Manufacturers meet sustainability: how the two can co-exist?

Recognition is growing that if the world is to avoid the worst outcomes of climate change, it’s vital to halve greenhouse gas emissions by 2030 and reduce them to net zero by 2050. Companies across all sectors – including many manufacturers – have made net-zero commitments, but few have translated their intentions into initiatives that drive meaningful change.

In his role at Capgemini, Prasad Shyam helps companies address this by doing a better job of collecting, analyzing, and acting on their sustainability data. Here, he explains why data plays an essential role in bridging the gap between ambition and action – and why it’s possible to turn a regulatory requirement into a business opportunity.

Most manufacturers seem aware of the need to be more sustainable, but how many are actually turning that awareness into action?

Prasad Shyam: When we’re talking about sustainable manufacturing, what we’re really talking about is “net zero” – which means either eliminating greenhouse-gas emissions from a company’s activities or offsetting them through actions such as carbon capture. It’s a mature idea and that’s reflected in the high number of manufacturers who have made public commitments to it.

At Capgemini, we have determined that data is one of the key drivers in activating the journey to net zero. In Data for Net Zero – our company’s recent report that explains how data bridges the gap between net-zero ambitions and action – the Capgemini Research Institute notes that more than 70 percent of the 900 global organizations it surveyed had committed to achieving net zero by 2050. Some have even more aggressive targets.

But that same report also notes only 41 percent of manufacturers surveyed are actually collecting and using emissions data to measure their sustainability performance. Furthermore, only 25 percent use this data to drive improvements to existing business processes and only 17 percent are using emissions data for forecasting and scenario analysis – to predict and prescribe new business outcomes.

Why are those numbers so low?

Shyam: When I speak with manufacturing executives, what I’ve learned is that leaders have set the goal but, in terms of looking at their sustainability data in a holistic perspective, many organizations are still in the initial stages of figuring out where they are.

For example, most organizations surveyed are measuring scope 1 emissions – those from the company’s facilities and vehicles. About half are measuring scope 2, which covers emissions from electricity, heating, and so on. But only 22 percent are measuring scope 3 emissions – those produced by partners upstream and downstream in their value chain.

If they’re trying to achieve net zero, that’s a serious problem because those scope 3 emissions account for 65 to 95 percent of a company’s carbon footprint.

If scope 3 has such an impact, why aren’t companies measuring it?

Shyam: It’s a complex problem. Most companies struggle to just measure the emissions generated by their own operations. Scope 3 requires companies to track the emissions generated by their upstream suppliers, their downstream distributors and retailers, and even by their products – from the time they’re sold to their end of life. Unfortunately, if they don’t accurately capture that data, they can’t define their goals and then track the effectiveness of their initiatives. And that means they can’t maximize their progress.

How does a sound data strategy improve a manufacturing company’s performance?

Shyam: As they strive to achieve net zero, companies that collect trusted data from their departments, their functions, their processes, and the partners in their ecosystem can use it to identify emissions hotspots – then assign goals to address them.

That’s a benefit directly related to sustainability. But a robust data strategy delivers other benefits, too.

For example, it can identify opportunities to reduce or eliminate waste from the manufacturing process. Since companies pay for inputs regardless of whether they become part of the product or become waste, that efficiency improvement reduces the cost of raw materials.

Beyond this, by applying AI and other emerging technologies to the problem, companies can evolve from merely reacting to anticipating. Turning sustainability goals into actionable insights opens up new business opportunities.

Sustainability performance is also a branding imperative. Better emissions performance improves the company’s image with consumers and with other companies – which contributes to long-term business success.

And of course, having high-quality data makes it easier to achieve regulatory compliance.

You mentioned other companies. In a B2B transaction, one manufacturer’s scope 1 and scope 2 emissions become their customer’s scope 3 emissions, right?

Shyam: Exactly. This is one of the reasons Capgemini has invested heavily in data mastery and data exchange: to ensure companies can securely collect and share their data with suppliers and partners. We also ensure the data can be properly traced. Once a company starts submitting sustainability data to regulators, it’s important that the company be able to trace that data back to its sources.

What advice do you have for a manufacturer that wants to improve its net-zero strategy?

Shyam: There are several things they can do.

First, if they have not already done so they should establish a strong governance structure, including appointing a chief sustainability officer – someone to steer the initiatives and guide the overall process. Capgemini’s data strategy for net zero is designed to help companies establish the required organizational and governance models, and orchestrate the optimum data-partner ecosystem.

A manufacturer should also establish good data-management practices – starting with a data platform to capture all of its sustainability data points across all business functions and business units. An example of this is Capgemini’s Sustainability Data Hub. This provides the trusted data, at scale, that the company requires to establish internal goals, monitor progress, and build accountability into all activities.

As well, it’s important to stay on top of current and impending regulations. Capgemini deploys ESG Data Performance to industrialize and automate a company’s regulatory reporting requirements, and also to ensure the company is aware of and compliant with upcoming frameworks, regulations, and guidelines.

In summary, companies must establish a robust data strategy, enable a sustainability hub, and then focus on ESG performance across the value chain. The companies that do this will discover that tracking emissions can be more than a task they have to do to satisfy regulators: it can be leveraged to create significant strategic advantages.

To learn more, read the Data for Net Zero report from the Capgemini Research Institute.