At the center of the industrial complex, a new energy norm is unfolding. As the world focuses on achieving a carbon neutral economy, today’s advanced manufacturers are increasingly paying close attention to their reputations as socially and environmentally conscious enterprises.
For the global automotive industry and other manufacturing industries, the importance of sustainability is redefining strategic priorities. Companies understand that their long-term success and survival is rooted in how they mitigate climate impact.
The manufacturing industry is not just talking about sustainability, they are doing something about it. The National Association of Manufacturers, which represents 14,000 small, medium and large companies across all industrial sectors in every state, launched a Sustainability in Manufacturing Partnership in 2019 in collaboration with the U.S. Department of Energy. The program is helping manufacturers gain greater insight into the sustainability best practices of industry peers.
That same year, 181 CEOs of America’s largest corporations overturned a 22-year-old policy statement that defined a corporation’s principal purpose as maximizing shareholder return. In its place, the CEOs of Business Roundtable adopted a new Statement on the Purpose of a Corporation, declaring that companies should serve not only their shareholders, but also deliver value to their customers, invest in employees, deal fairly with suppliers and support the communities in which they operate.
This growing trend emphasizes the importance of an ESG (environmental, social and governance) investment framework to measure the sustainability and ethical impact of a company’s business activities.
In Indiana, one electric generation and transmission (G&T) cooperative is at the forefront of an effort to develop an ESG strategy for the benefit of members serving the Tier 1 and Tier 2 automotive suppliers, multinational agribusiness giants, logistics and healthcare manufacturers that dominate the region.
Hoosier Energy recently partnered with ACES, a nationwide energy management company based in Carmel, IN, to develop a next generation business strategy that includes performance metrics tied to ESG principles and disclosures.
“ESG is a more comprehensive and inclusive approach to developing and disclosing how an organization develops value for all stakeholders,” noted project director/coordinator Nette Brocks, Senior Resource Planning Analyst for ACES. While ESG may mean different things to different companies, investors often are looking for guideposts that demonstrate a commitment to environmental, social and governance principles. “ESG is the next generation of financial reporting,” Brocks added.
For Hoosier Energy, the project represents an extension of the cooperative’s ongoing commitment to provide value to its 18-member distribution cooperatives and the businesses they serve throughout central and southern Indiana and southeastern Illinois.
The goal of the ESG project is to create a strategic framework that can provide member systems, and the companies they provide power to, with ESG-based portfolio metrics. Those metrics may include many areas Hoosier Energy and its member cooperatives are already engaged in, project officials say, as well as identify new value-added opportunities.
The analysis is an opportunity “to better understand the needs and goals of residential and commercial and industrial customers, and demonstrate how we can meet those goals within an ESG framework,” says Scott Bowers, Senior Vice President, Government & Community Relations for Hoosier Energy.
He pointed to Hoosier Energy’s recently revised renewables-focused portfolio strategy, expertise in serving energy-intensive industries, beneficial electrification programs, flexible business model and use of smart grid technology as prime examples of the company’s ability to meet market demand for a reliable, sustainable energy supply for the region’s manufacturing base.
Other areas targeted for ESG metrics include how Hoosier Energy and its member cooperatives work with water as a shared resource and how member cooperatives manage biodiversity programs that protect wildlife habitats. The analysis also includes the social side—diversity, inclusion, safety, data and cyber security and community involvement, for example.
It seems utilities such as Hoosier Energy are on the right track. In his 2021 letter to CEOs, Larry Fink, Chairman and CEO of BlackRock, a multinational investment management company, noted that there is no company whose business model won’t be profoundly affected by the transition to a net zero economy. “The more your company can show its purpose in delivering value to its customers, its employees and its communities, the better able you will be to compete and deliver long-term, durable profits for shareholders.”
Locations that are out in front of the ESG investment model can provide a competitive edge in the site selection process, added Tracey Hyatt Bosman, Managing Director for Biggins Lacy Shapiro & Co.
“There has been a dramatic change in the way companies are talking about these issues,” said Bosman. “They are now making them the fabric of the day-to-day conversation in the site selection process. Companies are increasingly asking how location portfolios can contribute to the achievement of ESG goals, including access to clean/renewable energy and a diverse labor pool, and further foster the corporate culture the company is seeking to create and maintain.”
Commitment to community is prevalent among not-for-profit electric cooperatives, Bowers said, and fits well with the public desire for ESG-minded companies. “Every facet of Hoosier Energy—from generation to transmission to member services to emerging technologies—is dedicated to providing value that consumers want and hold dear.”
Read the full report at Business Facilities’ Manufacturing: The Jobs Multiplier.