The situation isn’t any better in Europe, where the manufacturing industry emits 880 million tons of carbon dioxide annually. Environmental Protection Agency (EPA), 23% of greenhouse gas emissions come from burning fossil fuels for industrial purposes. The manufacturing industry is a driver for economic growth, but there’s no question that it’s also one of the largest contributors to greenhouse gas (GHG) emissions across the globe. The most common hurdles that organizations face today are high carbon emissions, water scarcity, finite fossil fuel availability, severe weather conditions causing service disruptions, inefficiency and waste management. The importance of ESG has even greater significance in light of recent events, like the COVID-19 pandemic and the increasingly dire climate conditions. Governance: Non-financial reporting, assurance of those reports, responsible tax, board composition, remuneration and executive compensation, shareholder rights, ethics, bribery and corruption, and corporate investigations, ethics and compliance, supply chain management, product quality, cybersecurity and data protection. Social: Talent attraction and retention, employee and community engagement, health and safety, human rights, diversity and inclusion, supply chain advisory and due diligence and conflict minerals audits. This includes carbon/greenhouse gas (GHG) accounting and audits, energy assessments, carbon tax, water usage, environmental certifications, energy transitions and environmental impact analysis. The term ESG was coined in a 2005 study, “ Who Cares Wins,” developed by the world’s largest banks and institutional investors.Įnvironmental: The production of goods with regards to climate impact, energy and resource and material use. What is Environmental, Social and Governance (ESG)?Įnvironmental, social and governance (ESG) are standards for a company’s operations that help guide an organization to do better and be more accountable about their environmental impact, social responsibility and organizational governance. However, ESG is about meeting the needs of the present without compromising the needs of the future. It’s easy for companies to be focused on making immediate business decisions. If you haven’t already started implementing ESG initiatives or begun thinking about it, you’re already behind. This includes consumers being more aware of sustainable goods, business to business (B2B) purchases putting more pressure on supply chains and their ESG practices, and the rise in C-suite and boards paying more attention to these concerns. There are mounting pressures on multiple fronts from legislators, investors, consumers and the media. Whether you’re a small specialized firm or a large multinational manufacturer, there’s no hiding from investors, regulators and consumers that are growing increasingly vocal about companies’ environmental, social and governance (ESG) practices. The importance of ESG and sustainability initiatives have reached a tipping point, particularly for manufacturing companies. In today’s global economy, manufacturers must adopt more sustainable and ethical business practices if they want to remain profitable.
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