Sustainability Leadership in Manufacturing

Authors

• Raj Sapru

  Former Director, Advisory Services, BSR

Despite persistent volatility in the markets, the manufacturing sector is cautiously optimistic about growth. Sustaining this growth will require that sector become a lot more adept at anticipating the future.

At BSR, we believe the ability to identify emerging trends is one of the key dimensions of sustainability leadership. Leaders must question assumptions and pay more attention to long-term trends than short-term fluctuations. To anticipate those trends, they also must learn to listen to the weak signals that are often coming from the margins.

Three Trends to Watch

Global manufacturers are operating in an environment with ever-increasing complexities. Making sense of this will require a focus on sustainability issues that will have direct and significant impact on the business. Some of the priority trends for the industry include:

The future of fuels: The landscape of fuels is changing, with an uncertain future mix of traditional fossil fuels, renewable sources such as wind and solar, or “unconventional” fossil fuels such as those produced from oil sands. Campaigns surrounding issues like oil sands highlight the complexity and politics involved.

Companies must engage across the value chain to identify technologies, tools, and partnerships that can help them anticipate trends. Companies will need to understand the lifecycle impacts (social and economic, as well as environmental) of different fossil-based fuels to understand the inevitable trade-offs related to issues including security, policy, and the importance of fuels to local development (see BSR’s brief on the Future of Fuels). Gaining a clearer, longer-term picture of the future of fuel supply will help drive innovation in cars and other vehicles.

Demographic shifts in development: The rise of India, China, and Brazil; the growing global and regional income disparity; and a changing workforce will affect how 21st century manufacturers do everything from fill jobs to meet consumer demands. Many young workers in emerging economies will soon join the workforce (indeed, one third of India’s population is now under 15 years old), but manufacturers are already struggling to find people with the right skills and talent needed for modern production.

Demographic trends will also affect consumption patterns. Regional trends in income, congestion, and other factors in economic development will determine which products consumers demand.

Companies that engage locally and understand local development trends and regional operating environments will attract valuable talent and develop valuable products.

Manufacturing supply chains: Increasing demands from regulatory agencies and other stakeholders have placed conflict minerals on the agenda for manufacturing sectors (see BSR’s three-part series on conflict minerals), and more issues are on the horizon. The already volatile supply of manufacturing inputs, combined with increased scrutiny about where, why, and how the inputs are supplied, is a recipe for significant supply chain risk and complexity.

Manufacturers should expect a future in which regional trends and issues require swift due diligence and prompt action to avoid disruption. No company can afford to focus on all emerging issues; instead, companies must focus on the sourcing trends that matter most to their own supply chains. And they can determine these by engaging with issue experts to spot trends—and solutions—before they become disruptions.

Listening to the Margins

Traditionally, leaders were supposed to have all the answers. They were expected to identify and respond to trends before the issues became distractions. Today, leaders have to listen to weak signals and nontraditional voices to identify trends and respond in a meaningful way. Incorporating these nontraditional voices happens through deliberate and direct engagement with stakeholders to understand emerging issues in key markets and areas of operation (see more on this approach in BSR’s “Five Step Approach to Stakeholder Engagement”).

Some leaders in manufacturing are already taking this approach: BMW’s Guggenheim Lab project does this though a series of creative global stakeholder sessions focused on the future of cities. Companies in other sectors are making similar efforts: Siemens has its “Future Dialogue” series, GE has its ecomagination commitments, and IBM has its Smarter Planet campaign. These companies understand that it is not enough to show that their products are better, smarter, and more efficient. Leading companies must demonstrate an understanding of their operating environment and the global challenges that their products seek to address—through two-way dialogue, communication, and other proactive forms of engagement.

By listening to and engaging with a broader set of stakeholders—and identifying and responding to relevant trends affecting the industry—manufacturers will help build credibility for product-performance improvements and cast truly innovative products, services, and technologies as sustainability solutions.