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December 01, 2023

ESG in manufacturing: from compliance to competitive edge

Forward-looking companies now view sustainability as a strategic differentiator—but to succeed, new enterprise capabilities are needed.

“What environmental claims can we make about product A vs. product B?” asks the sales department. “How does the carbon footprint of this product change if we use plastics instead of aluminum?” ask the engineers. “Which process in our factory has the highest environmental impact?” chimes in the manufacturing manager.

Companies struggle to find a cohesive source of truth to answer questions like these.

Siloed information, disconnected systems, unstructured, low-quality data and a lack of competency make it difficult to answer practical questions about product or manufacturing process when it comes to decisions on sustainability.  

Sustainability competitiveness requires new capabilities

As customer awareness and choice increases and regulations tighten, companies strive to find competitive differentiators—and business ambitions must extend well beyond ESG regulations. For our customers, sustainability issues have become business imperatives. They say focusing on these issues enables them to differentiate their business models, strengthen their innovation capabilities, and improve their risk management profile and brand.

Factor in operational efficiency; responsible material and supply chain management; and development of circular business models, and you have the levers for a winning strategy. But today, most companies don’t have the data, decision points or people capabilities to deliver sustained transformation capability. Most change in product strategy is cost-driven and usually comes with the price of additional stress to the logistics and supply chain.

The twin transition

Meeting obligatory burdens and attracting investors and customers, while also optimizing resource use, offering differentiated products and services, and maintaining a sustainable business model, calls for a major overhaul of current processes, systems and solutions. In this context, a “twin transition” in which Net Zero-related transitions and digital transformation go hand in hand; one cannot exist without the other. To succeed, it’s critical to understand where the enterprise’s capabilities fall short—and to build a pathway to uplift those capabilities.

To get started on this challenging path, manufacturers must understand the velocity and effort required toward their Net Zero goals, as well as various stakeholders’ responsibilities. Among other things, it’s about prioritizing ESG metrics based on potential value; defining optimized metrics journeys; driving better business decisions through governed data assets; prioritizing technology capabilities to enable scalability; and enabling a new operating model to deliver consistently and well. Businesses must next prioritize the deployment of foundational capability in the enterprise IT/OT model to drive business outcomes.

Clearly, this is a daunting task—one for which many manufacturers will seek a partner. It’s important that this partner possess the depth of expertise and experience needed to effect the twin transition.

Ongoing projects

Already, several Cognizant clients have driven tangible sustainability projects with digital transformation at their core. Among the current examples is a pump manufacturer for which an integrated IoT-based service delivery framework improved the revenue lifecycle; AI-driven crop evaluation within the agriculture industry; improved sustainable product lifecycle management with a focus on Scope 3 at a consumer product brand; and integrated refrigeration monitoring between processing, transport and store shelves to improve energy efficiency for a food and beverage company.

For some companies, ESG may feel like an administrative burden—but many industry leaders are driving materiality which can bring consistent customer gains, and with a sound fiscal underpinning.

To learn more, please visit the Manufacturing and Sustainability sections of our website or contact us.

Manoj Mathew

VP, Advisory-Engineering, Industry 4.0 & Sustainability

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Manoj has led strategy consulting, acquisitions, and engineering teams at Cognizant. His current focus is rethinking product lifecycle around sustainable solutions — and helping clients leverage ever-increasing pools of sensor data, live telemetry, and data science.

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