A Low-Code Digital Paradigm Shift to Tackle Industrial ESG Challenges
Scroll to the bottom of this blog to see Sustaira Founder & CEO, Vincent de la Mar present this information at Hannover Messe 2023
Coming off the heels of Hannover Messe 2023, it’s clear that we are at the crux of a true paradigm shift when solving the Industrial ESG and Sustainability challenges many manufacturers are facing. These challenges, which we will dive into shortly, require a low-code digital paradigm shift. What does that mean exactly? Allow me to set the stage.
Hannover Messe is a massive gathering that is truly “the place to be” to experience industry innovation. This is where 6,500 exhibitors from across the globe converge with 250,000 eager visitors at the captivating Hanover Fairground in Germany, setting the stage for groundbreaking advancements in industrial development. This year, the theme of Hannover Messe was carbon neutral industry, making it the perfect place to shift the norm and to showcase how a low-code approach can solve the Industrial ESG challenges.
During the event attendees saw a lot about Sustainability, and obviously it's become a central theme in our lifetime. At the end of the day, it’s all about Sustainability. But what is Sustainability? More specifically, what does the term ESG mean? At Sustaira, we define sustainability as, “mindfully meeting the needs of the present without compromising the ability of future generations to meet their own needs.”
When we apply Sustainability and ESG to specific industries, we are faced with specific challenges. The production and manufacturing industry dilemma: fulfill people's needs and offer products, while exhausting natural resources. Due to the rising awareness of the fact that we don’t have abundant resources, the concept of Sustainability is growing significantly and you can argue is the biggest threat and therefore opportunity for each of us.
This is where the paradigm shift sits, in opportunity. Let’s zoom into the challenges in the industry related to Sustainability and how we can uniquely address these challenges with a new approach.
What is ESG
ESG is commonly broken down by Environmental, Social, and Governance. Environmental refers to a company's impact on the environment and its efforts towards sustainability. Social examines a company's relationships with its employees, customers, communities, and other stakeholders. Lastly, Governance assesses the company's leadership, accountability, and adherence to ethical and responsible business practices. The question now is, so what?
Why ESG Matters & Common Challenges for Manufacturers
ESG holds significant importance as it directly applies to both the organizations we are associated with as employees or customers and plays a vital role in shaping our positive or negative impact across these domains of environmental, social, and governance. Gaining a comprehensive understanding of these metrics allows us to assess our influence and develop meaningful strategies to drive real change. This journey starts with knowing and understanding. In the realm of production and manufacturing, there are specific examples that highlight why ESG is so important here:
Environmental Impact: Tackling challenges related to high greenhouse gas emissions, pollution, and waste becomes imperative. Compliance with environmental regulations, reducing carbon footprints, and optimizing resource consumption are crucial objectives.
Social Impact: The industry faces operational hurdles concerning labor practices, human rights, community engagement, and safety. Addressing these concerns is essential for fostering sustainable and responsible practices.
Governance: Upholding transparency, integrity, and ethical conduct while adhering to robust corporate governance standards is vital. Combating corruption, ensuring compliance, and maintaining high ethical standards are integral aspects of governance in the industry.
By recognizing and addressing these ESG factors, the production and manufacturing industry can pave the way for positive change, fostering sustainability, and responsible practices that benefit both the organizations and society at large.
Going a level deeper - The Challenges
The first challenge to highlight when addressing ESG in production and manufacturing is around greenhouse gas emissions. A massive 22% of GHG emissions are Industrial. Representing over one fifth of total emissions is a huge pressure and challenge to solve as an industry. This is especially the case when looking to decarbonize, meet changing policies and requirements, and preserve our planet for the generations to come.
Which is why Carbon Accounting is of top importance. Carbon accounting, or greenhouse gas accounting is the process by which organizations measure how much carbon dioxide equivalents they emit. It's basically measuring your greenhouse gas emissions but it goes deeper than that. Carbon Accounting is broken into 3 areas or parts, that we call scopes. Scope 1, 2 and 3.
Scope 1 relates to the direct impact of your organization, this is emissions from things such as manufacturing plants and vehicles. Scope 2 is an organization's purchased electricity, heating, cooling, steam for its own use. Where it gets complicated, and where we see another core challenge is that where the majority of the emissions is in the supply chain. This is scope 3, the indirect emissions. These emissions come from the companies you either work with for downstream activities, as well as even upstream who use yours.
Which brings us to our next challenge; supply chain management. Ensuring the supply chain is sustainable and ethical, meeting compliance standards and requirements is an immense challenge. Data collection and aggregation across the value chain is a huge bottleneck. It’s complex, everyone is dependent on each others data and it all lives in Excel or legacy systems
Another immense challenge for manufacturers is Industry 4.0
Industry 4.0 is the idea that manufacturers are disrupting or being disrupted by new technical advancements in the Sustainability field reducing their environmental impact. Think about AI, blockchain, augmented reality, and IoT. All of these technologies are true disruptors and can change the landscape for the better, or leave companies struggling to catch up.
A fantastic example of industry 4.0 was illustrated by 80 Acres Farms at Hannover Messe this year. 80 Acres Farms has made supplying fresh food for a growing population its mission. How? With fully automated, indoor vertical farming. As it turns out, controlled environment agriculture is also more sustainable than traditional farming methods. 80 Acres took new technology and disrupted the industry and the norms with it, they were not disrupted by it. This was a complete disruption based on the need to become more sustainable. They are certainly not the only ones doing this. The question now is, how will you keep up?
The final Sustainability and ESG challenge to highlight in the industrial and manufacturing sector is the ongoing pressure from stakeholders to provide more transparency. Not only is transparency being demanded, but this pressure is also asking for transparency on an ongoing and frequently changing basis. This is coming from all directions and all different stakeholders.
First of all we see pressure mounting from new and changing regulations. Europe is leading in terms of regulations and it’s happening in cities, countries, but even broader than that through the European union with the Green deal forcing legislation such as the CSRD. The Corporate Sustainability Reporting Directive (CSRD) requires companies to report on the impact of corporate activities on the environment and society, and requires the audit (assurance) of reported information. The purpose of the Green Deal is to make Europe the first climate-neutral continent by 2050.
Over 50,000 companies will need to disclose ESG data under CSRD: that in itself is a massive task, but how about all the companies working with these companies? It will cause a huge ripple effect around the world in terms of ESG actio and it’s already happening. The SEC (Securities and Exchange Commission) is following the lead of CSRD very quickly for the US.
According to the 2022 Deloitte CxO Sustainability report, our world is not only at a tipping point in terms of climate change, but 89% of executives agree that there is a global climate emergency. This shift is not about profit or even policy, it comes back to the people and the planet and ultimately there must be action in this domain.
We’ve seen many business challenges the organizations are facing to become more Sustainable and it’s clear there is a growing importance of ESG. What’s important here is that these business challenges put a tremendous pressure on the digital capabilities within organizations: supply chain transparency, industry 4.0 technology and big data, and ever changing requirements around ESG data transparency needs. All of these require digital solutions.
The business challenges are now becoming a digital issue.
When we look at the most common challenges we see in Sustainability and ESG it becomes clear that these are in fact digital issues. Zooming out from the Industrial side of things for a moment and looking at just the core challenges in sustainability and ESG we see three core pillars:
Sustainability/ESG data is siloed
No efficient way to aggregate and manage data with a single source of truth
Many manual processes and Excel
Manufacturing specific: supply chain transparency and Scope 3 complexity
Inefficient disclosures and reporting
Difficult to demonstrate the impact to all stakeholders
Once a year reporting versus real time and ongoing insights
Manufacturing specific: Localization needs, waste, different disclosures standards
Incapable to turn insights into measurable actions
No way to track progress and results based on set goals and changing requirements
Unable to engage employees around sustainability
Manufacturing specific: PLM rigidness, design decision impact, and circular economy
Typically, these core challenges translate back to a lack of flexible solutions that are instead replaced by a myriad of off the shelf solutions that only somewhat address the needs of the organization. It’s a lack of IT solutions that can truly deliver the value needed, without creating new challenges or expanding an already tangled workflow. So how are we going to solve and tackle these things? You guessed it, we believe a paradigm shift is needed.
Shifting the Paradigm
On one hand, off the shelf solutions are not flexible enough to adjust to changing requirements from different stakeholders. On the other hand, custom coding isn’t fast enough and compromises efficiency. This is where low-code and Siemens low-code platform Mendix comes in.
The team at Sustaira has been working with Siemens low-code platform Mendix for many years and applies many of the lessons and expertise from other domains, into the ESG and Sustainability domain. By applying a building-block approach with reusable templates, Sustiara offers the goldilocks zone of solutions. Think of these as the half-way point between on off the shelf solution and a totally custom project. You’re starting with an accelerator that is pre-made with the core elements you need already ready for you, but is open and has the flexibility to be rapidly customized to 100% meet your needs.
We’ve chosen Mendix as the platform for Sustaira for a variety of reasons such as:
Mendix = Proven Low-code leader
Agility to keep up with change
Reusability: Templates
Microservices architecture
Localization & Deployment Flexibility
Global, incl. Internationalization
Out-of-the box building blocks
Strong integration capabilities
Siemens network and credibility
Powerful partner network, i.e. AWS
And many more...
Ultimately, the low-code approach Sustaira provides is exactly what the Sustainability and ESG domain has been missing.
Who is Sustaira, and what do we offer?
The best way to understand Sustaira is through Sustaira Sustainability Circle. This circle illustrates all the ESG and Sustainability domains such as Goals, Data Aggregation, Awareness and Actions, results & rewards and ultimately digital reporting (including disclosures and dashboards)
Sustaira has created ESG and Sustainability app templates within and between each of these domains. These templates are building blocks that have core features and functionalities that most people will need, but are left open and flexible. What you see isn't just what you get. These templates are meant to be customized and tailored to 100% meet the needs of whomever may adopt them. On top of these application templates, Sustaira is co-creating new ones very rapidly. For those of you who have a specific process or workflow that you haven’t been able to find a solution for, a co-created, custom application could be the solution. Be sure to connect with us if you have ideas.
Going Further - A Low-Code Approach
With the core of the platform built, Sustaira is verticalizing this building block approach. This means that there are specialized versions of the Sustaira platform not only for manufacturing and production companies, but also for smart infrastructure, construction, energy & utilities and education or finance. This is done through the Sustaira launchpad. This launchpad is just like what you see when you turn on your phone. You likely have your main applications represented as little tiles on your screen. Imagine this for Sustainability. Most verticals will need things such as Goals and KPI tracking, Carbon Accounting, Disclosures and reporting. But specialized applications may be a custom construction disclosure application like Contractor’s Commitment. Or Scenario Analysis in Higher Education like what Sustaira built with California State University Northridge.
Each company in each vertical has about 80% of the same ESG challenges, however to solve that final 20% of their requirements, that are often specific and complex, that is the biggest challenge from an IT perspective. This is where low-code and composite app templates and building blocks come into play.
Explore Some Examples:
The Sustaira ESG Goals & KPI Tracker
The Sustaira ESG Goals & KPI Tracker is a powerful app designed to streamline sustainability monitoring. With vase integration capabilities such as Energy Star Portfolio manager for smart metering, it enables efficient, real-time, ESG tracking. Choose from pre-established frameworks like the UN SDGs or create your own, such as the Siemens DEGREE framework. This app provides continuous 24/7 data and accountability, replacing traditional once-a-year reporting. Embrace a proactive approach to sustainability with the Sustaira ESG Goals & KPI Tracker, driving enhanced performance and progress.
Carbon & Emission Accounting Scope 1, 2 and 3
Sustaira offers a comprehensive carbon accounting solution, which is truly the engine behind ESG and Sustainability disclosures. Typically people start with scope 1 and 2 and slowly expand and this is what is usually required from external stakeholders or requirements. This application automates manual tracking and data aggregation, addressing scope 1 and 2 emissions and extending to scope 3 and supply chain analysis.
Use Cases:
Sustaira offers three types of propositions that can be best demonstrated through some of our recent customers:
Complete platform with building blocks / apps: This is demonstrated by our work with California State University Northridge and Monterey Bay. From Carbon Accounting needs to a Waste tracker, all the way to a custom Sustainability Planner application. The university started with a couple blocks and can grow as needs change.
Specific ESG app templates: This is highlighted through co-created applications such as the world done with Sellen Construction. Sellen is a $1b construction firm that needed a Contractor’s Commitment app to provide more ESG data transparency on construction sites. This application is essentially a construction disclosure framework that has over a dozen other companies involved who can benefit from it.
Lastly, completely custom apps: A great example is the case of Siemens Canada and their application that layers a mobile microgrid app on top of DesigoCC (HVAC data), Solarflower (solar data), and EV chargers, to provide visibility into energy distribution. This allowed Siemens to extend existing solutions without having to replace anything, but instead just expand and strengthen their existing portfolio. California State University Northridge is also a fitting example here through their Scenario Analysis application. This application allowed them to adjust variables regarding energy efficiency measures to see financial impacts, connecting ESG with the bottom line. This same framework could be applied in many ways, instead of energy efficiency measures, perhaps comparing ingredients in a product, or production site locations, or even distribution routes. The possibilities are endless.
Bringing it back together
Ultimately, what we have here and what I have outlined is a powerful and proven partnership approach. We have created a strong triangle that combines the scale and size of Siemens and its network, with the proven technology with Mendix, and the agility and focus on ESG and Sustainability with Sustaira. What this delivers is a powerful, flexible, and reliable ESG and Sustainability App Platform.
I’d like to invite you to connect with me if you have any questions and, most importantly especially if you have ideas how we can possibly work together and co-create something meaningful. To get in touch please head to our Contact Us page or learn more about our Menu of Solutions through this link. Sustainability and ESG involves all of us and impacts the generations after us, so let’s accelerate.
Watch Sustaira Founder & CEO, Vincent de la Mar present at Hannover Messe 2023. This blog will dive into this same content in more detail!
