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The Benefits of ESG Initiatives in Manufacturing

Smart Manufacturing, State of Smart Manufacturing, Fourth Industrial Revolution
July 26, 2022

Sustainability and Environmental, Social, and (Corporate) Governance (ESG) policy is growing in importance across all industries, and especially in manufacturing. The public concerns around climate change, social justice, corporate responsibility – including increased regulations, emission reductions, and responsible governance – are increasingly driving more businesses to take action.

If taking care of your community and environment, your employees, and your business weren’t reason enough, adopting sustainability/ESG policies is also good for business. Accenture points out 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.”

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 like manufacturing execution systems (MES), quality management systems (QMS), and/or supply chain planning (SCP) solutions, companies can gain efficiencies, lower energy costs, streamline their supply chain, and lower or eliminate waste.

According to IDC, “Digital manufacturers benefited from a 26% increase in their revenue performance index (RPI) and a 27% increase in the profit performance index (PPI), whereas nondigital manufacturers experienced decreases of 9% in RPI and 2% in PPI.” Those are 35% and 29% differences between the performance of digital vs nondigital manufacturers. How much of a difference would a 29% increase in profit performance make for you?

Going beyond the numbers, these practices are also good for the environment, which is good for the community hosting the business, and 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 gen workers want to use their skills to benefit a cause. 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.

Our 7th Annual State of Smart Manufacturing Report highlights the acceleration of smart manufacturing adoption and the benefits gained from new technology that has made its way into the mainstream, and manufacturers have made clear that sustainability and ESG efforts are counted among those benefits. Incorporating these as formal policies is good for business and will empower your company to navigate into the next decade (and beyond) of change in manufacturing.

For more insights, download the ESG Edition of the State of Smart Manufacturing Report here.

About the Author

Anthony Murphy Vice President; Head of Product Management, Application Group

Anthony is Vice President and head of Product Management for the Application group and is responsible for Plex's core customer facing products such as ERP, MES, and QMS. Prior to Plex, Anthony worked in manufacturing, holding a variety of roles across functions such as IT and software development, Logistics, Operations, and General Management. He has a deep passion for manufacturing and Plex's customers and engaging with them to solve key problems and deliver competitive advantages.