How can Foundation Industry SMEs become more innovation active in their journey to Net Zero?

Natalie Fredericks, CLT Associate, Programme Manager

Carbon Limiting Technologies (CLT) recently completed a 9-month programme, commissioned by Innovate UK under the Transforming Foundation Industries (TFI) Challenge to support a group of Foundation Industry micro, small and medium sized enterprises (SMEs).

The aim of the programme was to help selected SMEs to become more innovation active and to engage with the UK innovation ecosystem in moving their production processes towards Net Zero. 

Why Foundation Industry SMEs and why this programme?

The Foundation Industries play a crucial role in the UK’s economy, manufacturing the core materials – cement, paper, ceramics, metals, chemicals and glass – that underpin manufacturing supply chains.  They have a collective turnover of over £67.5 bn and employ more than a quarter of a million people.

However, the Foundation Industries are also by far the UK’s biggest industrial emitters of greenhouse gasses, and with SMEs representing 98% of the industry, the sectors will not decarbonise without SMEs playing a major role.  The drive to meet Net Zero commitments requires the adoption of new technologies, processes, and strategic partnerships. However, innovation across these industries is uneven, and collaborative innovation is not the norm, particularly amongst SMEs. Addressing these shortcomings is key, as these sectors are well placed to be embedded into high value supply chains of strategic industries such as aerospace, automotive and pharmaceuticals.

Previous studies, such as that by the Innovation Caucus in 2022, have highlighted a willingness to innovate within Foundation Industry SMEs, but with a tendency to incremental innovation, that increases with incentives from customers and the rest of the supply chain.  However, most are not currently engaged with the innovation support ecosystem and are not aware of the help that is available from funded support, research collaborators, specialist advice, industry networks and technology innovators.

This programme, “Success through Innovation”, was designed to test mechanisms to help a group of SMEs to raise awareness and skills, facilitate those connections and take first steps towards finding support to accelerate innovation towards Net Zero.

What we did

16 SMEs were selected to join the cohort, none of whom had yet received funded innovation support for decarbonising their processes.  Representatives from metals (foundries and forges), ceramics (refractories), pulp and paper, cement and chemicals sectors were included, with a focus on high heat users.

Each SME was guided to take the first steps on their innovation journey, with the hope that innovative projects would be identified, new collaborations established, and funding applied for. They received a mix of group and one-to-one support to raise awareness of both innovative solutions and support available, and to guide them to identify innovation projects to reduce energy, carbon, or resource use.

Activities included events and workshops covering topic areas such as hydrogen, heat recovery, electrification, data collection and creating an innovation culture as well as signposting to grant and other support.  CLT worked with each SME individually to facilitate identification of innovation projects and introductions to relevant innovation ecosystem partners.

What were the outcomes?

All participants increased their understanding of the support ecosystem, finishing the programme with a much higher awareness of how and where to look for support.

Individual connections and introductions to the innovation ecosystem were made – including funding opportunities, links to universities, technology solutions and expert consultants.  

Most companies progressed along their innovation journeys, both by developing existing, or, for half of the SMEs, identifying new, potential innovation projects.   Some of the newly defined projects were highly creative and the learnings could potentially have impact across the sector.  Examples included a foundry that started a collaborative research project with Cranfield University to look at the impact of scrap metal parameters on melt times and energy use, and an SME that is switching from diesel to electric equipment and is working with an innovation partner to implement a battery storage solution to deliver peak load shaving, UPS and access to flexible tariffs to provide a base for progressive electrification of all its machinery.  The SME was also connected to the University of Sheffield to look at data analysis post-installation for ongoing electrification of operations.

What did we learn?

It was striking to see the creative ideas generated by the SMEs’ staff.  When given the opportunity, there was enormous capacity to identify innovative projects – some small, some larger.  Time and resource constraints typically create day-to-day barriers to harnessing this creativity, but with individual support to facilitate those ideas, most of the SMEs saw opportunities to switch fuel and / or reduce energy use.  The one-to-one advice was highly valued as it allowed CLT to match the SMEs with the right ecosystem partners.

Capital and resource constraints within SMEs mean that they tend to be conservative regarding innovation projects; robust evidence is needed before progressing a project to de-risk as much as possible, particularly when timescales for impact may be longer.  Many did not have energy metering in place, so did not have enough data to provide the confidence that a project would be focused on the highest-impact areas and to ensure payback.

The scope and scale of available funding opportunities were often not aligned to SME requirements.  There was one relevant funding opportunity that arose towards the end of the programme, with most too large in scale.  For SMEs where projects tend to be more incremental, even if innovative and risky, funding needs to match the scale of the projects.

By focusing in on specific innovation areas, and providing one-on-one support to SMEs, several projects are now in development, with relationships and connections with funders, innovators and research partners established. The programme has helped UKRI to understand the importance for SMEs of providing long-term support, matching funding to smaller project requirements and finding approaches to de-risk the innovation process for smaller businesses.

Natalie Fredericks led this programme on behalf of UKRI