Drivers for future success: implementing ESG into production

Using ESG criteria in business

The implementation of sustainability criteria, particularly ESG, is becoming increasingly vital in corporate management. ESG scores significantly influence lenders such as banks and funds, potentially leading to more favorable credit terms. Additionally, regulatory requirements are rising, such as the EU’s Corporate Sustainability Reporting Directive (CSRD), which expands reporting obligations on sustainability.

The market has become almost opaque when it comes to ESG reporting and choosing the right ESG strategy, leading some to liken it to a “Wild West.”

What many overlook is this: the focus should not simply be on producing a report or obtaining certification. The primary task is embedding sustainability through ESG into the core of the organization. This enables effective risk management on one hand, while also positively impacting the company’s reputation, access to capital, innovation, and competitiveness on the other.

Moreover, integrating ESG criteria into corporate strategy contributes to creating long-term corporate value. This is achieved by identifying and managing environmental and social risks and fostering responsible corporate governance, which in turn enhances the company’s financial performance over time.

Developing the right ESG strategy

The approach chosen for implementing ESG should be closely aligned with the goals of the company and its stakeholders. This alignment allows business opportunities arising from sustainability to be systematically leveraged. Integrating ESG criteria into strategic and operational processes becomes a key success factor for sustainable development.

Simply “purchasing” certifications may seem like an easy and cost-effective solution initially, but these certificates often lack long-term value. Perhaps even more critically, the organization’s ability to undergo a sustainable transformation toward becoming an agile and sustainable enterprise is not developed, resulting in valuable time being lost in building competitiveness.

The process starts with establishing a genuine commitment to sustainable development and identifying blind spots. A sustainability report following the GRI standard is an excellent starting point.

Implementing sustainability standards

The first step in sustainability reporting is a materiality analysis, identifying sustainability aspects that are strategically significant for the company’s success. This involves working out which aspects of sustainability are of key strategic relevance to the company’s success.

Vice versa, the impact of business activities on social and environmental dimensions is also analyzed. This creates a link between sustainability issues and corporate strategy, while at the same time keeping an eye on stakeholder requirements.

The subsequent reporting process, in which data is collected, compiled and published, now creates transparency for the status quo – especially regarding the company’s own perspective and relevant stakeholders.

It is at least as important that the reporting process enables the organization to tackle sustainability and ESG in terms of competitiveness and build confidence in its own ability to transform.

In a nutshell: A company’s long-term successful and sustainable development does not depend on the selection of a specific ESG certificate, let alone the short-term procurement of such a certificate.

Rather, it is important to initiate a process that helps the company to understand its own goals as well as the expectations and requirements of its stakeholders. The next step is to enable the organization to identify the necessary measures and implement them accordingly.

Advancing ESG strategies through OPEX

Industrial companies can approach such a process via existing operational excellence programs (OPEX)and use these to create access to sustainable business practices.

Both ESG/CSRD reporting and OPEX aim to drive transformation that ensures long-term competitiveness. They also share the approach of integrating such a transformation into a company’s strategic and operational processes and understanding it as an iterative process of continuous improvement.

The key to successful implementation is to enable the organization and individual employees to identify solutions to problems and implement them in a targeted manner. 

Existing OPEX programs provide a very good breeding ground for a successful sustainable transformation and the development of an ESG strategy as well as the implementation of ESG criteria in the company.

Conclusion

OPEX programs inherently improve environmental and social outcomes, such as reducing energy consumption and enhancing workplace culture. More importantly, they cultivate the culture and understanding of transformation processes essential for sustainable development. Existing structures can be utilized, and scarce resources consolidated.

Expanding OPEX into “Sustainable Excellence“ offers industrial enterprises a practical pathway to long-term sustainable success.

And as an aside, the result also promises ESG ratings that mark the company as a leader in sustainable development.

Have you established an operational excellence program in your company? And are you aware of the potential for sustainable development that results from this program? Share your examples and thoughts with us – we look forward to hearing from you!