Leading the Way: Italy Is Manufacturing a Greener Future

As the world’s number-one producer of luxury fashion, Italy is driving efforts to shift the apparel industry away from dependence on wasteful and environmentally damaging materials and disposable “fast fashion.”

Sicilian startup Orange Fiber is extracting cellulose from the peel of citrus fruits to create a fabric used in fashion items, including a range by Salvatore Ferragamo. Prada has vowed to use recycled nylon, with one scheme recovering nylon from discarded fishing nets. Clothes dye is being made from automotive and aerospace waste in Turin, while Valentino has launched trainers made from recycled and bio-based materials.

With bourgeoning expertise in sustainability, Italy is building a global reputation as a center for green manufacturing, which is helping to attract foreign investment. For example, among many other forward-thinking companies investing in Italy, French multinational Kering Group, the owner of Gucci, has made a significant investment in the Gucci ArtLab outside Florence to develop leather goods, new materials and metal hardware through sustainable innovation.

But it’s not just fashion with the promise of sustainability that is attracting overseas investors. A broad-based green transformation is sweeping Italy’s economy, turning the nation into a hotspot for foreign direct investment in a range of green industries and technologies.

Inward investors are increasingly seeking to meet environmental, social and governance (ESG) targets and ethical investment goals. As Italy’s economy moves quickly toward decarbonization and circularity, its desirability as an overseas investment destination is growing, and there are significant opportunities to invest in sustainable infrastructure construction, engineering, renewable energy, gas pipelines, waste management and the green economy.

This transformation to a sustainable, low-carbon economy is being driven by Italy’s National Energy and Climate Plan, which is mandating improvements in energy efficiency to ensure that 30% of the country’s energy consumption comes from renewable sources by 2030.

To achieve this target, nearly 350,000 Italian firms have committed to low-carbon production. The renewable energy industry is growing rapidly along with the extensive use of hydroelectric power and increasing contributions from solar, wind, biofuels and geothermal energy.

Italy is Europe’s leading circular economy, according to a report by the Circular Economy Network and energy-efficiency agency ENEA (Italy’s National Agency for New Technologies, Energy and Sustainable Economic Development). Through its National Recovery and Resilience Plan, the Italian government is investing over €2 billion in circular economy strategies to promote green infrastructure and boost the processes of recycling, reuse and repair.

Ranking first in production circularity among the major European economies, Italy also performs well in recovering industrial and urban waste, surpassing the EU target of 65% and recovering 79%, the best performance in Europe.

As global economies aim to hit sustainability targets, Italy’s manufacturing base is making significant strides in decarbonizing its energy requirements and implementing more sustainable methods of production. The Italian government’s Industry 4.0 plan has invested €18 billion into supporting advanced technology and is funding entrepreneurs and companies developing smart machinery. The switch to digital technology is also accelerating moves to promote energy efficiency.

The 4.0 plan’s tax incentives have boosted foreign and domestic investment, especially among SMEs. The number of greenfield investment sites built with foreign direct investment reached 230 for the year in 2021.

Hitting ambitious sustainable energy targets requires tremendous innovation in energy production and infrastructure. Italy is well-placed to achieve this as it is one of the top five countries for oil and gas pressure equipment exports, with strong production of heat exchanges, pressure vessels and related machinery—all essential to hit energy-efficiency targets.

Italy’s commitment to energy efficiency has been boosted with inward investment from clean energy group GemaTEG, which was founded in Seattle by a group of Italian engineers and specializes in thermoelectric systems to recover waste heat from data center servers. GemaTEG is boosting investment in its operations in Italy to strengthen its Perugia, Umbria operational headquarters and focus its R&D activities in Italy to take advantage of the country’s technical and specialized expertise, and the company plans to triple the number of employees at its HQ.

Meanwhile, Italy’s industrial and engineering expertise and gas infrastructure make the country well positioned to become a hub for green hydrogen, which can be generated using renewable energy and stored and transported using existing systems. As a green energy source, green hydrogen could provide up to a quarter of all energy in Italy by 2050.

Italy’s automotive sector is a key area for boosting sustainability and is undergoing a transition to green transport and manufacturing. New government initiatives are supporting this effort with purchase subsidies for electric vehicles (EVs), which have seen sales surge across Italy; in August 2022, sales of EVs were triple those for the same month in 2019. With €650 million in government funding through 2024, the Ecobonus incentive program offers car buyers €3,000 for an EV purchase and another €2,000 if they trade in a qualifying internal combustion engine vehicle.

Major car plants across Italy have announced plans to switch to renewable energy in their factories and to produce electric vehicles. The country is making a significant shift toward sustainability by increasing production of EVs and accelerating the installation of new charging points and other EV infrastructure.

Encouraging inward investment from overseas investors, sustainability is also helping to make the case for Italy’s export industries. Ambassador Lorenzo Angeloni, General Director for Country Promotion at Italy’s Ministry of Foreign Affairs and International Cooperation, says the nation’s enterprises are facing the challenge of both the green and the digital transitions, which are essential for them to be competitive in Italy and in international markets.

“That is why we chose digitalization and sustainability as strategic axes and drivers of our strategy of public export promotion,” he says. “The encouraging results of our exports in 2021 showed that, with the adoption of these measures, we are going in the right direction. Our goal is to continue along this path, remaining alongside our companies looking for new business opportunities in foreign markets.”

The country’s BeIT nation-branding campaign is promoted by the Italian Ministry of Foreign Affairs and International Cooperation (MAECI) in collaboration with Italian Trade Agency (ITA). It ran globally in 2021 and 2022, promotes the Made in Italy brand and the contribution of sustainability. The campaign includes a tie-in with Treedom, the world’s first platform allowing users to plant a tree remotely and follow the story online. Since its foundation in Florence in 2010, more than 3 million trees have been planted in Africa, South America and Italy.

Overseas investors keen to buy into a rapidly transforming economy that is leading the way toward sustainability inevitably look to Italy. With its prowess in fashion, luxury goods, manufacturing and energy, the nation is buzzing with innovation and enterprise, and is rapidly becoming one of the world’s leading hubs for sustainable investment.