The integration of energy-efficient technologies, carbon offsetting, renewable energy sources, and digitalisation are pivotal to achieving sustainability, writes Dr Eoin McCarthy, manager, R&D Incentives Practice, KPMG. 

From the exploration of hydrogen mining to the extraction of solar energy in outer space for terrestrial use, to the utilisation of electrically driven biological production, there are a myriad of disruptive innovations in the race to develop clean, sustainable, renewable and alternative sources of energy.

While these visionary concepts unfold, substantial efforts within the manufacturing sector are under way to incorporate green or greener technologies seamlessly into existing infrastructure. So how is Ireland placed in the race towards achieving net zero, what supports are available to fund the change, and how is RD&I strategy setting the foundation for the shift to green?

Ireland has a diverse manufacturing sector across the technology spectrum, with life sciences and medical technologies representing our biggest sector from a net selling value perspective. These vital industries are also energy and material intensive and represent significant opportunity for carbon abatement and improved energy efficient production.

A key challenge lies in the complexity of manufacturing technologies and developing robust energy efficient technologies that deliver reduced energy usage, production efficiency, and capacity for increased demand.

Ireland’s performance

Ireland's climate performance, captured in the Climate Change Performance Index (CCPI)¹, has seen positive improvement, rising nine places in 2023.

Despite this progress, the nation remains categorised as 'low-performing', with notable weaknesses in Climate Policy and GHG Emissions. However, Ireland is acknowledged as a transition leader in the EU's Transition Performance Index², second only to Denmark.

Our place as a transition leader is being driven by our ambitious RD&I strategy defined under Impact 2030. The recently published Impact 2030 progress report³ shows significant progress across all pillars with a particular focus on Ireland RD&I strategy around sustainability.

From an infrastructure, skills base and government policy perspective, Ireland is well positioned to develop and implement robust structures to improve sustainability in our manufacturing sector leading towards 2050. It is important to drive the innovation agenda and maintain our aggressive approach throughout the lifetime of Impact 2030 and beyond.

Delivering innovation

A pivotal catalyst to delivering the Impact 2030 vision is systematically managing the innovation process through the TRL scales, with a clear focus on the deployment of usable technologies that ideally cross-cut the manufacturing sector where possible.

The new ISO 56000 series, designed to define and support 'Innovation Management Systems', has been recently developed and will be an important lever empowering companies to streamline and obtain the best value from their innovation pathways.

It will provide the tools and methods to bring important sustainability technologies to fruition as quickly as possible. We expect the ISO 56000 series to emerge as an important benchmark for companies in Ireland with the IDA, Enterprise Ireland and the NSAI actively driving the agenda.

Undoubtedly, going green is incredibly challenging. Attaining the levels of sustainability will demand significant R&D across the technology spectrum. This paradigm shift presents significant challenges for companies technologically and financially, accompanied with great opportunity, and it is vital that companies assess national funding opportunities to de-risk and support their sustainable transformation.

R&D supports: Tax benefits for Ireland-based manufacturers

Companies based in Ireland can maximise the benefit from their R&D activity through the R&D Tax Credit, a valuable tax-based incentive giving 25% credit on qualifying R&D expenditure in the science and technology areas.

For companies that already claim the credit or those that are interested in claiming, it is important to realise that R&D for tax purposes often captures a larger breadth of activity than you might have expected. This is an important lever to maximising your opportunity, and our R&D Incentives Practice has significant expertise in mapping complex projects for RD&I incentive purposes.

The drive to sustainability may have the biggest influence on our SMEs, from a risk exposure and opportunity perspective. We expect to see the emergence of SMEs carving the path in developing technologically enabled sustainable approaches, and an increase in disruptive technologies.

In Budget 2024 two important enhancements to the R&D Tax Credit were announced. The first enhancement is an increase in the rate from 25% to 30%. This increased rate is available to all claimants, regardless of company size. This change is one of the most consequential changes made to the R&D Tax Credit in the last 15 years.

The second enhancement is a doubling of the amount of R&D Tax Credit available to be refunded to a company as part of its first year R&D Tax Credit payment. This has increased from €25,000 to €50,000. This change is designed to provide quicker access to funding. Coupled with the increase in the rate of the credit to 30%, the acceleration of the repayment aspect of the R&D Tax Credit will positively impact our SME sector.

Sustainability RD&I opportunities

In addition to the R&D tax credit, there are several key funding streams that can part-finance the transition to more sustainable production. The Sustainable Energy Authority of Ireland’s EXEED programme focuses on supporting energy-efficient capital projects, with up to €1m available per project.

The Disruptive Technology Innovation Fund, not specifically for sustainability, but may be leveraged for more ambitious projects, which has funded 91 projects totalling €306m to date. The DTIF call 7 will open in early 2024.

The Green Transition Fund is a €55m fund to support companies across each of the different aspects of their decarbonisation journey, from initial planning and capability building to investment and R&I. There are also many more funding mechanisms through Enterprise Ireland, Environmental Protection Agency, and the IDA⁴.

On the EU level, Horizon Europe offers ample funding opportunity with 42% of the 2023-2024 work programme's budget dedicated to reaching key climate action objectives, finding innovative solutions to reduce greenhouse gas emissions, and adapting to climate change. Ireland punches above its weight in attracting EU funding. Leveraging these skills to finance our sustainability goals is critical.

The 'European Institute of Innovation & Technology' manufacturing programme focuses on the environmental and economic sustainability of manufacturing, as well as on opportunities within the LIFE and Innovation Fund mechanisms.

The challenge with EU funding is the administrative burden involved in preparing an application and the extremely low success rates – a little less than 16% of Horizon Europe proposals are successful, and 71% of high-quality quality proposals go unfunded⁵.

Achieving our net zero goals will be extremely challenging and rewarding. It is a long-term strategy requiring significant short to medium-term buy-in. As the momentum for transformative change intensifies, opportunities are emerging for our manufacturing industries, and now is a critical time to ensure you are positioned to maximise the benefits that can support your development work. 

Biopharma case study

The biopharmaceutical commercial and clinical supply chain exemplifies the intricate and multifaceted challenges associated with enhancing sustainable production. The first challenge is that of geography – end-to-end drug substance production often spans multiple jurisdictions.

The biopharma industry is, like many, international, with the movement of materials between sites and suppliers often located large distances apart. We have seen real examples, in practice, of co-locating R&D, production, sterilisation, and processing facilities to maximise efficiencies, the byproduct being reduced logistical Green-House Gas (GHG) emissions.

The bigger picture is that production of biological derived APIs requires the use of multiple complex and sensitive raw materials, technologically advanced production and analytical equipment, advanced building envelopes, production areas, testing laboratories and storage facilities, as well as substantial volumes of single use consumables – all of which are energy hungry.

There are also the challenges of processing complex waste material. For context, a generic 2000 L single use process was shown to generate 22.7 tonnes CO2 eq per 1kg of drug substance produced.

In recent years there has been a significant step change with the adoption of Industry 4.0. The development of digital manufacturing execution systems, continuous production, and real time process analytics will be a key lever to implementing sustainability and measuring its performance. However, achieving net zero in the biopharma industry, like many, will inevitably result in new demands on already complex production processes.

From a materials perspective, developing sustainable raw materials will require significant work to requalify the use of new materials and understand how these could impact product quality, and possible regulatory ramifications.

If we consider the production equipment – implementing new production technologies that deliver improved energy usage must also ensure product quality is maintained and enables future expansion capacity – scalability coupled with efficiency is key.

Developing efficient support infrastructure will also be important, from the use of renewable energy sources, to capturing and reusing energy byproduct such as heat.

The clinical supply chain is also an important element in the sustainable life cycle analysis, which often requires the maintenance of a cold supply chain. How might a formulation containing a sensitive large molecule API, buffer, preservatives, surfactants, excipients etc be modified to enable ambient storage without degradation or denaturing? 

Generally, emissions in the manufacturing sector are considered particularly difficult to abate, mainly due to the long life times and expense of the key infrastructure.

Long infrastructure life times are particularly pertinent as the 'Climate Action and Low Carbon Development Act' aims to reach net zero greenhouse gas emissions by 2050, which is frighteningly close given the scale of the challenge and may only be three or four investment cycles away. Now is the window of opportunity to develop innovative near-zero-emission industrial technologies.

Author: Dr Eoin McCarthy, manager, R&D Incentives Practice.

In KPMG’s R&D Incentives Practice, we have significant experience in identifying the right approach across the varied funding mechanisms and can add value to your RD&I. Go to kpmg.ie/RandD to find out more. 

References

1) Climate Change Performance Index (CCPI) 2023 - https://ccpi.org/

2) Transitions Performance Index (TPI), 2022, https://research-and-innovation.ec.europa.eu/strategy/support-policy-making/support-national-research-and-innovation-policy-making/transitions-performance-index-tpi_en

3) Impact 2030: Ireland’s Research and Innovation Strategy, First Annual Progress Report May 2022 – May 2023, DFHERIS.

4) Funding Sustainable R&D, 2023, https://kpmg.com/ie/en/home/insights/2023/03/funding-sustainability-rd.html

5) Horizon Europe strategic plan 2025-2027 analysis, May 2023, European Commission.