The 6 Elements You Need to Build Effective ESG
If any perception ever existed that environmental, social, and governance (ESG) efforts focused more on building public relations than on revenue, that perception is gone.
Today, successful organizations see ESG not as a cost of doing business but as a critical function of business strategy. In an increasingly connected and unpredictable landscape, having a powerful and effective ESG platform is intrinsic to growing your business and leading your competitors as well as to serving your customers, workforce, partners, investors, communities, and the planet.
Your organization’s ESG framework must empower all stakeholders to drive sustainable policies and practices, to boost themselves and the communities they serve, and to set ambitious goals for both growth and enrichment of the world.
What makes an ESG framework work? The success of your organization’s program depends on six critical factors.
Decarbonization
Cutting CO2 emissions from your industrial systems, manufacturing processes, and transportation must be an urgent priority to help reduce the threat of climate catastrophe. Many future-forward companies have already signed the Science Based Targets Initiative to commit to cutting emissions in half by 2030 and to net zero by 2050.
Decarbonization efforts are yielding promising results in Germany, where SFBW, the railroad authority of the southwestern state of Baden-Württemberg, is preparing to roll out Mireo, its emissions-free commuter-train network developed with Siemens that will cut its reliance on diesel power by using electricity and high-performance batteries.
German energy utility SWW Wunsiedel, a longtime leader on renewable energy and sustainable technology, is upgrading its infrastructure with Siemens for greater transparency and connectivity. The utility is shifting its supply network entirely to renewable resources and plans to bring an efficient battery-storage and electrolysis system online, adding potential revenue from the electricity-balancing market.
In the Azores, the Atlantic archipelago governed by Portugal, developing and implementing a battery-based storage system and a smart microgrid with Siemens have helped drastically reduce fossil-fuel shipments from the mainland—cutting diesel use on one island by 1,150 metric tons annually.
Ethics
Every organization is responsible for instituting ethical policies that support prosperity, shape economic growth sustainably, and earn stakeholders’ trust through such measures as transparent business conduct, data privacy, and a commitment to human rights and fighting corruption and fraud.
To protect data and to drive cybersecurity in a trusted digital world, Siemens cofounded the Charter of Trust initiative with cross-industry and global partners and invested nearly $100 million in anti-corruption organizations and projects. Siemens has also committed to the United Nations’ Global Compact, the U.N.’s voluntary sustainability initiative, and to implementing the U.N.’s Guiding Principles on Business and Human Rights.
Governance
Your organization’s sustainability efforts depend on strong governance and leadership that support effective, transparent, and responsible business conduct, both internally and with your chosen partners and suppliers, so you can set high ethical standards across your industry.
Based on its own Business Conduct Guidelines and the U.N. Global Compact, Siemens signs a Code of Conduct with each of its 65,000 suppliers to support human rights, prohibit forced labor, promote workers’ health and well-being, and condemn corruption. Siemens also uses a digital tool, ESG Radar, to help identify and provide early warnings of potential environmental and social risks.
Resource Efficiency
Recycling, circularity, secondary materials, environmental compatibility—how your organization uses its resources is critical to your growth strategy. Organizations, regardless of sector, are increasingly incorporating measures to reduce consumption.
Mercedes-Benz AG is working with Siemens to update its Berlin plant—the company’s oldest—to digitize and automate its production processes for flexibility and efficiency and to roll out these new processes at 30 sites worldwide. The automaker’s resource efficiency relies on the industrial internet of things (IIoT) to connect operational technology (OT) and information technology (IT), uniting the physical and digital worlds and improving processes through continuous data analysis.
TrakRap, which produces packing systems for U.K. food producers, employed Siemens to develop ultrathin stretch film for its partners’ goods, using a “digital twin” to conserve materials and cut its development costs by 30%.
In the United Arab Emirates, where water consumption rates are among the world’s highest, Siemens is facilitating and financing the world’s largest desalination plant, using seawater reverse-osmosis technology.
Equity
To reflect the world around you, your organization must practice inclusive and equitable policies and cultural messaging to promote a sense of belonging and physical and mental well-being in your hiring and team building. That attention to equity also applies to your interactions with partners, customers, and communities.
A large global company has ample opportunity to adopt equitable practices both internally—Siemens plans to ensure by FY2025 that women represent at least 30% of its top management—and externally, through projects supporting education, health care access, and infrastructure. With Siemens, Volkswagen recently launched an electric mobility pilot program in Kigali, Rwanda, with the goal of scaling up to 50 cars and 15 charging stations.
Employability
The success of your organization depends on investing in your workforce to build the next generation of innovators by continually upskilling and reskilling your employees.
Mercedes-Benz is investing in its future with the Werner-von-Siemens Centre for Industry and Science in the Siemensstadt in Berlin, a leading scientific and research facility where white- and blue-collar workers upskill by using simplified software and low-code platforms. And as the pandemic pushed the carmaker to transform on-site training to digital training, it achieved greater flexibility, faster scalability, and a broader global reach at a lower price.
Six Degrees of DEGREE
Decarbonization, ethics, governance, resource efficiency, equity, employability—these six factors form the sustainability framework Siemens has created and named with the group’s six-letter abbreviation, DEGREE.
Although the framework sets internal targets at Siemens, its spirit doesn’t belong to Siemens alone. DEGREE is a strategic sustainability transformation platform for you to adopt within your business, your industry, and your global community.
Your organization has an obligation to itself, its customers, its partners, and the world to ensure it builds a robust sustainability program designed to grow for the future.
Learn more about how Siemens’s DEGREE framework can help your business grow sustainably.