Sustainability Strategies Drive the Future of Industry

Figure 1. Social, regulatory, and financial forces have made sustainability a key focus for companies of all sizes and industries. (Image: Siemens)

Sustainability has evolved into a primary concern across industries. What started as a trend has become a key business driver as organizations have begun to adopt net-zero-type goals for carbon and carbon-equivalent emissions to reduce their ecological footprint (Figure 1).

Many companies are working to take accountability of their environmental impacts and make good on commitments to improve their environmental stewardship. This surge in eco-conscious business practices demonstrates a growing emphasis on sustainability in many industries, making the need for robust sustainability strategies crucial for a company’s future.

Developing these sustainability strategies may appear a costly and challenging task for some organizations; however, a closer analysis of the reasons driving this transition to greener practices shows that companies who invest in sustainable operations are, in fact, investing in their own long-term success.

Sustainability Drivers: New Opportunities, New challenges

Organizations are actively pursuing sustainable designs and implementing environmentally friendly practices into their everyday operations. But what’s driving these eco-friendly initiatives? There are several incentives and challenges motivating companies to take a greener approach to their businesses:

Government Regulations: Government agencies worldwide are developing legislation and regulations that require companies to provide transparency into their current conservation practices and inquiries into how they plan to fulfill future sustainability obligations. For example, the Corporate Sustainability Reporting Directive (CSRD) is responsible for driving sustainable development across the EU. Companies who want to continue conducting business in the EU or are looking to do business in the future will need to meet certain reporting guidelines on their environmental impacts. These new benchmarks are making climate-conscious plans a recurring conversation in boardrooms as leaders strive to ensure their businesses maintain compliance.

Financial Incentives: While governments are requiring companies to take accountability for their sustainability goals via regulations, they are also incentivizing companies to take a greener approach. For example, in the U.S. the Inflation Reduction Act (IRA) is tackling clean energy by encouraging companies to decarbonize and instead adopt clean energy solutions. This symbiotic arrangement yields a win for all: governments, companies, and the environment. Furthermore, companies are finding that sustainability initiatives make sense for the bottom line as reductions in energy and material usage help lower operational costs throughout the organization (Figure 2).

Figure 2. Environmental programs also help reduce operational costs as companies find ways to optimize energy consumption and material usage. (Image: Siemens)

Increasing Social Awareness: Education surrounding sustainability has improved immensely and people are now prioritizing the health of our planet. Customers, suppliers, investors, and shareholders have a much deeper understanding of environmental issues now than they did in the past. Consumers are willing to pay a premium for products if they’re sustainably produced, and investors want to be associated with companies that prioritize and actively engage in green business practices. This social awareness is compelling companies to quickly adapt to the current climate by investing in sustainability strategies that resonate with their clientele. Moreover, there is a growing realization that perhaps the only thing costlier than developing a sustainability strategy is not having one at all.

Clearing the Hurdles

These new rules, standards, and incentives paint a clear picture: sustainability can no longer be treated as an afterthought. Companies will need to find ways to achieve a new standard of efficient and ecological operations while also ensuring a sound competitive position. Threading this needle involves a number of challenges that companies will need to overcome on the path to a greener future.

While the government regulations mentioned above are a major motivator for companies to go green, they can also present significant challenges. The details of new legislation and regulations are often in flux, especially when managing various new laws and rules around the globe. This can make navigating the maze of regulatory requirements seemingly insurmountable.

In addition to managing varied regulations, companies must also develop a complete understanding of their product and production lifecycle. This process is crucial to sustainability initiatives as it both forms the datum for later measurement and provides the information needed to create a roadmap towards the goal of sustainable business.

To achieve this, companies must have a holistic view of their lifecycles through collaboration and cross communication (Figure 3). From designing and manufacturing, to the supply chain and consumers, companies must learn to communicate with teams in ways they haven’t before. By doing so, they can generate collective intelligence to understand the total impact of an existing product or process, or to develop the sustainability requirements for a new one. Establishing channels of communication between teams is certainly a challenge, however the success of sustainable designs is dependent on those relationships.

Figure 3. Collaboration and communication must extend into the supply ecosystem to enable a complete understanding of the product and production lifecycle. (Image: Siemens)

Finally, data acts as both an aid and an obstacle when it comes to eco-minded decision making. The challenge of data is both in its acquisition and determining how to use it to drive decisions. Sorting through piles of data can be both tedious and time consuming, yet it’s the key to informed decision making. Engineers, planners, and business managers will need to develop processes to leverage these immense volumes of data to drive sustainable decisions.

How Digitalization Enables a Greener Future

So how can companies begin achieving these sustainability goals? When it comes to bridging the gap between conceptualization and implementation, digitalization and the digital twin are imperative.

Digitalization of the product, production, and supplier ecosystem ensures that data streams are available from throughout the organization to enrich your collective intelligence on an ongoing basis. Then, the digital twin of the product and production helps engineering teams and the entire company to achieve their cost, sustainability, and time-to-market goals. By combining the virtual and real worlds, the digital twin capitalizes on this collective intelligence to enhance design exploration on aggressive schedules with sustainability as a core requirement.

With these capabilities companies can simulate, innovate, and create modern designs that prioritize positive environmental impacts. By analyzing and leveraging data, the digital twin empowers engineers to examine and manipulate different parameters of a product to evaluate its performance under a variety of sustainability requirements.

Figure 4. Digitalization enables companies to make informed sustainability decisions on suppliers, material sources, and designs. (Image: Siemens)

Through data sharing, teamwork, and facilitating communication and collaboration among engineers, product managers, and supply chain providers, companies can uncover opportunities to prioritize sustainability throughout their organizations, such as by selecting component suppliers or materials based on their carbon emissions or other environmental performance metrics (Figure 4). This collaborative approach results in a workflow that culminates in a holistic sustainability strategy, empowering companies to achieve enduring success in an increasingly eco-conscious landscape.

As companies invest in the development of eco-friendly products and strategies, they will reap the rewards from increased consumer confidence, financial incentives, greater resiliency, and the ability to drive profound social change. Achieving these benefits requires a deeper commitment than simply tacking sustainable attributes onto existing products and operations. Instead, enterprises must undergo a fundamental shift in perspective by integrating sustainability into the very essence of the product and production lifecycle.

This article was written by Eryn Devola, Head of Sustainability, Siemens Digital Industries, and Dale Tutt, Vice President of Industry Strategy, Siemens Digital Industries Software (Plano, TX).