On 17th September 2024 MidasDX ran a sustainability webinar in partnership with Bioregional, a purpose-led sustainability consultancy who have been helping businesses transition to a sustainable future for more than two decades. They support companies on net-zero, circularity, biodiversity, governance and wider ESG areas.
The webinar examined the business case for becoming a sustainable manufacturer, while also understanding that many businesses just don’t know where to start. We discussed the benefits of going green and highlighted practical steps to get started.
There are a number of so called “Megaforces” including climate change, urbanisation, population growth and ecological decline, that are putting pressure on resources including food, water, materials, and energy. With the manufacturing sector estimated to be responsible for ⅕ of global carbon emissions and over ½ of global energy use, in a global market with unstable supply chains and resource scarcity, the manufacturing sector needs to innovate and address these challenges.
The sector needs to develop efficient low-impact processes, embrace renewable resources, and adapt supply chains to manage risks, but these changes also offer huge opportunities. Over the long-term sustainable companies have been seen to outperform low-sustainability companies annually in terms of stock market returns, and have lower volatility [1].
In one meta-analysis, 88% of studies found that companies that adhered to social or environmental standards showed better operational performance, and 80% of studies showed a positive effect on stock price performance [2].
So what are some of the pitfalls?
No clear strategy or vision – Without knowing what you want to achieve, what you have to measure, and how you’re going to do it, how can you set out the actions you need to complete to get you there?
Not engaging your employees – By not involving them in the process, and not providing them with the skills to help transform your business, you will have an uphill battle to achieve your goals.
Overreporting – Without understanding your own scope, and your emissions, you deploy far more resources to gather information and report on areas you don’t need to.
Too much too quickly – The business tries to implement significant changes through the business in one giant project that grinds the business to a halt. You cannot do it all in one go, you need a step by step plan, an achievable plan, to ensure you can effectively embed the changes without detrimental effect on your business.
Regulations – The number of environmental regulations are increasing. Since 2018, in the UK alone, there have been updates to The Environmental Permitting Regulations, The Environmental Authorisations in Scotland was established, The Environment Act was established, Streamlined Energy and Carbon was implemented, and is likely to expand its reach soon. Companies listed on the London Stock Exchange have had to include climate-related disclosures on a "comply or explain" basis, and UK Sustainable Reporting Standards is Expected to be implemented in early 2025, which will unify and expand on existing sustainability reporting requirements. This is a lot for any business to understand, let alone implement and manage.
What can we do, and where should we start?
Carry out a COSIRI Assessment – Why? You need to understand where you are, and what you need to do. What is your current state? What are you already doing? What should you be doing? Where are the gaps? Where should we start? A COSIRI Assessment provides the answers to all these questions.
Embed sustainability into your business strategy – Don’t make sustainability a stand-alone exercise, make it part of everyday decision making. It has to form part of day-to-day activities. Changes to the equipment must consider how you manufacture the products, safety, capability, waste and energy consumption. This begins with the design of your product, to end of life.
- What materials? Virgin/non virgin materials?
- Design for disassembly. Can we reuse part/all of the product? How do we disassemble so the materials can be extracted?
- Who will supply the materials? Do they have sustainability credentials?
- How will we manufacture the product? What waste? What energy?
- How do we package them? What materials? Can we re-use or recycle the packaging?
- How do we ship them? What emissions are created? Do our distributors and logistics have sustainability credentials?
Focus on high impact areas – COSIRI will provide you with the 5 areas of greatest impact. Focus on these, and also the hotspots, the easy low hanging fruit with low cost and effort for high impact. This provides positive impact and quick wins, which drives the changes through the business.
What are some of the benefits?
Sustainability drives innovation in product design, materials, and manufacturing processes. This can lead to a competitive edge in the market.
Implementing energy-efficient processes can significantly lower costs, whilst reducing waste can support long term resource availability. Additionally, sustainable manufacturing practices look at diversifying suppliers and materials, to increase supply chain resilience. These can help your sustainability scores, but also help support the financial impacts.
Cost reduction – By implementing energy and resource efficiency measures companies can significantly lower operational expenses.
Risk management – Sustainable practices can help mitigate supply chain risks. For example, renewable energy can provide greater security and stability in energy supply. Adopting circular economy strategies increases a company's control over resources, reducing its vulnerability to impacts from socio-economic or political crises.
Recruitment and retention of staff – Sustainability is increasingly important to employees - especially younger generations. 71% of employees believe environmentally sustainable companies are "more attractive employers", according to a 2021 study.
Regulatory compliance and preparedness – Research by ESG Book Global demonstrates that sustainability regulations have increased by 155% in the last 10 years. Staying ahead of compliance requirements prevents companies from becoming overwhelmed with regulations and avoids potential fines or penalties.
Access to capital – Many investors now consider sustainability performance when making investment decisions. In 2023, four-in-ten British SMEs told Rimm Sustainability that having a strong sustainability approach can help to attract investment.
REFERENCES
[1] - https://www.mckinsey.com/capabilities/strategy-and-corporate-finance/our-insights/the-triple-play-growth-profit-and-sustainability
[2] - Clark, G. L. (2014). From the Stockholder to the Stakeholder: How Sustainability Can Drive Financial Outperformance. Oxford University Smith School of Enterprise and the Environment.
