By Katherine Munn 

The sustainability of business operations has become a popular area of discussion in recent years largely due to the changing regulatory situation relating to environmental matters.

The terms ‘sustainable business’ and ‘responsible business’ have evolved to apply to a much broader category of environmental, social and governance issues (ESG). They can be broadly defined as businesses that minimise their negative environmental impact while having a positive impact on their consumers, workforce and communities.

  • Environmental responsibility 

Manufacturers will be familiar with the regulatory perimeters on their operations due to environmental factors. The current mantra of environmentally sustainable manufacturing focuses on not depleting future availability of resources through irresponsible use of resources today. As well as generally being a good thing for businesses to do, developing environmentally friendly processes can include resource and energy efficiencies which may lead to lower overheads and higher profitability.

  • Social responsibility

The social element of responsible businesses should also be considered carefully by manufacturers. Social factors include matters such as health and safety, human rights, employment conditions, and the impact of a business on its local community. When a business starts to evaluate its social impact, the scale of effects of business operations can become startlingly apparent.

While there can be challenges in creating a ‘socially responsible’ business, there are also significant opportunities. The UK manufacturing industry is facing a skills shortage, and proactive policies around valuing and protecting employees can help a business attract talent as well as retain current staff.

Further, not using labour from modern slavery or human trafficking in the supply chain is essential for any business concerned about corporate responsibility. While the Modern Slavery Act 2015 sets out certain legislative requirements, businesses may seek to eliminate modern slavery from their supply chains with enhanced due diligence. A ‘socially responsible’ supply chain can only enhance a business’s reputation.

  • Governance

Governance considerations for a responsible manufacturing business may include matters such as reviewing incentive arrangements for executives, promoting effective management through diverse and effective senior management teams, and making sure the business doesn’t benefit from corrupt business practices anywhere in its supply chain.  

The legal obligations of a company in respect of its governance will depend on its size, but any business will benefit from ensuring that it has appropriate management structures and including ESG criteria on its risk register.          

Investors and consumers alike are now more aware of the benefits of responsible business. Institutional investors are increasingly conscious of ESG factors. Even investors who aren’t primarily driven to ethical investment may use ESG considerations as an indication of the level of risk associated with the business and the potential level of return over a long investment period.

Responsible business manufacturers may also discover further opportunities in establishing commercial relationships with suppliers and distributors who are conscious of corporate behaviour in their own supply chains.  

Adopting responsible business practices can provide long-term benefits to businesses and the development of interest in ESG matters offers a wealth of opportunities.