In the current modern marketplace, discerning consumers and investors are becoming more and more attuned to the need for commercial production to uphold rigorous environmental, social, and governance (ESG) standards, supporting their values of stewardship for the planet and the community. What does the “social” in ESG mean to manufacturers? Social sustainability in manufacturing involves ensuring fair treatment of workers throughout the supply chain, fostering positive relationships with local communities, upholding human rights standards, and promoting the well-being of employees.
In recent decades, the concept has expanded to include broader considerations such as environmental impact, corporate social responsibility (CSR), and ethical sourcing. Today, countries worldwide have regulations in place to monitor social sustainability practices, with influencers like the recent 28th Conference of the Parties (COP28), the World Economic Forum (WEF), and the United Nations advocating for stronger regulations and accountability measures.
The business case for social sustainability
Embracing social sustainability isn’t just about doing good—it’s also smart business. Companies that prioritise social responsibility not only enhance their brand reputation and customer loyalty but also benefit from an uptick in brand loyalty and reputation and enhanced risk management.
Several high-profile cases highlight successes and failures in social sustainability within the manufacturing industry. For instance, companies like Ben & Jerry’s and Body Shop have gained recognition for their commitment to social responsibility, becoming synonymous with their brand, while others, such as Shein, have faced global backlash and criticism for alleged labour rights violations and environmental harm. We’ve seen how negative press can affect businesses that do not embrace ESG, but there are significant wins that enterprises can unlock. The below represent the top three advantages of incorporating socially responsible policies with business goals:
Reputation and brand loyalty
Companies prioritising social sustainability often experience enhanced brand reputation and customer loyalty. Research indicates that consumers are increasingly conscientious of ethical considerations, which influence their buying decisions and reinforce their commitment to supporting ESG-minded brands that uphold social responsibility. This is particularly true of the younger demographic: a study by Cone Communications found that 94% of Gen Z respondents believe that companies should address social issues and have a social conscience.
Increasing shareholder returns
According to the Boston Consulting Group, when executed effectively, social sustainability initiatives can be a potent catalyst for organisations striving to drive positive change within their operations and in the broader world. A well-crafted social transformation can get the support of stakeholders such as management, employees, investors, and customers. In fact, the consulting firm asserts that strategic investment in sustainability issues relevant to a company’s operations can potentially boost stakeholder return by up to 5 per cent.
Risk management
Social sustainability efforts can help companies mitigate various risks, including labour disputes, regulatory non-compliance, and reputational damage. By addressing social issues proactively, companies can minimise the likelihood of negative consequences.
With these gains in mind, what strategies can manufacturers employ to advance the adoption of socially responsible initiatives?
Strategies for implementing social sustainability
According to BCG, companies must find that sweet spot between material advantage and societal impact. Shifting towards social transformation in business goes beyond merely boosting CSR credentials. Traditional CSR initiatives, often relegated to localised, pro bono efforts, may result in limited societal impact unless integrated into broader business strategies, asserts BCG research. The key lies in identifying avenues where the company’s contributions align with its business objectives.
For example, global pharmaceutical giant Pfizer launched an initiative called ‘An Accord for a Healthier World’ to provide medicines for 1.2 billion people living in 45 low-income countries. The company’s efforts are aligned with its core business objectives by delivering social impact at scale. The Pfizer example aligns with the following critical aspects required to support CSR initiatives successfully.
Stakeholder engagement
By involving relevant stakeholders in decision-making processes and seeking their input and feedback, companies can ensure that their efforts align with all parties’ needs and expectations.
Transparent reporting and accountability
Companies should regularly disclose relevant information about their social sustainability practices and outcomes, allowing stakeholders to assess their progress and hold them accountable for their commitments.
Investing in community development
Companies can build positive relationships with local communities and address social issues at the grassroots level. By supporting initiatives related to education, healthcare, infrastructure, and economic development, companies can contribute to the long-term well-being of the communities in which they operate, which will always have a positive impact on brand reputation.
Aside from securing backing from external and internal corporate stakeholders, manufacturers should proactively identify and leverage innovative solutions to further augment their CSR commitments, which can unlock value and optimisation.
How can manufacturers leverage emerging technology trends
Industry 4.0 has ushered in innovative technology shaping the future of social sustainability in manufacturing. Emerging technologies like Artificial Intelligence (AI) and Machine Learning (ML) are revolutionising how manufacturers monitor and track their social impact. AI-powered analytics can sift through vast amounts of data from various sources, including social media, employee feedback, supply chain interactions, and community engagement, to provide real-time insights into social sustainability performance.
Through advanced algorithms, AI can detect patterns, identify areas of concern, and predict potential social risks or opportunities. For instance, AI can analyse workforce demographics to ensure diversity and inclusion goals are met, monitor supplier practices to detect labour violations or unethical behaviour and assess community sentiment to gauge the company’s reputation and social license to operate.
In the case of Walmart, the company leveraged a proprietary solution to optimise delivery routes, considering traffic conditions, delivery times, and vehicle capacities. This strategic approach enabled Walmart to avoid production of 94 million pounds of carbon dioxide by eliminating 30 million unnecessary miles driven and bypassing 110,000 inefficient paths.
Other advancements, such as blockchain, artificial intelligence, and IoT technology, offer new opportunities for transparency and traceability in supply chains. Continuous changes in government policies and international regulations are expected to influence social sustainability practices while consumer demand for socially responsible products grows.
To avoid a lack of sustainability transparency, the Consumer Sustainability Industry Readiness Index (COSIRI) is a robust framework and toolkit designed to empower small to large-scale manufacturers to integrate sustainability seamlessly into all operations. By guiding manufacturers towards more sustainable practices, COSIRI contributes to reducing environmental impact, fostering ethical production standards, and promoting social responsibility within the manufacturing industry.
