.He held positions in both divisions of the company(Commercial Vehicle Systems and Rail Vehicle Systems)and worked for several years in the industrial engineering department of the Rail Vehicle Systems division.His responsibilities included coordi-nating Industry 4.0 initiatives with the global plants.Since May 2021,he has headed the Production cen-tral unit of the Rail Vehicle division(Production Rail)and is responsible for performance management and digital manufacturing,in addition to technology devel-opment and industrialization,production system,test stand construction,and investments and footprint.Participants:Bernhard Winkler(Vice President Production Rail,Knorr-Bremse Rail Vehicle Systems),Dr.Christina Reich(MHP),Dr.Thilo Greshake(MHP),Stephan Mller(MHP)52 Industry 4.0 Barometer 2024areas when it comes to AI-based solutions,because we see great potential there and the proportion of repetitive tasks is higher.Reich:What specific use cases are there in your area as regards typical Industry 4.0 solutions?Winkler:We are currently working intensively on connecting our production assets using an IIoT plat-form,with the initial aim being to have transparency around the status of assets,productivity,and so on at all times.Building on this,the aim is to ultimately create self-regulating control loops in order to reduce manual control effort.In addition,our plants are work-ing hard on automating a wide range of processes in the direct area,in intralogistics,and in admin areas.Here,we are currently focusing intensively on robotic process automation(RPA).Thats perhaps not a typical AI field,but its the first step towards it for us.For example,were using a bot for order management.That means all orders are automatically dispatched to the SAP system,irrespective of which channel is used to send them to the plant or service center.Reich:What performance indicators are used at Knorr-Bremse to measure improvements brought about by the use of industrial AI?Winkler:We look at overhead productivity,for exam-ple.That means we examine how many overheads we need in a plant in order to generate output X.More automation means fewer skilled workers are need-ed for some tasks.However,were also noticing that sometimes we need more staff in other functions than we did before,such as for data preparation,pro-cess control,and programming and operating bots.Of course,other skills are needed for this,which we have to build up first.Our colleagues in Purchasing are also working very intensively with RPA and are mea-suring indicators such as the number of automatically processed orders and the automation level of certain subprocesses.Reich:We saw in our survey that approximately 70 percent of companies are hiring external AI experts to compensate for the shortage of skilled workers.How are you handling this at Knorr-Bremse?Winkler:Were taking a two-pronged approach here.Firstly,were gradually building up internal skills,for example through vacancy filling and further training.This takes time,however,which is why were also trying to scale using external experts.Essentially,in the central unit we are striving to drive forward new approaches,initially in the form of pilot projects in or with individual plants.In doing so,we ensure that these approaches address real problems,rather than being pure technology studies.If an approach succeeds,its our job to design it in such a way that it can be scaled and transferred to other plants or areas.Reich:What are the most serious challenges you face when integrating industrial AI in the production envi-ronment?What are the barriers that have prevented AI from being used more widely up to now?Winkler:Data quality is a major issue.For example,if the master data is not correct,the algorithm wont work at some point.That means well reach a limit as regards standardization in the system.Both our SAP landscape and the IT environment for our sup-plementary systems,such as for our quality assurance or process control issues,are very varied.This makes it necessary to keep redefining the interfaces.Reich:What role do safety-critical aspects play in the application of industrial AI in rail systems?Is that also a factor inhibiting its use?Winkler:Currently,we are not yet using AI as the sole means of ensuring quality in production because we have a zero defect policy.Our products are absolutely safety critical.For example,the brakes on a high-speed train simply have to work there can be no safety issues.We have to make sure at the plant that the product is 100 percent correct.To do that,we would also have to be able to rely on AI.But weve established that our quantities are currently too small for this.We are not at that point yet.Another factor for us in terms of safety-critical aspects is,of course,cybersecurity.What interfaces or system boundaries are open,for example?How may systems be permitted to interact?What can we even roll out anyway,particularly in the cloud?This is currently really hindering us from rolling things out or scaling them.Reich:Weve seen that youve made strategic invest-ments in AI start-ups like Rail Vision.The idea behind Rail Vision is driver assistance technology in the form of high-tech sensor systems.It enables trains to detect objects and obstacles over long distances.Please can you tell us a bit more about it?Could it be extended more widely in the
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Waking the giants:Insights on the decarbonisation and just transition efforts of the heavy industries Insights report June 2024 Waking the giants:Insights on the decarbonisation and just transition efforts of the heavy industries 2024 Insights Report 2 Table of contents The 2024 Climate and Energy Benchmark for the heavy industries .3 Keystone companies in the 2024 Heavy Industries Benchmark.5 Summary of results.7 Five key findings.11 Key finding 1:Companies need to triple efforts to reduce emissions intensity and align with 1.5C in the next five years.11 Key finding 2:Net zero will be impossible unless companies radically increase investments to make low-carbon technologies market ready.12 Key finding 3:Good practices for strong transition plans exist,but need to be emulated by major players and laggards alike.13 Key finding 4:Top performers in the sector demonstrate a just transition is feasible,but the majority struggles to keep pace.14 Key finding 5:Companies fail to show even basic commitment and actions to ensure responsible business conduct.15 Technical summary.17 Targets.17 Emissions performance.19 Investments.21 Climate governance and oversight.23 Transition planning and scenario analysis.25 Supplier and client engagement.27 Trade associations and policy engagement.29 Low-carbon business activities.30 Appendix:Companies in the Heavy Industries Benchmark 2024.34 About the World Benchmarking Alliance.36 Waking the giants:Insights on the decarbonisation and just transition efforts of the heavy industries 2024 Insights Report 3 The 2024 Climate and Energy Benchmark for the heavy industries Heavy industries of aluminium,cement and iron&steel accounted in 2022 for about 19%of global energy-related CO2 emissions.Known for their hard-to-abate emissions,they play a crucial role in the global decarbonisation journey.Within the next decade,significant emissions reductions must be achieved within the next decade,driven by investments in clean technologies and new business models.Meanwhile,these industries must continue to supply the raw materials needed for expanding clean energy infrastructure and protect their workers.This insights report examines how leading companies in aluminium,cement,and steel manufacturing are tackling these challenges.In 2022,emissions from the aluminium,cement and iron&steel industries made up about 7 gigatonnes(Gt)of carbon dioxide(CO2),or 19%of global emissions.By 2030,to align with the International Energy Agencys(IEA)Net-Zero Emissions(NZE)Scenario(IEA 2023),the combined emissions of the three industries will need to decrease by about 22%to a global total of approximately 5.4 Gt of CO2.The sector can achieve significant emissions reduction with actions and technologies that are readily available to companies.For instance,steel emissions can be lowered by 40%by enhancing material efficiency and circular economy compared to current production practices(IEA 2019),while clinker substitution has the potential to reduce emissions from cement production up to 50%(Habert et al.2020).In the long run,however,deeper structural changes are required to keep the heavy industries aligned with a 1.5C scenario.The sector has long investment cycles of typically 40 years,which means that production facilities in place today will likely remain emitting well past 2050.Consequently,by 2050,95%of CO2 in cement production will have to be captured and stored,and 96%of primary steel production will need to come from near-zero carbon processes(IEA 2022).This will require transitioning to innovative processes utilising low-to zero-carbon energy carriers and feedstocks,like biofuels,electricity,hydrogen,and carbon capture and utilisation(CCU)for carbon feedstock.Implementing these alternatives mandates a substantial scaling up of infrastructure alongside phasing out or converting the operations of existing industrial plants.On the positive side,heavy industries can expect an increasing demand for high-value low-carbon materials with the low-carbon transition.The materials produced by these industries are fundamental to constructing renewable energy infrastructure.For instance,the steel consumption of wind industries is expected to double over 2021-2030(S&P 2021),while an overall increase of 28%in steel demand is forecasted by 2030 under the NZE assumptions(IEA 2023).Furthermore,the aluminium sector plays a crucial role in supplying battery enclosures for electric vehicles(EVs),charging infrastructure and power transmission lines.Keeping abreast with these changes,heavy industries will need to re-invest their increased revenues from the growing demand for these materials in both cleaner means of production and the protection Waking the giants:Insights on the decarbonisation and just transition efforts of the heavy industries 2024 Insights Report 4 of their workers.Failing to invest in the former,particularly,will leave these companies exposed to increasing regulatory pressures as governments expand the scope of carbon pricing and policies to avoid carbon leakage.The European Unions(EU)Carbon Border Adjustment Mechanism(CBAM)aims to put a carbon price on imports of certain carbon-intensive industrial goods into the EU,equivalent to the carbon costs paid by EU producers under the EU Emissions Trading System(EU ETS).For sectors like steel,the CBAM could significantly increase costs for major exporting countries like China and India by 2034 if they do not adopt cleaner production methods.Finally,companies need to factor in the impacts of technology and policy changes in their training and compensatory measures for workers to ensure a just transition.In the steel sector,for example,the green transition is estimated to directly affect 2.4 million jobs globally(Agora Industry,Wuppertal Institute and Lund University 2021)due to coal-based assets that risk becoming obsolete.The signs are visible that more work and long-term planning is needed,as recent steel plant closures are already impacting local workers and communities.Tata Steels shutdown of blast furnaces at Port Talbot in Wales will eliminate nearly 3,000 jobs in a local economy heavily reliant on steel.British Steels plans to lay off over 2,000 workers at its Northern England mills will similarly affect those areas.In the US,Cleveland-Cliffs closure of a West Virginia tin mill threatens around 900 jobs in the sector.The challenges are mounting on aluminium,cement and steel companies to implement robust transition plans that ensure long-term,future-proof employment,while putting the sector firmly on the path to climate neutrality and maintaining competitiveness in a rapidly changing global market.This report presents the five key findings from the 2024 Heavy Industries Benchmark and a technical summary of the Accelerate Climate Transition(ACT)assessment findings covering key elements of companies low-carbon transition plans.The findings are designed to provide investors,civil society and policymakers as well as the companies themselves with the insights needed to take responsible and effective action.WBAs mission is to build a movement to measure and incentivise business impact towards a sustainable future that works for everyone.Working with over 400 organisations in our Alliance,we envision a society that values the success of business by what it contributes to the world.To achieve this,we need all actors in the ecosystem to drive the needed transformations.If you have any feedback on our findings,please reach out to Vicky Sins,Decarbonisation and Energy Transformation Lead at WBA:info.climateworldbenchmarkingalliance.org Waking the giants:Insights on the decarbonisation and just transition efforts of the heavy industries 2024 Insights Report 5 Keystone companies in the 2024 Heavy Industries Benchmark The 2024 Heavy Industries Benchmark assesses a total of 91 companies in the aluminium(12),cement(34)and iron&steel industries(45).Together,the combined operational scope 1 and 2 emissions of the selected companies amounted to 2.6 Gt of CO2 in 2022,approximately 7%of the worlds global energy-related emissions(IEA 2022)and 28%of the emissions originating from the heavy industries sector as a whole(IEA 2023).In terms of production footprint,the 91 assessed companies were responsible in 2022 for approximately 43%(0.03 billion tonnes)of the global aluminium production,36%of the global cement production(1.5 billion tonnes)and 28%(0.69 billion tonnes)of the global steel production.In terms of industry-specific emissions,the benchmark encompasses nearly half of global emissions from cement production,42%of the emissions related to primary aluminium production and approximately 28%of the emissions from steel production.These figures highlight that though the assessed companies constitute only a moderate share of the total companies in the sector,the extent of their operations and the magnitude of their emissions is significant at both global and sectoral scales.For instance,while the benchmark assesses only 12 aluminium companies,these contributed to about half of the global production in 2022.As the heavy industries sector evolves with the energy transition,companies are adapting new ways to remain competitive,secure their resources and increase their production capacities.To achieve this,some companies are turning to mergers and acquisitions and the expansion of their portfolios(Deloitte 2024).This emerging trend was evidenced among the companies assessed in this benchmark.Out of the 91 companies,40 have gone through or will go through a merger or acquisition within a three-year timeframe of 2022.This is the latest year on which all companies are Waking the giants:Insights on the decarbonisation and just transition efforts of the heavy industries 2024 Insights Report 6 evaluated based on publicly available information reported until 31st December 2023.Depending on the indicator,the benchmark typically considers data reported for the years between 2017 and 2022.The geography of the assessed companies is a reflection of the production asymmetries observed for some of the heavy industries worldwide.Emerging markets and developing economies accounted for 74%of global steel production in 2021(World steel Association 2022),while China is currently the country of origin for nearly half of the global cement production(Global Cement and Concrete Association 2023).Accordingly,about 50%of the companies assessed in the 2024 Heavy Industries Benchmark are headquartered in the East Asia&Pacific region and a total of 56 are headquartered in developing economies,including countries from Sub-Saharan Africa.That said,companies in the Organisation for Economic Co-operation and Development(OECD)countries constitute a significant 36%share in the benchmark,dominated by companies headquartered in Europe.In terms of ownership structure,the majority of companies(67)are publicly listed and only nine are state owned.The remaining are privately owned.All companies are evaluated with regard to their climate performance Accelerate Climate Transition(ACT)assessment and social performance the just transition(JT)and core social indicators(CSI).For more details regarding the methodologies used in the 2024 Heavy Industries Benchmark,please refer to the benchmark methodology document.The next sections of the report present an overall summary of the results,before detailing the five key findings.Waking the giants:Insights on the decarbonisation and just transition efforts of the heavy industries 2024 Insights Report 7 Summary of results The average score for the 91 companies evaluated in the 2024 Heavy Industries Benchmark stands at a mere 21.1 out of 100.Out of this,the ACT score of companies contributed 16.1 points to the final score on average,while the social score averaged at 5.0 points.The ACT and social dimensions respectively constitute 60%and 40%of the total final score.On average,cement companies obtained higher benchmark scores,averaging at 25.6,followed by aluminium companies with an average score of 23.8 and finally iron&steel companies with an average score of only 17.0.Sectoral performance on the ACT assessment follows the same trend as the overall scores,with cement companies obtaining an average score of 20.5(out of 60),aluminium companies scoring 14.8 and iron&steel companies scoring 13.1.In the social dimension,companies in the aluminium sector show the best performance,with an average score of 9.1(out of 40).Cement and iron&steel companies only manage average scores of 5.1 and 3.9 respectively.The average scores per region were noted to be higher for companies headquartered in the Latin America&Caribbean region,particularly for the ACT assessment for which the average regional score is 26.9.In relation to the social dimension,companies in the region obtained an average score of 8.0.This is practically the same as for companies headquartered in Europe&Central Asia,which,with an average score of 8.5,is the best-performing region in the social dimension of the benchmark.Companies located in the Latin America&Caribbean region have an overwhelming representation of cement manufacturers:five out of the six companies evaluated from the region.These include some of the best performers on the benchmark,which explains the high overall average score.Companies headquartered in Europe&Central Asia show a higher benchmark performance on average than those in North America;this is true for both the ACT and just transition dimensions.The average ACT score of companies headquartered in North America amounts to only 88%of the average ACT scores for companies in Europe&Central Asia,while for the social dimension,this value is 72%.The average benchmark scores for companies located in East Asia&Pacific are very low.Waking the giants:Insights on the decarbonisation and just transition efforts of the heavy industries 2024 Insights Report 8 About 60%of the companies headquartered in this region are iron&steel companies,a sector with overall lower ACT and social scores.Still,it is telling that the region in which the majority of the global cement and steel capacity is headquartered,so substantially lags behind in terms of planning for the energy transition and securing a just transition.Similar to the results of the Electric Utilities Benchmark and the Oil&Gas Benchmark,publicly traded companies show better average ACT and social scores than those that are privately owned or those with majority government stakes.Publicly traded companies obtained an average ACT score of 19.4,which is about two times higher than the average observed for private companies and six times that observed for companies controlled by governments.Also coherent with the previous benchmarks,company size measured in terms of activity in this case global production of aluminium,cement or steel is not associated with significant differences in ACT or social scores.Categorising companies according to their material production(see below)reveals small maximum differences between classes:about 2.0 points for ACT scores and 1.4 for social scores.Waking the giants:Insights on the decarbonisation and just transition efforts of the heavy industries 2024 Insights Report 9 While the overall performance of companies on this benchmark is low across both ACT and social dimensions,a disaggregated view at the company-and industry-level reveals substantial heterogeneity of performance.In the cement industry,only eight companies attained an ACT score above 30,i.e.50%or more of the maximum available score.Despite their relative position as sectoral leaders,cement companies can and should be doing more.A synthetic ACT score composed of all best practices evaluated in this benchmark(determined as the sum of the best scores achieved for each indicator)for the cement industry returns a possible attainable ACT score of 54.The highest-scoring company in the ACT dimension on the benchmark,Cemex(see below),lags a full 14 points from this achievable score.In the aluminium industry,not a single company attains even half of the maximum benchmark score.Norsk Hydro,the best-performing company in the aluminium industry in the ACT assessment trails 18 points behind the attainable score based on existing best practices observed throughout the sample.In the iron&steel industry,a large prevalence of companies with poor disclosure and non-disclosers,concentrated particularly in East Asia,bring the overall average ACT score down.Only four iron&steel companies(SSAB,POSCO,Voestalpine and Gerdau)attain more than 50%of the total benchmark score.Similar to the aluminium industry,the best-performer among iron&steel companies(SSAB)still lags 17 points behind the ACT score that is possible for companies to achieve with current best practices.These examples show how even the top-ranked companies on the benchmark significantly lag behind the type of performance expected from industry leaders,having so far failed to implement already available best practices in different areas of the ACT assessment.For low-ranking companies on the benchmark,bridging the gap to the average ACT score is a matter of undertaking relatively simple but crucial steps.These include setting near-and long-term emissions reduction targets,transparent disclosure of research and development(R&D)investments in low-carbon technologies and developing their first version of a transition plan to organise and operationalise the companys vision for a cleaner future.Waking the giants:Insights on the decarbonisation and just transition efforts of the heavy industries 2024 Insights Report 10 Evaluating the results from the lens of the just transition indicators,which account for 20%of the total benchmark score,reveals the existence of clear front-runners across the three industries.For the aluminium and iron&steel industries,there is a significant gap between the best-ranked company and the remaining companies in the benchmark.This is in strong contrast to the ACT assessment.Importantly,the best-ranked companies for the just transition indicators determine,to a large extent,the best just transition practices within the sector.A synthetic just transition score composed of all best practices evaluated in this benchmark(determined as the sum of the best scores achieved for each indicator)for the aluminium industry is only one point higher than the just transition score of South32,the leading aluminium company on the just transition assessment.The same is true for the cement and iron&steel industries,with the gap being only marginally higher.This trend is worrying because the concentration of best practices among a narrow sample of companies limits the possibilities for cross-learning.In addition,the companies that embody most of the best just transition practices are themselves poor performers overall.In the case of the cement industry,for example,the best-scoring company,Holcim,fails to get even 25%of the total just transition score.When it comes to just transition,the benchmark leaders are failing to deliver even the most basic performance,and there are limited examples and instances of best practices available from other companies.Waking the giants:Insights on the decarbonisation and just transition efforts of the heavy industries 2024 Insights Report 11 Five key findings This section presents the five key benchmark findings,outlining the most significant challenges and opportunities for achieving a just low-carbon transition in the heavy industries sector.The next section further delves on the findings for individual ACT assessment modules.Key finding 1:Companies need to triple efforts to reduce emissions intensity and align with 1.5C in the next five years The emissions intensity of the benchmarked companies decreased on average by 0.8%annually between 2017 and 2022.With this current trend,companies will continue to digress from the reduction path needed for a 1.5C world.To counter this,companies must triple their current efforts,achieving annual reductions of 2.4%in emissions intensities over the next five years.Failing to do so will increase the reliance of the heavy industries sector on high-risk,high-cost technologies post-2030.The anticipated global demand for aluminium,cement and steel implies that in order to keep total emissions in check,companies need to make significant progress in lowering their specific emissions,that is the amount of emissions per unit of output.Companies can do this by enhancing energy and material efficiency,switching to low-carbon fuels and adopting innovative,near-zero emissions production methods.Cement and steel industries,particularly,need to step up these efforts to decrease emissions by an average of approximately 3%on an annual basis until 2030(IEA NZE 2023 cement,steel).Insufficient emissions decline poses future risks The benchmarked companies do show some progress in reducing specific emissions per output of production.Between 2017 and 2022,reduction in emissions intensities were observed for 47 of the 91 companies.In contrast to this general trend,a total of 11 companies reported an increase in emissions intensities over the same timeframe.It is important to note that sufficiently detailed data on emissions intensities was available for only 67%,i.e.61 of the 91 companies assessed in the benchmark.The yearly emissions reduction rate across the benchmarked keystone companies stood only at about 0.8%per year,with important sectoral differences.While the average emissions intensity reduction for cement companies was estimated at 1.2%a year,for steel companies the average rate was only 0.46%and for aluminium companies the rate was 0.5%.Over the next five years,aluminium,cement and iron&steel companies need to reduce their specific emissions by 2.4%,2.5%and 2.9%on average,respectively,to comply with the Paris Agreement.Presently,only four companies in the 2024 Heavy Industries Benchmark fall into this category when regional,technological and supply chain specifics are factored in.Three of these are cement companies:Dalmia Bharat,Cemex and SIG,and one is an iron&steel company:Nucor.These companies were responsible for about 0.09 Gt of CO2 emissions in 2022,which represents only 1.2%of the global emissions for the aluminium,cement and iron&steel industries.If companies fail to align their emissions reduction with 1.5C in the short-term,they will incur higher costs and risks post-2030,such as having to use non-mature low-carbon technologies that are presently not market ready and whose implementation costs are likely to be high.Waking the giants:Insights on the decarbonisation and just transition efforts of the heavy industries 2024 Insights Report 12 Key finding 2:Net zero will be impossible unless companies radically increase investments to make low-carbon technologies market ready Many of the technologies necessary for the decarbonisation of heavy industries are not yet market ready and demand significant levels of research and development(R&D).Only 24%of the benchmarked companies report R&D investments in low-carbon technologies,and only 10%report their investments in non-mature technologies specifically.Among the disclosing companies,around 46%of total R&D investments go towards developing low-carbon technologies,showing an equal priority alongside other R&D expenses.While this trend is encouraging,there is a clear need not just for increased disclosure but also increased investments towards market-ready low-carbon technologies,without which net zero will be unattainable.Companies in the heavy industries sector must scale up investment in R&D activities on low-carbon technologies to accelerate the transition to net-zero emissions.These capital-intensive industries have long investment cycles;so,devoting resources to developing viable low-carbon solutions now is crucial to avoid locking in emissions-intensive assets for decades.Moreover,investing in R&D will help the sector drive innovation and create new technologies that in turn can decarbonise other hard-to-abate sectors.With strategic R&D funding,heavy industries can align innovation timelines with their investment windows and unlock multi-billion dollar markets for clean technologies.Investments in non-mature low-carbon technologies need to gain momentum While 54(59%)companies reported their total R&D spending for the year 2022,when sectioning the analysis by investments in low-carbon technologies,the share drops to less than a quarter(22 companies).Still,total R&D investments in low-carbon technologies across the assessed companies was found to be USD 1.4 billion for 2022,constituting circa 46%of the total amount spent on R&D by the companies.This is a positive development showing that these companies are at least placing research needs in low-carbon technologies on par with other R&D expenses.The picture is less encouraging when evaluating R&D reporting for non-mature low carbon technologies,i.e.technologies that are not yet market ready.Only nine(10%)of the companies provide any convincing evidence of expenses allocated to R&D of non-mature low-carbon technologies,making up an amount of about USD 0.12 billion in 2022(less than 10%of the total R&D investments reported).When companies do disclose consistent R&D investments in non-mature low-carbon technologies,these can vary substantially,from up to 37%of total R&D to less than 1%(with an average share of about 16%).Given that only a few companies report this detail,it makes these numbers only indicative of an overall dearth of investments in this area,without providing a clearer trend or picture.What is clear is that investments in non-mature low-carbon technologies are being driven by a rather small number of companies that are yet to be joined by the bulk of their sector peers.Lack of momentum in this area not only risks making the transition to clean aluminium,cement and steel more expensive(given that development costs are not shared),but also delaying the market readiness of some vital low-carbon technologies.Waking the giants:Insights on the decarbonisation and just transition efforts of the heavy industries 2024 Insights Report 13 Key finding 3:Good practices for strong transition plans exist,but need to be emulated by major players and laggards alike.Among the assessed companies,28%have transition plans covering all business units and operations,while 13%extend these plans to their entire value chain.Additionally,12%of the companies commit to reporting progress annually on their transition plans and have a defined stakeholder feedback process.Moreover,23%incorporate a carbon price into their cost calculations as a financial indicator,and 8%align it with a low-carbon scenario,integrating it into key business decisions.The prevalence of these good practices in the sector shows that achieving the fundamentals of a robust transition plan is within the reach of all companies.What is required is for major players to elevate their transition planning standards and for laggards to follow suit.Climate transition plans are crucial for demonstrating a companys commitment to a 1.5C pathway and are relevant in positioning and communicating its actions towards a net-zero economy to stakeholders and capital markets.Transition plans outline strategies to align the companys activities with ambitious climate science recommendations and policy goals,focusing on reducing greenhouse gas emissions by 2030 and achieving net zero by 2050,while enabling organisations to stay ahead of policy changes and secure profitability.Target setting a common practice,but alignment with 1.5C yet to be attained Setting convincing climate targets is a requisite step for a credible transition plan.Encouragingly,target setting is a common practice across the benchmarked companies and,more often than not,companies disclose some form of emissions reduction targets,be it for the short-,medium-or long-term.Around 57(62%)of the companies in the 2024 Heavy Industries Benchmark have set emissions targets for their main operational emissions(consisting of combined scope 1 and 2 and scope 1 emissions).Most of the companies(47%)disclose emissions targets for the year 2030,while only 31%commit to reductions in operational emissions until the year 2050.However,only 20(22%)companies have set targets in relation to scope 3 emissions.This highlights that a considerable amount of companies are still not holding themselves adequately accountable for their supply chain emissions.While disclosing emissions targets is becoming a widespread practice,in 2022,just 5%of the aluminium,cement and steel emissions globally came from companies that have 1.5C-aligned targets.When regional,technological and value chain aspects are considered,only three out of the 57 target disclosing companies have direct emissions targets that are fully aligned with the Paris Agreement,in the short and long term.Few companies cover all the basics of transition planning Of the 91 companies assessed,13monstrate convincing evidence of a comprehensive transition plan that encompasses all business units and their value chains,setting a benchmark for emissions accountability.In the aluminium industry,58%of companies have transition plans covering all business units,while nine cement companies(26%)have comprehensive plans for both operations and value chains.Three of the iron&steel companies assessed have similarly extensive plans.Financial considerations within transition plans are acknowledged by some companies,with 34%providing financial quantification.Additionally,65%of the companies outline short-term actions,with Waking the giants:Insights on the decarbonisation and just transition efforts of the heavy industries 2024 Insights Report 14 31tailing these plans thoroughly.The cement industry leads in this area,with 44%of the companies offering detailed descriptions of short-term actions.Although positive examples exist throughout the three assessed heavy industries,some fundamentals for transition planning still need to be elevated.A significant gap exists in companies reporting financial content within their transition plans,with 66%of all companies lacking quantification of financial projections or cost estimates;the iron&steel industry performs the worst here at 76%.Planning of long-term actions is also lacking,with only 25%of the companies detailing achievable long-term actions,and aluminium companies performing particularly poorly.Moreover,only 13%of the companies commit to reviewing and updating their transition plans regularly,with Holcim and Heidelberg Materials in the cement sector committing to updates at least every five years.Key finding 4:Top performers demonstrate the feasibility of a just transition,but the majority struggles to keep pace.Most heavy industries companies assessed in this benchmark are neither committed to,nor planning or undertaking actions towards ensuring that their low-carbon transitions are just.Half of the companies in the benchmark score 0 on all the just transition indicators,which assess companies on six fundamentals for a just transition,including social dialogue,planning and upskilling of workers.Meanwhile,the top performer scored half of the available points and four companies scored at least 20%,showing that there are just transition practices already prevalent in the sector and therefore feasible to attain.A just transition envisions workers and communities that are thriving and resilient to change,while remaining within 1.5C as set out in the Paris Agreement.A just transition is about striking the right balance between the need to rapidly decarbonise,while respecting workers rights and being considerate of all the stakeholders that are impacted,to ensure that decarbonisation is successful without major backlash from those whose lives will change as a result.Companies play a vital part in ensuring a just transition,by understanding and working towards a low-carbon transition aligned with a 1.5C pathway,and at the same time understanding and addressing the social impacts these changes will have.With adequate planning for the low-carbon transition,companies can foresee what their low-carbon future may look like;foresight that is necessary for ensuring that the transition is just.A just transition ideally holds space for workers,communities and vulnerable groups that are impacted to play a part in shaping how the transition will happen.Companies should,therefore,engage these groups through social dialogue and in jointly shaping the decarbonisation journey.Social dialogue enables inclusive decision-making on any topic and brings commitment from all those involved in the process towards the decisions they have helped make through negotiation.As such,it is unfortunate that only 18%of the assessed companies a commit to engaging in social dialogue.Furthermore,89 of the 91 assessed companies score 0 on just transition planning,which emphasises the point that nearly all heavy industries companies in this benchmark need to make considerable progress to ensure a just transition.The two companies with a positive score show some good examples on what planning for a just transition may look like in the heavy industries sector.Similarly,89 of the 91 companies score 0 on their efforts for social protection and social impact management.Waking the giants:Insights on the decarbonisation and just transition efforts of the heavy industries 2024 Insights Report 15 Only two companies show some examples of programmes to address the social impacts of the low-carbon transition on affected stakeholders.South32 and ArcelorMittal Companies in the 2024 Heavy Industries Benchmark show an overall lack of consideration for ensuring a just low-carbon transition.In total,only two companies evidence any good practices in this area,and each of these takes a different pathway.South32,the top performer,focuses its just transition efforts at specific locations across different countries,as it continues to develop its approach to be applied in more locations.Importantly,the company shows it has an understanding of what impacts its transition may have,gained by conducting a value chain analysis.The companys local actions are further supported by strategic work at the corporate level,such as ensuring alignment between lobbying efforts and ensuring a just transition.ArcelorMittal,on the other hand,displays frequent stakeholder engagement and partner collaboration,which are central to making progress on a just transition.The companys just transition strategy includes identifying and taking adequate measures to avoid causing direct and indirect adverse impacts on fundamental human rights of workers and communities.Through this collaboration,ArcelorMittal demonstrates a fundamental practice and commitment for a just low-carbon transition.Key finding 5:The heavy industries lack commitment and activity in practicing basics of responsible business conduct.Almost all the benchmarked companies show a considerable lack in both commitment and actions when it comes to ensuring all the basics of responsible business conduct.Only 55%,just over half,have a policy level commitment to ensure the health and safety of their employees,and only seven companies disclose a basic amount of information on the health and safety of their employees.Meanwhile,less than half(45%)of all companies are committed to respecting human rights.Further,only nine(10%)of the companies disclose the categories of stakeholders whose human rights may have been impacted by their activities,and only three of these provide examples of engaging with these stakeholders.The companies covered in the 2024 Heavy Industries Benchmark employ over 2.9 million workers in total.Yet,most fail to show adequate commitment and actions towards decent work practices and respect for human rights.Companies in the heavy industries sector are susceptible to a range of potential serious human rights issues as well as workplace safety risks.Common risks in this sector may originate in raw material sourcing and the supply chain as well as include discrimination at the workplace.Through a human rights due diligence process,companies can identify which issues are salient for their business specifically.While just over half of the companies(55%)are committed to protecting the health and safety of their workers,only seven companies,with a total of 159,000 workers,disclose fundamental quantitative information regarding the health and safety of their workers.These disclosures are what allow us to Waking the giants:Insights on the decarbonisation and just transition efforts of the heavy industries 2024 Insights Report 16 track the workplace health and safety outcomes,and with non-disclosure of this information for the majority of the sector,we cannot follow up on the commitments and basic health and safety performance of these companies.This leaves millions of workers of the companies in this benchmark at risk of continued mismanagement of their workplace safety.Meanwhile,less than half(45%)of the assessed companies are committed to respecting human rights.Only nine(10%)of the companies disclose the categories of stakeholders whose human rights may have been impacted by their activities,and only three of these provide examples of engaging with these stakeholders.All the heavy industries companies assessed in the benchmark need to strengthen their commitments and actions to protect those whose human rights are at risk of being violated.Waking the giants:Insights on the decarbonisation and just transition efforts of the heavy industries 2024 Insights Report 17 Technical summary This section provides an in-depth look into the ACT assessment results of the 2024 Heavy Industries Benchmark.The summary is arranged by topic,drawing on analyses from the individual ACT performance modules and indicators.The table below outlines the modules and indicators discussed under each topic.For more information about the ACT performance scoring,please refer to the dedicated ACT methodologies for the aluminium,cement and iron&steel industries.The Heavy Industry 2024 benchmark has utilized climate questionnaires provided by CDP as a data source to score several elements assessed under the ACT methodology.TABLE 1:TECHNICAL SUMMARY TOPICS AND THE ACT MODULES AND INDICATORS COVERED Technical summary topic ACT modules/indicators Targets Module 1 Emissions performance Indicator 2.1 Investments Module 3 and CapEx Climate oversight and governance Indicators 5.1,5.2 and 5.4 Transition planning and scenario analysis Indicators 5.3 and 5.5 Supplier and client engagement Modules 6 and 7 Trade associations and policy engagement Module 8 Low-carbon business activities Module 9 Targets A public-facing decarbonisation target is an indication of corporate commitment to reducing emissions.Companies without ambitious targets are unlikely to be adequately committed to decarbonising,and therefore this indicator has a high impact on the likelihood of a successful low-carbon transition.Targets provide a direction towards which companies can align their strategy,capital expenditure and R&D to deliver the requisite emissions reductions.The emissions reduction targets set by the benchmarked heavy industries fall short of what is needed to drive a low-carbon transition at the required scale and speed.Of the assessed companies,almost a third are yet to set any target and an astonishing three quarters have not yet set a net-zero target for their scope 1 and 2 emissions.What targets have been set?Out of the 91 heavy industries companies assessed in this benchmark,68%have publicly disclosed an emissions reduction target.The 29 companies without any emissions reduction target contribute to nearly 30%of the combined scope 1 and 2 emissions of all the companies covered in the benchmark.Interestingly,among these 29 companies,79%are headquartered in China,while out of the total of 91 assessed companies,only 33 are Chinese.This clearly highlights a lack of emissions reduction commitment from Chinese companies,which is problematic considering that over half of global aluminium,cement and steel production currently takes place in China.Setting scope 1 and 2 emissions reduction targets is of prime importance for heavy industries companies,since their operations are highly emissive.Depending on the type of energy consumed to Waking the giants:Insights on the decarbonisation and just transition efforts of the heavy industries 2024 Insights Report 18 feed production processes,either scope 1 emissions(combustion of fossil fuels)or scope 2 emissions(electricity and heat consumption)will predominate.Among the 45 assessed steel companies,24(53%)have set scope 1 and 2 emissions targets.The same is the case for seven(58%)aluminium companies out of 12.When it comes to cement companies,14(41%)out of 34 have set scope 1 and 2 emissions targets and another 35%have set scope 1 emissions targets.The fact that a significant proportion of cement producers only cover their scope 1 emissions is explained by the assessed cement companies reporting that scope 2 and scope 3 emissions represented less than 15%of their total emissions in 2022 on average.Companies should,however,ensure that their targets cover all significant sources of emissions related to their activities.While more than 70%of the scope 1 and 2 emissions of the assessed companies are covered by targets set by cement and steel companies,this ratio is lower than 40%for aluminium companies.Of the 91 assessed companies,31(34%)companies have set at least one short-term target for scope 1 and 2 emissions,i.e.reductions targeted by no later than 2032,ten years after the reporting year 2022.On the other hand,36(40%)companies have set at least one long-term target,i.e.reductions targeted by no sooner than 2033.In total,51 targets with a short-term horizon have been observed,out of which 13 have been set for 2025 and 30 have been set for 2030.Additionally,37 targets with a long-term horizon have been observed,out of which 28 have been set for 2050.Among the 91 assessed companies,only 20(22%)have set at least one target including their scope 3 emissions.These 20 companies include about 40%of aluminium companies and 30%of cement companies,but only 10%of steel companies.This result highlights that the heavy industries,and more particularly the steel industry,comprise a very limited share of producers who are considering the emissions arising from their value chain.Are the targets ambitious enough?To determine whether a companys target is aligned with its 1.5C pathway,and is therefore sufficiently ambitious,the ACT methodologies require a company to disclose sufficient detail on each target.Only 53(58%)of the companies disclosed enough information for their targets to be assessed in this benchmark.Among the 91 companies,only three:CRH,Heidelberg Materials and Taiwan Cement,score 100%on the targets ambition indicator,and two others:Cementos Argos and Cemex,score higher than 90%.Together,these five companies represent 7%of the scope 1 and 2 emissions of the 91 companies in the benchmark,with 180 million tonnes of CO2 equivalent(MtCO2eq).This means that a large majority of companies do not set targets that are ambitious enough and adequately cover their scope 1 and 2 emissions for both the short and long term.While 53 companies score positively on the target ambition assessment,only 30 score more than half the available points.This is explained by one or more of the following situations.Companies may have set only short-or long-term targets,while both are required to get a full score.Companies may have set some targets that are not ambitious enough to align with their 1.5C pathway,especially in the short term.Waking the giants:Insights on the decarbonisation and just transition efforts of the heavy industries 2024 Insights Report 19 Companies may have set net-zero targets without specifying and quantifying their reliance on carbon offsets.Such targets are not rewarded in the assessments since it is not possible to determine the effective emissions reduction these companies intend to achieve.Out of the 91 assessed companies,34(37%)have set net-zero scope 1 and 2 emissions targets,among which 11(12%)have also considered scope 3 emissions.When assessing targets,the ACT methodology also measures companies historic target achievement and current progress towards active emissions targets.In total,13(14%)of the companies in this benchmark are on track to achieving all their emissions targets,while 49(54%)of the companies have scored 0 on this indicator.Case study:Taiwan Cement Taiwan Cement aims to reach net zero across its scope 1 and 2 emissions by 2050.To achieve its 2050 net-zero target,the company counts on the following action levers:substituting fossil fuels with alternative fuels and self-produced renewable energy,replacing clinker with alternative raw materials,progressing energy efficiency,implementing waste heat recovery systems to reduce electricity purchase,implementing energy storage technologies,and using carbon capture solutions.Taiwan Cement quantifies the expected contribution of each action lever to get to net-zero emissions and mentions related running projects allowing the company to reduce its emissions.The companys 2050 net-zero target is also supported by its intermediary targets for 2025 and 2030.Emissions performance The indicator trend in past emissions intensity compares a companys rate of emissions reduction over the previous five years with the rate required by its 1.5C pathway over the coming five years.Emissions intensity is an important metric to track the extent to which companies are improving their production processes and cleaning their energy sources.Comparing a companys past and projected emissions intensity trends with its 1.5C pathway provides a good measure of its progress towards transition and gives an indication of the scale of change the company needs to make to align with a low-carbon future.How are past emissions intensities aligned with 1.5C requirements?In total,nine(75%)of the assessed aluminium companies,28(82%)of the cement companies,and 24(53%)of the steel companies disclosed emissions intensity values for their production.On average,cement companies have decreased their emissions intensities at about 1.2%a year,followed by aluminium and steel companies with yearly reductions of around 0.5%(see below).Waking the giants:Insights on the decarbonisation and just transition efforts of the heavy industries 2024 Insights Report 20 However in order for cement companies to align their yearly reductions in emissions intensities with a 1.5C pathway over the next five years,they would need to double their current performance to achieve reductions of 2.5%annually.The gap between current and required performance is larger for aluminium and steel companies.These companies have only reduced emissions intensities on average by 0-5%a year an need to attain average yearly reductions of 2.4%and 2.9%respectively to align with a 1.5C pathway.This represents a substantial increase from current levels of effort.In total,only eight(9%)of the companies evaluated in the 2024 Heavy Industries Benchmark show a past emissions intensity performance that is substantially aligned(i.e.80%or more)with a 1.5C pathway.These companies accounted for about 0.19 Gt of CO2 emissions in 2022,representing only 2.7%of the global emissions for the assessed aluminium,cement and iron&steel companies.Only four companies out of the 91 show past reductions in their emissions intensities fully compatible with the Paris Agreement.These companies are Cemex,Dalmia Bharat and SIG,among the cement producers,and Nucor,the only company among the iron&steel producers.No aluminium company shows past emissions intensity reductions fully aligned with a 1.5C pathway.Arconic,the best-scoring aluminium company under this indicator,only showed 80%alignment with a 1.5C pathway.Nucor Nucor uses electricity in most of its operations due to its pioneering business model of steel production using electric arc furnaces(EAFs).As reported by the company,40%of this electricity comes from renewable or zero-carbon energy sources.Consequently,the companys emissions intensity is relatively low and has been steadily declining over time.In 2017,the companys emissions intensity was 0.50 tonnes of CO2 per tonne of crude steel and in 2022 this decreased to 0.44 tonnes.This represents a total decline of 12%,or 2.4%per year,a value that matches the reductions required by the companys specific 1.5C pathway.Nucor has been further diversifying and greening its energy supply chain.In 2021,it signed a long-term agreement with rsted to purchase energy from the 367 megawatt(MW)wind farm in Texas and in 2023 with NextEra Energy Resources for 250 MW from phase-two of its Kentucky solar project.With this,Nucors emissions intensity is expected to continue to decline.The company has also been promoting circular steelmaking,which is one of the most efficient ways to reduce material and hence energy inputs.Currently,its scrap recycling operations make up 56%of the raw materials segment output which supplies its other business segments.Waking the giants:Insights on the decarbonisation and just transition efforts of the heavy industries 2024 Insights Report 21 Investments R&D and low-carbon capital expenditure(CapEx)are crucial for the decarbonisation of heavy industries such as aluminium,cement and iron&steel,which face significant challenges due to the need to develop non-mature technologies,readying them for the market.These industries rely on long-lived assets like blast furnaces,which can operate for 20 to 30 years,making it essential to invest in innovative solutions that can be integrated into existing infrastructure over time.Yet,41%of the assessed companies do not disclose their CapEx,while 46%do not disclose their R&D investments.Research and development Investment in R&D is necessary to reduce the costs and speed up deployment of innovative low-carbon technologies.Out of the 91 companies in the benchmark,54(59%)reported information on their R&D expenditure;however,only 22(24%)reported information on how much of this was dedicated to low-carbon technologies in 2022.Dalmia Bharat,JSW Steel and Vicat lead with 100%of their R&D invested in low-carbon technologies,followed by Siam Cement with a 91%low-carbon R&D share.These companies invest in technologies such as carbon capture,use and storage(CCUS),adapted process to manufacture clinker using renewable energy,or hydrogen use in steelmaking.The average low-carbon R&D share for the 22 companies that reported this figure is close to 50%.However,the cumulative low-carbon R&D investments for these 22 companies only represent 3%of the cumulative R&D investments captured in this analysis.The leading region in terms of low-carbon R&D investments is South Asia:seven(88%)out of the eight assessed companies from this region disclosed both their total and low-carbon R&D investments.The two other regions with more than half the companies disclosing this data are Europe&Central Asia and East Asia&Pacific,with 67%and 57%disclosing companies respectively.Non-mature technologies are key to addressing some of the intractable,hard-to-abate emissions from different sectors,and so the ACT methodology rewards companies for their investments in these technologies.Around 35%of global CO2 reductions between now and 2050 will result from low-carbon technologies that are currently in the demonstration or prototype phase(IEA 2023).Typical examples for heavy industries are 100%electrolytic hydrogen-based direct reduced iron(DRI)Waking the giants:Insights on the decarbonisation and just transition efforts of the heavy industries 2024 Insights Report 22 steelmaking,carbon capture through indirect calcination,alternatives to conventional raw materials and clinker for cement production,and inert anodes for primary aluminium production.Yet,only nine(10%)of the 91 assessed companies clearly disclosed their R&D investments in non-mature technologies.Around half of the R&D investments dedicated to low-carbon technologies for these nine companies are directed towards non-mature technologies.However,the cumulative 2022 investments for non-mature technologies amounted to just around USD 116 million,i.e.less than 10%of the total R&D investments reported.Low-carbon patenting Low-carbon patenting activity is an important indicator of a companys ability to transition and develop new low-carbon business models in an era of electrification and decarbonisation.Evidence of patenting activity could only be found for 38(42%)of the assessed companies,and a smaller group of 19(21%)companies also disclosed activity related to low-carbon technologies.The steel industry shows a slightly higher share of disclosure,with 47%of the companies having reported their patenting activity in 2022,compared to aluminium and cement industries with 33%and 38%respectively.These trends are a bit more pronounced when considering low-carbon technologies only,since no aluminium company was found to have reported any related low-carbon patent.When comparing regions,East Asia&Pacific and Europe&Central Asia are the only ones where some companies disclosed their low-carbon patenting activities.Just over 9,300 patents were reported in total in 2022 by the companies covered in this benchmark,among which 383 were dedicated to low-carbon technologies,representing a mere 4%of total patents.This ratio has been found to be quite stable over the last five years.With such a low ratio of low-carbon to total patents,industry or regional comparisons remain limited and do not provide insightful information.Capital expenditure Of the 91 companies assessed,20(22%)disclosed the proportion of CapEx invested in low-carbon technologies in the reporting year 2022.Companies disclosing this information spend on average about 12%of their CapEx on low-carbon technologies.Only Heidelberg Materials,Salzgitter and Tata Steel invest more than a fifth of their CapEx in low-carbon technologies,with 23%,24%and 23%shares respectively.From the data found in the benchmark analysis,there is no evidence that any of the 91 companies have a low-carbon CapEx share exceeding 25%.Reporting total CapEx appears to be a common practice among companies in different regions;CapEx data was found for 100%of the assessed companies in Latin America&Caribbean,North America,South Asia and Sub-Saharan Africa.The share of companies reporting total CapEx goes down to 62%in Europe&Central Asia and 39%in East Asia&Pacific,this latter region comprising 46(51%)of the 91 companies in this benchmark.The only company from Middle East&North Africa covered in the benchmark did not disclose its total CapEx.When it comes to disclosing low-carbon CapEx,companies from Latin America&Caribbean and Europe&Central Asia took the lead,with 50%and 48%of the companies having reported this figure respectively.Analysing CapEx disclosure at the level of the three industries,cement companies take the lead,followed by aluminium and lastly by steel companies.In total,28(82%)of the cement companies and nine(75%)of the aluminium companies in the benchmark reported their total CapEx,while 17(38%)of the steel companies did the same.That being said,the share of companies disclosing their low-carbon CapEx in a comprehensive way is quite low for all three industries:32%for cement,17%for aluminium and 16%for steel.Waking the giants:Insights on the decarbonisation and just transition efforts of the heavy industries 2024 Insights Report 23 For the 20 companies that reported both their total and low-carbon CapEx,the average share of investments in 2022 directed towards low-carbon technologies was only 12%.However,when the total CapEx of the 54 companies that disclosed overall CapEx information is considered,the share of investments dedicated to low-carbon technologies falls to just 5%.Not only do companies need to significantly improve diclosure of overall as well as low-carbon CapEx,the observed figures make it clear that currently companies are not investing enough in identified solutions to contribute to the low-carbon transition of their industry.Contrary to what is observed for disclosure quality,steel companies are the best performers in terms of their share of low-carbon CapEx,with an average of 16%in 2022,compared to 11%for cement companies.The aluminium industry trails behind with an average low-carbon CapEx share of just 4%,and the best-performing aluminium company in this regard,Rio Tinto,only reaching a 7%share of low-carbon CapEx.No clear regional trend is observed in companies performance.The ACT assessment also looks at CapEx planned for the near future.Few companies include such forward-looking data in their disclosure:for 2023,information on planned total CapEx and planned low-carbon CapEx was found for only 33%and 11%of the assessed companies,respectively.The gap is even higher for 2024,only two years following the 2022 reporting year,with 4%of the companies having disclosed total CapEx,and 2%having disclosed low-carbon CapEx.However,it is worth mentioning the case of Norsk Hydro,which has planned to invest 62%of its CapEx in low-carbon technologies in 2023 an exceptional figure compared to the 5%average planned by other companies.Climate governance and oversight Corporate climate oversight and governance help ensure that companies include the low-carbon transition in their strategic plans and address other environmental challenges.By having a structured framework for climate oversight,companies can set and meet emissions reduction targets and commit to achieving the Paris Agreement goals.Climate governance For 24(26%)of the assessed companies there was no convincing disclosure indicating the existence of an established structure dedicated to climate governance.The majority,i.e.56(61%)of the companies reported maintaining board-level oversight of climate-related issues,indicating that governance of climate change mitigation primarily rests with boards or the Chief Executive Officer(CEO).From a formal perspective at least,heavy industries companies are allocating climate governance to high levels of corporate management.There are nevertheless significant differences between the investigated industries.For 67%of the aluminium companies and 76%of the cement companies,oversight of climate change issues rests with the highest level of the management structure,while for the iron&steel industry this is only observed for 49%of the companies.A stronger contrast is revealed when results are evaluated by ownership types.It is publicly owned companies where oversight for climate change issues is more often allocated to the highest level of corporate management;this was observed for 49(73%)of such companies.By contrast only one government-owned company(11%)follows this practice.Baowu,an iron&steel company headquartered in Shanghai,integrates green and low-carbon initiatives into its board of directors responsibilities and manages climate change issues through its Carbon Neutrality Office.Private companies sit in between this range with six(40%)of the companies having board-level climate oversight.Although companies have been placing climate change oversight at the highest level of corporate management,they are notably lagging behind in making sure the management structure is equipped Waking the giants:Insights on the decarbonisation and just transition efforts of the heavy industries 2024 Insights Report 24 with adequate climate change expertise.The existence of some level of climate expertise at the board level was only identified for 15(16%)of the companies.As such,over 80%of the assessed companies fail to demonstrate the existence of adequate climate change expertise at the management level responsible for climate oversight.In the ACT methodology,climate expertise is characterised by five key attributes:possessing academic or professional qualifications specifically related to climate change and the low-carbon transition(excluding purely energy-related backgrounds);professional experience in roles or organisations focused on climate change and low-carbon initiatives;active membership in organisations that drive corporate knowledge on these issues;and,demonstrating technical knowledge through recent publications/outputs on the impacts,risks and solutions associated with climate change.Votorantim Cimentos The Brazilian company Votorantim Cimentos is the only one where one of the board committee members has the full academic/professional qualifications relating to climate change and sustainability,required to achieve the maximum score in relation to this benchmark indicator.The members qualifications include ESG Global Competent Boards Designation and an executive education programme on corporate sustainability and climate change,publications related to environment and social risk analysis and sustainability,membership in the sustainability committee,and professional experience related to climate change and sustainability.In addition,the board of Votorantim Cimentos is responsible for oversight of climate-related issues and,the CEO is responsible for executing board decisions related to the environment,among others.Climate-related incentives In total,39(43%)of the assessed companies reported having management incentives linked to climate change mitigation.For 30(33%)of the companies,management incentives were set at the highest level of decision-making authority in the organisation(responsible for guiding its overall strategy and direction).The remaining 52(57%)companies did not report any climate-related incentives.Companies provide different types of monetary rewards for achieving climate-related performance,including annual bonuses,bonuses as a percentage of salary,salary increases and other forms of incentives over both the short-and long-term.Among the companies in this benchmark,the most popular model was the inclusion of incentives within the companys long-term incentive plan.This was observed for 24(26%)of the companies.The remaining companies with climate-related incentives adopted a short-term view by making incentives part of annual bonuses or other short-term incentive plans.Waking the giants:Insights on the decarbonisation and just transition efforts of the heavy industries 2024 Insights Report 25 Transition planning and scenario analysis Companies should establish a time-bound action plan outlining how they will adapt and prepare for a low-carbon transition.This action plan should include medium-and long-term targets,quantified objectives and financial commitments.The plan should also be informed by climate scenario analysis to ensure its ambition is sufficient to align with a 1.5C pathway.Transition planning Of the 91 companies assessed,only 12(13%)show convincing evidence of a transition plan that covers all business units/operations as well as upstream and downstream activities related to the companys production activities.This is the level of coverage that all companies need to strive for as it expands the companys accountability to include its value chain emissions.No aluminium company was observed to fall into this latter category,but seven(58%)of the companies in the aluminium industry provided evidence of a transition plan applicable to all business units/operations.Nine cement companies:Asia Cement,Boral,CRH,Holcim,Ramco Cement,Taiheiyo Cement,Titan Cement,Vicat and Votorantim Cimentos,representing circa 26%of the industry sample covered in the benchmark,have a transition plan applying to both company operations and the value chain.For the iron&steel industry,this was observed to be the case for only three companies:Ansteel,JFE Holdings and POSCO,representing about 7%of the assessed iron&steel companies.More importantly though,for 31(69%)of the companies evaluated in the iron&steel industry,no convincing disclosure was found of the existence of any type of transition plan.In comparison,the same is true for only nine(27%)of the assessed cement companies.Next to the existence of a transition plan,companies were evaluated on the extent to which financial content was included in the plan,such as financial projections or indicators,and how decarbonisation aligns with the companys long-term vision and business strategy.Failing to present convincing evidence of financial considerations in the transition plan weakens the credibility of companies as it becomes unclear whether they are embedding carbon reduction efforts in key operational activities.For 60(66%)of the companies no evidence was found of quantified financial content,such as projections,cost estimates or other estimates of financial viability associated with the transition plan,although these might have been referred to within the plan.Specifically,this was the case for 34(76%)of the iron&steel companies the worst performing industry under this indicator and for eight(67%)of the aluminium companies and eight(53%)of the cement companies.Waking the giants:Insights on the decarbonisation and just transition efforts of the heavy industries 2024 Insights Report 26 To achieve their decarbonisation goals,companies should develop both short-and long-term actions.Half of the 91 assessed companies did not disclose examples of actions they expect to implement in the long term(beyond the next five years).Only 23(25%)of the companies provided detailed descriptions of relevant and achievable long-term actions they expect to implement to make the transition a reality.The aluminium industry performed the worst under this indicator with few companies disclosing detailed long-term actions associated with their transition plans.The outlier is Norsk Hydro,which disclosed detailed descriptions of long-term actions.Overall more companies disclosed short-term actions rather than long-term ones.In total 59(65%)of the companies provided a description of planned short-term actions.Detailed descriptions of short-term actions were observed for 28(31%)of the companies but with marked sectoral discrepancies.While only 12(27%)of the iron&steel companies disclosed detailed descriptions of their planned short-term actions,15(44%)of the cement companies did so.Commitments by companies to establish processes for reviewing and updating their transition plan were found to be missing across most of the assessed companies.Of the 91 companies,only 12(13%)disclose a commitment to review and update their transition plan with either a defined timescale or process.Of these,only two cement companies:Holcim and Heidelberg Materials,commit to updating their transition plan at least every five years with a defined process.No similar level of commitments were found for companies in the aluminium and iron&steel industries.POSCO POSCO has a transition plan in place the Carbon Neutrality Roadmap that encompasses the entire value chain,from production and research to sales and purchasing.The roadmap considers financial content linked to potential profits and losses of POSCO,short-and long-term considerations.Short-term actions include developing technologies to reduce the proportion of metallurgical coal used in steel production,reduce the use of molten iron in our steelmaking processes and expand the use of scrap metal.The Company frequently reports to the Management and Board of Directors on the progress of carbon neutrality.It also includes in its risk management specific to carbon neutrality a monitoring and reporting system.POSCO has implemented an internal carbon pricing system that reflects potential risks tied to carbon costs during the investment decision-making process.Climate change scenario testing and analysis has also been employed following IEA NZE 2050 scenarios and Task Force on Climate-related Financial Disclosures(TCFD)recommendations.Waking the giants:Insights on the decarbonisation and just transition efforts of the heavy industries 2024 Insights Report 27 Scenario testing and carbon price Companies should develop their transition plans based on a 1.5C scenario.More than half(53%)of the assessed companies have not conducted any scenario analysis or have not defined the scope of their analysis.This figure is highest for the iron&steel industry in which 26(58%)of the companies were found to not have conducted a scenario analysis.Only four cement companies:CRH,Cementos Argos,Heidelberg Materials and SIG,and two iron&steel companies:ArcelorMittal and Nippon Steel,were found to have conducted scenario analysis that applied to all business units/operations and the rest of the value chain.Among the assessed companies,28(31%)identified the use of a carbon price embedded in cost calculations as a financial indicator.Only nine(20%)of the iron&steel companies made use of a carbon price in quantitative terms for cost calculations.For the aluminium and cement industries,the share of companies making quantitative use of carbon pricing was 50%(6 companies)and 39%(13 companies),respectively.For the remaining 53(58%)of the assessed companies,no indication was found of the consideration of a carbon price,both in qualitative or quantitative terms.About seven(8%)of the companies aligned the carbon price with a low-carbon scenario and integrated it into the financial scenario used for making key business decisions.These companies were Cemex,Holcim,Kobelco,Norsk Hydro,Tata Steel,Thyssenkrupp and Vicat.Nippon Steel Nippon Steels scenario testing encompasses a comprehensive analysis of its entire value chain,from upstream procurement and direct operations to downstream demand for its products and services.This testing spans a medium-to long-term timeframe,extending up to 2050,and includes evaluations of market and technology shifts,reputation,policy and legal factors,and physical risks.The company assesses the potential impacts of global temperature increases under three scenarios:1.5C,2C and 4C,with particular attention to the 2C scenario as outlined by the IEA,and assumes the implementation of carbon pricing across all regions.For each scenario,Nippon Steel provides a qualitative description of the potential impacts and corresponding strategic responses,ensuring that the company is prepared for various future developments.Supplier and client engagement Heavy industries are a hard-to-abate sector for which a low-carbon transition poses higher challenges.Moreover,companies in this sector play an important role in the supply chain of the buildings and transportation sectors.Considering that aluminium,cement and iron&steel companies sit at the top of the supply chain for other high-emitting sectors,it is even more important for them to have strong engagement strategies with clients and suppliers to ensure a comprehensive low-carbon transition.The scope 3 emissions in the aluminium,cement and iron&steel industries represent between 10-50%of total emissions,depending on the industry and the specific companys activities.Despite,their position in the supply chain and the importance of indirect emissions for their own decarbonisation,few companies have implemented comprehensive supplier and client engagement strategies.Out of the 91 assessed companies,only five(6%)reported a strategy to engage with clients and 17(19%)reported a strategy to engage with suppliers on greenhouse gas reduction targets.The sector must make active efforts to engage with its clients and suppliers on greenhouse gas emissions reductions.Waking the giants:Insights on the decarbonisation and just transition efforts of the heavy industries 2024 Insights Report 28 Supplier engagement Overall,the heavy industries sector demonstrates poor performance in terms of climate-related supplier engagement.On average,the companies received only 17%of the points available for supplier engagement strategy and activities.Among the 91 companies assessed,only 12(13%)have a supplier engagement strategy that encompasses over 90%of their procurement spending or covers more than 90%of supplier-related scope 3 emissions.Despite this,more than half of the companies lack a strategy to influence their suppliers climate performance,and none require suppliers to reduce their emissions.Only five(6%)companies mandate their suppliers to publicly report their emissions,and the same number include greenhouse gas emissions reduction or reporting requirements in their supplier selection or contract renewal processes.For those that set emissions reduction requirements,over half have a process to address non-compliance,with 11(12%)companies suspending or further engaging non-compliant suppliers to drive improvements.Additionally,only four companies:JSW,Salzgitter,SSAB and Taiwan Cement,exclude suppliers who fail to make significant improvements after engagement.In terms of evaluating the impact of their strategies,20(22%)companies use quantitative measures,while six(7%)rely on qualitative assessments.Titan Cement Titan Cement stands out as the top-performing company under the supplier engagement module.The company requests all its key suppliers to set objectives and targets to reduce environmental impacts,devise action plans to mitigate climate change-related impacts as well as report progress on an annual basis.The company also includes education initiatives in its engagement strategy and cooperates with suppliers to introduce innovative products with the potential to reduce CO2 emissions.Waking the giants:Insights on the decarbonisation and just transition efforts of the heavy industries 2024 Insights Report 29 Client engagement Among the 91 companies assessed,72(79%)lack a client emissions reduction strategy.However,20(22%)of the companies have implemented various measures to encourage their clients to reduce emissions.Additionally,24(26%)companies disclose the impact of their client engagement activities in quantitative terms.Despite these efforts,the sectors approach to client engagement generally lacks a well-defined structure,clear objectives,consistency and transparent key performance indicators(KPIs)to assess effectiveness.Trade associations and policy engagement As hard-to-abate sectors increasingly receive more attention from the climate change momentum,a corresponding policy environment is needed to urge them on their decarbonisation journey.Several countries are developing initiatives to create a market for low-carbon industrial products,such as their inclusion in emissions trading systems in the EU and the US.It is estimated that by the end of 2021,more than 90%of the worlds steel capacity and production came from countries committed to achieving net-zero emissions by mid-century(OECD 2022).Companies also play a key role in the low-carbon transition of the heavy industries sector,with many industry organisations being initiated for international cooperation,such as the First Movers Coalition,the SteelZero Initiative and IRENAs Alliance for Industry Decarbonisation.Moreover,by supporting climate-positive measures and associations,companies can intervene when the trade associations they are members of do not align with these policies.Strength of engagement strategy Trade alliances,associations,coalitions and think tanks are key instruments through which companies can indirectly influence climate-related policy.Yet,78%of the companies assessed in this benchmark have not disclosed how they govern their relationships with these influential parties.Moreover,over 83%of the companies do not have a process in place to monitor and review the climate policy positions of the alliances,associations,coalitions and think tanks which they are members of.Additionally,84 out of the 91 companies fail to disclose an action plan for addressing instances when the associations they support are found to oppose climate-positive policies.Only six companies mentioned action plans to withdraw funding,suspend or end memberships in alliances,associations,coalitions or think tanks when they oppose climate-positive policies.Out of the 91 companies,only 14(15%)are not members of nor provide funding to any alliances or associations with climate-negative activities or positions.Of the remaining 77 companies that are members of associations involved in climate-negative activities or positions,only 25 are not on the board nor provide funding to these associations.Waking the giants:Insights on the decarbonisation and just transition efforts of the heavy industries 2024 Insights Report 30 Support for the Paris Agreement and climate initiatives On a more positive note,53(58%)of the assessed companies publicly support significant climate policies,with 36 of these explicitly committing to the Paris Agreement.Despite these commitments,only 11(12%)of the companies have implemented a monitoring and review process to ensure their policy positions align with the Paris Agreement goals.In the aluminium industry specifically,only one company out of 12,actively participates in small-scale or pilot projects with local authorities to implement climate-related partnerships.Low-carbon business activities Companies must adapt to stay profitable in a low-carbon economy.They need to transition away from high-carbon business models to ensure that all revenue stems from low-carbon products and services.The ACT assessment focuses on two key aspects of companies businesses:the share of income from low-carbon products and services and their actions to embrace new low-carbon business models while phasing out high-carbon ones.Additionally,companies actions to mitigate life cycle emissions associated with low-carbon assets are also assessed.Revenue from low-carbon products and services Out of the 91 assessed companies,seven:Cemex,China Steel,Dalmia Bharat,Norsk Hydro,Salzgitter,SSAB and Voestalpine,disclosed their share of revenue from low-carbon products and services.In 2022,the average low-carbon revenue share among these companies was 30%.Notably,only three companies reported a low-carbon revenue share exceeding 30%in 2022:Dalmia Bharat leads with a percentage of 82%,followed by SSAB at 32%and China Steel at 31%.Among these seven companies,four are in the steel industry:China Steel,Salzgitter,SSAB,and Voestalpine.Two companies,Cemex and Dalmia Bharat,are in the cement industry,while Norsk Hydro operates in the aluminium industry.In addition to evaluating the overall share of company revenue from low-carbon products and services,the increase in this share over time was also assessed.This evaluation covered the two years leading up to the 2022 reporting year.In 2020 and 2021,the average revenue share from low-carbon products and low-carbon services was 34%and circa 28%,respectively,for the seven companies that reported these figures.It is important to note that SSAB did not disclose this percentage for 2020,and Norsk Hydro did not disclose this percentage for 2021.Among the other five companies that provided information from 2020 to 2022,Dalmia Bharat and Salzgitter have slightly increased their share of revenue from low-carbon products and services in 2022 compared to 2020.Lowering the carbon intensity of the business portfolio Company performance in relation to expanding new,low-carbon business models was evaluated based on their current implementation of sector-specific decarbonisation actions and the projected growth of these activities.The decarbonisation actions tailored to the aluminium,cement and iron&steel industries were derived from the IEAs mitigation measure recommendations per sector.These recommendations are primarily centred on actions likely to deliver the highest contribution to greenhouse gas reductions by 2030.Companies are evaluated on whether they are creating or expanding low-carbon business models,or implementing these decarbonisation actions within existing low-carbon business models.For the aluminium sector,the recommended decarbonisation actions encompass services provided to the electrical grid,low-carbon electricity self-generation,substitution with thermal energy and adopting good circular waste practices.In the cement industry,recommended actions involve developing zero-clinker cement and producing low-clinker cement products,enhancing the use of biomass,contributing to low-carbon optimisation of construction,developing CCU/CCS solutions and Waking the giants:Insights on the decarbonisation and just transition efforts of the heavy industries 2024 Insights Report 31 increasing the recycling rate of concrete and cement.For the steel industry,recommended actions include switching to low-carbon electricity in the steelmaking process,increasing the integration of hydrogen technology in steelmaking,increasing steel waste collection and/or the use of scrap steel,developing CCU/CCS solutions and the valorisation of by-products for the steel sector.Aluminium Out of the 12 aluminium companies included in the 2024 Heavy Industries Benchmark,only three are currently engaged in only one low-carbon business out of the four that are recommended for aluminium companies.Alcoa is active in providing services to the electrical grid,with renewable sources comprising 86%of its global smelting portfolios power consumption in 2022.Emirates Global Aluminium recycled 100%of its dross in 2022,with the recycled dross generating salt slag repurposed for use in the cement,steel and other industries.In addition to these two companies,which show ambitious scale in adopting low-carbon business practices,Norsk Hydro has established a dedicated company to generating renewable energy for industrial processes,particularly for bauxite refining.When it comes to scheduling the growth of low-carbon businesses,the three aforementioned aluminium companies aim to expand only the low-carbon business in which they are currently engaged.However,these decarbonisation actions are not expected to even double in size within the next five years.Another aluminium company,Hindalco,plans to expand its renewable energy portfolio by adding capacity for 71 MW of hybrid(wind solar)energy and is finalising a renewable hybrid energy project with pumped hydro storage to deliver 100-300 MW of round-the-clock power.While aluminium companies aim to expand their current low-carbon business practices but do not anticipate a substantial increase.This indicates a significant gap in the industrys overall adoption of a comprehensive low-carbon strategy.Cement Out of the 34 cement companies included in the 2024 Heavy Industries Benchmark,12(35%)companies are currently engaged in low-carbon businesses.Among them,four companies:Cemex,Dalmia Bharat,Ramco Cements and Shree Cement,are involved in two low-carbon businesses out of the six recommended for cement companies.Seven companies:China Shanshui Cement,CRH,Siam Cement,Taiheiyo Cement,Taiwan Cement,UltraTech Cement and Vicat,are active in one low-carbon business.None of the cement companies assessed is currently involved in three or more low-carbon businesses.Currently,five companies are active in contributing to low-carbon optimisation of construction,of which four companies:China Shanshui Cement,Ramco Cements,Siam Cement and UltraTech Cement,are already low-carbon aligned.In overall,70%(24)of the cement companies assessed have scheduled growth in at least one low-carbon business.The most ambitious companies in terms of planned growth are Cementos Argos and Holcim,which aim to be active in five low-carbon businesses from 2023 to 2028.They are followed by Asia Cement,Cemex,Heidelberg Materials,UltraTech Cement and Vicat,each of which is planning growth in four low-carbon businesses.Of the six low-carbon businesses recommended for cement companies,the most preferred future activity is producing low-clinker cement products,followed by enhancing the use of biomass and the development of CCU/CCS technologies.Engagement and ambition levels on low-carbon businesses vary significantly among cement companies.Some show a strong commitment to expanding their low-carbon initiatives,while others are just beginning to incorporate these practices.Overall,low-clinker cement production and advanced carbon capture technologies emerged as key focus areas.Waking the giants:Insights on the decarbonisation and just transition efforts of the heavy industries 2024 Insights Report 32 Cemex Cemex has developed Vertua Cement Plus and Ultra with a lower CO2 footprint.Vertua Ultra Zero Concrete,is a geopolymer clinker-free concrete that reduces CO2 emissions by up to 70%compared to standard concrete(CEM I).In 2021,low-carbon ready-mix sales made up 3%of the companys global ready-mix sales.Additionally,Cemex is among the few cement companies active in producing low-clinker cement products.Vertua sales accounted for 41%of its total cement volumes and 33%of its total concrete sales in 2022.The company has set a target of achieving 50%of Vertua cement and ready-mix sales by 2025.Cemex also aims to lead the sectoral transition by developing another crucial business model:the advancement of Carbon Capture,Utilization,and Storage(CCU/CCS)technologies.The company plans to establish its first net-zero CO2 emission plants by 2030.Iron&steel Out of the 45 iron&steel companies included in the 2024 Heavy Industries Benchmark,11(24%)are currently engaged in low-carbon businesses.Among them,NLMK and Nucor are active in two low-carbon businesses each,while Ansteel,China Steel,Evraz,Gerdau,JFE Holdings,Maanshan Iron&Steel,Steel Dynamics,Tata Steel and Ternium are each active in one low-carbon business out of the five recommended activities for iron&steel companies.None of the iron and steel companies are currently involved in three or more low-carbon businesses.The most preferred low-carbon business model currently adopted by iron&steel companies is increasing steel waste collection and/or the use of scrap steel,with nine out of the 11 companies engaged in low-carbon initiatives focused on this aspect at varying levels.For example,Ansteel has a recycling rate of 100%for both of its steel production subsidiaries and JFE Holdings introduced the Double-slag Refining Process(DRP)to increase the amount of scrap iron used in all its steelmaking facilities.Evraz,Maanshan Iron&Steel and NLMK,on the other hand,have lower recycling rates.Apart from this business model,other low-carbon initiatives already adopted by the industry include the valorisation of by-products.For example,Tata Steel achieves 100%slag granulation for the cement industry.Additionally,Ternium and Nucor promote the switch to low-carbon electricity in the steelmaking process,with 65%and 40%of their electricity generated from renewable or zero-carbon energy sources,respectively.Next to this,22(48%)iron&steel companies are expanding their low-carbon business models,with some aiming to double in size within the next five years.The most sought-after low-carbon business model among these companies is increasing steel waste collection and/or the use of scrap steel,pursued by 15(33%)of the steel companies,out of which only SSAB schedules to at least double the size of this business model in the upcoming five years.Following this,13 companies have planned for growth in integrating hydrogen technology in steelmaking and promoting the switch to low-carbon electricity in steel production(Gerdau,JSW Steel and Salzgitter aim to at least double the size of the latter low-carbon business model in the upcoming five years).Additionally,ten companies are targeting growth in developing CCU/CCS solutions across industries,while nine companies are focusing on valorising by-products.The most ambitious companies in this regard are JFE Holdings and Kobelco,which aim to grow five low-carbon businesses.They are followed by China Steel,JSW Steel,Nippon Steel,POSCO,Salzgitter,Thyssenkrupp and US Steel,each of which is planning growth in four low-carbon businesses.Waking the giants:Insights on the decarbonisation and just transition efforts of the heavy industries 2024 Insights Report 33 There is movement towards integrating sustainable practices in steelmaking,with a strong focus on recycling and energy efficiency.Companies are strategically prioritizing certain low-carbon models over others,reflecting both current capabilities and future aspirations.A few companies are leading with advanced and multiple low-carbon initiatives,but the most common picture is of an industry that is only now beginning to scale their low-carbon business efforts.Waking the giants:Insights on the decarbonisation and just transition efforts of the heavy industries 2024 Insights Report 34 Appendix:Companies in the Heavy Industries Benchmark 2024 Company name Country of headquarters Sub-sector Alcoa United States of America of America Aluminium Arconic United States of America of America Aluminium Century Aluminum United States of America of America Aluminium CHALCO China Aluminium China Hongqiao China Aluminium Emirates Global Aluminium United Arab Emirates Aluminium Hindalco India Aluminium Norsk Hydro Norway Aluminium Rio Tinto United Kingdom Aluminium Rusal Russian Federation Aluminium South32 Australia Aluminium Vedanta Resources United Kingdom Aluminium Anhui Conch Cement China Cement Asia Cement Taiwan,China Cement BBMG China Cement Boral Australia Cement BUA Cement Nigeria Cement Buzzi Unicem Italy Cement Cementos Argos Colombia Cement Cemex Mexico Cement Cemros Russian Federation Cement China Res.Building Materials Technology China Cement China Shanshui Cement China Cement CNBM China Cement CRH Ireland Cement Dalmia Bharat India Cement Dangote Cement Nigeria Cement Heidelberg Materials Germany Cement Holcim Switzerland Cement Huaxin Cement China Cement InterCement Brazil Cement Martin Marietta United States of America of America Cement Ramco Cements India Cement Shree Cement India Cement Siam Cement Thailand Cement Siam City Cement Thailand Cement SIG Indonesia Cement Taiheiyo Cement Japan Cement Taiwan Cement Taiwan,China Cement Titan Cement Belgium Cement TPI Polene Thailand Cement UltraTech Cement India Cement Waking the giants:Insights on the decarbonisation and just transition efforts of the heavy industries 2024 Insights Report 35 UNACEM Peru Cement Vicat France Cement Votorantim Cimentos Brazil Cement Yatai Building Materials China Cement Ansteel China Steel ArcelorMittal Luxembourg Steel Baotou Steel China Steel Baowu China Steel China Steel Taiwan,China Steel CITIC Pacific Special Steel China Steel Delong Steel China Steel Donghai Special Steel China Steel Evraz United Kingdom Steel Gerdau Brazil Steel Guangxi Shenglong Metallurgical China Steel Hanwa Japan Steel Hebei Jingye Group China Steel Hesteel China Steel Hunan Valin Steel China Steel Hyundai Steel Korea,Rep.Steel JFE Holdings Japan Steel JiuQuan Iron and Steel Group China Steel JSW Steel India Steel Kobelco Japan Steel Liuzhou Iron&Steel China Steel Maanshan Iron&Steel China Steel Metinvest Ukraine Steel Nanjing Iron&Steel China Steel Nippon Steel Japan Steel NLMK Russian Federation Steel Nucor United States of America of America Steel POSCO Korea,Rep.Steel Rizhao Steel China Steel SAIL India Steel Salzgitter Germany Steel Severstal Russian Federation Steel Shagang China Steel Shandong Iron&Steel Group China Steel Shougang China Steel SSAB Sweden Steel Steel Dynamics United States of America of America Steel Tata Steel India Steel Ternium Luxembourg Steel thyssenkrupp Germany Steel Tsingshan Holding China Steel U.S.Steel United States of America of America Steel Voestalpine Austria Steel Xinhua Metallurgical China Steel Xinyu Iron&Steel China Steel Waking the giants:Insights on the decarbonisation and just transition efforts of the heavy industries 2024 Insights Report 36 About the World Benchmarking Alliance Founded in 2018,the World Benchmarking Alliance(WBA)is a non-profit organisation holding 2,000 of the worlds most influential companies accountable for their part in achieving the United Nations Sustainable Development Goals.It does this by publishing free and publicly available benchmarks on their performance.WBA shows what good corporate practice looks like so that leading companies have an incentive to keep going and laggards feel pressure to catch up.WBA has identified seven systems that,if transformed,have the greatest potential to put our society,planet and economy on a more sustainable and resilient path.These are the transformation of our social system,our agriculture and food system,our decarbonisation and energy system,our nature system,our digital system,our urban system and our financial system.By benchmarking companies on each system transformation every second year,WBA reveals where each company stands in comparison to its peers,where it can improve and where urgent action is needed.The benchmarks provide companies with a clear roadmap of the commitments and changes they must make.Over time,they will show whether or not these 2,000 companies are improving their business impact on people,workers,communities and the environment.They equip everyone including a community of about 390 organisations,referred to as the WBA Allies with the insights that they need to collectively ensure that the private sector changes.For more information,visit www.worldbenchmarkingalliance.org and follow us on Twitter SDGBenchmarks.If you have any feedback on our findings,please reach out to Vicky Sins,Decarbonisation and Energy Transformation Lead at WBA:info.climateworldbenchmarkingalliance.org Waking the giants:Insights on the decarbonisation and just transition efforts of the heavy industries 2024 Insights Report 37.FUNDING PARTNERS Our work is funded by governments and foundations.For more information,visit:https:/www.worldbenchmarkingalliance.org/funding-partners/COPYRIGHT This work is the product of the World Benchmarking Alliance.Our work is licensed under the Creative Commons Attribution 4.0 International License.To view a copy of this license,visit:www.creativecommons.org/licenses/by/4.0/DISCLAIMER Information available on our website,visit:www.worldbenchmarkingalliance.org/disclaimer WORLD BENCHMARKING ALLIANCE Prins Hendrikkade 25,1021 TM Amsterdam The Netherlands.www.worldbenchmarkingalliance.org
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