In October last year, the Volvo Group unveiled the world’s first car made of “green” steel. This self-driving electric truck weighs 8 tons and is designed for quarries and mines.

This is the result of an industrial partnership between Swedish steelmaker SSAB, state-owned power generator Vattenfall and iron ore miner LKAB. Their goal is to create the first fossil-fuel-free steel by replacing coking coal traditionally used in manufacturing with green hydrogen.

This partnership is called “Hybrid”, at the forefront of European industry, striving to develop more energy-efficient, low-carbon manufacturing technologies.

Many initiatives were already underway before the coronavirus hit, but the pandemic has focused the attention of industry leaders on the importance of reshaping and strengthening supply chains and tackling long-term challenges, notably climate change. superior.

“It’s no longer about the lowest-cost producer, it’s about the resilience of the supply chain,” said Stephen Phipson, chief executive of Make UK, a UK trade body.

He noted that UK manufacturing executives were reassessing “just-in-time” manufacturing processes and how much inventory to hold in the future to ensure greater resilience. The importance of skills is also on the agenda, especially as companies struggle to attract and retain workers in the wake of the pandemic, which has led to shortages for many.

But business leaders warn that the massive transformation won’t happen overnight.

One McKinsey’s investigation These challenges were highlighted last November. In a previous survey in May 2020, a majority of companies said they plan to take multiple paths to improve supply chain resilience, including diversifying their supply base. But, in reality, by the end of 2021, most people are mostly stocking up.

A recent survey found that 61% of companies have increased inventories of critical products and 55% have taken action to ensure they have at least two sources of raw materials. Only 11% of businesses are producing “near-shoring” to avoid the risk of disruption from geographically remote suppliers??.

Duncan Johnston, head of UK manufacturing at Deloitte, said: “Changing manufacturing will take time. You can’t quickly transform a global supply chain to one that is closer to the coast or UK-centric.”

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The same goes for sustainability ambitions, he said. While the company has given some thought to this, they have yet to “really embark on the substantial journey needed to reduce carbon emissions from the UK economy”.

Manufacturers face several challenges along the way. In addition to reducing emissions from their own processes, they also need to consider emissions from their supply chain. They need to find new ways to power their activities and, in some cases, like the automotive industry, need to completely redesign their products.

Heavy manufacturing, such as steel and cement, is at the forefront of efforts to decarbonize economies. Apart from power generation, the steel industry is the largest industrial producer of CO2. It accounts for 7 to 9 percent of all direct fossil fuel emissions, according to worldsteel.

Emissions from the steel industry to meet global climate and energy goals Must drop by at least half by mid-century, according to the International Energy Agency. Achieving such reductions requires more than just increasing the efficiency of conventional blast furnaces.

“We’ve gotten to the point where there’s no more room in terms of improving efficiency,” said SSAB CTO Martin Pei. “What we’re working on right now is truly groundbreaking technology.”

In the blast furnace process, the company uses carbon to absorb oxygen from iron ore to obtain iron. SSAB will instead use clean hydrogen, which is produced at an electrolyser facility powered by Sweden’s abundant renewable electricity. The output will be a solid intermediate called sponge iron, which goes into an electric arc furnace, where it is mixed with scrap and refined into steel.

The successful production of Volvo’s first heavy-duty truck shows that “the entire value chain is working,” Pei said.

SSAB estimates that metals in its hydrogen-based process will be 20-30% more expensive than conventional production, at least initially. However, Pei said customer demand for green steel was growing as more companies worked to decarbonize their supply chains.

Policymakers also need to play a role in helping manufacturers transition to a low-carbon economy. For example, a large-scale switch to hydrogen energy in the European steel industry will require a large-scale expansion of renewable energy sources. State support is needed to finance the necessary investments to expand the grid and other infrastructure to accommodate the transition to a low-carbon economy.

Hydrogen is a typical example. Both the EU and the UK have unveiled ambitious plans to develop a hydrogen economy, but hurdles remain to turn it into a commercial reality.

For example, the UK has a “very small hydrogen innovation sector,” says Phipson. . . the challenge is scaling”. He added that the UK was excellent at funding for innovation and research, but what was needed was “funding to scale”.

As for funding sources, he said: “Companies are committed to using private capital, but governments also need to play a role.”

Transforming the workforce to deal with this shift is another issue. Even before the pandemic, manufacturers were concerned about the impact of an aging workforce and how to attract younger talent with more digital skills.

“We don’t know of a manufacturing company that has as many digital skills as they want,” Johnston said.

Those concerns have grown, with many employers emerging from the pandemic with more job openings. Phipson would also like to see more government action on this front.

“[It] It needs to be more ambitious with its skills,” he believes. Currently, skills shortages are “a drag on growth.”