How industrial leaders can use sustainability to create value

Yesterday’s sustainability-related innovations rapidly become today’s minimum standards. Forward- thinking firms in the industrial sector are raising the bar, putting sustainability at the core of their commercial and operational strategies, and increasingly demanding that partners across their ecosystems do the same.

Here are five areas where industrial sustainability leaders are leapfrogging their competitors:

1. Driving deep organizational commitment

Industrial leaders are moving beyond aspirational decarbonization objectives and rudimentary environmental disclosures which have become table stakes. Instead, they are anchoring sustainability principles across their operations. This often includes developing and executing road maps that detail technology and infrastructure investments contributing to long-term sustainability targets. They are also embedding sustainability in core decision-making and incentive structures, such as KPIs, ROI assessments, product road maps and design principles.

2. Putting sustainability at the core of innovation and business models

Rather than bolting it on as an afterthought, sustainability leaders are putting environmental considerations at the center of their innovation, product design and life cycle planning, and even commercial models. Taking sustainability into account from the outset, designers can create products specifically crafted to use fewer and greener materials. Firms are also seeking longer-term benefits as they reimagine production lines or even entire factories to reduce waste and increase energy efficiency. Leaders are dedicating portions of their R&D budgets to developing more sustainable materials and technologies. They are also building innovation hubs and incubators to make sure that there are always internal stakeholders with sustainability-related advances as their top priority.

Forward-thinking firms are also increasingly focused externally as well as internally, recognizing that some of the most significant advances can be realized via increased collaboration with ecosystem partners. This can include working with customers to introduce new commercial models — improving financial outcomes for both parties, as well as the environment.

3. Reimagining entire value chains — not just individual parts

As companies increasingly pursue incremental product and process improvements to boost sustainability, leaders are also rigorously evaluating all elements of their value chains for more differentiated gains. These firms are assessing all aspects of their supply chains and manufacturing processes, as well as the environmental handprint of their products post-sale.

Depending on the nature of the offering, this may be relatively straightforward (e.g., creating circular material loops for packaging or other low-complexity offerings) or much more complicated. In the case of capital equipment, the lifetime environmental impact from inefficient utilization or improper maintenance can be considerable. By deploying digital technologies and connected devices, leaders are analyzing performance in the field to help customers increase efficiency and reduce waste. The insights generated from this sort of ongoing customer interaction can be invaluable in identifying areas for future innovation while creating immediate value as an ongoing revenue stream.

4. Reinventing supply chains

Given their complexity, one of the greatest areas of environmental vulnerability — and opportunity — facing firms is their supply chains. To minimize risk, leaders are moving beyond superficial sustainability assessments and are instead engaging deeply with their entire supply chains, mapping direct suppliers down to the initial sources of basic commodities. Equipped with a more comprehensive view, firms can better align their supply chains with their overall sustainability strategies.

Leaders are also pursuing supply chain transformations by raising sustainability requirements for vendors and instituting accountability measures. These may include third-party certifications or more technology-driven solutions, such as the use of blockchain and advanced analytics to track input attributes from raw materials, all the way to the final product. When paired with ongoing diligence measures such as audits and on-site inspections, these measures can reduce risks and costs while improving quality and transparency.