Sustainability - more than a buzzword

Nicole Mohan is a principal within Environmental, Social and Governance (ESG) and Climate Services and is RSM Australia’s National Sustainability Lead, responsible for developing and implementing initiatives to drive the adoption of sustainable practices and values across RSM. 

Starting as a Graduate and working with the company for almost 13 years, she has a passion for helping others and providing value added services. She has brought this passion to her role, by helping to improve ESG initiatives and practices both internally within RSM and externally for clients as well.

"All through my university degree and masters, I have been interested in the value that sustainable practices can generate for businesses, considering people, planet and economic prosperity. Now, as a leader within RSM's ESG and Climate Services team, I enjoy demonstrating how critical these practices are in achieving strategic success in the current and future environment."

What is ESG?

ESG is a reporting framework for measuring an individual or commercial impact on environmental, social and resources, which in turn informs the longer term sustainability of a company. This framework can be used to evaluate a company’s overall performance based on non-financial criteria, which may ultimately impact the long-term financial performance of the company.

ESG is now mainstream, front of mind with stakeholders and used globally to promote transparency of a company’s footprint and to also influence positive change in society. This could mean taking measures to lower pollution, CO2 output and reduce waste. It also means having a diverse and inclusive workforce, at the entry-level and all the way up to the board of directors.

"It is important to remember that measuring ESG performance is more than just climate change and the environment and that all elements should be looked at together, as one interrelated framework,” Mohan said.

Implementing sustainable practices within your company to improve your ESG performance

In terms of supporting clients on their ESG and sustainability maturity journey, one of the first steps a company can take is conducting a current state analysis of existing ESG and sustainability practices and data collection processes to identify areas for improvement, strengths, and weaknesses to help inform key stages and actions.

Following that, the company can then develop an ESG roadmap which is a detailed action plan that describes key milestones required to improve ESG maturity and performance. It includes the detailed steps, timelines and resource requirements to achieve the desired state of ESG maturity as companies move towards embedding sustainability culture throughout their operations.

Often, companies have already embarked on a journey to advance their ESG and sustainability practices and improve their performance, however, struggle to collate all required data and processes into one easy-to-navigate place.

“If a company has the internal resources and a formal governance structure over sustainability and climate related risks and opportunities, they can often take the lead in driving activities and initiatives themselves and we can help guide the company, where required."

“However, if companies lack those internal resources or structure, we can provide support to embed a structured approach for ESG and sustainability as the business continues to grow.

“With a mix of sustainability, risk management and reporting knowledge skills to assist, we ensure that the development of any deliverables is fit-for-purpose for the company’s operations,” she said. RSM understands that each company is slightly different. Accordingly, each will require its own unique ESG Roadmap, Strategy and Framework.

Resistance to change

A common challenge when commencing ESG and sustainability journeys can be an education gap in understanding the benefits of implementing ESG and sustainability within your business and what it can bring to the table. While there may be a common acknowledgement that ESG and sustainable initiatives can be fantastic for the environment and the wider community, there remains a sizeable proportion of stakeholders who are not aware of the long-term success and value proposition.

Mohan added that even in cases where businesses are in fact quite mature in their ESG and sustainability journey, they often are still uncertain as to whether they’re achieving their ESG targets and goals. In such cases, RSM can support the development of a refreshed set of “SMART” ESG targets and goals that are aligned with the company's ESG strategy, overall values and company priorities, and provide the means of performing accurate self-evaluations, as well as demonstrating ESG outcomes to stakeholders.

Importance of sustainability within the manufacturing industry 

Initially a compliance and reporting activity, sustainability has evolved into a strategic business imperative for manufacturers. With evolving regulatory landscapes, growing customer and stakeholder expectations underpinned by the pressing need to address climate change and preserve our natural environment, leveraging sustainable manufacturing practices to optimise processes, increase efficiency and reduce waste, can result in cost savings for manufacturers, which in turn can also improve profitability in the long run.

As part of leveraging sustainable manufacturing practices, commencing your ESG and sustainability journey can enhance a manufacturer’s position in the market - for long-term success and to appeal to socially conscious consumers and investors. It can mean the difference between winning and losing contracts and as such, it is important for manufacturers to be prepared.

It is equally important when manufacturers themselves are the prospective clients as Mohan explained.

“Banks and insurers are taking sustainability seriously when it comes to decisions around lending and insurance,” she noted. “It will be important for companies to demonstrate their sustainability credentials and performance to potential lenders and insurers, as we are now seeing that interest rates can be linked to this performance and KPIs."

Government policy is also beginning to shift and with the pressure of Net Zero targets and commitments hitting a range of industries. Recently, International Sustainability Standards Board (“ISSB”) officially launched its inaugural Global IFRS Sustainability Standards to establish a comprehensive global baseline of sustainability and climate-related disclosures that meets the information needs of investors to support better decision-making.

In Australia, the Treasury have released a consultation paper which provides information on Australia’s proposed approach towards implementation of the mandatory reporting standards including timelines and assurance requirements. While mandatory reporting requirements have not yet come into place, they provide the industry with an insight into what future expectations may be. Some manufacturers may need to begin reporting as soon as next year. Manufacturers who prioritise ESG and sustainability practices are more likely to comply with these reporting requirements, as such it is crucial for manufacturers to be prepared for these potential rapid regulatory changes.

Why you should consider implementing strategies to improve environmental performance 

RSM has identified that a key part of many manufacturing processes where sustainability and environmental performance can be improved is in value chain strategy. Many customers and suppliers are beginning to ask manufacturers for ESG and sustainability data and information, signifying the importance of ensuring the information is readily available when needed.

In particular, corporate purchasers are now starting to enforce sustainability requirements on downstream suppliers and are increasingly requesting detailed environmental performance data from key suppliers. This has placed pressure on Australian manufacturers to disclose and improve their environmental performance through initiatives such as reducing their GHG emissions, minimising generated waste, improving energy efficiency and limiting water usage. In driving sustainability within the manufacturing sector, there are several key strategies that manufacturers can adopt to improve their environmental performance.

• Water conservation - implementation of water-saving measures within manufacturing processes such as investing in water recycling and treatment technologies.
• Waste reduction measures – implementation of a strong waste management process such as exploring possibilities for reusing and recycling materials, reducing operational waste and packaging to promote sustainability;

Improving energy efficiency:

• Shift to renewable energy sources, such as solar, wind, or hydropower, to reduce carbon emissions from electricity consumption. Because energy costs fluctuate according to the demands made of the energy grid, companies might consider running high-energy equipment during the evening or overnight, because overall demand for energy is less during these hours, and thus cheaper. This not only saves on energy costs but affords greater opportunity for alternative energy sources to be utilised in daylight hours. For example, self-generated solar power can be used while the sun is shining to power less energy-intensive equipment;
• Consider lower efficiency globes or switching off parts of the plant can be a game changer, when considered over the course of a year.
• Investigate opportunities to enhance energy efficiency by switching or upgrading existing machinery to machines that can be powered by alternative sources, or others that emit less Co2, thereby lowering overall greenhouse gas output.  

We are here to help

We are here to support you on your ESG journey, offering tailored solutions. If you have any questions or concerns mentioned in this article, or if you would like to discuss ESG within your business, please contact Nicole Mohan.

This article was co-written with Manufacturer's Monthly.