Top 9 Business Case Reasons for Sustainability and ESG in the Manufacturing Industry

As sustainability and environmental, social, and governance (ESG) considerations gain momentum in the marketplace and the media, implementing sustainability in manufacturing is becoming increasingly crucial for businesses. The manufacturing industry is multifaceted and can be complex, but the many benefits of ESG work apply throughout sub-segments in the manufacturing world.

Below, we outline nine of the best business case reasons for your company to start or continue your ESG and sustainability journey.  

Governments worldwide are increasingly imposing stricter environmental regulations. Europe has its Corporate Sustainability Reporting Directive (CSRD) and the U.S. Securities and Exchange Commission (SEC) has proposed climate-related disclosure rules. Additionally, California has enacted two bills, SB 253 and 261, to mandate climate-related disclosures. Adopting sustainable practices helps manufacturers stay compliant, avoiding fines and legal issues.

Sustainable manufacturing often reduces resource consumption and waste production, while generating energy savings that can lower operational costs over time. Typical steps include adding solar, upgrading to Energy Star appliances, installing low-flow faucets and toilets, and using grey water in eco-friendly landscapes. You can add batteries to your solar arrays to control production during rolling power outages or switch your power during periods of peak rates.  

Assessing and reducing your carbon footprint is also key. This involves measuring greenhouse gas emissions from your operations and setting science-based targets to progressively reduce those emissions. Quantifying and decreasing your carbon footprint, such as reducing energy use and business travel, saves money while ensuring compliance and improving climate resilience.

Sustainability initiatives often drive process improvements and innovation, increasing operational efficiency. Investing in sustainable R&D can lead to breakthroughs in cleaner production methods and technologies. Optimizing production processes can enhance productivity and reduce waste.

Demonstrating a commitment to sustainability and ESG can improve a company’s reputation and brand image that, in turn, can attract environmentally conscious customers and investors. Sustainable manufacturing practices can build customer loyalty as consumers prefer to support environmentally responsible manufacturers and companies that align with their values. Patagonia’s customers, for instance, are highly vocal about supporting the brand. Their loyalty and brand advocacy help market the company in the most authentic way, lowering its marketing costs.

We recently had our marketing team investigate what new marketing swag we wanted to have this year. They made a list and then overlaid which companies were sustainable, B Corp, or minority owned. The companies that weren’t didn’t receive further consideration.

Sustainability efforts can help leaders identify and mitigate potential supply chain disruptions, climate change, and resource scarcity risks. This can ensure a more reliable flow of materials and reduce the impact of disruptions. For example, the companies that localized their supply chain before COVID had a much better survival and easier bounce back.

Resilience in the face of these challenges can protect the long-term viability of the business while increasing organizational agility.

ESG performance is increasingly considered by investors, banks, and insurance firms when making investment, lending, and coverage decisions. Companies with strong ESG practices may have easier access to capital, and lower borrowing and premium costs.

Sustainable practices can drive innovation in product design and manufacturing processes. Companies that innovate in sustainability often gain a competitive edge in the market. Reducing your packaging or changing to recycled materials can lower costs directly and indirectly. Eco-friendly packaging materials are usually lighter, so you spend less to ship heavier materials.

As employees seek purpose-driven organizations, demonstrating a commitment to sustainability can attract and retain top talent. When we added our B Corp logo to our recruiting booth, students flocked to us, and other firms started to notice and ask what a B Corp was. We also have many hires that say, when weighing offers, they reviewed our Sustainability Impact Report and were sold on our company. Sustainability matters to your employees.

Sustainability practices are critical for the long-term viability of the manufacturing sector. As resources become scarcer and environmental pressures mount, companies that embrace sustainability are more likely to thrive.

You have been making business decisions based on financial metrics for years. Adding  non-financial ESG metrics gives you a bigger picture of the health of your organization so you can make better business decisions for a longer-term view.

Starting to work through sustainability and ESG initiatives for your business is a financial imperative due to many business risks. It’s essential to analyze your specific situation, identify potential benefits and risks, set clear goals and targets, and develop a comprehensive strategy for integration. Contact us today to undergo a High-Level ESG Assessment to better understand which ESG metrics and sustainability risks are material to your manufacturing business.