In an uncertain climate, ESG can support businesses to improve agility. Business agility is defined as an organisation’s ability to adapt to changes in its environment without compromising on the quality of its product or service. ESG plays a key role in the current and upcoming changes facing the business environment; be that in stakeholder expectations, increased regulation, or the demand for low emissions manufacturing processes.
Understanding ESG is crucial for a business’ long-term planning objectives. Given the pace of change in the business environment it's hard to predict what business practice will look like in years to come. However, if businesses are early adopters in implementing robust ESG policies and controls, they can respond to changes in supply and demand without compromising quality. We can support your business to implement strategies that will help you cope with change.
Collecting accurate data from the supply chain is key to building resilience
To make informed decisions concerning its supply chain a business must have visibility of its activities. This is achieved by collecting accurate and timely data. This not only supports decision making but also improves flexibility. Understanding supply chain data also supports digital planning, be that through the introduction of artificial intelligence or automation. Supply chain emissions typically make up 70-90% of a business’ greenhouse gas emissions. The collection of this data is complex but essential in order to calculate a Scope 3 emissions baseline per the Greenhouse Gas (GHG) Protocol.
Understanding Scope 3 emissions across the supply chain helps businesses understand how their suppliers position themselves. Can they develop and implement changes to ensure continuity of supply in the current climate, or are their strategies outdated, using inefficient processes and high carbon intensity energy sources? The visibility obtained through collecting emissions and other data, can ensure a supply chain is more resilient. Furthermore, stakeholders are increasingly looking to businesses for transparency on their supply chain’s emissions profile as this is increasingly seen as a regulatory reporting risk.
If a business can effectively communicate the sustainability of its supply chain to stakeholders, engagement increases both internally and externally. Among younger people, over 50% of job applicants note that they researched a company’s ESG credentials when applying for a role. This will become more prevalent in years to come, as the next generation of the workforce ensure environmental and social issues are at the forefront of business objectives.
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ESG strategies can support cost base targets by highlighting inefficiencies and maintaining quality
As businesses struggle to pass costs onto consumers, margins continue to come under pressure. In a cost out environment it can be difficult to justify projects with an ESG focus. However, implementing ESG strategies can directly reduce costs, particularly when considering energy and price fluctuations of recent years.
Making manufacturing processes as energy efficient as possible is crucial to reducing a business’ overall energy consumption and therefore cost. This also supports the reduction of Scope 2 emissions, linked to purchased electricity, heat, steam and cooling per the GHG protocol.
We support our clients to accurately measure energy consumption on a macro and micro basis, from geographical area down to individual assets. We can monitor energy consumption over a designated period of time, highlighting which particular processes, or assets are inefficient and identify how this impacts emissions. Highlighting inefficiencies supports wider cost reduction and investment initiatives, such as maintenance planning, integration of low carbon intensity energy assets, renewable energy technology, and wider net zero strategies.
When discussing ESG investment, management should consider widening their definition of ROI, highlighting how short-term cost reduction strategies can also enable the fulfilment of long-term sustainability aims.
For more insight and guidance, get in touch with Oliver Bridge and Raj Kumar.
