The 2022 State of Smart Manufacturing revealed the brittle nature of systems, processes, and supply chain solutions that had historically measured as “good enough.” In fact, the 2021 and 2022 State of Smart Manufacturing Reports made clear that the pandemic exposed and exacerbated pre-existing conditions that manufacturers had previously tolerated or used band-aid solutions to address.

Gerry Abbey, Rockwell Automation’s Product Marketing Manager: Plex Systems, explains that this year’s respondents overwhelmingly demonstrated the increasing focus on sustainability and environmental, social, and governance (ESG) policy. Motivated by the desire to show better stewardship, community leadership, and even competitiveness, ESG emerged as a must-address policy.

The State of Smart Manufacturing: ESG & Sustainability Edition explores the critical role smart manufacturing plays in driving ESG and sustainability success in manufacturing – and how, together, they can help solve some of the biggest challenges manufacturers are facing. 

ESG Is Good for Business

Sustainability and ESG policy is growing in importance across all industries. The public concerns around climate change, social justice, and corporate responsibility, including increased regulations, emission reductions, and responsible governance, are increasingly driving more businesses to act, says Abbey.

“If taking care of your community and environment, your employees, and your business wasn’t reason enough, adopting sustainability/ESG policies is also good for business. Accenture identifies in their sustainability and ESG research that “between 2013 and 2020, companies with consistently high ESG performance tended to score 2.6x higher on total shareholder return than medium ESG performers.”

3 Ways ESG Can Add Value for Your Business

Analysts from Gartner, IDC, Blackrock, Boston Consulting Group, KPMG, and others emphasize the importance of sustainability/ESG for all companies in all industries. For manufacturing, sustainability and ESG initiatives can do many things.

“For the bottom line, they can save money and increase profitability. For the brand, they can increase goodwill and reputation. By digitizing the manufacturing environment through smart manufacturing software, companies can gain efficiencies, lower energy costs, streamline their supply chain, and lower waste,” Abbey adds.

There are some key ways that ESG can add value for a business and expand human possibility on one’s digital transformation journey:

Forging environmental stewardship. Manufacturers that focus on sustainability and ESG initiatives find gains in efficiency, help the planet, and, as a result, are more attractive to the talent they are looking to recruit.

Leading manufacturers are leaning into sustainability more than ever. In fact, 97% of survey respondents stated that they have a formal or informal policy in place. Smart manufacturing is a driving force helping organizations achieve their sustainability goals, as, for example, technology eliminates hundreds of thousands of pounds of paper waste.

Specifically, manufacturing execution systems (MES), quality management systems (QMS), and supply chain planning were the top systems identified as supporting sustainability/ESG efforts for their ability to reduce waste and maximize output. These technologies also enhance agility, whether it is pivoting to a new product line or providing a temporary social good, like producing masks and ventilators. According to the report, efficiency, adaptability, and accountability are becoming core to stakeholder value.

Attracting and retaining talent. Practices that are good for the environment are also good for attracting talent. Today’s workers are looking for purpose. A recent study from the Society for Human Resource Management (SHRM) found that 94% of next generation workers want to use their skills to benefit a cause. According to this year’s report, 84% of respondents ranked employee retention as “very” or “extremely” important. With over 800,000 unfilled manufacturing roles, a new approach is warranted to solve for the skilled worker shortage

“Digital transformation is not just about technology... Basic objectives such as cost optimization and process improvement can no longer be the ultimate aim. Leaders must inspire and empower their entire organization to boldly reimagine their work environment, customer needs, product offering, and even the purpose of the enterprise.” (4 Principles to Guide Your Digital Transformation, Harvard Business Review)

“How can manufacturers find and retain the best employees and support them to develop into the leaders they need for tomorrow? Companies are addressing the skilled workforce issue through innovation, technology, and their ability to use data to make decisions,” says Abbey. Employers that can equip employees with the right tools while also supporting the path for learning and development will be best positioned for the future.

Being prepared with risk mitigation. Each year, the State of Smart Manufacturing report has consistently shown security/risk management to be among the top challenges for business. Despite this, over 60% of respondents do not have a risk mitigation plan in place. 

In the last few weeks of 2021, manufacturers faced unprecedented levels of ransomware attacks. Though some larger companies publicly disclose these attacks, many more go unreported at smaller organizations. Small companies often bear more risk because they may not be able to afford to pay ransoms. Every organization should be vigilant and have a proactive security plan to avoid or minimize risks of attacks.

Risk mitigation continues to evolve, and it’s essential to advance with it. Security governance and compliance are critical components to promoting the safety, security and resiliency of your company’s infrastructure, products, and customers.

ESG: More Than Just “Doing the Right Thing”

According to Forbes, adopting an ESG policy is about so much more than “doing the right thing”:

“In a recent article on Business Fitness, former Unilever CEO Niall FitzGerald once said that ESG is a vital part of any company strategy, ‘not because it is a nice thing to do or because people are forcing us to do it … but because it’s good for business.”

“So, what are you waiting for”, asks Abbey.  “The time for action is now. Forward-looking, informed leaders are making the decisions that will pave the way to success this year, while also stepping back to assess where those decisions will lead the company in five, 10, and 15 years”

Abbey refers to the State of Smart Manufacturing: Sustainability & ESG Edition, which he says will help to benchmark technology usage and uncover “best practices to help an organization stay competitive and thrive not just today or tomorrow, but next year and every year thereafter.”