Greater alignment between a customer’s procurement and sustainability teams is needed to ensure the correct buying decisions are being made. With a lack of communication and visibility being a significant contributor toward this, they have observed a number of missed opportunities taking place within industry which could have big impact in months and years to come
Opportunities are being missed and business lost because leaders in the manufacturing sector are failing to clearly communicate sustainability initiatives to their junior colleagues, says Richard Sederman, M&A and Strategy Director at Essentra PLC. There is also a need for greater alignment between a customer’s procurement and sustainability teams to ensure the correct buying decisions are being made.
Richard’s comments follow the publication of a new State of Manufacturing 2023 report that suggests only 75% of firms have sustainability initiatives currently in place. He believes the figure is likely to be closer to 10%, but that details of the initiatives are not always known outside of the Boardroom:
“Many of the junior and middle management engineers responding to the survey may not have the same degree of visibility of initiatives that are more immediately apparent within the C-suite,” he says, “and this can have consequences for the business.
“We have experienced for ourselves how business can be won and lost when a customer’s procurement and sustainability teams are not properly aligned, and this is very much a factor of communication and awareness.”
While the drive for increased sustainability can bring pressures to a business, just over half of those surveyed say their customers have reacted positively to their initiatives, and only 1% report a negative reception. Overall, 61% of respondents view sustainability as an opportunity, 49% as an ethical obligation, and only 17% as a hindrance or cost.
Enthusiasm is highest among sectors already well on the path to decarbonisation, such as automotive, renewables and energy. It appears most problematic for the oil and gas sector where, by contrast, 30% view it as a hindrance and only 43% as an opportunity.
Richard says it is perhaps less surprising that engineers working in the oil and gas sector see sustainability as a hindrance rather than as a support: “What is surprising, however, is that they do not see it as an opportunity for some of the big oil firms to innovate, to offer their own low-carbon alternatives, but we see few, if any, coming forward with viable alternatives. Perhaps there is sufficient business for them elsewhere in other countries and markets that are still wedded to fossil fuels and likely to remain so for some time to make it an unnecessary investment.”
No area of industry is untouched by the push for net zero greenhouse gas emissions by 2050, and the findings show businesses are approaching sustainability in a number of ways; 65% cite recycling as a key area of activity, many are adopting new product development and production processes, and 41% emphasise the use of sustainable raw materials.
Across all vertical sectors, businesses are not just decarbonising their own operations. More than three-quarters of respondents are looking at how their entire supply chains can be more sustainable no matter what their size, although, unsurprisingly, the very largest companies employing more than 5,000 people are the most active.
The energy crisis has helped drive the sustainability agenda across industry. Some 60% of those questioned cited drives to be more energy efficient as critical. “Every good business is now focused on how it can become more energy efficient,” Richard continues, “and rising energy prices are accelerating the return on investment in renewables; put simply, payback is now much faster, making investment more attractive.”
What the report shows is that sustainability has moved on from being a tick-box exercise and is a potential ‘win-win’ for all concerned. Rather than simply satisfying corporate governance, Richard says it has become something meaningful and important that appeals to all stakeholders: “Customers are engaged, as it helps support their own sustainability agendas and targets; investors are engaged, as they increasingly wish to build portfolios that are more ESG focused; and Government agencies are more likely to grant investment to businesses that combine innovation with sustainability. Demonstrating a commitment to true sustainability is also critical in attracting and retaining talent.”