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By the numbers: ESG data, policies, and practices

Oct. 21, 2022
In this episode of The Tool Belt podcast, Augury's Dave Penrith explores how Environmental, Social and Corporate Governance policies are changing the industry.

Plant Services, in partnership with Augury surveyed readers about Environmental, Social and Corporate Governance (ESG) policies and practices earlier this year. The survey explored company policies, practices and perceptions about ESG and personal engagement by employees on these issues.

Plant Services Managing Editor Anna Townshend talked with retired Global Chief Engineer and industry executive Dave Penrith about the survey for his real-world perspective on the numbers. Penrith spent his 35-year career at a global consumer goods company. During his tenure there, he oversaw 300 factory units across all parts of the world. Penrith is a champion of digital technology, deploying automation and robotics on thousands of applications, and he is also known for his dedication to collaboration, community, and diversity.

Read the full report

PS: We're going to frame our conversation today around our survey statistics and hoping you can add some real-world perspective to those numbers. So the majority of companies on our survey, about 46%, indicated that ESG goals and objections are taken very seriously. Does that number, or perhaps the 19% that say ESG goals are not a priority, surprise you at all? Or does that confirm what you know to be true about industry and ESG?

DP: Well, I think some of them do surprise me; the 19% surprises me and so does the 46%. But I really believe that everyone is going to need to have a clear plan in these areas sooner or later. And I think the pressure for those plans will come from a combination of one or more areas. One will be about internal choice and policy moves, which will be good. There's also a shift that many people have seen in consumer or customer demand for responsible companies is increasing all the time.

But the worst pressure could come from legislation. If legislation comes in place, that could be the worst pressure, but those that choose to be toward the leading edge of this area can gain a couple of things. I think they can gain competitive advantage if it comes from consumer or customer demand. And if they get ahead of the curve, they can have more influence in any legislation that may come. Because I think governments don't really understand the detail in this as well as industry does. So any ill-informed legislation could be potentially damaging in some industries. And I really believe that being part of defining the end game is going to be a lot better than becoming a victim of it.

PS: Yeah, I think that's a great point about being proactive with these issues rather than reactive. I think it's a theme that's very familiar to our maintenance audience. So according to our research, about half are proactive, in this case, have a formal ESG policy or charter in place and of those that have a formal policy, the large majority (94%) have read at least a summary of the policy and about 44% have read it in full. What do you think accounts for the strong corporate support for ESG goals?

DP: Well, I think the answer to this is partly linked to the first question. That strong corporate support will no doubt be coming from the pressure from one of the areas that I mentioned before, whether that's internal policy and choice, a real shift in customer or consumer demand, or whether there is serious concern over possible impending legislation. But whatever the combination of reasons is I think the most well-informed boards of these companies clearly understand that in order to build a longer-term sustainable business, the areas of ESG and the goals that go with them need to become absolutely ingrained in their organization and in their corporate strategy.

PS: Clearly, policy and practice are two different things. In terms of employee engagement with ESG policies, our survey showed very high numbers of employees that were unengaged on a daily basis with ESG policies. So we're seeing a discrepancy between what companies outline as their ESG goals, and what practices are actually carried out. What do you think accounts for this discrepancy?

DP: Well, there are a couple of areas here. I'd imagine that most employees look at a list of corporate policies, or at least at the title to the email. And then they think, well, how does this really affect me on a daily basis? Because I think if the policy was on payroll conditions or personal safety and wellbeing, then I guess the survey numbers would look a lot different. So maybe it's about making it more personal and showing how it benefits them in a non-work way, in a more personal way.

I think the second one is an age-old challenge in larger or fast-growing companies, which is, how do you keep a constant and valuable dialogue between the leadership and the people within the rest of the company? And, in a small company, as it starts out, the CEO generally knows everybody. And in those smaller environments, communication can be around the coffee machine, and it's alive, and it's on the fly. And it's a little less formal perhaps. But if you look at the large corporate organizations, this is a constant and daily challenge. And some functions or departments need communication support, both internally as well as externally.

But I think the answer probably lies somewhere between the two. It's about how you can engage with people on a regular basis, and how you make it more personal to them. But by investing in your people's awareness in this space, not only do you engage them, but you can also start to realize a lot of the answers from them because the people will have the answers locked in there. There's a saying that goes, if only large companies knew what they already know. The trick is releasing all that trapped knowledge and capability in the people.

PS: Yeah, that's a great point about what can be gained from your people on the floor, and those working in the plant environment on a daily basis. Make sure you engage them and their knowledge. So that kind of change management is never easy, especially for large organizations. I think for all the reasons you just mentioned, ESG may be even more challenging of a message to establish and engender. So how do organizations go about driving the ESG message into all areas of the business, and in your experience in industry, what works and what doesn't?

DP: I think primarily it's about consistency and validity of the message at the higher level. But it also needs suitable adjustment as it cascades. Those adjustments should ensure the relevance of the message to the audience and connect with them around their daily work and their daily lives. Because as I said, we have to address the question, how does this affect me? And we have to be careful of too much corporate hype, because it makes the message a bit less authentic and less engaging to the people who have to make this change happen every day.

Listen to the entire interview

PS: So it's clear from our data that something is getting in the way of some companies achieving their ESG goals. Survey respondents indicated employee engagement levels as an obstacle, which we've discussed quite a bit here. Also, they identified undefined financial benefits and undefined operational benefits as the major obstacles to those goals. So what do you think those obstacles indicate about opportunities for organizations with communication and access at all levels?

DP: Well, we just spoke about employee engagement before and how some of the answers to the challenges will actually sit with the people. But let's look at the other two aspects. Let's take the operational ones first. If you look at asset and process performance, and, for example, if we can ensure that an asset is running in a known unhealthy state or a process is operating in its optimum window, then the benefits are clear at the shop floor level and above. Because optimum use of resources is about the best possible output per unit input. And if that unit input is energy and utilities, well, then you've got big pull on the world's precious resources as well. And the labor as well. I've always found that operating teams are in a much happier and better place when things are rolling well, not when they're running badly. But if we can get things rolling better, we can use their time more effectively, looking at further improvements rather than battling the symptoms of today's performance issues. We should always look at how more efficiency means less waste. If an asset is running well, there's less unplanned downtime, and any downtime that we do have is planned and adds value rather than depleting it.

Another area in the financial side is predictable performance. If you think that an asset will perform to its planned level, then you don't waste as much time and money replanning because it's working reliably and consistently. So you don't lose that time to planning and all the material that it would take. There's also a financial aspect to people resources. When people are happy and productive, that's a huge part of your retention plan as a company, because losing and rehiring people cost money and cost time. And newer generations of people in the workplace now have additional motivations. When some of us were younger, it was about getting a job. But now people want a career where they can gain experiences and skills and actually make a difference. So adopting some of these newer process approaches in this ESG space is a key motivator for many of these people. And we need those people to build that future for us. 

PS: Okay, that was a lot to think about in terms of using your resources most efficiently. And again, I like the focus on people, I think that is so important, especially when you're talking about culture change. Okay, we’ll flip gears a little bit here. And I want to talk about new technology solutions that are available to help companies with their ESG goals. So according to our survey, the majority of companies are already using energy monitoring technology, followed by leak detection, emissions monitoring, and asset monitoring and analytics solutions. So where can companies benefit from these technology solutions? And what might they be weary of?

DP: I've seen all of those or been involved with all of those, and I think the big difference that we need to think about is adopting more of a connected thinking approach. If you take leak detection on its own, it just tells you how bad it is. And it's a single dimension. It's a one-off data point. That's okay, but it doesn't prevent it from recurring a second and third and fourth time. The asset monitoring analytics can actually find the root cause, rectify it, and prevent it from happening again. So in addition to the “know what” you've then got the “know why.” That's where the true longer-term rewards can come. I'd say watch out in this digitization space. There is often a desire or a push to move everything to a full-blown digital twin. That's the ultimate stage of evolution of this whole digital journey. But I've actually found that the acquisition and visualization of data, even though it's early in the phases of that journey, are usually the key steps that engage people around the problem. I think we need to look at technology providers here as well. My suggestion is to always work with the people that fall in love with your problem before they fall in love with their own solution. They have to be really aware of what the benefits are to you as the operating company.

Automation is another issue, both in the physical and virtual spaces. There's a lot of this in physical automation, like robotics, or automation of procedures. But the “watch out” here is the same for both. It's about inefficiency. It's critical that any process, before you automate it, you need to ask, is it really necessary? Secondly, is it in its most efficient form before you start automating it? Because I believe the worst thing you can do is be more efficient at doing the wrong thing, or doing something that's completely unnecessary in the first place.

PS: Yeah, I think even with technology, it comes back to your people. And whether it's finding what's most efficient for your company, or using those advanced digital solutions really need engaged employees in order to make them work. Can we talk a little bit more about the people side of technology? What have you seen in the field when it comes to introducing new tech, making that tech work on the plant floor and your general insights about what works to get people not only enthusiastic about technology solutions, but also committed to the results for the long term?

DP: I think it starts with basic human nature. If we're honest, and this not everybody, but I think most human beings first reaction is to resist change. Everyone's got a built-in inertia around the direction that they're already moving in. And to change that creates a disturbance, which not everybody likes. So people need to trust the change and actually believe in the new path. To make that more effective, any change needs to also be seen as an investment in them personally. So upgrading skills is an absolute key area. As technology moves on, everyone's going to get taken with this wave so, rather than being reactive, make it a proactive and a positive experience. I think that starts people seeing that you're invested in the future, but it also removes their fear. Then they become part of that momentum of change and not fearful of being a casualty of it. Once you get people feeling part of that change, you get a multiplier effect. It kicks in and their engagement smooths the path for change. But, perhaps more importantly, you've got the hearts and minds in there now. As we discussed earlier, many of the answers you may be searching for could already be in your people. A more inclusive approach is the key to help release them.

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