Hannover Fair 2023 and the State of Industrial Sustainability

Well, that wasn’t the dramatic step forward I had hoped for. Based on the audience and focus of Hannover Fair, it isn’t the ideal lens through which to explore the state of industrial sustainability, but it does provide a measure of how effectively companies are executing on its demands. My opinion? I’m not yet seeing the step-change solutions needed. The reasons behind that lack of execution on industrial sustainability are worth a further breakdown.

Industrial sustainability progress is mixed

There was plenty of marketing at Hannover Fair relative to sustainability. In fact, the word “sustainability” and its related buzzword relatives―ESG, climate change, energy transition, e-mobility, green energy, decarbonization, emissions, etc.―were ubiquitous. Many booths focused on table stakes use cases that are fundamental to sustainable production and business performance, such as energy management, sourcing, and waste reduction,

Certainly, the promise and growth potential of the hydrogen industry and fuel cells were on clear display. Hundreds of exhibitors showcased hydrogen technology, with considerable evidence of use cases across production, transportation, storage, consumption, and, in certain cases, retirement. When speaking with many of the vendors, their comments echoed that the push toward greener and, ultimately, green hydrogen is a heavy lift. An industry is being built and transformed, and when examining the current value chain of green hydrogen there are many gaps. These holes are related to a range of product lifecycle issues, including difficulties in transportation and storage, lack of standards for new use models, and, most importantly, the current high cost of hydrogen innovation that can only be driven down by achieving scale.

Glimpses of transformational sustainability were present, most notably the vertical farming display that uses Siemens monitoring and automation technologies. It represents agricultural sustainability step change in terms of land conservation, resource efficiency and yield.  A few providers were touting their cloud-based sustainability solutions, including AWS, Google, Microsoft, and SAP. The continued and significant presence of the IT giants at Hannover is another indication of the growing role of software in industrial processes.

Generally, these offerings still focus primarily on cloud migration, reporting, and accounting functionality that characterize many first-generation sustainability solutions. However, some functionality is appearing that is geared more toward action, such as calculation models, target identification and tracking, sustainability performance analysis, and AI-supported recommendation engines.  These solutions are coming directly from the provider and/or via many of their partners, who are using the underlying technology to create app-based solutions.  It’s a good next step, but we continue to need much more in the way of transformative solutions.

Key reasons industrial sustainability lags

Overall, sustainability continues to be front and center with the Hannover Messe audience, but innovation still lags, frankly. One executive put it succinctly when stating that the plant floor is aware of sustainability, but it isn’t yet driving decision making.

The reasons for this lack of acceleration for solving what is, and will increasingly continue to be, a major business challenge are both many and nuanced. However, three key reasons rise to the top, and they are eerily similar to barriers related to executing digital transformation at scale:

• Another disconnect between the c-suite and operations: Leadership is keenly aware of the demands being placed upon them to make their businesses both profitable and sustainable. In the past few years, considerable pressure has come from the investment community, who view climate change and poor corporate stewardship as existential financial risks. As a result, c-suite demand for improved sustainability then gets pushed downhill to operations to carry out, without an understanding of the process, technological, and cultural realities preventing success.
• Lack of definable and executable strategy: In turn, the disconnect inhibits clarity in terms of what needs to be done, where, and when. The result is a cautious approach to change, with the assumption that some tipping point might eventually arrive and the issue can be soft-pedaled until then. Any results from projects that are undertaken are measured using traditional approaches to ROI, and the inability to balance cost with reward prevents additional substantive action. Organizations execute poorly, and efforts are held up as examples of greenwashing. 
• Currently, sustainability isn’t a key component to digital change that is underway: It’s becoming clearer with each passing day that digital transformation is the engine needed to drive improved sustainability. From the analytics that optimize asset maintenance and performance to AI that facilitates business agility and value chain cooperation, these digital technologies hold the keys to both identifying and executing opportunities for sustainability. At the moment, improved sustainability is simply an added benefit of a successful digital project versus a key driver of how and why the initiative is executed in the first place. Sustainability must be a front-and-center decision driver, though clearly in a way that balances other key business rationale such as cost, competitive differentiation, and profitability. 

Hannover Fair 2023 demonstrated that while some industrial sustainability progress is being realized, it is still halting, slow, and not fully supported by technological innovation. As indicated, that is mainly a reflection of the industrial organizations themselves versus some of the technological missteps (nascent machine learning solutions, as an example) seen on the provider side in the formative years of digital transformation. And so, the current state of industrial sustainability is most characterized by a disconnect between some level of desire to transform and the reality of being capable of doing so.