Dr. Wilfried Aulbur
Environmental sustainability
Globally, emission standards are becoming more stringent with the EU generally leading the charge. Looking at CO2 emissions, European targets for 2020 are, for example, about 65 percent more aggressive than those of the US.
India is the world's third largest Green House Gas (GHG) emitter with 6.6 percent of total global emissions (behind China (25.4 percent) and the US (17.3 percent), 2010 numbers). India cannot abdicate her responsibility towards a cleaner and sustainable future both from a global and even more importantly from a local perspective. The current discussions around air quality in major Indian metros clearly indicate that awareness of pollution and its impact on quality of life is increasing in India as well.
Indian companies, and especially Indian MNCs, hence need to pursue Green Manufacturing initiatives due to a number of factors such as resource scarcity, climate change, import dependence, government regulations, etc. Customer pull for green products is continuously increasing and - if not taken seriously - may be leveraged by competition to create product and brand differentiation.
Opportunities for profitable and green manufacturing increase due to advances in science and may need to be leveraged to satisfy investors who demand carbon disclosure.
Examples of successful, green manufacturing initiatives in India abound. Take Godrej's ‘Fast Card' as one example. It is a smokeless paper mosquito repellent that provides a mosquito free environment for 4-5 hours at the cost of just Rs1/-. To reach such an aggressive price point dictated by the needs of the customers (farmers in rural areas that would like to get one night of undisturbed sleep), Godrej had to re-invent the product and its production process.
The mosquito repellent formula was changed to reduce water content and to allow for rapid drying hence reducing both water and electricity consumption during the production process massively. Clearly, green manufacturing is not only the right thing to do but also enables companies to provide profitable solutions even for ‘Bottom of the Pyramid' customers.
From ‘Make' to ‘Innovate'
In the coming decades, India will need to transform herself from ‘copy and paste' manufacturing to innovation driven manufacturing. While global innovation leaders in India exist today, the task is to transform industries and companies such that innovation leaders are the norm rather than the exception.
Market factors driving this need are many. Customers are constantly becoming more sophisticated and individualized. This requires covering of more market niches and sub-segments, shorter time-to-market for products and increased risks of R&D amortization. Technologies, such as Industry 4.0 that we discussed earlier in this paper, threaten to negate competitive advantages if not mastered.
Alternative ‘new' R&D areas (China, Eastern Europe, etc.) may win the race for manufacturing and related service jobs based on better products and higher margin retention and hence higher competitiveness of their companies. Stronger global IPR laws may have a negative impact on ‘Copy and Paste' manufacturing.
In addition, corporate customers are increasingly looking for system partners that can co-create products and share in the associated risks and pure ‘Copy and Paste" players may be relegated to Tier II or Tier III status.
India should actively leverage global best practices. Blue prints for increased R&D performance exist. Take Fraunhofer from Germany as an example. Fraunhofer's mission for applied research is to benefit private and public enterprise and to drive competitive strength through innovation. Fraunhofer operates with a variety of business models and has been instrumental in improving products, commercialisation of new technologies, etc. globally.
In South Korea, Daedeok Innopolis is a successful, government supported business ecosystem that focuses on the virtuous cycle of Research & Development, Business Development, and Reinvestment. Daedeok employed about 140k people in 2010 across more than 100 companies and generated 57k patents. Research is focused on Integrated Circuits, Precision Instruments, Computers, Opto-electronics, Biotechnology, and Telecom.
In Brazil, São José dos Campos is a very successful aerospace industrial cluster that was a crucial support to the global ascendancy of Embraer. Employment in over 50 suppliers in São José dos Campos stands at 23k employees. For São Paulo, the aerospace industry is a crucial contributor to exports at 8 percent of total exports.
(Continued on the next page)
