A recent report from Make UK and Lloyds Bank has shed light on a significant uptick in the number of manufacturing firms in the UK setting Environmental, Social, and Governance (ESG) targets for their businesses. The report reveals a staggering 48% increase since 2021, with approximately two thirds (62%) of manufacturing firms now incorporating ESG targets into their strategies.
The comprehensive report, which delves into the progress, opportunities, and challenges faced by UK manufacturing firms in enhancing their ESG strategies, indicates a strong inclination among manufacturers to expand the scale of their ESG strategies in the next two years, with nearly two thirds (61%) expressing this intention. This surge in ESG commitment is attributed to mounting pressures from various stakeholders, including the labor market, government, investors, and customers.
While the majority of firms (77%) are receiving ESG conditions or targets from their customers, only a fraction (27%) are receiving adequate support from them to meet these requirements, indicating a clear need for enhanced support mechanisms. Additionally, the report highlights an acceleration in the inclusion of ESG conditions in procurement strategies, with three-quarters (74%) of firms incorporating ESG conditions into their procurement strategies, up from two thirds (66%) two years ago. However, a significant proportion (45%) are unaware of their suppliers’ performance against these targets.
The report underscores a notable shift in the focus of ESG conditions, with human capital-related factors taking center stage in the ESG framework. Health and safety (53%), human rights (41%), labor rights (34%), and diversity and inclusion (27%) emerge as prominent areas of focus for manufacturers. However, there is a growing emphasis on environmental factors, particularly carbon emissions (24%) and biodiversity/nature (12%), with manufacturers anticipating an increase in the prevalence of these requirements in their supply chain conditions.
Despite the increased emphasis on ESG, the report highlights challenges faced by manufacturers, including financial and technological barriers, particularly for smaller firms in their supply chains. In light of these challenges, collaboration within supply chains is emphasized as essential to ensuring sustainable ESG strategies and fostering future growth.
Faye Skelton, head of policy at Make UK, commented on the evolving landscape of ESG, stating, “ESG is becoming more than a ‘nice to have’ and is rapidly rising up the boardroom agenda. As a result, those companies getting ahead of the game will clearly have a competitive advantage.”
Huw Howells, head of manufacturing & industrials at Lloyds Bank, echoed Skelton’s sentiments, highlighting the need for manufacturers to work collaboratively with their supply chains to navigate the evolving ESG landscape and drive collective achievement.