Marshall Chase, Associate Director, Advisory Services, BSR

Manufacturing and industrial companies—auto and equipment makers, aerospace manufacturers, building materials and chemicals producers, and others—play an important role in addressing sustainability challenges. Their global supply chains use vast amounts of labor and raw materials, and their operations and products underpin economies around the world—creating vital jobs and infrastructure, as well as benefits and challenges for communities and the environment.

In 2015, I expect the sustainability challenges and opportunities in this sector to expand, as companies, consumers, regulators, and activists demand greater focus on environmental and social issues like climate change and conflict minerals, and as shifting markets and business practices raise new issues, such as the integration of “smart” networked information technology into manufactured products.

Based on conversations with colleagues, BSR member companies, and others, here are four issues that are most relevant for the sector in 2015:

  1. Deepening supply chain engagement: From conflict minerals and human trafficking to environmental degradation and resource scarcity, there are growing regulatory, commercial, and societal expectations that manufacturers should understand and address issues deep in their supply chains. Most of these issues exist in a complex supply network beyond first-tier suppliers, so it can be unclear how to tackle them. At the same time, companies have an opportunity to increase transparency, improve sustainability, and strengthen supply networks to reduce business risks. Leading companies like Ford have demonstrated this through effective engagement on issues such as conflict minerals.
  2. Respecting human rights: Under the UN Guiding Principles on Business and Human Rights, companies are expected to “know and show” that they respect human rights. Appropriate policies, due diligence, and impact assessments can help address concerns that manufactured products can be used to limit human rights—such as preventing freedom of movement or conducting illegitimate surveillance, especially with the increasing integration of information technology into “smart” products. Responsible human rights policies and approaches can also address concerns about the supply chain challenges mentioned above. And here, too, there are significant opportunities for manufacturers to empower people by providing good jobs, education, and products that address people’s basic needs for sustainable and reliable energy, water, and shelter. For example, General Electric’s entry into Myanmar focuses on improving local healthcare and infrastructure while supporting rule of law and anticorruption efforts.
  3. Addressing climate constraints: Global manufacturers affect the world’s climate through their own energy and resource use and through the impacts of their products and supply chains. These companies are often incredibly efficient in their internal operations. But fewer companies understand how they can influence climate impacts upstream and downstream from their own operations, and fewer still know how climate change will affect operations and markets. As energy prices slump, there is a risk that less attention will be paid to reducing greenhouse gas emissions. But there is a tremendous opportunity for manufacturing companies to understand the full range of climate impacts on their operations and markets, and to work with customers and partners to develop products and services to meet those needs. BMW’s work to incorporate climate considerations into its supply chain, operations, and products is an example of a comprehensive climate-resilience approach.
  4. Implementing effective global sustainability strategies: Complex global manufacturing organizations need effective sustainability strategies that empower local operations to address issues in communities around factories and adapt to regional markets, while connecting back to a global vision. One element of this is to engage with customers to understand how companies’ products, services, and technologies can become environmentally and socially sustainable solutions to their customers’ needs. For example, CEMEX’s Patrimonio Hoy program provides access to much-needed building materials, financing, and technical support to build homes and create jobs.

To address these issues, companies should start by thinking about risks—to brands, markets, supply chains, and operations—and about the opportunities to enhance business relationships, obtain competitive advantage, build reputation, and address the real needs of people around the world.

In 2015, we will share our perspective on these issues, and the perspective of BSR’s member companies and partners. And we want to hear your thoughts: How can BSR work with industrial companies on these and other issues to achieve our mission to create a more just and sustainable world?