Nearly a year after the release of Profit & Purpose, we’ve had the opportunity to learn from (and work with!) so many innovative companies. And as the world turns rapidly towards a greater focus on ESG, businesses across all industries are looking at how to best integrate impact and sustainability into their own business models.
Advanced manufacturing companies and other blue-collar dominant businesses are no different. We’ve had a number of conversations with leaders in manufacturing industries this year, and the benefits and challenges ESG poses to these companies are significant and unique from many other business models.
The manufacturing sector has long been ahead of the curve on strategies such as apprenticeship programs and exposing students to the trades to build their workforce pipeline. But ESG is quickly evolving and many of these same businesses are now turning their attention to DEI efforts, workforce retention and environmental sustainability, in addition to workforce pipeline efforts.
Why are manufacturing companies investing in ESG?
Like other industries, manufacturers are experiencing disruption due to changing expectations of shareholders. Millennial workers and consumers expect the companies they engage to be responsible across a range of issues. Environmental and sustainability factors play a particularly big role in this industry and many advanced manufacturing companies have established sustainability departments focused on reducing their carbon footprint, making their supply chain more environmentally-sound and examining production processes of the future.
While this movement is driven by large, publicly-traded companies, it is having a trickle-down impact. Many privately-owned manufacturing companies find themselves in the supply chains of these larger companies and must evolve their business models to remain competitive.
Layer in a rapidly-retiring workforce, the impacts of the pandemic, supply chain shortages and a need for greater inclusivity of both women and workers of color in these fields – many of these companies are being forced to evolve in real time to meet quickly changing needs and expectations.
Where does CSR or community impact fit in?
As we noted back in January, CSR is not the same as ESG, but community impact is a critical part of a comprehensive ESG strategy. Savvy manufacturing companies are looking to leverage the long-term impact of their community efforts to solve business challenges and to support the broader goals of their ESG strategy.
This is typically an unexplored area of focus for a company accustomed to running in the background of civic engagement, with its business-to-business model less often resulting in prominent social impact efforts. But it is a trend we believe is only going to become more essential for manufacturing companies in the coming months and years.
How are advanced manufacturing companies leveraging ESG and social impact efforts to support their businesses?
Social impact strategies can be leveraged to solve many of the challenges faced by companies that count on blue-collar, gray-collar and white-collar employees working together to produce a profit, including:
- Talent Recruitment – A large portion of the blue-collar workforce in the United States is rapidly approaching retirement age, without enough next-gen employees to fill their spots. Some companies are partnering directly with nonprofits to set up training, hiring or apprenticeship programs in a clear win-win strategy. The company gains qualified workers, while the nonprofit and community gain valuable job training and positions.
- Employee Engagement – More than one leader we spoke to specifically pointed out the challenges of employee retention over the last few years. Considered essential workers, many manufacturing employees are feeling the stress of the last two years. Staffing shortages and overtime hours compound this stress and many businesses are looking for team-building, mental health support and other engagement strategies to prevent burnout and retain their workforce.
- DEI Efforts – Similarly, nearly every manufacturing leader we spoke to cited DEI as another focus area they hope social impact efforts can support. For example, one local company has its eye on increasing the diversity of their workforce and increasing the number of women and people of color in their leadership structure. In addition to examining their current practices, they are working on cultivating a diverse future workforce by investing in technology programs at under-resourced high schools.
- Workforce Pipeline – Long-term pipeline is on the mind of nearly every business leader. Advanced manufacturing companies need to cultivate a strong pipeline across a range of areas – technology, finance, trade jobs and more and many companies are investing in nonprofits designed to support the long-term success of students. Some companies are investing in schools and academic support for students, while others are funding organizations that focus specifically on segments of the future workforce, such as girls and technology or students of color and engineering.
A new way to look at nonprofit partnerships.
Nonprofit partnerships have long been seen as primarily a ‘give back’ or cause marketing effort for companies. But what if these partnerships had the ability to invest not only in the community, but inside the walls of your company? A shift in thinking opens up a new world for private-sector and community organizations that collaborate. If we instead viewed nonprofits as valuable partners and vendors who could help address company issues, your company could find efficient and effective partners in solving common workplace challenges.
Here are a couple of tips to keep in mind as you consider partnerships in line with your ESG strategy:
- Create a ‘theory of change’ – Your company needs a narrative that ties together your focus on each of the initials in ESG. We see companies with mostly disconnected strategies that don’t speak to each other, making it difficult to communicate how your company is addressing these complicated issues. A strong human-centered narrative that connects metrics to your newly-developed mission is the key to remaining competitive.
- Prioritize key challenges – As you consider a social impact strategy, explore how it could support your business challenges. If the mental health and stress of your workforce is a concern, consider partnering with an organization that offers group meditation or wellness services. Hiring challenges could be supported by partnering with an organization that offers training in the trades for their clients. When you consider partnerships based on your own challenges, it opens a world of collaboration that provides wins for everyone.
- Find collaborative partners – In this vendor-based model, it is critical to find nonprofit partners who ‘get it.’ Consider the ways you form partnerships with organizations and see if you can change the dynamic. What would it look like to present a specific problem to a nonprofit, then collaborate on a solution? These collaborative partnerships frequently produce innovative, targeted solutions that work well for both parties.
The impacts of ESG on advanced manufacturing and other blue-collar businesses is significant, but we believe it can be harnessed to leverage the win-win-win potential hidden in every company. Want to learn more? Reach out for a free consultation.