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Using AI for cradle-to-grave product lifecycle analysis (LCA)

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In an age where sustainability is no longer optional but crucial for business longevity and global well-being, product lifecycle analysis (LCA) stands as an invaluable tool for measuring and reducing the environmental impact of products. However, the complexities involved in traditional LCAs, as well as the dependence on specific expertise, often lead to time and resource-intensive processes, which can be barriers to widespread adoption, particularly for smaller businesses. 

Enter artificial intelligence (AI), with its capabilities to automate, analyze, and scale. The integration of AI into LCA processes offers a new horizon for manufacturers and sustainable innovators to conduct more thorough and frequent analyses, leading to more informed decision-making and, ultimately, greener products. This blog explores the role of AI in revolutionizing product LCAs, the benefits it offers, and the challenges it confronts, as well as real-world examples of AI-driven LCA in action. 

For a comprehensive look at navigating AI’s potential and pitfalls with LCA, and ensuring trustworthy results, we delve deeper into these topics in our latest whitepaper – The AI tightrope: Balancing automation, accuracy and trust in LCA/EPD

Understanding product lifecycle analysis 

Product Lifecycle Analysis (LCA) can be categorized mainly into two types: “cradle-to-gate” and “cradle-to-grave.”  

Cradle-to-gate LCA focuses on assessing the environmental impact of a product from the extraction of raw materials (the cradle) up to the point where the product leaves the factory gate, ready for distribution. It doesn’t consider the use and disposal phases of the product’s life cycle.  

In contrast, cradle-to-grave LCA encompasses a more comprehensive assessment, extending from raw material extraction through to the product’s end-of-life disposal, including its use, recycling, and landfill stages. 

The principal advantage of cradle-to-grave LCA lies in its holistic approach. By considering the entire lifespan of a product, this method provides a more accurate picture of its environmental impact.  

This thorough analysis enables manufacturers and businesses to identify potential areas for reducing environmental damage not just in production, but in product use and disposal as well, leading to more sustainable products and practices. Consequently, cradle-to-grave LCA is often regarded as superior for those aiming to make genuinely eco-friendly decisions. 

Challenges in conducting cradle-to-grave LCA 

Undertaking a cradle-to-grave life cycle assessment poses distinctive challenges for sustainability professionals. One major obstacle lies in the difficulty of acquiring precise and comprehensive data concerning the environmental impact of raw material extraction and processing. This data is crucial for conducting a thorough LCA but can prove elusive due to proprietary processes or the dispersed nature of supply chains. 

Another hurdle is the intricate nature of contemporary supply chains themselves. Products often traverse multiple countries and manufacturing stages before reaching the final disposal stage, complicating the tracking of their precise environmental impact. Moreover, standardizing this data for comparison purposes can be laborious, given the diverse production techniques and materials utilized across various industries. 

These challenges demand advanced expertise, significant resources, and frequently, innovative data collection and analysis methods, underscoring the intricacy and significance of conducting precise cradle-to-grave LCAs. 

Overcoming challenges in LCA with AI 

AI plays a pivotal role in revolutionizing cradle-to-grave life cycle assessment (LCA) by offering unparalleled advantages in data collection, processing, and mapping across diverse systems. Firstly, AI streamlines the collection process by automatically gathering data from a myriad of sources, such as online databases and enterprise systems. This automation not only saves time and resources but also guarantees the inclusion of up-to-date data in the analysis. 

Secondly, AI’s capability to handle vast datasets enables sophisticated mapping and processing, significantly bolstering LCA efforts by intelligently inferring and filling gaps in datasets, thereby providing a more complete and accurate picture of a product’s environmental impact. 

Manufacturers can proactively identify and address potential environmental risks through AI-driven simulations of various scenarios like material changes or production process adjustments, thus bolstering sustainability efforts. 

Moreover, AI facilitates real-time monitoring and optimization by providing continuous feedback loops. For instance, product data models built with AI can help engineers quickly identify alternative material or supplier choices, based on multiple criteria such as cost or environmental impact. This real-time insight empowers organizations to make informed decisions promptly, ensuring efficient resource utilization and environmental lifecycle thinking. 

Benefits for manufacturers and sustainable innovators 

AI brings a multitude of benefits to those invested in sustainable practices, ranging from efficiency and innovation to market competitiveness. 

Improved decision-making processes 

By enhancing the speed and accuracy of LCA, AI empowers decision-makers to develop and implement sustainability strategies more proactively. With AI insights, product teams can prioritize areas for improvement and make smarter choices that align with business and environmental goals. 

Enhanced product innovation and market competitiveness 

AI’s contributions to LCA enable businesses to innovate sustainably. Through a deeper understanding of their products’ lifecycles, companies can develop eco-friendly products that resonate with consumers’ growing environmental consciousness, thereby gaining a competitive edge in the market. 

Challenges and considerations 

While the prospects of AI in LCA are promising, there are challenges that need to be addressed. 

Data accuracy and reliability 

The effectiveness of AI-driven LCAs depends on the quality of the input data. Ensuring the accuracy and reliability of data sources, especially those feeding predictive models, is critical to generate meaningful and actionable insights. 

Integration with existing systems and workflows 

Adopting AI solutions for LCA needs careful integration with existing systems and workflows. For successful implementation of AI in LCA, it’s important to integrate product data from Product Lifecycle Management (PLM) systems and map this information to transaction data held in Enterprise Resource Planning (ERP) or purchasing systems, ensuring a seamless flow of information and heightened efficiency in sustainability analysis. 

Examples of AI-enabled LCA 

Several industries have begun to leverage AI for LCA: 

  • Amazon and Flamingo: With the assistance of Flamingo, an AI-powered algorithm, Amazon is now able to swiftly and precisely measure the carbon footprint of its products. In a specific trial, the algorithm decreased the time required by scientists to map 15,000 Amazon products from a month to just a few hours.
  • Microsoft’s LCA 2.0 powered Makersite: Microsoft is committed to reducing the environmental impacts of its products through structured Ecodesign approaches and LCA. Microsoft’s innovative approach involves leveraging AI and data analysis provided by Makersite to automate and scale the product modeling process, focusing on supply chain-specific environmental impact accounting. The transition to Version 2.0 has improved quality, increased accuracy, and better identification of environmental hotspots in their supply chain. The methodology shift aims to enhance transparency, collaboration, and consistency in LCA results, and product emissions, across Microsoft’s entire product portfolio 

These examples demonstrate the potential of AI to transform LCA into a more agile and strategic product carbon footprint environmental management tool. 

Conclusion 

AI will be a game-changer in many industries. Its role in accelerating and enhancing product design processes makes it a powerful solution for managing complex products and their supply chain. With its ability to clean, connect and enrich cross-departmental data with third-party sources, it removes the dependency on sustainability, cost and risk experts.

With AI, product engineers and designers are able automatically detect and connect product components and manufacturing processes to the right supply chain data from a harmonized and hyper-connected database, instantly solving one of the most time-consuming problems: mapping data to multiple sources at a granular level. The result is a detailed, extremely specific view into deep-tier supply chains, giving users a better understanding of environmental footprints, should-costing, and compliance risks at an unprecedented speed.

As manufacturers and innovators realize the benefits of AI-driven LCAs—better decision-making, deep-tier supply chain visibility, reduced environmental impact, and enhanced competitiveness, to name a few—it’s not a question of whether AI should be integrated, but instead of how quickly and effectively it can be done. 

The AI tightrope: Balancing automation, accuracy and trust in LCA/EPD

How to source materials more reliably, more efficiently – and more cost effectively

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In our collaborative white paper with Forrester – titled “Transform Product Sustainability into Performance Initiatives with Product Lifecycle Intelligence” – we take insights from 493 respondents, all of whom are product design and sourcing decision-makers in manufacturing. The overall aim of the white paper? To redefine how businesses approach sustainability. 

We’re diving into a series of key takeaways from the report across a number of blogs. You can read parts 1 and 2 in the series here and here, and below we’ll take a deep dive into the third takeaway: organizations must improve their materials sourcing reliability and efficiency. Let’s take a look at why. 

Sustainability remains a business priority. But it is not simply a case of ticking regulatory boxes and filing annual reports. A business equipped with a fully considered and smoothly functioning sustainable procurement plan will not only be able to maintain critical continuity – shielding itself against the impact of supply disruptions that would inevitably result in lost production – but will also be able to manage bottom lines in a tightening and ever more competitive business environment. 

Our report found that most manufacturers track product lifecycle management metrics regularly, although sustainability-related metrics are less automated. It goes without saying that stakeholders across product development, procurement, compliance, and sustainability need to collaborate closely to shorten product development cycles, reduce cost and risks in production, and lower environmental impact throughout the supply chain. However, this can only be done well with a finely tuned and automated data-driven approach. 

Although sustainability has an increasing number of champions with businesses, the lack of detailed, reliable data on materials, components and suppliers remains a critical hurdle that many still have to overcome. Harmonized access to a breadth of reliable data forms the foundation of efficient product design and sourcing, and organizations that are able to leverage granular product lifecycle intelligence in product development will enjoy competitive advantage against their peers with a faster time to market and more successful and profitable products. 

What are organizations doing – and how can they do it better? 

Despite the growing realization of the importance of sustainability metrics feeding into both cost efficiency and business continuity, it is clear that many organization’s sustainability activities remain primarily driven by regulatory obligations. The reality of incorporating sustainability in product lifecycle management is underpinned by the findings in the Forrester report. Ultimately, it comes down to data. Basic data usage is leaving a gap between vision and execution which is by no means insurmountable, but still some way from ideal. 

Sustainability metrics in product design and sourcing are inconsistently manually tracked. Over two-in-five of those surveyed confess to haphazard or nonexistent monitoring of critical sustainability metrics such as waste generation, Scope 1 and 2, and Scope 3 greenhouse gas emissions, and recycled or reused materials or components was either manual, ad hoc, or non-existent. Less than 35% of manufacturers boast fully automated, routine reporting for any specific metric and, perhaps most damningly from the perspective of the bottom line, 39% of respondents do not track change of materials cost (or, if they do, they track it manually). Just 32% have fully automated materials cost tracking. A manual approach is not only unreliable, but time consuming and a significant drain on resources too. 

From design, production, to maintenance, and end of life, sustainability across the product lifecycle is becoming business-critical and time-critical for manufacturers seeking to maintain a competitive cadence of successful new product launches. Stakeholders across functions must have access to granular, product-level data to rapidly and accurately make trade-offs as they design products, and source materials and components from suppliers. Those who don’t make this leap will be left behind. 

The issues surrounding data maintenance are one of the key issues for many companies experiencing a lack of executive-level support, as well as the struggle to raise required budgets. Difficulties maintaining data in material and component libraries make it harder to justify the impact of sustainability, despite access to that data remaining a top priority for many. 49% of those surveyed have the challenge of maintaining stock, cost, sustainability and performance data in their materials libraries, but they find themselves between a rock and a hard place. A lack of data means an inability to measure impact, which in turn means they lack funding and support in the areas of the business where it matters most. Only with access to the right data can that situation improve. 

As it stands now, data management challenges remain fundamental and acute. When asked which three challenges create the most profound impact, leaders hone in on their data shortfalls: one-in-five decision-makers rank maintaining libraries with up-to-date data as one of their biggest issues, and over half experience difficulties measuring and quantifying the environmental impact of their products, which in turn is a significant factor in the lack of leadership alignment. These governance challenges are a manifestation of poor maintenance of availability, cost, sustainability, and performance data in manufacturer’s material and component libraries. 

Ultimately, the equation is quite simple: better access to better data equals more support and more funding, leading in turn to enhanced cost efficiency and stronger business continuity. 

How can Makersite help? 

In a volatile business environment, putting steps in place to limit supply disruptions and minimize losses in production can make all the difference between success and failure. A more secure supply chain is less prone to disruption, and an ability to source greener alternatives not only aids the bottom line in the long run, but also helps to grow market share through an adherence to emerging regulations and through catering to new, sustainability-focused customer segments. We worked with German manufacturing giant Schaeffler to achieve a similar outcome. 

To achieve a climate-neutral supply chain by 2040, the company aims to reduce the carbon footprint of its raw materials by 25% by 2030. The problem is that 90% of the raw materials used to make their electric motors are sourced from China with little-to-no deep-tier insight into emissions. It’s a common challenge faced by many manufacturers today.  

With our help, they optimized their supply chain. We detailed alternative sourcing options to China, from Australia to Norway to Canada. In a very short timeframe, we were able to implement new supply chains for Schaeffler for neodymium, disposium and electricity. In doing so, we were able to significantly lower their carbon footprint, particularly due to a better electricity carbon footprint in Norway. 

Schaeffler wanted to test whether their new, optimized supply chain was greener, more sustainable and more secure than their existing model. With Makersite, they were able to confirm their hypothesis. As their Manager of Sustainable Products & Advanced Materials Dr. Michael Kobes noted: “By teaming up with Makersite, Schaeffler can run ad-hoc automated analyses of environmental impacts from various supply chains in scope, for example for the use of materials. Together, we are able to compare difference product scenarios from sustainability perspectives.” 

Validating their results and findings gave Schaeffler the confidence that the changes they were implementing would result in a demonstrable improvement, allowing them to move from theory to practice. 

With a tool like Makersite’s procurement dashboard, sustainable procurement best practice becomes a day-to-day reality. Procurement teams have access to the data they need to make better trade-off decisions, in turn helping their organizations not only to remain steadfast in strong regulatory and economic headwinds, but to thrive in markets both old and new.
 

The ultimate guide to selecting enterprise-level sustainability software for global manufacturers 

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Selecting enterprise-level sustainability software either for regulatory reporting requirements or to drive product innovation is a pivotal step for global manufacturing companies looking to transition their sustainable practices. In an era where corporate environmental responsibility is a point of differentiation in markets worldwide, this decision can transform an organization’s approach towards what they sell, how they sell it, as well as what they make and where they source their materials from. 

This guide is tailored for sustainability and compliance managers in manufacturing sectors. Through a structured approach, it will walk you through the considerations of selecting sustainability software that not only meets current reporting requirements but is scalable as your organization grows and standards evolve. 

It’s also worth noting that we have another guide on sustainability SaaS options for manufacturers – a piece that functions as a market overview and as a round-up of what options are available. When searching for the right tool, it can be difficult to get a clear picture of what they are offering and if they fit what you and your company need. Accordingly, we run through key features (from Scope 3 reporting to LCAs) and pinpoint who does what – and how well. You can read that here.

Comparison-Table-List-Diagram-Brainstorm-2

Two types of sustainability software for product manufacturing with complex supply chains: 

Sustainability software can be broadly categorized into two main types, each designed to meet distinct aspects of an organization’s sustainability objectives: 

Sustainability software to meet reporting requirements 

The first type focuses primarily on reporting compliance, helping businesses to gather, manage, and report environmental, social, and governance (ESG) data in line with regulatory requirements. For example, software that facilitates spend-based Scope 3 or CBAM reporting falls into this category. 

Sustainability software to drive product innovation and decision-making

The second type of sustainability software is designed to leverage collected data from reporting efforts for strategic actions, such as decarbonization efforts or accelerating product development and innovation. Crucially, this category emphasizes the need for cradle-to-grave lifecycle analysis, ensuring a thorough understanding of a product’s environmental impact from inception to disposal.

It involves the functionality of gathering comprehensive sustainability, cost and compliance data and integrating this information seamlessly into existing product development workflows. The significant challenge lies in ensuring that designers, engineers, and procurement teams have timely access to these insights, thereby enabling them to make decisions that are not only informed but also aligned with broader business objectives.  

By effectively addressing the integration of cost, materials, process and supply chain data, this advanced software category empowers organizations to proactively utilize their sustainability efforts. 

Building the foundation: Understanding sustainability reporting needs for manufacturers 

As sustainability regulations grow in complexity, manufacturers must assess their ability to meet an expanding array of disclosure requirements. Consideration should be given to existing mandates like the Carbon Border Adjustment Mechanism (CBAM) and Corporate Sustainability Reporting Directive (CSRD), alongside potentially forthcoming obligations such as The Corporate Sustainability Due Diligence Directive (CSDDD) and Ecodesign for Sustainable Products Regulation (ESPR).

You must first reflect on the breadth of your reporting needs, factoring in the scale of your operations, the diversity of your product portfolio, and the depth of your data on suppliers and materials. For instance, Cummins’ proactive expansion of its ESG reporting capacity to 27 annual reports illustrates a strategic approach to data standardization and supply chain transparency through digitalization. 

Understanding the gaps in your product and supply chain data 

Conducting a thorough inventory of products and scrutinizing the existing data repository within your ERP, PLM and CAD systems is a crucial step towards establishing a robust sustainability reporting framework.

This process involves not only knowing the number of products and their individual components in your portfolio but also evaluating the depth and reliability of the data associated with each product. This data comes from a deep understanding of your supply chain, including the origin of materials, the sustainability practices of your suppliers, and the environmental impact of your production processes. By assessing the quality of information you possess on these fronts, you can identify gaps in your data collection methods and areas where improvements are necessary. 

Integrating sustainability reporting initiatives with the current IT ecosystem 

Integrating sustainability reporting initiatives with your current IT ecosystem is pivotal for streamlining and enhancing the efficiency of data management and reporting processes. This integration requires carefully evaluating how well sustainability reporting tools and practices mesh with existing IT infrastructures, such as Product Lifecycle Management (PLM) and Enterprise Resource Planning (ERP) systems.

The goal is to achieve seamless interoperability, ensuring that sustainability data flows smoothly across different platforms and supports real-time analysis and decision-making. Compatibility with PLM systems is crucial for tracking the environmental impact of products throughout their lifecycle, from design to disposal, while ERP integration facilitates the efficient management of resources, including energy and materials, and oversight of supply chain sustainability practices.

By ensuring a high degree of integration, companies can leverage automated reporting, reduce manual data entry errors, and gain a holistic view of their sustainability performance, thereby enabling more strategic and informed decision-making in support of their environmental objectives. 

Identifying common sustainability data challenges: 

Recognizing common challenges is vital for enhancing sustainability reporting. Key obstacles include ensuring data accuracy, the cumbersome nature of manual reporting, and a dependence on obsolete technology.

These issues can lead to inefficiencies and inaccuracies that undermine the integrity of sustainability initiatives. To mitigate these problems, it’s essential to explore diversifying data sources that can fill existing gaps. This might involve leveraging advanced technologies for automated data collection or tapping into emerging databases and platforms that offer richer, more reliable datasets.

By integrating these new data sources, organizations can improve the precision of their reporting, reduce the time and effort required for data gathering, and phase out outdated systems. 

Scalability and future proofing sustainability software investments 

Addressing scalability and preparing for future industry trends are crucial for a resilient sustainability reporting framework. To meet these needs, incorporating automated Life Cycle Assessments (LCAs) and Artificial Intelligence (AI) can significantly enhance the framework’s adaptability and scalability.

AI-enabled LCAs allow for efficient evaluation of environmental impacts from cradle to grave, while AI technologies offer recommendation engines and streamline data processing, accommodating expanding reporting requirements with precision.

These technologies not only ensure that the framework can scale with the organization’s growth but also keep it aligned with evolving sustainability standards and expectations. By leveraging automated LCAs and AI, companies can future-proof their sustainability efforts, ensuring they remain agile and responsive to both current needs and forthcoming industry developments. 

Aligning software capabilities with business objectives 

The next step is to align the features and capabilities of the sustainability software with your key business objectives. For instance, if your primary goal is to reduce time-to-market for new products as part of a broader sustainability agenda, you should look for software that integrates seamlessly with product design, development and sourcing processes. Other critical business objectives could include: 

  • Ecodesign and circularity to differentiate products in the market through detailed sustainability disclosures 
  • Keep your license to sell by strengthening regulatory compliance with in-built monitoring and reporting mechanisms 
  • Use product lifecycle intelligence to accelerate innovation at the design and sourcing stage through automation and data-driven insights. 

Those sustainability leaders who wish to go beyond reporting must demand software solutions that offer actionable insights to make tangible advancements in both sustainability and regulatory compliance. 

Navigating sustainability data integration: Ensuring a seamless product and supply chain data ecosystem 

A sustainability tool can only be as effective as the data it has access to. Ensuring that the chosen software can integrate with existing systems such as CAD, PLM, ERP, and other data management tools is crucial. Without this level of integration, the software will struggle to provide a comprehensive view of the product lifecycle and related sustainability and compliance metrics. The goal is a seamless data-sharing ecosystem: 

  • Ensure that the sustainability software allows easy and bi-directional data flow from these integrated systems. 
  • Look for RESTful APIs or other modern technologies that facilitate easy connections. 
  • Prioritize flexibility, as your IT landscape is likely to evolve over time. 

Making the business case: Securing senior buy-in for sustainability software 

To gain the necessary senior-level support for investing in sustainability software, you need a robust business case. This case should clearly outline how the software will contribute to: 

  • Growing revenue: By adopting sustainability software, businesses can identify and capitalize on eco-friendly opportunities, appealing to the growing market segment concerned with environmental responsibility. This alignment with consumer values can drive sales, open new market avenues, and enhance brand loyalty, ultimately contributing to revenue growth.
  • Improving the ability to innovate: Sustainability software enables companies to leverage data-driven insights for the development of new, eco-friendly products and services. This fosters innovation by highlighting areas for improvement and potential market needs, positioning the company as a leader in sustainable solutions. 
  • Enhancing operational resilience: Utilizing sustainability software helps businesses anticipate and adapt to environmental regulations and supply chain risks. This proactive approach reduces risks associated with resource scarcity and regulatory penalties, ensuring long-term operational resilience. 
  • Strengthening regulatory compliance: The software provides monitoring and reporting tools that simplify compliance with evolving sustainability regulations. By ensuring adherence to legal standards, companies can avoid fines, enhance their reputation, and secure a competitive edge in industries where sustainability is increasingly regulated. 
  • Accelerating product time-to-market: Integrating sustainability software with product development processes streamlines the design and launch of new products. This accelerates time-to-market by ensuring that sustainability criteria are met from the outset, reducing the need for costly revisions and speeding up regulatory approvals. 
  • Improving supply chain environmental sustainability: The software offers visibility into the environmental impact of supply chain operations, enabling companies to identify and mitigate negative effects. By optimizing supply chain sustainability, businesses can reduce waste, lower carbon footprints, and improve overall environmental performance, contributing to a healthier planet and a stronger brand image. 

Highlighting these benefits, supported by industry benchmarks and potential ROI calculations, can help decision-makers understand the long-term value of the investment. 

Ultimate checklist for procuring sustainability software 

Armed with the information above, your procurement process should include the following steps: 

  1. Conduct a thorough market analysis to identify potential vendors. 
  2. Develop a comprehensive, detailed Request for Proposal (RFP) based on your unique needs and the key features outlined above. 
  3. Evaluate proposals based on their alignment with your business objectives, integration capabilities, and the features and benefits of the software. 
  4. Shortlist potential vendors and engage in detailed discussions, including demos and pilot projects if possible. 
  5. Consider the total cost of ownership, including implementation, support, and maintenance, not just the initial software cost. 
  6. Assess the vendor’s commitment to ongoing development and compliance with global sustainability standards. 

In conclusion, the choice of sustainability software is a critical one for global manufacturing companies. It’s not just about ticking the box for sustainability reporting; it’s about creating a comprehensive, scalable, and actionable framework for driving real change.

By understanding your needs, aligning software capabilities with your objectives, prioritizing integrations, and steering clear of common pitfalls, you’ll be well on your way to selecting an enterprise-level solution that will set the gold standard for sustainability in your industry. 

Scope 3 and the SEC: What happens now?

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On March 6th 2024, the United States Securities and Exchange Commission (SEC) set in place new rules regarding climate disclosures, requiring many companies to disclose greenhouse gas emissions and climate change-related risk, including in their annual reports. Although the ruling was watered down considerably from the original proposal, it still met with considerable blowback from opponents.

Let’s take a look at what’s happened previously – and what happens now.

What were the SEC proposing?

Previously, companies only disclosed their climate impact information on a voluntary basis. There has been no standardised way to report climate data, and many companies used different metrics or chose not to report at all.

Although the SEC has been encouraging companies to disclose their climate-related risks since 2010, the voluntary nature of those disclosures has made it much easier for them to water down their data or simply avoid publicising it altogether. Accordingly, in recent years the SEC and its chair, Gary Gensler, have been taking bigger steps towards enshrining disclosure rules in an effort to drive accountability and transparency across the market.

In its original form, the proposed regulation would have required US-listed companies to disclose a range of climate-related risks and greenhouse gas emissions, including Scope 1 and 2 emissions. The proposal also required organizations to disclose the greenhouse gasses generated by their suppliers and partners, known as Scope 3 emissions (if the emissions are material or included in emission targets the company has set.)

What‘s the latest update?

In an attempt to pre-emptively placate likely opposition, the updated rules this March contained some striking omissions. It was, as Fortune noted, “as notable for what it contains as for what it leaves out.” Scope 3 emissions, which are created indirectly along the value chain and can make up a significant proportion of a company’s carbon footprint, were omitted from the final version. So was a direct emissions disclosure requirement for all public corporations.

Nonetheless, despite the dilution, the adoption of the rules marks something of a watershed moment. As Gensler stated before the vote: “Our vote today is on rules, not just guidance like we had in 2010 but on actual rules and ones that require disclosures. Bringing them into such filings I think will help make them more reliable.”

He continued: “I’m pleased to support this adoption because it benefits investors and issuers alike. It would provide investors with consistent, comparable, decision-useful information, and issuers with clear reporting requirements.”

SEC documents show that the disclosure will require companies to share how climate conditions affect their business strategy, operations, and financial condition.

Their reported information must include direct emissions like manufacturing and indirect emissions like energy use, but companies will not be required to report emissions from supply chains and product consumers (which we were part of the original proposal, but not adopted).

As expected, the rule drew what might be charitably described as a mixed response. 10 Republican-led US states – as well as the top US business group – vowed to sue the SEC. Meanwhile, several environmental groups applauded the rule but said they had hoped for stricter requirements.

Although the disclosure is not an environmental protection law, it will certainly serve to increase transparency, with Bryan McGannon, managing director of the non-profit sustainable investment forum US SIF, telling Business Insider that it was “a really good first step” in that regard.

“I think that it’s going to be very valuable for investors to use this information to get that better understanding — and understand if the company is taking it seriously,” McGannon continued. “Are they identifying all the risks?”

He noted that there is a lot of climate reporting that is not being done right now, and the disclosures will allow investors to better digest a company’s climate data and make good investment decisions.

What do companies need to do now?

Companies will not be required to report emissions from supply chains and product consumers, as per the SEC. The supply chain disclosures – Scope 3 emissions – were in the original rule proposal, but were not adopted. As Business Insider noted: “For companies that sell many products or finance infrastructure — like food companies, oil and gas majors, and big banks — these emissions are often the biggest chunk of their overall carbon footprint.”

So does that mean Scope 3 reporting is no longer important? Not quite, say business leaders. Alongside investor and stakeholder pressure on reporting, the latest SEC ruling means that “companies are now facing a wave of global requirements,” according to KPMG’s US ESG Leader Rob Fisher.

He continues: “Amidst these disclosure requirements, the organizations that view new reporting requirements as an integral part of their broader strategy will find themselves in a better position to realize the full value sustainability initiatives can bring to their business.”

“Scope 3 may be out of the SEC’s climate rule but it’s very much in scope for US multinationals and likely many private companies. The SEC’s rule followed actions of the EU, California and the ISSB, all of which require Scope 3 reporting. Regulatory relief in one jurisdiction does not alter the burden imposed in others.”

Sustain.Life’s Chief Sustainability Officer Alyssa Rade concurred, calling the omission of Scope 3 reporting requirements by the SEC an “irrelevant caveat.”

“Companies shouldn’t be lulled into a false sense of security. Existing regulations in California and the EU and resulting pressure from investors and consumers make the SEC’s decision to exclude Scope 3 from their emissions mandate an irrelevant caveat for most global corporations. We’re already witnessing a mad scramble for disclosure data. Companies of all sizes — irrespective of their geographic location — need to understand that climate disclosures will be the norm within the next decade.”

The common consensus seems to be that, regardless of Scope 3 featuring as part of the SEC’s latest ruling or not, organizations need to get their houses in order as a priority. And the benefits extend far beyond just “reporting compliance” as Makersite’s CEO Neil D’Souza says:

“Transparency around carbon emissions is a complex but necessary undertaking, yet many organizations are waiting for mandates before they get their house in order. It’s most often because they have not yet unlocked any business value beyond ‘reporting compliance.’ Creating better, more differentiated products that are priced better, have better win rates, improve brand performance, mitigate supply risks and reduce costs from efficiency measures are all much more powerful value propositions that are unlocked through the process. It just takes time and effort to get there and technology like AI can help solve many of the challenges in tracking, reporting, assurance and dissemination.”

More rigorous emissions regulations will continue to appear. It is only a question of time until Scope 3 reporting, for example, will be mandatory for companies. Countries worldwide have committed to emission targets and those targets will, sooner or later, reach industry level. Companies that take voluntary action now will thrive, but companies who don’t will be left behind. So how can they prepare? There are four key steps to take:

  • Conduct a data gap assessment: Check what data is available in-house and if the data is easily accessible for stakeholders. At the end of the assessment, you should be able to put together an inventory of climate-related data you already have in comparison to the data the rule requires – and then act on the differences.
  • Re-evaluate your approach to data collection: Is your sustainability reporting scalable and cost effective? Have you committed to Net Zero goals and can they be backed up with trustworthy data? How long will it take you to have full Scope 3 reporting across all products?
  • Support your key stakeholders: Key champions for reduction initiatives in an organization will most likely sit across procurement, product management and product design teams. To be able to move forward and hit emissions targets, you need ensure that these stakeholders have everything they need to work efficiently.
  • Don’t do it alone: Scope 3 reporting is different: The vast majority of data you need does not sit within your company. Tools are invaluable for saving time, increasing credibility for auditors and, most importantly, critical in order to achieve meaningful progress with the data you are collecting. The right tools can help you to report on existing and future products at scale. The reporting obligations of the future are a complex issue that will take companies a long time to solve. Starting now will put your company ahead of others and help you prepare for prospective challenges.

If you’d like more information on how to stay up to speed with the latest regulatory developments, speak to our sustainability experts today.

How increasing your carbon footprint reporting can drive sales – and profits 

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Makersite and Forrester’s collaborative thought leadership paper has, at its heart, a simple objective: to redefine how businesses approach sustainability. 

Makersite commissioned Forrester to evaluate the state and impact of sustainability in product lifecycle management in the manufacturing industry. In order to do so, they surveyed 493 organizations, liaising directly with product design and sourcing decision-makers in manufacturing to build the fullest possible picture of the opportunities – and challenges – that lie ahead. 

In a series of blog posts designed to compartmentalize the report, we’re taking a deeper look at 5 of the key takeaways for manufacturing businesses based on the research. 

You can read part one in the series here. For this instalment, we’ll outline why increasing the carbon footprint reporting of your products will be a key driver for sales and profits in your organization. 

Sustainability, without doubt, remains a critical business issue. Whether from a regulatory, reputational or financial perspective, an organization with its house in order is better primed for success. For some, sustainability and the regulations surrounding its proper implementation have been seen as little more than a fad. A box to tick in order to satisfy stakeholders and regulators. But now we have irrefutable evidence that better and more complete carbon footprint reporting serves as an essential catalyst for supporting – and driving – sales.  

Within the manufacturing industry, key decision makers in product design and sourcing are taking action to balance sustainability, resilience, and top and bottom-line improvements. There is a growing realization that manufacturers must become quicker, smarter, and more sustainable to survive. They can leverage material, component, and supplier intelligence to improve data visibility, to guide better design and sourcing decisions. With a stronger foundation and a more granular approach, carbon footprint reporting is no longer such a burden. 

Why do organizations need to do this? 

When it comes to carbon footprint reporting, now is not the time to stand still. Good intentions will get you nowhere. In a competitive marketplace, meeting reporting obligations is an absolute minimum. Moreover, companies who neglect to accelerate their carbon footprint reporting will find themselves rapidly losing their share of the market to those who have been more agile and innovative in their approach. Efficiency and data granularity are key. Without a solution that ticks both boxes, you will very quickly find yourself losing position to a competitor who is able to move faster than you. And once you’ve fallen behind, it becomes twice as hard to get back. 

Similarly, a more proactive approach to carbon footprint reporting will leave you poised for greater success going forward. Better product reporting can open your organization up to new markets and new audiences, which in turn will increase sales and profitability. It will also likely open up new territories where, previously, different reporting obligations may have meant that prior attempts at entry into that marketplace were stymied. The potential is enormous. You don’t have to make new products to access new markets and new customer segments – you simply have to report better, and report faster. 

As the Forrester paper notes, manufacturers with a more mature approach to their carbon footprint reporting – those who sought out and actively implemented a solution designed to enhance previous practices – are likely to see greater success. Those who integrate a material, component, and supplier intelligence solution into their PLM practices expect to see high gains across a number of important KPIs. Most prominently, manufacturers equipped with the right solution saw a 25% improvement in win rate, with 26% also identifying the opportunity to command a greater price premium. 

The hypothesis speaks for itself: manufacturers that integrate PLM processes with material, component, and supplier intelligence will enjoy time to market advantage over less mature competitors and have the opportunity to scale their scarce design and supply chain expertise over a wider range of product variants. 

How can Makersite help? 

Transparency is central to accurate, detailed carbon footprint reporting. With Makersite, organizations are able to rely on deep-tier, up-to-date and consistent data that allows them to demonstrate their decarbonization strategy in absolute detail. 

Depending on the nature of the product being manufactured, reporting across numerous product groups can be a painstaking task – particularly if it’s being done manually. However, with Makersite’s AI-driven solution, organizations can use product and supply chain data – sourced from the largest product and supply chain database with 36,000+ industrial processes, 600,000+ environmental impacts, and 100,000+ materials – to automate reporting across all products groups. 

Additionally, Makersite’s dedicated eco-design dashboard allows users to make data-driven product optimization decisions across sustainability, costing, risk and compliance. With some 80% of ecological impacts occurring in the design stage of a product, full oversight is critical when it comes to achieving sustainable design goals and hitting reporting parameters.  

Users simply have to upload their BOM and, once uploaded, they will receive automated, AI-driven recommendations for switching out key product components, in turn optimizing carbon footprint while lowering costs, giving them the depth of knowledge they need to make crucial design decisions at the click of a button. 

At Makersite, several of our key clients have experienced this revolutionary approach to optimizing carbon footprint reporting first-hand. 

Belgian technology giant Barco faced challenges in efficiently reporting SKU-level environmental data due to data being siloed and scattered across the supply chain, resulting in slow and costly manual efforts.  

To solve the problem, Makersite provided Barco with automated Life Cycle Analysis (LCA) and Product Environmental Footprints (PEFs) at the SKU level, allowing them to accurately offset their emissions, comply with EU taxonomy reporting requirements, and implement more targeted eco-design principles across their product portfolio 

By doing so, Barco were able to consolidate and enrich their data, perform comprehensive environmental reporting, and make data-driven decisions to minimize their environmental impact while lowering costs. 

Automating their LCAs allows Barco to accurately offset their emissions and further promote their climate-neutral ambitions, as well as strengthen communication on sustainability with external stakeholders – all based on data. 

In a similar vein, the cosmetics pioneer Lush wanted to double down on their already impressive sustainability and carbon footprint reporting credentials. As a company, Lush are closely aligned with and well-known for their commitment to sustainable processes. Customers and stakeholders alike expect them to lead from the front. Falling behind would not only have an impact reputationally, but financially too. 

The team at Lush felt they were not doing enough to measure supply chain impacts from an environmental point of view. They lacked visibility around carbon emissions produced as a result of their supply chain activity, and needed more detailed insight into where the problems lay. They lacked harmonized, integrated data, which hampered their ability to plan and hit their target of being “carbon neutral, climate positive” by 2030. 

Makersite’s integrated data software provided the solution Lush were looking for. With relevant data on supply chains typically siloed away in different databases, Makersite’s ability to bring together the 3,000 ingredients the company purchased worldwide in one platform made a big difference, giving them “all of the emission factors and LCA databases at our fingertips.” Lush were able to analyze various impacts at a much deeper, more granular level, and had all of their choices laid out directly and simply in front of them, allowing them to make sense of complex data and measure it more easily. 

Makersite’s modelling capabilities gave Lush significantly deeper insight into their supply chain data. From energy sources to waste management, a better understanding of how their supply chain operated gave Lush the ability to go back to suppliers and suggest changes in order to help them achieve their goals. The company now has an automated and scalable way to manage and understand their supply chain in greater detail, giving them the speed, scale and granularity that they were seeking and a much better chance of hitting their ambitious 2030 targets. 

Lush are preparing to release their first TCFD report based on modelling powered by Makersite. Their supply chain makes up 42% of their total emissions – by far the biggest impact in their business. With Makersite they’ve been able to assess the impact of more than 3,000 materials this year, including remodelling FY21 materials based on better data that more closely reflects the practices in the suppliers they buy from. Doing so has shown that Lush have reduced their carbon impact by 25% against emissions in 2021 – and all because of increased data accuracy and improved granularity provided by Makersite’s software. 

Being smarter with data – and being able to accurately measure it – not only allowed Lush to see where they needed to do work, but also gave them the platform to increase their transparency efforts and advance their goals. 

Ultimately, as a result of using Makersite’s solution, both companies were able to use more detailed, more granular product and supply chain data to not only automate their carbon footprint reporting, but to position their organizations as pioneers in their industry, giving them a distinct advantage in markets both old and new. 

How to meet increasing sustainability regulations 

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Makersite and Forrester have collaborated on a thought leadership paper with a grand – but simple – goal: to redefine how businesses approach sustainability. 

Makersite commissioned Forrester to evaluate the state and impact of sustainability in product lifecycle management in the manufacturing industry. In order to do so, they surveyed 493 organizations, liaising directly with product design and sourcing decision-makers in manufacturing to build the fullest possible picture of the opportunities – and challenges – that lie ahead. 

We’ll delve further into the report in future blog posts, starting off with a series on 5 key takeaways for manufacturing businesses based on the research. 

The first takeaway: organizations must be able to keep pace with and meet the increasing number of sustainability regulations. Let’s take a look at why. 

It is clear from our research that sustainability – now more than ever – is business critical. For many organizations, its importance lies on par with revenue growth. A huge increase in sustainability regulations, heightened customer expectations around supply chain transparency, compounded with complexities in the supply chain of materials and components, are compelling manufacturers to transform their product lifecycle management and supply chain processes. 

Within the manufacturing industry, product design and sourcing leaders are addressing the intersection of sustainability, resilience, and business performance, prioritizing initiatives such as enhancing sustainability reporting for compliance and to support sales, as well as optimizing materials sourcing reliability and efficiency. 

Why do organizations need to do this? 

Most importantly, however, companies who seek to increase regulatory sustainability reporting of their products and operations will reap two particular benefits. 

Firstly, no matter the size of your organization, you need to abide by the regulatory requirements of the region, or regions, in which you’re seeking to operate. With an enhanced focus on and alignment with regional regulatory obligations, businesses give themselves a license to sell in the market they’re targeting. With some 80% of emissions coming in the design phase of a product, it’s crucial that each stage of the process is rigorously mapped and evaluated. 

Secondly, a firmer grasp on sustainability reporting goes a long way to establishing – and maintaining – business continuity. In an environment where marginal gains and a keen sense of foresight can offer major advantages over peers and competitors, a lackadaisical approach to sustainability reporting can quickly result in major supply disruptions (for example, having to find supply chain alternatives at the last minute, or at much greater cost), ultimately leading to lost production and severe impacts on revenue. In a competitive environment, such missteps can be hard to recover from. 

What are organizations doing currently? 

The Forrester research underlines these findings. 66% of respondents showcased an awareness and understanding of the potentially severe impact on product and operations that not toeing the regulatory line would bring about. Furthermore, a full 10% of respondents ranked ‘strengthening regulatory compliance’ as their greatest business priority during the next 12 months, while 35% in total ranked it as being within their top 3 priorities. Out of the 10 options given to those surveyed, ‘strengthening regulatory compliance’ came top of the list. 

Despite that figure winning out, however, the relatively low number indicates there is some way to go before there is a proper acceptance of the importance of increasing regulatory sustainability reporting. With only 35% of organizations having the initiative to solve the challenge, the research suggests an element of indecision and uncertainty, exacerbated by competing priorities coming from different angles. A successful organization in 2024 and beyond will be defined by its ability to cut through the noise, manage competing expectations, and execute a vision firmly focused on removing the biggest barriers to market entry and success as a priority. 

How can Makersite help? 

Whilst there are many benefits to regulation – from better risk management to increased transparency to greater innovation to enhanced efficiency – the increase in reporting requirements comes with some obvious downsides. They put a greater strain on teams and distract from the important work at hand. In many cases, organizations simply do not have enough people to actually put together the reports. This results in a scenario where the time spent on reporting adds little-to-nothing to business value. 

At Makersite, some of our biggest clients experienced that exact dilemma.  

We partnered with Microsoft to transform their LCA methodology from directional modeling to a supply chain-specific environmental impact accounting process. In doing so, Microsoft were able to automate and scale the modeling of complex electronic products with an unprecedented level of primary data coverage. 

Of the multiple benefits, perhaps the most valuable was the reduction of the modeling time, allowing Microsoft to focus their efforts on collecting and processing suppliers’ primary data and performing data quality assurance and data analysis. As Kelly Stumbaugh, Microsoft’s Director of Devices, Ecodesign, Ecolabels, and Carbon Emissions, noted: “[With Makersite] we are efficiently scaling up our LCAs so our engineers can focus on designing the best and most sustainable products instead of only focusing on disclosures.” 

Similarly, with Cummins Inc., the company had a clear goal that they needed help in executing. They wanted to grow and create a circular lifecycle plan for every part of their reports so that they could, as Mousumi Mukhopadhyay, their Manager of Circular Economy, stated: “Use less, use better and use again.” 

They were looking to take the next step in their sustainability journey. For them, this included keeping pace with the growth in annual ESG reporting obligations (including scaling their reporting capabilities to handle 27 ESG reports annually), standardizing their data and enhancing supply chain transparency through digitization.  

With Makersite, Cummins were able to digitize their supply chains to show multitiered data aggregation layers, including data assurance, traceability and transparency as well as the collection and inspection of specific domains. With our solution, they were able to show how a product was generated, trace its journey through the supply chain and translate that information into the required sustainability reports, setting them on their way towards achieving their ambitious 2050 goals: reducing Scope 3 absolute lifetime GHG emissions from newly sold products by 25% and reusing or responsibly recycling 100% of packaging plastics or any other goal. 

Ultimately, thanks to Makersite, both companies were able to use product and supply chain data to automate reporting across all product groups, saving time, greatly increasing efficiency and giving their teams a priceless opportunity to execute their key tasks undistracted and to the best of their abilities. 

The end of the entrepreneur: Why ‘take, make, waste’ culture must end

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2 hours, 11 minutes, 53 seconds. That was how long it took Ethiopia’s Tigist Assefa to complete the Berlin Marathon in September 2023. She smashed the women’s marathon world record. Beat it by more than 2 minutes. But it wasn’t Assefa who made the headlines afterwards. It was her shoes. 

On her feet were the Adidas Adios Pro Evo 1. They weight just 138 grams. They have a 39-millimetre heel. They cost $500. And they’re only meant to last for one race. A feat of design and engineering? Absolutely. A revolution in running technology? Of course. But at what cost? 

Despite their public proclamations to the contrary – their stated commitments to ‘people, product and planet’ – Adidas, Nike (who also have a foot in the single-use shoe game) and their contemporaries seem to value column inches over reducing GHG emissions, instant (but fleeting) acclaim over a sustainable and more efficient future.  

Yes, they’ll tell you they’re only producing these shoes in very limited numbers and that it’s the lowest carbon emissions performance running shoe they have ever created. But that’s not the point. In its promotion of such a high-profile single-use product, Adidas are creating a new normal.  A continuing acceptance that increased consumption and rapid wastage is fine. Our global climate crisis is driven by over-consumption, an overreliance on oil-derived materials, huge energy usage in production and shipping and a general disregard for our environment. The Adidas Adios Pro Evo 1 represents everything that is bad in microcosm. 

But this isn’t an article written to call out Adidas. Their approach is simply emblematic of a bigger problem that we’re facing. A problem that, in our approach to solving it, will define us. We live in a world weighed down by commercialism and individualism. We venerate waste and consumption. We exist in a place and a time where ‘take, make and waste’ has become the norm. 

It didn’t have to be this way. Today, most products are made with a singular goal in mind: to sell as much as possible. If our leading companies were not blinded by greed and an unerring focus on the bottom line, they might be able to see that there is another way forward. A future where single-use products aren’t seen as little more than a tool to increase brand power and drive visibility, where sustainability and consideration of the environment aren’t sacrificed at the altar of the dollar. We are a long way from where we need to be. 

Our focus on wealth and immediacy is damaging us. A culture and an economy underpinned by the ‘get rich quick’ mantra is no good for anyone. The people at the helm of our biggest organizations are leaving us with a legacy of poor-quality products that add little to no value. Commercialism, consumption and immediate availability come at a price – and are all concepts defined by low costs, oversupply and a lax attitude towards sustainability and the health of our planet. 

Our culture of consumption has been orchestrated by a very specific type of business person. A person who started out with good intentions but either found themselves at the head of a hydra they could no longer control, or who simply lost their purpose – their duty to people and planet – as soon as money became the primary goal.  

They were no longer the makers and innovators that set out to change entrenched systems. Great ideas, without enough support to hold off commercial imperatives, meant that these people simply became a part of the system themselves. They fell in love with the ‘celebrity’ of the entrepreneur and the financial rewards that come with it. They take actions first and ask questions later. We are left with a scenario where the masses are in awe of the product but don’t consider what goes into creating it. And by the time the curtain falls and the negative cost and supply chain impacts of such rapid consumerism become clearer, it’s already too late. The damage has been done. 

These disruptors of old have become something else. Ideals corrupted by wealth and greed. A symptom of our problems rather than a cure for them. Douglas Rushkoff recently wrote about the “unbearable hubris” of Musk, Bezos and the rest, about their “increasingly outlandish and imperial” behaviour towards the world around them. He’s not wrong. These are men – and they’re almost always men – who cast contemptuous glances at anyone without a similar vision, who view rules and regulations as little more than minor impediments on their quest for growth. 

Unlike the titans of the past – Rockefeller, Carnegie, Vanderbilt, Morgan – it is harder to track the impact of today’s billionaires. Unlike their forebears, they are not capped by the limits of the material world. But that does not mean their operations do not have an impact. As Rushkoff notes, we can still see the consequences of their undertakings in the form of “externalised harm.” 

“Digital businesses,’ he writes, “depend on mineral slavery in Africa, dump toxic waste in China, facilitate the undermining of democracy across the globe and spread destabilising disinformation for profit – all from the sociopathic remove afforded by remote administration.” This represents a new frontier. The imperiousness of this new billionaire class is unprecedented, their “disregard for people and places” without comparison. 

Today’s entrepreneurial leaders are essentially unlimited in the broadness of their reach – holders of what Rushkoff terms “horizontal power.” They donate from their own organisations, often in the form of their own stock, and make their own decisions about how the money is spent. They exist in an impenetrable bubble whilst the world – remade in their own interests – collapses around them. 

But there is still hope. Still time to make a change. Damage has been done, but it is not yet irreversible. We don’t require a complete realignment. It is time, says Rushkoff, to “get on with reclaiming the world from this new generation of robber barons rather than continuing to fund their fantasies.” But how, and when? 

I think now is the moment for a new thought process. A future defined by collaboration, not individualism. Working together for the greater good. Not ‘make it faster’ but ‘make it better’. But in order to create the better world that so many of us want, we have to give our innovators the right platform to succeed. We need to create an environment where success isn’t judged on how many extra zeroes there are on the balance sheet, but on how we build for the future we want and how we protect our planet in the process. 

I’m done with radical promises. I’m finished with sceptics and non-believers. I’m putting my faith in product engineers being able to lead us to a new, better future where they drive strategic transformation underpinned by a shared, compelling vision, financial support based on more than just commercial imperatives and a dynamic ecosystem that is agile, efficient and geared toward ethical, criteria-driven innovation. 

And how do we get there? That’s something we’ll talk about next time.

 

An edited version of this article also appeared on Forbes.com.

CSDDD: Where do we go from here?

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Update, 15th March 2024:

EU member states on Friday (15th March) have voted in favour of a stripped-down version of CSDDD.

MEPs and government officials struck a tentative deal on the Corporate Sustainability Due Diligence Directive, or CSDDD, in December – but its future was thrown into doubt after last-minute hesitation from Germany and Italy.

Now the measures seem likely to pass into law, after Italy approved a stripped-down version of the legislation at a regular meeting of diplomats in Brussels.

The rules still need to be voted on by MEPs, and April is the last chance for them to do so ahead of June elections. Click here for more detail.

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In light of the latest development in CSDDD’s (Corporate Sustainability Due Diligence Directive) labyrinthine path through the corridors of EU legislation, it seems pertinent to once again re-examine what it is, what its goals are, and what lies ahead now that it failed to achieve final approval by the European Council.

What is CSDDD?

The Corporate Sustainability Due Diligence Directive, more commonly shortened to either CSDDD or CS3D, is a key piece of EU legislation that seeks to set mandatory obligations for companies to address the negative impacts of their supply chains on human rights and the environment.

At its core CSDDD requires due diligence around companies’ business operations and supply chains. That means companies must look at not just who they buy from, but who those supply chain partners buy from as well.

The intention of CSDDD is to build on another EU directive – the Corporate Sustainability Reporting Directive (better known as CSRD) – which covers disclosures and operations. It requires companies to look at their carbon footprint and their impact on human rights and labor laws, among other ESG goals.

In its proposed format, CSDDD is meant to act as an enforcement mechanism for the EU – a vehicle for checking in and ensuring that ESG initiatives are being followed. Hypothetically speaking, if a company claims to make a reduction measure in environmental impacts, CSDDD will ensure that it’s actually being done. Essentially, CSDDD functions as the legal imperative to perform the due diligence, meaning that organizations cannot just create a report and claim adherence.

In tandem with CSRD, CSDDD also supports the due diligence of other regulations and directives, including but not limited to the Global Reporting Initiative, Carbon Disclosure Project and the Sustainable Finance Disclosure Regulation (SFDR).

Under the proposed directive, companies with more than 250 employees and a global turnover of over 40 million euros would be subject to the requirements. This contrasts with the previous draft, which set the limits at 500 employees and 150 million euros. To accommodate different company sizes, staggered transition periods of up to five years are suggested.

What’s the latest development – and what’s happened previously?

Although many assumed that the formal enacting of CSDDD was a foregone conclusion, a significant blow was dealt on 28th February 2024. Despite a provisional agreement having previously been reached by the EU Council and the EU Parliament, the directive failed to achieve final approval following objections from countries including Germany and Italy.

This follows a four-year process to advance the regulation, beginning with studies by the European Commission in 2020, which in turn lead to the Commission’s proposed CSDDD draft in February 2022. That draft set out obligations for companies to identify, assess, prevent, mitigate, address and remedy impacts on people and planet in their upstream supply chain and some downstream activities such as distribution and recycling. On 1st June 2023, the majority of Members of the European Parliament (MEPs) voted in favor of strengthening the original legislative proposal put forth by the EU Commission.

Agreement was reached on CSDDD with the EU Parliament in December 2023, but a vote on its approval in the EU Council was postponed last month after, according to ESG Today, “Germany threatened to not support the regulation on concerns of the bureaucratic and potential legal impact it would have on companies, and [it was] thrown into further doubt when Italy reportedly also subsequently pulled its support.” Recent rumors have also suggested that a last-minute effort by France to significantly scale back the scope of the new rules further scuppered any chance of approval.

What happens now?

Whether CSDDD is dead in the water – as it appears – or whether the recent troubles are something of a political bluff – a strategic move to tease out the opposition – remains to be seen.

After the failure of the approval the Belgian Presidency of the Council released a statement which concluded: “We now have to consider the state of play and will see if it’s possible to address the concerns put forward by member states, in consultation with the European Parliament.” What those concerns are – and whether they can be overcome – is fundamental to any future approval of CSDDD.

What is not in doubt, however, is the disappointment of key sustainability figures, who view the politicking and back-and-forth as little more than a scandalous attempt at obfuscation.

As Uku Lilleväli, Sustainable Finance Policy Officer at WWF European Policy Office, noted: “It’s scandalous that, in the 21st century, certain European lawmakers wish to permit companies to ignore human rights and environmental integrity, all under the guise of short-term profits. Let’s be clear: the law wouldn’t burden companies with unnecessary red tape; instead, it would secure a level playing field and help firms navigate necessary transitions in an informed and responsible manner.”

However, regardless of the future direction of travel of CSDDD, it remains clear that the push for increased regulation and legislation isn’t going anywhere. It is time for companies to get their houses in order.

In order to prepare, they must put together a holistic view of their supply chains along with a product-centric view of the lifecycle of their products.

Under a product-centric view, companies start upstream and follow each product all the way downstream so they can get a holistic view of their supply chain. This will better set them up for success when they try to align their efforts with regulations when the time comes.

As for when that will be – who knows? But it will be sooner rather than later, and forward-thinking organizations should start to get a handle on their supply chains now. As initiatives like CSDDD – or whatever guise it may take in the future – become more common, the thresholds for compliance will go down and more and more businesses will be required to pay attention.

One way or another – and with an eye firmly on the longer-term future – initiatives like CSRD and CSDDD are going to have an impact on your business.

Forecasting the future: From tightening budgets to the rise of Gen AI

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We might not have a crystal ball, but we do have a very good idea of where the worlds of manufacturing and product development are heading in the months and years ahead. 

The pace of change – and the regulatory, market and stakeholder demands that accompany it – has, and will continue to be, rapid. For all of these predictions it is not a case of ‘if’, but ‘when’. 

For businesses looking to capitalize on this momentum, the time is now. Being ahead of the curve is much easier than catching up. 

Below, we offer some insights of our own alongside contributions from a couple of our closest collaborators.  

Predictions from Makersite: 

Supply chain disruptions will subside

Contrary to the fearmongering that we’ve seen in the news lately, we believe that disruptions will continue to subside in 2024, bringing immense relief to manufacturers and customers. Most of the supply chains have recovered from pandemic era disruptions, both in terms of production and logistics. While recent challenges in the Red Sea have caused concern, logistics have largely adapted with marginal increases in delivery times and costs thanks to the overcapacity that was created after the pandemic. 

Generative AI will not take our jobs, yet

This topic isn’t quite our wheelhouse, but as there is so much hype about GenAI we felt we had to say something. While a quarter of CEO’s anticipate significant AI-related job losses this year (Source: PwC, Global CEO Survey), we feel this is massively overblown. The truth is that these things take time in most functions where its applications are still immature. 

Companies will remain carbon neutral , experimenting with the use of generative AI to create marketing content, summarize customer service calls, unlock domain-specific knowledge via chatbots and generate workflows and apps. Jobs in supply chains are not going anywhere. In fact, it’s never been cooler to be in this space.

It’s also worth keeping a close eye on how some of our biggest and most innovative companies are embracing the possibilities of generative AI. Look to Autodesk and PTC’s use of generative design – “a form of AI that produces myriad solutions to defined engineering problems” – and its ability to boost innovation, reduce waste, and accelerate time-to-market. Both showcase a potential future where engineers and AI work in tandem to create something demonstrably better. As PTC puts it: “[With generative AI] engineers can interact with the technology to create superior designs and drive product innovation more quickly.”

Budgets will continue to tighten

While there is a lot more optimism amongst business leaders (PwC Global CEO Survey) and consumers (Source: Ipsos, Global Advisor Predictions 2024) than in 2023, Makersite CEO Neil D’Souza predicts that for the most part, 2024 will be a year when companies have to “do even more with even less.” There is still a lot of ambiguity in the EU,” he notes.

“The economy is growing in the US, but in the EU it’s stagnating. Across manufacturing, budgets are still getting cut and I don’t think that’s going to change any time soon.” Unfortunately, most of the primary levers of efficiency have been exhausted, so companies will need to make investments to drive the next level of savings.  

The “S” in ESG will become more important

When it comes to an increasing onus on rules, regulations and political optics, Sophie Kieselbach, Makersite’s Experts Team Lead, believes that the ‘S’ in ‘ESG’ is going to increase in prominence. “Driven by the Corporate Sustainability Reporting Directive (CSRD), 2024 will be the year when social indicators really begin to permeate business decisions along the supply chain. Businesses will need to start implementing more concrete methodologies that allow them to track human rights issues such as slavery or child labour or gender inequality more accurately.”  

Future Forecasting Quote

Predictions from friends of Makersite: 

We also reached out to a few close friends of Makersite for their input on what the future holds. Here are their predictions:

Leaders in sustainability will finally get to shine

Capgemini’s Lukas Birn, VP of Sustainability believes that as we navigate through 2024, the disparity between sustainability leaders and laggards will become starkly evident. Those lagging behind will find themselves grappling with increasingly stringent legislation designed to curtail unsustainable practices.

In contrast, sustainability frontrunners will intensify their investment in innovative products and services that bolster their commitment to a Net Zero future. With the likelihood of an economic downturn, there will be a heightened emphasis on cost-efficiency and the maximization of impact. Budget constraints will prompt a more judicious allocation of resources, ensuring that only the most effective sustainability initiatives are pursued.  

Customers and regulators will amplify calls for transparency

 67% of chief supply chain officers now oversee environmental and social sustainability KPIs, with many setting ambitious targets for carbon neutrality within five to 10 years. To achieve green and circular supply chains, companies are building ecosystems that extend beyond their internal operations and Tier 1 suppliers, driving change across the entire value chain. This will require a greater level and quality of transparency internally – to drive better decision making – but also externally, due to regulations

As Microsoft’s Kelly Stumbaugh, Director Devices, Ecodesign, Ecolabels, and Carbon Emissions, says: “Something that is top of mind for me is growing demand for transparency around sustainability metrics, especially GHG emissions and circularity (at least for my industry, electronics). To accomplish this in an ethical manner, companies will need to continue to increase rigor around how these metrics are calculated and the input data that they are collecting, and to include these details and explanations of methodology along with the metrics themselves. Regulations and initiatives in Europe such as SPI, CSRD, and CBAM will drive much of this, but so will customer demand.”  

Power to the people: Why sustainability is an issue everyone must tackle

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“The most important values to me are honesty and modesty. I think that’s something we all need in this context as well. The clock is ticking. We need to show modesty towards the people who actually have to do this stuff – we need to help them and not judge them for creating dirty products. It’s about guiding them along the right path.”

Berlin-based Lukas Birn is VP of Sustainability at the French company Capgemini, a global leader in consulting, technology services and digital transformation.

Lukas’ personal journey towards sustainability commenced as a teenager, at a time when individuals were first encouraged to sort their plastic waste by hand. Today, his understanding has evolved, fueled in large part by the profound impact of witnessing the world through his children’s eyes. This transformative change in perspective led him to transition his deeply held personal convictions into a fulfilling career dedicated to the advancement of sustainability.

We recently sat down with Lukas to talk through what sustainability means to him, his career path, and his thoughts on what the future holds.

Below, we discuss:

  • The perils of taking shortcuts and looking for easy solutions
  • The importance of not judging others for their decisions, and the need to follow your own path
  • Putting the power of change into the hands of everyday people rather than just a few specialists
  • To remember that the loudest voices in the room don’t necessarily belong to the most important people
  • The emergence of generative AI, and the impact it can have on our approach to sustainability challenges

Makersite: The first question I have is very open-ended. What does sustainability mean to you?

Lukas Birn: Obviously, sustainability in general is super broad. So I tend to think of it more for the planetary part. There’s always the ‘grandchildren perspective’ – what do we do for the upcoming generations? And I think if you have your own children, then it’s very clear and obvious. The question is simple: How can we ensure that the upcoming generations have a planet they want to live on as well?

M: In terms of your career path and your role now [as a VP of Sustainability] – what does that involve?

LB: ‘VP’ is just a title. It can be anything and nothing. It can mean different things to different people in different companies. In terms of my work at Capgemini, an IT consultancy, it’s of course not about the sustainability of our company, but what we offer to our clients. Both us and our clients are generally large and complex organizations. I see myself as a facilitator, walking around with my grease can and lubricating the wheels. Minimizing friction. Bringing together all the expertise that’s already there.

There are some people who have worked in sustainability for many years – for decades – but often they’ve been operating in silos. Now, it’s really about scaling and connecting. This is where I can help.

M: To that point – weaving things together, minimizing friction – what skills do you need to succeed in a role like yours?

LB: Sustainability is a complex project. One of the main challenges is about systematic thinking. It’s not just a simple trick here and there and then you’re done. If you use a trick in one place, you can easily be doing more harm than good elsewhere. And as an engineer by profession, I’m always wary of shortcuts and easy solutions. I think having a scientific approach – really looking at the numbers and avoiding wishful thinking – are core capabilities. It’s not only about what is technically feasible but what is viable, and having a holistic view on that. To me, that’s key.

M: What motivated you to work in sustainability? What put you on this path in the first place?

LB: For a long time, I was always only sustainable in my life outside of work. My father was actually my first touch point. He was a publisher of laws and he was already active in the circular economy 40 years ago. It has long been an old issue in the industry. It was more about chemicals and harmful materials that ended up in nature, but the topic was present.

And then having children, and also now being 50, I asked myself ‘what career change would be interesting for me?’ I saw some colleagues at Capgemini struggling with organizational complexity, so I thought ‘why not combine my private motivations with my ambition to master complex organizations?’ And that’s how the two things came together.

M: Was it always your intention to pivot your career in that direction at some point, or was it more that you just saw the opportunity and took it?

LB: It was not long-term career planning. Some people do that, but not me. It just happened. Maybe it was the Buddhist inside me – enlightenment. I just said ‘let’s do it.’ In your career there are always some motivations and some voids. So I filled the voids.

M: Going back to the personal/private side of things, how do you make your own life more sustainable?

LB: One thing I want to point out here is that people tend to overemphasize things they are already doing anyway. For instance, I’ve been a vegetarian for 35 years. But it just happened by chance when I was a child and now I stick to it. It’s not like I go around telling everyone ‘oh yeah, I’m a vegetarian.’ I’ve never had a car because I live in the center of Berlin. Under the given conditions, it’s easy.

I’m not a big traveler, so I don’t take the plane. It’s really about minimizing, but I’m also reluctant to preach about what is easy for me and not consider the other side. For people who love to travel and see different cultures, it’s much harder to say ‘I’m not going to take flights anymore.’

M: What about something new you learned in the last year? It could be around sustainability, but it can be broader. It can be positive or negative.

LB: Obviously anyone involved with sustainability has heard about the Greenhouse Gas Protocol, but as with many things in life it’s not as simple as it looks. The more you get into it, the more complexity there is. And then what if you’re shifting it from Scope 1 to Scope 3 or vice versa? So for me, I learnt a lot more not just about the simplicity of this protocol but also the challenges. It’s a common denominator for all of us, and it’s really helpful to close at least some gaps in the system.

M: Where do you think companies are lacking at the moment in their approach to sustainability? What can they do better and how can they do it?

LB: I always say, in the end, it’s simple. It’s all about getting to [Net] Zero. First of all, you need to know your baseline. And this can be quite complex, because most mid-sized companies are now global players. They have hundreds of legal entities, and are spread all over the world. The first step is always a challenge. They will say ‘oh, I wasn’t aware that it is part of my scope as well.’

Once you’ve had those discussions and established that transparency, it’s about going from ambition to action. I’m not talking about reporting and ESG and CSRD, but looking ahead to 2030. That’s what’s important. How do you get there? How do you really measure? You can do a sustainability report, and that’s great, but you need to really measure the impact correctly in order to tackle the challenges.

I had a discussion with a colleague from Volvo once, and he said his most challenging part is to look at the things they do already through the lens of sustainability. How do you get rid of  what is really hurting companies? That’s something we need to think more about.

Lukas Birn Capgemini

M: When you’re having those conversations with companies around sustainability, what resonates the most? What makes them realize that they really need to take action?

LB: Being an engineer, I’m a little biased. I think the products themselves are the decisive factor, and therefore I’m always shifting the scope away from minor impacts that for many customers are part of operating the supply chains. I want people to ask themselves: ‘How do we design the product of the future?’ ‘What is a sustainable product?’ ‘Which product contributes to the idea of a circular economy?’ They need to understand that these are long-term investments.

Above all, I think it’s important to take sustainability out of the hands of the dedicated sustainability professionals and give it to the ordinary people. They are the ones who need to make it happen. Maybe it’s all tiny steps, but eventually it adds up to making better, greener products. That’s where we need to be.

Capgemini has had the same seven core values for the last 50 years. The most important values to me are honesty and modesty. I think that’s something we all need in this context as well. The clock is ticking. We need to show modesty towards the people who actually have to do this stuff – we need to help them and not judge them for creating dirty products. It’s about guiding them along the right path.

M: In terms of today’s evolving regulatory environment, both in Europe and in the US, do you think we’re heading in the right direction? Are there areas that are neglected? What legislation would you like to see?

LB: I think there’s never a customer complaining about regulation. All of them realize that we need it. However, since sustainability or climate change is by definition a global problem, we need a level playing field globally. There’s no value in bankrupting an industry in one country and then importing dirty products from another. I think it’s important that we avoid going back to a protectionist approach. It’s a balancing act.

Especially with the EU, they’re really driving forward all the initiatives, which is a challenge for companies, but it’s manageable and it’s a real opportunity for change. When we had GDPR, many smart technologies emerged as a result and I think it will be the same here.

AI, for example, can help you streamline and cope with the bureaucracy and the paperwork. At their core, all regulations have a good purpose and a good intention.

M: Do you ever worry that the conversation around sustainability has become too politicized? Do you think it dilutes its importance?

LB: Yeah, but I think sometimes the loudest voices don’t necessarily belong to the most important people. You see it in every company. ‘We can’t afford sustainability, it will ruin our business.’ But maybe some businesses are doomed for good reasons. There’s always that free capitalism, too. On the one hand there are negative effects, but on the other hand it’s really transformative.

Today you see people leaving companies because they’re not doing what they promised to do. It’s important that we have that freedom. If companies are receiving government contracts, will they really feel the need to change things? Is the imperative still there? They are incentivizing the wrong behavior. That could be a challenge.

M: When it comes to promoting a long-term approach to sustainability, how would you do it?

LB: I think I kind of answered that before when I said it’s about thinking of zero. That’s it essentially. It’s about having a goal at the very end and working towards that. What it comes down to, when you’re thinking about 2030 or 2050, is to think of the strategy. It’s not just something for the end of the month or the end of the year. How do you really make it last?

The planet and its people are finite. We have to use the peoples’ creativity to focus. Directing them to the big problems and asking them to put their brain power towards the right spot. That’s what I’m doing internally, too. There are many motivated people, but they don’t know where to put their energy. It’s important to guide them towards the most impactful areas.

M: Where do you hope the world will be from a sustainability perspective in 2050, and where do you think it’ll be?

LB: I’m an optimistic person. You have to be optimistic, especially if you have children. There’s no point in just saying that we’re all doomed. There are many things that should motivate us. There are different opinions, but it feels like a tsunami is piling up and I think there is movement. Did something like COP28 make a difference? I don’t know. But I’m positive that there will be massive changes and that a transformation  is underway, and  it will also change how the world functions.

We are going towards a more decentralized system. Both solar and wind are decentralized by design. It’s about taking something off the big energy producers, about reshuffling the cards to create a broader perspective. Let’s look at Africa and what’s at stake there. It is their right to do what’s best for themselves. That is critical. It’s not about telling them what they should do regarding climate, but we must support them.

M: Ok, last question. AI is everywhere. How do think generative AI and sustainability might align in the future? Is it good thing or a bad thing? Do you think about it much?

LB: I think it’s unavoidable. You can’t just say ‘let’s leave generative AI alone because it’s too energy intensive.’ We have to find a solution. It’s not having a hammer and everything being a nail. It’s about working out where it fits. I think it’s a really beautiful technology and there’s a lot of value to it. It blows my mind. I write something in my lousy English and then the AI transforms it and it’s so simple and easy. Someone else can grasp it.

Climate tech is important, too. Carbon capture and storage, for example. It’s about striking a balance, even if it’s only a few percent we can rescue. Even if we can only solve a small part of the problem or change the situation a little for the better, it is already important.