Increasingly, organizations are finding that aligning core business strategy with the principles of sustainability can differentiate them in the marketplace, drive operational efficiency, as well as business innovation and help manage risk. This corporate sustainability effort is focused on the integration and management of issues beyond traditional economic performance.
Though there are common issues of concern for all organizations — such as energy use and efficiency — there is no “one size fits all” solution or program that can address the unique sustainability challenges and opportunities facing an organization. Every business is different in terms of culture, markets and overall business model. While there is no simple playbook, there are best practices and approaches to consider.
Here are some of the important strategies and perspectives manufacturing companies should keep in mind when discussing the potential fit of a sustainability program:
No. 1 - Determine your focus areas and the “material” issues to know where you are heading
Sustainability goes well beyond philanthropic activities and green team initiatives to address more fundamental financial, operational, and risk drivers for an organization, such as resource efficiency and cost reductions, selling of products or services, and brand reputation. Setting up a sustainability program and supporting initiatives begins with identifying the most important, or material, issues for the organization, then establishing a baseline, identifying risks and opportunities, working with stakeholders and being aware of your place in the industry. This leads to a customized view of sustainability and business operations. This picture is crucially important because sustainability covers so many issues and organizations cannot tackle it all. The best performing organizations acknowledge their position and exert their influence where it is most material.
Manufacturers must be aware of what challenges will be most harmful to their business community and network. Awareness of these challenges also represents opportunity. For example, reducing greenhouse gas (GHG) emissions is a common goal amongst many manufacturers. Energy use and resource efficiency can be the most material ways in achieving significant reductions. Not only does this result in improved business metrics for your organization, it also represents positive impacts for the wider community.
No. 2 - Take the time to truly assess and evaluate your program areas to determine impact and improvement potential
The first step in advancing your company’s sustainability performance is an awareness of where it currently stands.
Completing a baseline assessment allows companies to understand their current performances in many key areas and simplifies the monitoring program impacts going forward. Conducting a baseline and assessing program areas involves collecting available information, calculating rates of resource consumption and identifying sustainability opportunities and challenges year-on-year.
We recently worked with a client to set up a sustainability program and developed a Sustainability Report in accordance with the Global Reporting Initiative (GRI) reporting requirements. The project included a materiality assessment review, report action plan, alongside identification and evaluation of GRI G4 Aspects. By starting with data collection on the material impacts of the organization, the client was then able to use the data to identify the risks and opportunities facing their operations bespoke to their business areas.
No. 3 - Identify and plan for risks
Now that you have identified that sustainability means a triple bottom line, considering environmental, economic and social outcomes in the context of your organization, where do you go from there? What do you focus on next?
Understanding where your operations deliver the biggest impacts and what hazards pose the greatest threats to your business is not a new activity, but today the challenges are becoming more complex and further reaching. Identifying risks and completing appropriate sustainability assessments will help you implement action and resilience plans to address those issues, whether those may include physical risks such as supply chain or business disruption from flooding or severe drought, or reputational or market risks such as inadequate performance on environmental, social, and governance (ESG) disclosures to investors or clients.
No. 4 - Develop an effective management program and implementation plan
One of the greatest outcomes of sustainability planning is the summary of risks and drivers for a manufacturer’s area of interest, ranging from regulatory compliance to innovative forward thinking campaigns and programs. These results can be used by key decision-makers to inform the brand’s enterprise strategy and sustainability initiatives.
An organization’s sustainability plans and initiatives can be achieved in different locations within its operations such as reducing energy consumption or waste output, developing new sustainable product or service offerings, or improving the supply chain with circular economy principles. But in all cases, if your program focus areas are not treated as a management issue they will simply not be well managed. This means developing strategies and action plans which include implementation tactics, budget or resource needs, schedule, and communication procedures.
No. 5 - Commit to reporting on sustainability in a way that aligns with your organization
The sustainability report has become a seemingly ubiquitous phenomenon, but in many ways, too much attention is paid to this effort with relatively insufficient effort invested on the reporting and management that goes on behind the scenes. A sustainability report can be more than just a pure communication exercise and is increasingly being done in a brief, digital format. Ideally, the reporting effort should align the interests of those in the company that are tasked with implementing sustainability initiatives and monitoring performance with the company’s communication, marketing and public relations functions.
Making sustainability a core business driver has been an imperative for several years now, and in manufacturing it has a strong business case. The great challenge (and opportunity) for manufacturers is to understand what role sustainability plays in their organization and how it can be strategically integrated. Understanding organizational capabilities, setting goals and implementing management processes will ensure the success of sustainability initiatives. Reporting will act as your "measuring stick" when assessing progress towards your stated ambitions. Those companies that have been most successful in finding value in sustainability have gone beyond traditional efficiency (i.e., cost saving) projects and integrated it throughout the value chain and have found ways to embed it within the core competencies of the organization.
Craig Riley is a Corporate Advisory & Sustainability Services Leader at AECOM, DCS Americas.