Environmental, social and governance (ESG)
31st July 2023
The pursuit of net zero requires rethinking due to the climate and energy crises – but ESG is much more than being carbon neutral.
Sustainability is a strategic issue for the automotive industry
Rising climate concerns, more widely and strictly enforced regulations, and stakeholder pressure pushed the automotive industry into the new era of sustainability. Thus ensuring sustainability became a focus of automotive original equipment manufacturers (OEMs) and suppliers. EU regulations mandating the phasing out of Internal Combustion Engine (ICE) vehicle sales by 2035 have boosted the EV segment. However, transitioning to EVs alone won't sufficiently decarbonise the automotive sector. Addressing charging infrastructure, sustainable mining of minerals and metals, and other considerations were recognised as being crucial.
Major automotive manufacturers in the UK have committed to ambitious sustainability goals. For instance, Jaguar Land Rover aims to achieve zero tailpipe emissions by 2036, while Bentley plans to transition to an entirely electric lineup by 2030. Additionally, investments in renewable energy sources for manufacturing plants and the implementation of circular economy practices are helping reduce the industry's environmental footprint.
Linking sustainability with day-to-day activities continues to be a major challenge
Action, not just words, is needed. Outdated data, inaccurate assumptions, arbitrary numbers, and static spreadsheet models in industry lead to misleading results, and delayed sustainability projects. Rudolph and Hellmann Automotive is working with its automotive clients to help reduce carbon emissions, develop more sustainable practices, reduce waste and make them more efficient. Transformation through process improvement, and prioritising people is crucial for any manufacturing organisation transitioning to sustainability. We're constantly seeking ways to capture all relevant data and integrate sustainability metrics into our performance management.
Leading the way in manufacturing
The global automotive industry has already undergone a significant transformation, leading the way in manufacturing with its emphasis on environmental, social, and governance (ESG). The industry is driving positive change and setting new standards for environmental responsibility, social accountability, and transparent governance. As the demand for greener transportation options grows, the integration of ESG considerations will enable the UK automotive sector to thrive in a rapidly evolving landscape, benefiting both the industry and the broader society.
Sustainability reporting in the wider manufacturing sector
Where the automotive industry leads, the wider manufacturing sector typically follows. All manufacturing organisations will need to anticipate investor and stakeholder demands, manage ESG risks and take advantage of ESG opportunities. They will have to transform their approaches in several ways. This will involve fast-tracking product and service evolution to decarbonise activities. This means establishing new processes and enhancing traditional ones for sustainability, and putting people at the heart of their sustainable transition. But it's a more than just decarbonisation, it's also about putting people and communities first.
Social accountability
The social dimension of ESG encompasses the welfare of employees, engagement with local communities, and the promotion of diversity and inclusion. A key aspect of social responsibility is ensuring safe and fair working conditions for employees. Adopting sustainable labour practices, emphasising worker well-being, and striving for ethical supply chain management. Prioritising diversity and inclusion in the workforce to harness a broader range of perspectives and ideas. This can be also potentially be achieved by engaging with local communities, and strengthening the bond with the communities in which they operate. Providing initiatives like educational support, sponsoring local events, and investing in community development projects.
Governance and transparency
The final element of ESG is placing a heightened emphasis on strong corporate governance, to ensure responsible decision-making and long-term sustainability. Robust governance structures need to be implemented to uphold ethical standards and prevent corruption. Companies must improve their reporting mechanisms, provide transparent information on environmental impacts, social initiatives, and governance practices. This enables stakeholders, including investors, customers, and the general public, to make informed decisions and hold companies accountable for their actions.
Why ESG is more important now
ESG highlights where your organisation fits within the wider world, considering its social and environmental responsibilities – to ensure it governs with a conscience.
This helps individuals, investors and other businesses determine whether your company is in alignment with their values, as well as analyse the ultimate worth of a company for their purposes - whether this be as an employee, selecting you as a supplier, or investing in your products. Also, companies with strong ESG reporting practices are better equipped to identify and address potential risks to their operations and reputation. In shorts it can help organisations reduce their legal and reputational risk, carve out new markets, win customer loyalty, and attract top talent.
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