Why the focus on ESG?

Why the focus on ESG?

Welcome to “Ask Deb from QA,” an advice column from MxD.

Deb from QA — with decades of experience on the factory floor — will answer your questions to demystify and explain the digital manufacturing industry.

Please submit your questions to debfromqa@mxdusa.org

Q:  I keep hearing about “ESG.” Why does this matter to manufacturers? 

You keep hearing about Environmental, Social, and Governance — or ESG — because manufacturers are feeling pressure from up and down the supply chain to pay attention to — and be able to report their progress on — these issues.

That pressure is coming from customers, the board, investors, the community, employees, and even would-be workers. 

For instance, manufacturers are seeing ESG-related requirements on things like climate and labor in contracts. Communities want transparency on what manufacturers are doing to be sustainable. Job candidates aren’t shy about asking for companies’ track records in areas that are important to them, such as diversity and inclusion. And thanks to digital transformation innovations that let manufacturers track and measure, more companies are going to be able to deliver this data.

ESG isn’t new. But it really picked up steam during the pandemic and the related supply chain chaos. We’ve been so focused on that chaos and on things like the rise of cyberattacks, war in Ukraine, and other global calamities, that I can’t fault you for missing the groundswell. But it was those calamities that were the wake-up call.

We’ve learned the hard way that neglecting supply chain management hurts. We’ve learned that we have to find ways to cut risks so we can grow. If ESG was ever only about feel-good PR, as some folks claim, it has moved solidly into the “must-pay-attention-to” category. 

Under the giant ESG umbrella are the kinds of things that experts say will keep a company competitive and profitable and not needing to hire a crisis communications firm. Very simply put that is:

  • Environmental: How an organization affects or protects the environment. That includes use of resources, greenhouse gas emissions, and the like. (And we need to protect the environment, people, because I am counting on retirement to a condo on a white-sand beach.)
  • Social: How an organization deals with human issues, like rights and labor. This covers areas including supplier labor, workplace safety, workforce development, and diversity and inclusion. (We all want to work at a place that keeps us healthy in the present and trains us for the future.)
  • Governance: How a company behaves. We’re talking here about ethics and transparency. (I know the boss makes a lot more money than I do. But my colleague who does the same exact job that I do had better not.)

To see what this looks like in action, we can use Dow (which partners with my friends at MxD) as an example. In its 2021 ESG Report, Dow talks about such ESG efforts as its plans for the world’s first net-zero emissions ethylene and derivatives complex; its worker safety initiatives; and its commitment to a diverse Board.

And before anyone shrugs this off, thinking ESG is only for the big guys, guess again. Small and medium-size firms also are being urged to get with the ESG program. After all, they also got hit by supply chain disruptions and struggle with workplace transformation.

ESG covers a lot of ground. Hopefully this little roadmap helps you understand why these are three letters you’ll be hearing a lot.

Check out the last Ask Deb here:
What’s Predictive Maintenance?

Deb from QA wants to hear your questions. Send ’em to debfromqa@mxdusa.org and she’ll answer as soon as the lights go back on.