Manufacturers operate in a tangible world.
The production line works, or it doesn’t. The batch meets quality standards, or it falls short. It ships on time, or it’s late. It’s all measurable, and manufacturers track performance to deliver what they said they would.
That’s what makes the rise of net-zero and other environmental commitments such an enigma to many manufacturers.
Despite more than a third of the world’s largest companies being committed to net-zero, nearly all of them (93%) are on track to fall short at the 2030 finish line. Complex supply chains and siloed data obscure visibility into current emissions. And the process of converting any of that data into insights is labor-intensive.
But whether driven by new regulations or corporate commitments, manufacturing teams have a new charge to cut CO2 emissions and boost energy efficiency. Fortunately, leaders can overcome the hurdles that make decarbonization and environmental efforts a challenge, but they’ll need to act fast.
The first step is getting visibility into current emissions — and simplifying manual, laborious data collection. Then, it’s about using that real-time view to make progress against goals.
CO2 Commitments by Manufacturing Market
- Industrial: 61% have decarbonization targets; 29% full net zero.
- Auto/Transportation: 67% have decarbonization targets; 37% full net zero.
- Consumer Goods/Services: 74% have decarbonization targets; 41% full net zero.
- Aerospace/Defense: 68% have decarbonization targets; 36% full net zero.
- Natural Resources: 57% have decarbonization targets; 29% full net zero.
- Energy: 69% have decarbonization targets; 31% full net zero.
Source: https://www.accenture.com/us-en/insights/sustainability/reaching-net-zero-by-2050
Expanded ESG reporting rules are coming in hot
Regulatory bodies are working hard to drive progress on the road to net-zero.
Published in June 2023, the International Financial Reporting Standards (IFRS) S1 and S2 are poised to become the global standard for the measurement, monitoring and disclosure of sustainability-related and climate-related risks and opportunities.
Already in the lead, the European Union (EU) recently adopted the Corporate Sustainability Reporting Directive (CSRD), applying new ESG standards to more than 50,000 companies beginning in 2025. The CSRD will impact not only European-based companies, but any company with significant activities in the EU. That means manufacturers that export into the EU would be required to disclose Scope 1, 2 and 3 greenhouse gas emissions in metric tons of CO2 equivalents starting in 2028.
Meanwhile, in the U.S., Scope 3 carbon-disclosure requirements are coming for companies sooner than expected. California is pioneering a wave of state laws that would require companies to add climate impact to their financial data, and to disclose Scope 3 emissions from suppliers and customers. And while more states are expected to adopt the California regulations, new SEC rules are also on the horizon.
“In one shape or another, these disclosure requirements are coming,” Sara Mahaffy, ESG strategist at RBC Capital Markets LLC, told The Wall Street Journal in September 2023.
An emerging push for environmental performance
External pressures aside, manufacturing organizations are prioritizing sustainability from the inside.
Increasingly, manufacturers recognize the link between a reduced carbon footprint and cost savings. Often, changes in things like energy efficiency, fleet management and cloud optimization strategies pack a one-two punch of reducing costs and carbon. With Europe's carbon price hovering between 70 and 100 EUR/t, there is obviously also a cost savings factor to environmental performance.
And while climate change is a compelling reason to adopt sustainable practices, customer demand may become the real tipping point. Millennials and Gen Z are driving progress towards more sustainability, which manufacturers must factor into their growth strategies.
Already, products with ESG-related claims grow at a sales rate eight points faster than products that don’t, and the majority of consumers say they’re willing to pay more for sustainable products and packaging.
Net-zero is a journey, and IT sustainability is the perfect first step
As manufacturers set off on their path to net-zero, they need to know where to start.
My advice? Instead of trying to boil the ocean and letting the sheer complexity of sustainability become overwhelming, savvy business leaders should embrace the old wisdom of low-hanging fruit. Looking at two important parameters, CO2 reduction potential and implementation efforts, it’s clear that IT sustainability is a natural place to start.
One key lever is cloud migration. Moving from on-prem data centers to the cloud can drive massive CO2 savings — up to 80%. Even just optimizing on-premises data centers with data analytics can offer significant CO2 reduction.
The possibilities with IT sustainability make it a lot easier to get real about net-zero. That’s why sustainability leaders have joined forces and founded Sustainable IT, an organization focusing on advancing sustainability through the impact of IT. Manufacturing leaders, like Assa Abloy and GSK, are at the table.
As manufacturers lean into growing technology advancements and use data-driven insights to manage their sustainability efforts, net-zero starts to look a lot more real.
