Driving Sustainability for Manufacturing Enterprises

Summary

Nearly every conversation touching business, economics, or government today involves some consideration of ESG - Environmental, Social, and Governance. The environmental piece (and the need to develop a more sustainable economy) first found its way into the discussion late last century but remained a relatively minor issue until recently. Today, governments around the world are painting their agendas green, with regulation and fiscal policy following suit. Customers are demanding products with lower carbon footprints, and capital markets are signaling ESG preference as well. The COVID-19 pandemic highlighted our vulnerability to global natural catastrophe, and the possibility of constructive action to mitigate that.

The trend toward a sustainable economy is clear, and businesses will need to adapt to remain competitive and compliant. This is happening quickly, however, and many organizations need support during the process. As ARC Advisory Group learned in a recent discussion, Tata Consultancy Services (TCS) has been working with manufacturing enterprises to help them improve their sustainability, helping them report, communicate, monitor, and reduce emissions, and comply with their regulators.

Sustainability Has Become a Key Objective

What is sustainability and why has it become a central issue in recent years? Sustainability means a long-term vision for businesses, where they can operate indefinitely without using resources faster than they can be replenished, all while not releasing pollutants into the atmosphere, soil, or water faster than nature neutralizes or removes them. The idea can be gainfully applied to less tangible parts of the organization, such as avoiding employee burnout, but we will stay with the environmental perspective here.

Sustainability is becoming more significant now, with increased public acceptance of the effects of excessive pollution, rapidly increasing greenhouse gases (GHGs) in the atmosphere, more severe natural disasters, and a scientific consensus that has developed over decades. Reducing emissions and employing more efficient sources of energy aren’t just good for people and the environment, they are good business.

The Tide Has Shifted

Government attention and activity have been ramping up with research funding, regulation, and industrial policy - all supporting the transition to a cleaner economy. With its invitation of looser monetary and fiscal policies (and newly blurred lines between the two) the pandemic has accelerated this shift. Most major nations are implementing “build back better” plans – channeling the torrent of stimulus money meant to kickstart the economic recovery toward green initiatives.

Government considerations aside, organizations are finding that sustainability often makes for good business performance. Reducing emissions means reducing waste, and today’s consumers, B2B customers, and investors alike are rewarding green enterprises as well.

Going Green

Moving towards sustainable business involves accounting for existing sources of waste and pollution and communicating that information to employees, investors, and regulators. GHG emissions (generally the main focus) are often broken down into:

• Scope 1 emissions: Those directly resulting from operations controlled by the organization.
• Scope 2 emissions: GHGs released from the generation of purchased electricity, heating, or cooling.
• Scope 3 emissions: All indirect emissions in the value chain, both upstream and downstream of the organization.

Scope 1 and 3 can be especially excruciating to report. Accurately assessing these is a serious challenge that can span the disciplines of engineering, chemistry, supply chain, and accounting to name a few. Many businesses thinking about this for the first time find they need some guidance.

Next, organizations continue to reduce their footprint, ideally in ways that benefit the entire business. Approaches range from direct emissions reduction to working with suppliers to reduce their footprint, purchasing carbon credits, creating your own offsets via carbon negative activities, and assisting customers in their own efforts as they relate to use of your products. The design space here is ripe with opportunity.

TCS: Enabling Manufacturing Enterprises to Be “Sustainable by Design”

Recently, TCS executives briefed ARC on its capabilities and recent experiences helping organizations improve and communicate their sustainability performance. TCS believes the future of manufacturing is neural. Through its thought leadership framework called Neural Manufacturing, it enables manufacturing enterprises orchestrate cognitive, connected, and collaborative ecosystems. These neural capabilities take center stage when organizations must work with multiple stakeholders to achieve common sustainability goals.

Case Studies

TCS is filling in knowledge and technical gaps for businesses, creating solutions that span environmental reporting, operations innovation, business model transformation, supply chain management, and more. Here are a few examples shared in the briefing:

Measurement & Reporting

Businesses need to understand and account for all their pollution and waste before they can hope to change it, as well as effectively communicate their footprint and mitigation efforts to the outside world. A leading building material manufacturer needed help synthesizing disparate environmental health & safety and sustainability (EHS&S) data from across the enterprise, as the existing piecemeal process was expensive and incomplete.

TCS worked with stakeholders in the organization to develop a streamlined, comprehensive data collection process leveraging standardization and automation. With this, the business was able to report across GRI G4, DJSI, FTSE, CDP Water, CDP Investor, CDP Supply Chain, and IW Financial with confidence and at lower cost. The company’s subsequent reduction of emissions and energy intensity earned it recognition as a DJSI leader.

If accounting for scope 1 and 2 emissions can be challenging, scope 3 is even more so. A large US-based agricultural enterprise decided it would partner with TCS to evaluate all scope 3 emissions for upstream and downstream operations with the intention of using the knowledge to drive meaningful decisions for the business. TCS implemented its Viridi platform (a part of TCS ESG services) to calculate all the company’s supplier and customer emissions. This expanded visibility into the sources of emissions and allowed the company to evaluate its sustainability performance and progress toward its footprint reduction goals more effectively.

Greening Operations

After accurately accounting for environmental impact, businesses can move toward reducing it. TCS provides support here on the operational side as well. TCS worked with a major industrial boiler OEM in its efforts to revamp its equipment tuning process. By implementing a full digital twin of the equipment and applying artificial intelligence analysis, TCS was able to automate the tuning of over 250 parameters for the customer. This resulted in a dramatic reduction in energy use, emissions, tuning cost, and manpower, which is key in an industry where experienced engineers retire faster than new ones can be trained.

TCS also worked with a large utility in Singapore that needed a platform for renewable energy certificates (RECs), where customers could buy and sell RE-100-recognized RECs as well as have their own issued to represent carbon reduction activities in their organizations. TCS built a REC platform which aggregates RECs from varying sources in the customer’s ecosystem, creating liquidity for the marketplace. The solution utilizes an internal blockchain system to increase transparency of market activity and REC asset ownership, furthering trust in the market.

Data Holds the Key

TCS strongly believes that access to data across the extended value chain from sourcing to production and subsequently product in use, is key to manage the goal to establish “lifecycle sustainability.” This they believe is possible with the information fabric enabled by its Neural Manufacturing framework.

Conclusion

Though a doubtful and laggard transition just three years ago when this analyst first began writing on the topic, the world seems to have crossed the proverbial Rubicon in its commitment to sustainability, and the trend looks unlikely to reverse. The pandemic focused minds on global issues and “build-back-better” initiatives, and these are a catalyst for dramatic change. Today, customers, regulators, investors, and employees are demanding sustainability, and businesses realize they must get on board to stay ahead. As ARC learned in our conversation, TCS is leveraging its wide spanning expertise and software tooling prowess to help businesses navigate and thrive in this new world.

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Keywords: Sustainability, ESG, Carbon Neutrality, Tata Consultancy Services, Neural Manufacturing, ARC Advisory Group.