Industrial Sustainability Report Says We’re Halfway There

A report shows that only half of the surveyed companies have a sustainability plan and offers suggestions for those getting started.

Sometimes, it seems as though corporate sustainability is like the old adage about the weather: everybody talks about it but nobody does anything. While “nobody” may be an exaggeration, a recent study by industrial automation company Schneider Electric and research firm Omdia showed that the industrial sector’s efforts to become more sustainable have demonstrated a great deal of corporate inertia, with about half of the surveyed manufacturers having a fully developed sustainability plan. The study’s results were summarized in the white paper Industrial Sustainability: Moving Sustainability Forward In Manufacturing.    

The Catalysts: Climate Change, Performance, Cost Savings  

In 2020, thirty-five billion metric tons of CO2 were emitted into the atmosphere, with the industrial sector contributing nearly a third. Industrial sustainability has been discussed for decades but didn’t enter the forefront until the 2015 Paris Climate Accords. In spite of the goals outlined in the resulting treaty, the data suggests that industry response has been slow.   

Although the adoption rate leaves something to be desired, industrial and manufacturing communities say they’re ready to embrace sustainability from both an altruistic and a self-serving perspective. When asked why their companies are taking steps toward sustainability, the most significant single factor was corporate responsibility, followed by improved performance and cost savings. External pressures are a minor factor, which may suggest that government intervention has little impact. This is misleading, however, when one considers that policies and regulations that have a financial stake — whether it’s through incentives or penalties — fall into the cost savings category.   

Top reasons companies are investing in sustainability. Source: Schneider Electric and OMDIA

Top reasons companies are investing in sustainability. Source: Schneider Electric and OMDIA

When interpreting survey results, keep in mind the tendency for people to speak or behave differently because they’re being observed. In this case, when asked why the company is striving for sustainability, someone might answer “corporate responsibility” because they perceive it to be the “right” answer, not necessarily because it’s the truth. This could help explain some of the contradictory evidence presented in the report.   

The State of Industrial Sustainability  

In 2022, Omdia surveyed executives from 262 industrial companies to get a glimpse of industrial sustainability efforts around the globe. The researchers found that only half of the surveyed companies have deployed a sustainability plan and, of those, just over half are actually meeting their goals. The remainder are either still developing a plan or just reaching the deployment stage.   

Maturity of sustainability initiatives among industrial companies. Source: Schneider Electric and OMDIA

Maturity of sustainability initiatives among industrial companies. Source: Schneider Electric and OMDIA

Many of the companies that had fully implemented their sustainability initiatives didn’t have a unified corporate plan; instead, they had a slew of miscellaneous strategies across multiple departments. This suggests that their plans may not be comprehensive enough to bring about the changes they seek.   

Challenges and Barriers  

The top five impediments were legacy assets (aging equipment), upfront costs, competing priorities, lack of access to appropriate data, and culture change.   

While the report says roughly half of the companies surveyed have a plan, it also shows ninety percent of the companies recognized the benefits of being more sustainable. Andre Babineau, Director of Strategic Initiatives at Schneider Electric, says the reason for this disparity is that sustainability gets more complex every day. Companies currently address obvious factors, such as CO2 emissions, in response to carbon taxes and legal liabilities. Some are using renewable energy procurement and carbon offsets in order to decarbonize their electricity consumption, but those incentives aren’t universally available. Other aspects are now coming into play, such as responsible use of raw materials, product lifecycle management, pollution control, Scope 3 (supply chain) emissions, recycling, and water conservation. As the targets change, it becomes more difficult for industries to fully implement their plans in a timely manner.   

 A holistic approach to sustainability starts with the company’s upper management. Since it could take up to five years for a business to reap the rewards of its efforts—a C-level executive in energy and industrials has an average tenure with a company of about of five years according to research firm Korn and Ferry—this may force short-sighted policies based more on quarterly profits than on long-term sustainability, especially when faced with challenges such as inflation and market downturns.   

Despite these challenges, sustainability is still a priority in the U.S. and worldwide, as evidenced by the Department of Energy’s Industrial Decarbonization Roadmap and global efforts to decarbonize heavy industries like steel, concrete, and chemical production.  

 Sustainability is Change Management  

“To move the needle,” Babineau says, “companies need three things: data, a roadmap, and internal stakeholder alignment.” Data shows where you are and where you can go, the stakeholders determine the goal, and the roadmap gets you there.   

For example, upfront cost, especially as it relates to aging equipment and infrastructure, is the largest perceived obstacle to sustainability, but actual data shows that this is a false barrier. It does take a lot of capital to transform an industry, but when corporate leaders recognize the business case for sustainability — the “what’s in it for me” factor — they become aware of the fact that the industry can achieve both sustainability and profitability. The question is whether they’re willing to look beyond the next few quarterly reports and play the long game.   

Anyone who’s watched as a new head coach transforms a sports franchise from a perennial loser to a persistent contender knows the power of leadership in bringing about culture change. The same is true for corporate sustainability. Babineau says that the most successful sustainability efforts have the support of the C-level officers and board of directors; the key is to effectively communicate the plan and the benefits to the stakeholders. The holistic top-down approach also helps to ensure alignment of goals so departments don’t establish competing priorities.   

Sustainability Data Management  

Reduced energy consumption was a top driver of operational sustainability investments, so it’s no surprise that executives listed automation efficiency and energy management systems as the technologies that will have the most impact on sustainability initiatives. Smart sensors, coupled with cloud-based dashboards such as Schneider Electric’s Resource Advisor, provide real-time access to energy consumption, performance, and emissions at both the machine and plant levels. It also allows a facilities manager to compare energy procurement options from both an emission and cost-savings standpoint. Companies that supply products and services to other industries can create dashboard reports that show sustainability numbers to their customers down the supply chain, which also helps both the supplier and the customer to comply with corporate sustainability reporting requirements.    

Which technologies will have the biggest impact on your sustainability initiatives? Source: Schneider Electric and OMDIA

Which technologies will have the biggest impact on your sustainability initiatives? Source: Schneider Electric and OMDIA

The Road Ahead  

When asked where he thinks the industry is headed in the next five years, Babineau said, “Globally, there has been increasing regulatory momentum — like the pending SEC climate disclosure rule in the U.S., the Hong Kong Stock Exchange ESG (environmental, social, governance) requirements put in place last year, and the recently passed European legislation in favor of all-electric vehicles by 2035 — that is going to drive a lot of the developments of the next five years. It means that companies will need to take action and be compliant in a way that they’ve not previously had to.” He also noted that some companies are voluntarily committing to change by setting more aggressive sustainability targets, purchasing additional renewable energy and carbon offsets, and investing in green technologies such as hydrogen.   

“Particularly as the impacts from climate change continue to grow — and with them, the risks of inaction — we anticipate that industrial sustainability will also grow,” Babineau added. “We know it can be done because we’re doing it ourselves at Schneider Electric.”