Environmental, Social, and\u202fGovernance (ESG) goals and practices are becoming increasingly critical for all industries; including the manufacturing sector which has its own unique challenges, such as data management, sustainable manufacturing, and ethical and social practices. To advance an ESG journey, manufacturers must start with assessing their entire business in greater detail to then be able to devise the right strategy moving forward. Digital transformation will inevitably be part of this plan as it has the power to not only support but amplify ESG activities.<\/p>\n
\u201cNo matter if you don\u2019t do anything else\u2026 improvements in manufacturing\u2019s digital transformation journey drives positive around ESG [environment, social & governance] and sustainability,\u201d says Craig Coulter, sustainability leader for global advanced manufacturing & mobility at\u202fErnst & Young<\/a>.<\/p>\n With digital transformation being an enabler of innovation, how can manufacturers best\u202fprioritise\u202fESG data governance practices? The progression of a manufacturer\u2019s digital transformation can illuminate new pathways, but it also has the potential to increase the amount of data manufacturers must manage, making ESG data governance a top priority for any business. In particular, manufacturers face significant obstacles surrounding ESG data governance due to complexities in reporting, gathering, and\u202fstandardising\u202fESG metrics across operations. Poor governance can lead to certain risks developing across a business from compliance to investments, and operations, which together could prevent progress towards achieving ESG goals.<\/p>\n ESG data management is vital\u202ffor sustainable manufacturing, as it aids the ability to monitor, evaluate, and boost ESG activities. It supports manufacturers with global sustainability standards for continuing success and regulatory observance, but clean and superior data is key.<\/p>\n \u201cQuality ESG\u202fdata is an intrinsic business imperative. Forward-thinking organisations are shifting from traditional methods and are beginning to invest in cutting-edge ESG data management solutions. This differentiates and repositions them for competitive sustainability performance,\u201d Marilyn Obaisa-Osula, Associate Director and Lead, ESG\/Sustainability Services,\u202fKPMG.<\/p>\n As enterprises progressively acknowledge the value of sustainability, creating and\u202fprioritising robust ESG data governance frameworks is far more critical than ever especially given its importance in terms of attaining long-term environmental and socio-cultural goals.<\/p>\n The manufacturing industry is under enormous pressure to ensure that ESG data governance is prioritised, particularly after manufacturing breaches have spiked with the highest share<\/a> of attacks globally but also due to the amount of data the industry collects. In the United States alone, roughly five million<\/a> persons were impacted by data breaches in the manufacturing industry.<\/p>\n Specific risks that have emerged due to poor ESG data management practices include:<\/p>\n Enterprises falling short of ESG standards including unethical practices within their frameworks risk damaging their brand value, reputation and paying large fines. One of the largest fines of USD $34.69 billion<\/a> was handed down to Volkswagen for employing software that \u201cfalsified\u201d data and helped evade emissions tests on its vehicles, whereas Australian auto giant Eagers Automotive<\/a>, has recently suffered reputation harm after hackers published sensitive data online.<\/p>\n Not reaching ESG goals, inclusive of ESG data governance benchmarks, can provoke operational and commercial risks. As reported by Lexology<\/a>, \u201cIn addition to regulatory enforcement, firms may also be subject to ESG-related litigation. For example, with respect to ESG investing, firms may be accused of making false, misleading, or exaggerated claims about their ESG records or practices, often summarised under the term ‘greenwashing’.”<\/p>\n A significant amount (one-fifth<\/a>) of the world\u2019s carbon emissions can be traced back to the manufacturing and production sectors. Manufacturing without proper ESG data governance can equate to substantial environmental damage by allowing unrestricted pollution and resource depletion, leading to the weakening of the supply chain’s sustainability capacity.<\/p>\n About 70 per cent<\/a> of industrial ransomware breaches suffered are by the manufacturing operations industry, and in the United States manufacturing is the second highest<\/a> targeted in the country. Vigorous ESG data governance is required if manufacturers intend to avoid compromised data quality, which can result in breaches and inaccurate sustainability reports or metrics.<\/p>\n Manufacturers that do not ensure proper ESG data governance will risk promoting threats to social and ethical issues, such as labour abuses. These massive governance slipups expand through the supply chain<\/a>, weakening ethical sourcing and fair-trade practices, possibly leading to regulatory penalties and loss of business partnerships.<\/p>\n To address these five primary concerns, manufacturers can future-proof their ESG data governance practices by embracing cutting-edge technologies like AI and blockchain for real-time data monitoring and transparent reporting.<\/p>\nESG data management + sustainable manufacturing = competitive industry leaders<\/h2>\n
The top 5 risks to manufacturers without proper ESG data governance<\/h2>\n
1. Reputational damage:<\/h3>\n
2. Increased operational and financial risks:<\/h3>\n
3. Environmental harm:<\/h3>\n
4. Compromised data quality and ineffectiveness:<\/h3>\n
5. Social issues and governance challenges:<\/h3>\n
Removing obstacles to enhance ESG data governance practices<\/h2>\n