Effective ESG reporting is rapidly becoming a key influencer in business performance management strategies as manufacturers realise its impact on the bottom line and value creation for stakeholders. Sixty percent of UK businesses are already setting long-term ESG targets, but there’s much more to it than this. In this blog I'll explain how easy it is for manufacturers to use ESG data accelerators to fast-forward their ESG reporting strategies, unlocking new business growth opportunities.
A recent survey highlighted the importance global business investors place on ESG performance, as over 80% of C-suite executives and investment professionals would be willing to pay around 10% more to invest in a company with a positive ESG record compared to a negative record. This is being reflected amongst UK based companies with 40% of respondents in a recent survey stating they have established dedicated ESG departments, compared to only 24% in North America.
But without the right expertise and IT software, manufacturers are just not able to gather the required ESG data to streamline operations, increase sales, and accelerate profitability. Effective ESG reporting will allow manufacturers to unlock a wealth of business opportunities, including collaboration, attracting, and retaining a skilled workforce, and also meet the increasing customer demands for corporate sustainability commitments.
ESG reporting 101 – it must be up to today’s challenges
So, what exactly is ESG reporting? It’s the gathering and disclosing of data on a manufacturer’s environmental, social, and governance activity. This data disclosure can be key to gaining the trust of key stakeholders such as consumers, suppliers, financial associates, and the government to help them understand a manufacturer’s commitment to ESG projects and goals.
But corporate compliance and risk management are also at the forefront of many manufacturing organisations as the industry becomes more complex and geopolitical volatility increases. So ESG reporting must be a flexible tool for manufacturers to enable them to overcome sustainability challenges and all the while, demonstrate their sustainability values and objectives.
For this data to appeal to stakeholders, manufacturers need to set out clear ESG strategies, which will get the buy-in and commitment of everyone in the business – from the top managers to those on the factory floor. ESG strategies need to be clearly set out and explain how they can be achieved in order to help the wider organisation understand the key drivers, opportunities, and risks of becoming more sustainable.
Fragmented data needs advanced data collection tools to bypass complexities
One of the biggest challenges that over 70% of companies reportedly face with their sustainability data is data fragmentation and a lack of comprehensive data when it comes to environmental and social impacts. This is where advanced data collection systems can help manufacturers collect, analyse, and visualise their ESG data to make it easier for interpretations to be made.
As regulations are not yet in place, many manufacturers will need to start tracking data from different sources to meet future ESG regulations. As highlighted in a recent Deloitte report: Manufacturers “…didn’t set up their operations to gather this information… They didn’t start projects expecting this data need, they don’t have the track record, they don’t have the systems, they don’t yet know how they will do it.” So, where does that leave ESG data tracking?
ESG data accelerators – easy to install, quick to collect
Manufacturers can look to implement autonomous technologies such as ESG data accelerators, IoT sensors, and machine learning so that internal resources are not stretched. These advanced tools allow manufacturers to gather ESG insights that measure and monitor their ESG reporting and ratings. Manufacturers can look to co-operate and share infrastructure both externally and internally in order to leverage stock data that optimises total inventory, reduces over production, and consumption – helping manufacturers to avoid unnecessary waste and cut down on carbon emissions across the entire supply chain. But how can manufacturers pinpoint the exact areas for further sustainable change?
Dashboards keep the business finger on the ESG pulse
For ESG reporting to benefit manufacturers, a data dashboard is required so that all data can be visualised and interpreted by every area of the business. This allows for strengths, weaknesses, opportunities, and threats to be identified along the manufacturing supply chain, which ensures continuous improvements and can help businesses gain a competitive edge.
Legal frameworks go green
Currently, there are very few ESG laws or regulations in the UK. At present, the Companies Act is the only regulation that discloses ESG requirements. This regulation ensures companies that have 500 employees, or that exceed £500 million in annual revenue, report their energy usage and carbon emissions. But the ESG guidelines don’t end there. The UK will shortly follow in the footsteps of EU legislation, with regulations being introduced such as the Streamlined Energy and Carbon Reporting (SECR) and the UK Sustainability Disclosure Standards (UK SDS). So how can manufacturers get ahead of this ESG regulation wave and minimise disruption?
Witness what happened in the EU with their European Sustainability Reporting Standards (ESRS) as a roadmap for how ESG reporting can ensure sustainability compliance. ESG reporting tools, such as ESG data accelerators, can identify gaps in data for reporting and provide insights into how manufacturers can match the ESRS requirements, helping organisations to avoid future problems with data fragmentation.
Listen to the calls for sustainable action to create a greener bottom line
Customer and employee demand for corporate commitment to the environment and sustainability is on the rise in manufacturing.
Nearly one-third (32%) of consumers would trust brands more if they had a transparent, accountable, and socially and environmentally responsible supply chain. But it’s not just customers holding manufacturers accountable.
A recent global survey highlighted that internal stakeholders are pushing the green initiative too. Employees would rather work for an organisation with a positive ESG profile – and this is where an ESG data accelerator service comes in. An effective accelerator can turn raw data into reportable data to help employees visualise the impact they are having on the organisation achieving their sustainability efforts.
An effective ESG strategy is bound to see manufacturers increase their brand reputation and customer collaboration opportunities through matching these sustainability demands, as customers are more willing to work with and buy from sustainable organisations.
It’s a win-win situation for manufacturers
A commitment to sustainability and improving ESG reporting can also help manufacturers win over financial investors, as many are now taking note of a company’s commitment to sustainability and ESG score when deciding to provide funding. This investment in sustainable infrastructure will see ESG reporting improve and deliver a high return on investment (ROI) in the long term.
However you look at it, ESG data accelerator services will unlock unprecedented business growth and bring both short and long-term financial and business benefits.
Interested in learning more about this topic?
Ian Kingstone is delivering a speaker session at Smart Factory Expo on 5 June 2024 at NEC Birmingham titled 'Turning Green into Gold: How manufacturers must harness ESG for both the planet and the bottom line'.
Sign up to attend using the button below.
