Simple Solutions That Work! Issue 16

What is Your ESG Rating & Why This is Now So Important S ustainability, greenhouse gases (GHG), emissions, and carbon neutral are all terms that are in the news these days but are they really relevant in your business? Sure, we all want to be environmentally friendly and socially responsible as long as it doesn’t negatively impact your company financially. All of these initiatives cost money and time, but will it improve things and bring you more business? Well, actually with the upcoming changes by the EPA put upon large companies and OEM’s – the answer is ‘Yes’ it very well could give you a big competitive advantage. Sustainability improvements are almost always a cost savings, too. In 2019, 90% of S & P 500 listed companies produced an ESG report that indicates improvement to their sustainability program. ESG (Environmental, Social, Governmental) is a reporting mechanism that is not an exact formula but rather a framework for disclosure of sustainable quantified data. There are 3 scopes of GHG emissions gathered inside the ESG report: ■ Scope 1 – emissions that are direct from the owned or controlled sources (those you emit because of your processes) ■ Scope 2 – emissions that are indirect from the generation of purchased energy (your power consumption) ■ Scope 3 – emissions that are all indirect (not in Scope 2) that occur in value chain of the reporting company, including upstream and downstream emissions (your supplier’s emissions) and account for 65% to 95% of the reporting company’s emissions If you are supplying parts to a company that is producing an ESG report, consider yourself to be in the 65-95% majority that your customer must improve. There is even an ‘ESG risk rating’ used by these large companies to access their supply chain and help regulate sourcing policies. If you have set a baseline, set an improvement strategy, and track your emissions then you very well may have a preferred supplier status with your customer. So, what is your ESG rating and how can you improve it? LUBRICANT RATIO & PROPER USAGE TO ELIMINATE WASTE The proper use of lubrication can affect all 3 Scopes and can show quick and effective improvements to your ESG reporting. The emission of excess gases (Scope 1) can be a direct result of using the incorrect lubricant, an improper dilution ratio, excessively applied volume or inaccurate lubricant location that all ends up burning off into the atmosphere or being hauled away as waste. If you can’t remember the last time you changed lubricants, consider meeting with your lubricant supplier to help determine the best choice for each part you manufacture as one size does not fit all in some circumstances based on metal make up. If using a graphite mixture or oil-based product, look into a synthetic FLEXIBLE MANUFACTURING & ENGINEERING TRENDS 9 Continued on page 11 TROY TURNBULL President Industrial Innovations ARTICLE TAKEAWAYS: • US sustainability initiatives are impacting manufacturers – and you too! • What is an Environmental, Social, Governmental (ESG) report and why the EPA is requiring it • How proper use of lubricants can reduce emissions of excess gases • Reducing waste will reduce emissions and hauling costs