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Addressing the biggest C Suite challenge: Managing sustainability with profitability

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With the global pandemic now in its third year, most business leaders continue to face significant challenges, but also unprecedented opportunities if fully realized. Some companies are already experiencing the early benefits of digitalization and automation in their business with improved efficiency, productivity, supply chain management, as well as helping close the skills shortage gap.
We still have significant improvement opportunities ahead of us — be it global multinationals, small-and-medium-sized enterprises (SMEs) or recent startups fully realizing all the benefits digitalization and automation have to offer. In particular, we are far fulfilling a need that will impact this and future generations: The ability to track carbon footprints on a larger scale for better environmental stewardship.

In a world where 20-30% of carbon emissions still come from industrial production—producers face seemingly contradictory goals: How to balance consumers’ rising demand for high-quality, affordable, customized-and-individualized goods with rising cost pressures, interrupted supply chains, decarbonization demands, as well as increasingly scarce raw materials.

In India, while some of the large businesses have been quick to transition into this digital world, the majority in the manufacturing sector are yet to put these digital technologies to work, especially the SMEs. Despite SMEs occupying a majority share of the industry, they currently face multiple issues that are hindering their growth like continuous quality improvement, scope and scale. Some of the major factors responsible for this are extensive manual interventions in processes, interrupted flow of data and lack of skilled manpower. There will be a sustainable development of manufacturing only when the SME sector participates with upgraded technology and skills.
Building a sustainable future will not be cheap, but the necessary investments will provide a significant opportunity for business growth. C-Suite leaders must plan for production and products that are more environmentally sustainable than ever before. That is what customers demand. That is what governments require. It means making more with fewer resources and leaving less environmental impact from industrial processes, buildings and infrastructure.

Cost pressures are growing as well—especially for CFOs. In addition, companies must now do more with less while also being environmentally sustainable. And sustainable products are only half the story. Energy-efficient production is also important to keep existing customers running more efficiently while also winning the trust of new ones. Consumers are also increasingly becoming data-loyal—as opposed to brand-loyal—making traceability and transparency more important than ever for producers.

It is critical to quantify the true economic impact of sustainability and monitoring the performance could be the key to bridging the gap between social and environmental initiatives and bottom-line results. Companies should address societal needs and environmental improvement in a convergent manner by developing profitable projects that give both economic and noneconomic benefits

With consumers wanting more customized products and markets being shorter-lived than ever, CEOs, and COOs today must plan for shorter innovation cycles than in the past. Production facilities need to be designed with enough flexibility and resilience to scale up, then scale down—often in record time. Brownfield optimization of existing facilities using adaptable technology is equally important for sustainability to succeed as are repairing and retrofitting services, as well as data analysis and predictive services solutions.

Initial investments in more expensive materials and methods will result in larger savings in the long run. As impressive as the cost savings are, the growth that companies in emerging markets have achieved by extending their sustainability efforts to their customers’ operations is even more intriguing. Businesses today must consider their total return not just on assets but also on resources.

Information technology is playing a larger role in today’s production facilities than ever before. Software and software-enabled hardware are increasingly becoming key competitive factors as CTOs, COOs and CDOs strive to make better use of data collaboration starting with a customer order all the way to the machine on the shopfloor, enabling a faster time-to-market as well as better quality control and traceability.

The pandemic only accelerated workplace trends long underway, including business’ ability to attract and retain the best-and-the-brightest, improve health, safety, etc. Current demographic changes also mean that virtually the entire C-Suite—but especially CHROs—must prioritize finding, retaining skilled-and-qualified workers who are in ever-shorter supply. Sustainability can boost profitability in many ways. Improved efficiency, a great reputation, and future-proofing against regulation are just a few of the advantages. Particularly in the aftermath of the COVID-19 outbreak, environmental, social, and corporate governance programs—and the demand for greater transparency around those efforts—will intensify.

The writer is Head- Digital Industries, Siemens Limited, India.

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