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Responsible and sustainable manufacturing – easy as ESG?

  • Posted on February 17, 2022
  • Estimated reading time 4 minutes

I’m often talking with manufacturers who are thinking about investing in technology to become more sustainable. It’s clear from these conversations that a key challenge is agreeing on the scope of sustainability. To address this issue, I’ve broadened the focus from sustainability to responsible manufacturing.

Often scoped as environmental, societal and governance (ESG), responsible business (or responsible manufacturing) discussions go beyond traditional notions of green or sustainability.

In my opinion, to enhance your digital investment strategy, it’s best to consider the three ESG areas separately when talking about responsible and sustainable manufacturing. The following sections highlight how manufacturers are enabling positive change and becoming more responsible across these three areas:

Environmental – Resilience starts at “Green for Go”
A great example of using the latest technology to support sustainable production is thyssenkrupp Materials Services. The company uses data to help strike a delicate balance between operations and optimal steel production.

Manufacturers, already reeling from the impact of COVID-19, are building resilience within their operations and creating a scalable foundation for the future. Clearly the challenge for manufacturers to be more environmentally friendly (or sustainable) is real. For example, 20% of new customers ask about a product’s carbon footprint before purchasing, yet 32% of manufacturing executives don’t consider carbon emissions when sourcing a new part or developing a new product.

Greener manufacturing solutions include implementing circular business models, modernizing inefficient operations, addressing continually changing supply chains and accelerating resilient production of sustainable goods and/or services.

Societal – Empowered people drive change
To ensure that manufacturers have the necessary production capabilities and positive working environments and address the demands of today’s consumers, they need to enhance digital skills, ethical working practices and workplace safety. The modern manufacturer looks very different from the manufacturer of even a few years ago, especially with hybrid working, which is being driven by several factors. Firstly, health and safety and the well-being of workers is being aided by digital solutions as manufacturers try to embrace new working practices.

Secondly, the war for talent in manufacturing is driving digital knowledge transfer, upskilling, and cultural change for a diverse and ethically sound workforce so that manufacturers can attract and retain the best people. It’s clearly a challenge; consider that 57% of manufacturing leaders feel their organization lacks skilled workers to support smart manufacturing digitization plans. The University of Wales Trinity St David (UWTSD) is embracing this challenge and rethinking the future of manufacturing using immersive technology to upskill the next generation of workers.

Governance – Compliance at scale requires agility
Manufacturers today are continually changing. Factors such as corporate social responsibility; executive orders for secure, sustainable and resilient supply chain management; and industry regulations require manufacturers to have the flexibility to renew and grow with the needs of today’s society. For example, by 2025, 90% of Global 2000 companies will mandate reusable materials in IT hardware supply chains, carbon neutrality targets for providers' facilities and lower energy use as prerequisites for doing business.

The VentilatorChallengeUK is a great example of manufacturers helping society by rapidly adapting and collaborating at scale to produce 10,000+ ventilators in 12 weeks, to help save lives.

I started this blog by suggesting that we define sustainability using an ESG framework, but there’s more to consider. In a perfect world, every company would do the right thing simply because it was right — but socially responsible manufacturing also makes good business sense. According to Accenture research, companies with high environmental, societal and governance performance have outperformed their peers, achieving 3.7 times higher operating margins and generating 2.6 times higher shareholder returns.

In the future, when someone asks you if you’re investing in sustainability, it may be worth you asking them for a little more detail about where and why they’re looking to make a difference.

If you need help understanding where you are on your responsible manufacturing journey, let us know. Our digital manufacturing solutions use an ESG framework and holistic approach to responsible manufacturing.

Visit this page to learn more about how Avanade prides itself on helping our clients make a genuine human impact.

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