When it comes to sustainability in manufacturing, the future is now.
According to the 2023 State of Smart Manufacturing Report, sustainability and environmental, social, and governance (ESG) have moved into the manufacturing mainstream. Over 95% of respondents stated they have a sustainability and/or ESG policy over the last two years, whether formal or informal.
That likely means your company already has a sustainability program or has one in the works. Whether your operations already benefit from the data you gather for sustainability requirements or you’re still searching for technology that will digitize the data you need, one thing is certain: manufacturers must be prepared to move sustainability efforts forward.
For a foundational understanding, let’s look at the EPA’s definition of sustainable manufacturing: “Sustainable manufacturing is the creation of manufactured products through economically-sound processes that minimize negative environmental impacts while conserving energy and natural resources. Sustainable manufacturing also enhances employee, community and product safety.” With this mentality alongside changing regulations and growing consumer interest, ESG criteria and reporting has emerged to measure a company’s sustainability and disclose information around those and related practices internally and externally.
The Benefits of ESG and Sustainability Strategies
The State of Smart Manufacturing report also shows that companies with formalized ESG or sustainability programs are more likely to have higher revenues (86%) compared to their counterparts in the medium revenue (80%) or low revenue (68%) brackets. However, trends indicate the increase in regulations and requirements from upstream and downstream suppliers will put pressure on all manufacturers, particularly when considering reporting demands around scope 1, 2, and 3 emissions.
What’s driving the change? Even though manufacturers are surrounded by intensifying regulations, those new rules are not always what pushes a company into embracing sustainability.
In 2022, fostering a collaborative environment and addressing social inequalities were the primary factors for pursuing sustainability and ESG policies. Over the last year, manufacturers’ priorities evolved, and the top reason cited was to improve efficiencies, a trend which suggests that sustainability is now recognized for its operational improvement capabilities and influence on the bottom line along with the positive social impact.
Other reported motivating factors driving manufacturers to pursue ESG and sustainability include:
- 42% — Improve efficiencies
- 41% — A competitive differentiator
- 38% — To address potential environmental issues before they arise
- 35% — To build our presence in the community
- 35% — Fosters a collaborative environment
- 32% — It’s good for the bottom line
- 30% — To address social inequalities that may suppress talent in the workforce
- 23% — Pressure from investors
Normalized by the world’s largest corporations and driven by new or strengthened regulatory frameworks, sustainability efforts are expanding for a wide variety of reasons. When asked what matters most to their organization’s ESG/sustainability program, survey respondents revealed the growing attention on the “circular economy,” which is based on eliminating waste and pollution by designing products and processes to maximize efficiencies and extend product life with a particular focus on repair and reuse.
Formalizing ESG and Sustainability Reporting
Regardless of the reasons for taking action to increase its sustainability, a company won’t be recognized as successful in its pursuit unless it can meet ESG reporting requirements. This is where smart manufacturing can help. Smart manufacturing solutions deliver the data that sustainability reporting demands. Importantly, monitoring this data is prompting manufacturers to take a closer look at their processes, ultimately leading to new efficiencies that can benefit the areas that manufacturers told us matter most, from product quality to diversity.
The State of Smart Manufacturing Report respondents say they need more data and a better way to harness its power. In fact, 40% more manufacturers say they lack the ability to use data to make decisions to outpace the competition compared to last year. Today’s smart manufacturing software solutions deliver monitoring, cloud, analytics, reporting, and more to better manage how a manufacturer uses water and energy and deals with waste.
Whether your company’s sustainability efforts are going smoothly or just getting off the ground, the time is now to explore the benefits of having digitized data. Smart manufacturing software is helping companies get ahead of sustainability requirements, use newly found efficiencies for positive change enterprise-wide, and create a competitive advantage.
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