Corporate sustainability initiatives, net-zero targets, scope 3 emissions and ESG regulations are topics that plant personnel should pay attention to and learn more about.
Learning Objectives
- Understand how sustainability has grown as a must for manufacturers.
- Learn about some of the voluntary and involuntary measures companies can learn about their sustainability initiatives.
- Understand the positive benefits of sustainability short- and long-term.
Sustainability insights
- Sustainability is no longer just a buzzword; it’s a strategic imperative driven by consumer demand, investor pressure and evolving economic mindsets toward responsible corporate practices.
- From voluntary reporting to regulatory compliance, companies navigate sustainability through partnerships, remanufacturing and quantifiable metrics, reshaping operations for long-term viability and environmental stewardship.
With an increased focus on sustainability in much of the world, companies are progressively under more pressure from their customers, shareholders and investors to “be more sustainable.”
However, people struggle to understand what that means and how it pertains to their daily lives. More recently, there has been an accelerated shift in economic mindset to recognizing the importance of doing what’s right for the environment and distancing away from the traditional economic/corporate mindset, popularized by Nobel Prize-winning economist Milton Friedman in the early 1970s, that the sole objective of a company is to maximize shareholder value.
Companies today are understanding the critical role they play, in not only maximizing shareholder value, but also doing so in a responsible manner through environmental and social engagement. Not only is this the ethical thing to do, but it helps to attract new customers and retain old customers
Regulations Are Growing
With corporations having such a large and sometimes global footprint, they need to understand the impact they are having at the intersection of society, environment and business. This can be measured in several different ways.
There are two kinds of sustainability measures: Voluntary and involuntary. Voluntary reporting often includes third-party auditing companies scoring and ranking sustainability efforts, which in turn can be provided to customers. This can be good marketing for companies with favorable ratings.
Such sustainability organizations like EcoVadis and CDP send out these surveys annually with questions about energy efficiency that drill down even to the plant engineering level. Depending on the score given to a company’s sustainability management system by EcoVadis, the company may be able to promote its platinum, gold, silver or bronze rating, or a badge. A company may then take measures to improve these rankings.
CDP is a charitable organization that runs a global disclosure system used by investors, companies, cities, states and regions to manage their environmental impacts. A scoring system is published once a year in various categories, with companies vying to be given a favorable ranking.
Involuntary reporting moves into the realm of governmental regulation. In Europe, there is legislation called Ecodesign for Sustainable Products Regulation (ESPR) that will replace the current EU Ecodesign Directive to introduce more extensive requirements for more product groups, requiring companies to report on emissions or risk being fined.
Within the United States, the U.S. Securities and Exchange Commission (SEC) has proposed a rule that would require publicly listed companies to disclose a range of climate-related risks that could affect their business. This is known as the SEC climate disclosure rule.
Carbon emissions result from various sources across a company’s value chain; monitoring emissions can help a company understand its carbon footprint. Common practice is to categorize this work into three categories based on the Greenhouse Gas Protocol scope system developed by the World Resources Institute:
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Scope 1: Direct emissions resulting from the company’s activities within its own “four walls”
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Scope 2: Indirect emissions such as energy/utilities directly sourced for the benefit of the company
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Scope 3: Greenhouse gas emissions, such as carbon dioxide, across the company’s upstream and downstream supply chain.
According to this World Economic Forum report, scope 3 emissions, which account for more than 70% of industries’ greenhouse gas (GHG) emissions on average, represent a critical challenge. In 2024, the requirement to disclose scope 3 emissions was removed from the original draft of the SEC climate disclosure rule, but this would deviate from European Union rules that make scope 3 disclosures mandatory for large companies beginning in 2024, complicating compliance for some global corporations.
One way to address scope 3 emissions is to foster new value-chain relationship dynamics. There is a large opportunity to examine the supply chain and choose the more ethical and sustainable option, all things being the same. Companies may want to look for valued partners with a similar mission and vision.
Whether companies change their processes internally or use suppliers that help them meet their sustainability metrics and commitments, it’s all a step toward a more circular and equitable economy in which restorative and responsible processes keep waste at a minimum through reuse, repair refurbishment and recycling while reducing the carbon and environmental footprint.
Environmental impact and corporate reputation
Consumers are voting with their dollars. If companies are on the wrong side of a given social issue, their business can be impacted almost overnight. If today’s environment is a public relations state where the smallest thing can reverberate through a company, it’s important to pay attention to environmental impact. Responsibility for sustainability has expanded from corporate operations to the plant floor. For example, companies who take a “fix-it-first” or “repair-first” strategy are asking their plant operators to consider sending their already owned assets back to the original manufacturer for repair/refurbishment rather than buying new ones.
Plant managers and individual contributors work toward the goals of the overall company, and companies today are carving out new groups or organizations within their operating base to focus on sustainability. For example, from an environmental health and safety standpoint, firms may be required to report on certain metrics and operational ways of doing business.
Going beyond regulatory compliance, another important reason that sustainability matters is company employees work in the communities in which they live. They should care about keeping the community clean and safe through reduced energy usage and carbon emissions. Resource conservation and pollution prevention provide a legacy that extends beyond the organization.
Companies are being more vocal in their sustainability commitment, with two-thirds of Fortune Global 500 companies making a significant climate commitment.
According to ClimateImpact.com: “Reducing emissions pays off both environmentally and financially: companies that reduced reported emissions year over year earned on average nearly $1 billion more in profit per company than their Fortune Global 500 peers.”
Prolonging asset life with cost savings
Making a quantifiable impact doesn’t necessarily have to mean big operational changes or capital investment. Fortunately, there is an easy and sustainable way to prolong the life of production assets in a plant: Leverage remanufacturing services to repair assets to like-new condition and keep production up and running.
The International Resource Panel estimated remanufacturing preserves 85% of energy expended and uses almost 90% fewer raw materials than the production of the original product. Manufacturers should look for repair partners that use genuine parts, offer advanced testing capabilities and have years of experience.
With electronic waste accounting for 2% of solid waste streams but constituting 70% of hazardous material in landfills, confirm the repair partner has appropriate end-of-life or disposal policies for e-waste. For example, if they can reduce landfill dependency by recycling a significant portion of the repair process waste stream, repair vendors can help support their customers’ sustainability goals.
Some suppliers also offer repair and inventory agreements to help a company focus on its greatest obsolescence risk areas, streamline its parts inventory and provide cost savings through the bundling of repairs.
A recent development offered with some repair agreements is a tool that helps quantify and provide metrics on the impact customers can have by repairing industrial automation assets vs. buying brand-new products. What can be measured can be managed. For example, if there is no gas gauge in a car, it’s difficult to know when the tank needs filling, and whether the mileage is good or bad.
A repair and sustainability dashboard can help tell the story by inputting the product type, dimensions and weight, and calculating how much carbon emissions would be saved by repairing that product vs. replacing it. These sustainability metrics (including cost savings) can be reported back to appropriate business units in the company, helping to measure how the company is reducing scope 3 emissions and meeting corporate sustainability goals.
It also is important to understand the planet’s resources are limited. Gone are the days where the traditional linear economic model and culture was “take, make and waste.” New and better economic models and principles around circularity are needed and a circular economy loop can prolong the useful value of industrial automation products.
Efficient and effective operations
Sustainability initiatives are at play in the corporate world. It’s important to understand and be open to the concept of global environmental management because the requirements are only going to increase. If legislation hits tomorrow, companies will be required to report on metrics like scope 3 emissions, whether that legislation is enacted next year or 10 years from now. Plant personnel also need to understand the basics and know how they can move the sustainability needle in their positions, and how it connects back up to the corporation’s larger goals.
Partnering with a trusted, sustainable supplier can help organizations improve at the plant operations level by increasing machine reliability, optimizing production operations, increasing material efficiency and reducing manufacturing waste. Companies should look for a partner that enables customers to achieve their own sustainability goals to make a positive impact on the world.
