There is no choice, says Patrick Löw, sustainability manager at sensors specialist Elobau. “In order to make the Earth a liveable place for our children, there is no getting around a circular economy following nature’s example.” Taking part in a roundtable organised by New Electronics ahead of the COP26 meeting at which governments will attempt to thrash out targets for environmental sustainability goals (ESGs) and look to address human-driven climate change, Löw described how outside government legislation and policies the shift towards sustainable practices in the electronics sector is already well under way
Other roundtable participants were keen to agree. Jean Chong, vice president of ethics and corporate social responsibility at Onsemi, adds, “We understand the importance of being a good, corporate citizen and doing our part to reduce our negative impacts to the environment and society. When we all work together, we can create long-lasting change to make the world a better place for future generations.”
Companies who have chosen to pay more attention to environmental issues by adopting sustainability targets have, for the most part, used as their internal targets the Global Sustainable Development Goals (SDGs) set by the United Nations.
Jenny Munday, Head of Sustainable Growth at the charity Engineers Without Borders (EWB) UK, says the UN’s list of goals are central to the charity’s objectives. “We recognise all of the challenges that the SDGs highlight, acknowledge the role that engineering has played in creating those challenges, and believe that engineering can and should also take responsibility for addressing those challenges.”
Not all of the goals apply to each company, so these organisations have typically gone through a review process to identify which ones they need to focus on.
“Our 2030 Corporate Impact Strategy, which outlines 15 goals and commitments that we aim to reach by the end of the decade, is informed by a comprehensive materiality assessment. That assessment included an analysis of the UN Sustainable Development Goals to determine which were most material to NI. As a result, each of our 2030 goals supports one or more SDGs,” says Tabitha Upshaw, senior director of brand, reputation and impact at instrumentation and test supplier NI.
Chong says Onsemi decided to focus on the five SDGs that are most pertinent to a semiconductor supplier, and which will make the most impact in terms of what the company can do environmentally. For example, chipmaking involves a large amount of water, so one of the company’s chosen goals is the sixth SDG that focuses on the availability of clean water and sanitation for people.
“Semiconductor manufacturing is a thirsty business,” notes Chong. “A large production facility uses up to 4.8 million gallons of water per day.”
Another is SDG number 12, which calls for responsible consumption and production. As well as raw materials, wafer production and fab operations consume large quantities of energy. “Fabs can use enough electricity to power a small city,” Chong adds.
The broader ecosystem
Andrea Barrett, vice president of sustainability and social responsibility at distributor Electrocomponents, says the review of the company’s objectives considered the responses of the organisations it works with. Some of the SDGs need to take into account what the rest of the supply chain is able to deliver. “In 2020, Electrocomponents conducted a materiality assessment with our key internal and external stakeholders to ensure that our ESG approach is focused on the issues that are most material to our business and the areas where we can have the greatest positive impact.
“This work also helped us identify and agree upon the six UN SDGs where we can make the greatest contribution. An example of how we are supporting UN SDG 12 is by working with our suppliers to deliver innovative and sustainable solutions for our customers,” Barrett notes.
The push is not necessarily coming from management in companies. Many of the people who interact with distributors, manufacturers and integrators are increasingly keen to see movement on sustainability.
“The expectations of people in all parts of a company’s ecosystem have changed and are changing,” says Munday. “Clients and customers want to make better choices. The people you’re recruiting are often asking more about sustainability in interviews and using it to inform their employment choices, particularly the younger generation who have grown up aware and frustrated by issues like the climate crisis and poverty and want to see their employers engaging in addressing them.
It is not just staff and customers, Munday adds, “The people you’re seeking investment from are now aware of the risks of ignoring social and environmental responsibility issues in your supply chain. For example, if materials in your supply chain are sourced from conflict zones and you’re found to be funding that conflict, there are not just questions over your morals: your investors are now worrying about potential reputation and PR issues, associated sales and talent retention risks. And they will be questioning the reliability of that material’s availability, quality and cost in the future. Sustainability is becoming hard to ignore.”
Chong agrees that there is a growing demand for action on ESG from many quarters. “Employees demand it, customers expect it, and investors require it.” She adds that another factor in the change is a shift towards transparency in resource usage. “The industry has been accused of poor disclosure of its risk profile to investors.”
Upshaw adds, “We’re seeing increased interest in ESG issues from investors, which we welcome. We held a corporate impact Q&A at our investor conference in August and are reporting to the ESG ratings agencies that investors use to evaluate risks and performance.”
Conversely, Löw argues the private structure of Elobau has helped focus attention on sustainability and social responsibility goals at the company. “Since 2016, Elobau has been a so-called steward ownership foundation. This means that the company cannot be sold and more or less belongs to itself. This is a company characterised by its high sense of responsibility to its employees, society and the environment.”
People working on sustainability are keenly aware there are equally social obstacles to engaging in these programmes. “Much in the same way as I believe the greatest potential comes from shifting mindsets and company culture, I also believe this is the greatest barrier,” says Munday. “The perception that sustainability is harder, more expensive and the exception rather than the norm makes it easy to be dismissed and undervalued.
"Competence and confidence are a big part of shifting mindsets. Building competence in global responsibility and the confidence to implement it is a core component of our work at EWB.
“We need competent people who know what the more sustainable options are and have the skills to drive sustainability in their work. This is either helped or hindered by company culture where hierarchies and power dynamics create or destroy the space for new ideas and suggestions to be heard, explored, and actioned.
"A recent IET survey found that 93% of UK engineering companies with a sustainability strategy do not have the staff with the skills to fulfil it, so there’s a big hurdle to overcome.”
For those organisations that have adopted ESGs such as those promoted by the UN, the work is an extension of existing programmes aimed at corporate social responsibility (CSR). Löw points out Elobau started looking at CSR issues in 2009. Over time ESG elements were added to the internal performance indicators.
Munday says the shift in approach has been “characterised by an increased recognition that engineering companies can make more positive differences in the world not only by supporting social and environmental causes external to themselves but also by recognising the impact their day-to-day work has on people and the planet and taking more responsibility for it.
“For example, the UN’s Global E-waste Monitor report found that, in 2019, a record 54 million tonnes of electronic waste were generated worldwide and estimates that the volume of e-waste is rising three times faster than the global population. The electronics industry is well placed to help avoid this pending environmental pollution and human health crisis by recognising what part they can play and implementing sustainability strategies that mitigate waste from the outset.”
Upshaw says many entities, especially in Europe, tend to use CSR and ESG as terms interchangeably. “But ESG still generally places a greater focus on mitigating risk and driving long-term value for investors. At NI, we use the term ’corporate impact’, which we feel is broader than CSR or ESG.”
Barrett stresses there are important differences between CSR and ESG. “The traditional focus of CSR is about a business ‘doing good’ through standalone environmental or social impact programmes, which drive positive impact. ESG is different: it’s about how you do business in a sustainable and responsible way. It should be core to your purpose, strategy and business model and run through everything you do.”
To that end, Barrett adds, “We are working towards a net-zero global value chain by 2050 through building more energy-efficient operations and facilities and reducing transport impacts.”
One of the advantages of working in the engineering sector, says Munday is that it is one area that can make a big difference to achieving SDGs. “If we think about the electronics industry, for instance, access to electronic goods is key to achieving SDG 7: access to affordable, reliable, sustainable, and modern energy for all. There are new markets for electronics companies to explore to help achieve this.”
At the same time, Munday says engineering needs to tackle other issues, not least the impact of electricity consumption and the production of electronic waste.
Electrocomponents has picked a number of areas it has prioritised for improving sustainability in its distribution operations. The plan is to reduce absolute emissions from operations by switching to renewable energy, improving energy efficiency and by adopting other low-carbon technologies. That includes investing in low-carbon logistics and to try limit the miles that individual products travel on their way from supplier to customer. Another strand of the programme is to make packaging more recyclable, reusable and compostable as well as to try and reduce waste overall.
Barrett argues the adoption of circular economy principles will help in that effort. The final component, she says, is to “develop innovative and sustainable product and service solutions that help reduce environmental impacts, saving energy, water and air.”
For Upshaw, the biggest gains NI can deliver as a supplier lie in the development of improved renewable energy and battery storage technologies, with internal changes focusing on other elements of sustainability. “In our sector, we see great potential in moving toward a circular economic model in which we design out waste whenever possible. That’s why one of our 2030 goals is to make circular design improvements in our product design, manufacturing, and packaging. We’re nearing completion of a lifecycle analysis of NI products, which measures their environmental impact at every stage: manufacturing; packaging and shipping; use; and end of life. We’ll use the results of this analysis to inform our strategies for minimising resource use and emissions.”
Upshaw says there is enthusiasm among NI’s engineers and other staff to try to come up with solutions. “Our employees are passionate about sustainability and finding ways to reduce our impact. We have a global zero-waste working group that is led by NI Hungary, a circular-design working group exploring packaging and product design options, and an employee resource group called Healthy Planet pursuing everything from facilities improvements to educational events. We also have other more informal, employee-driven initiatives. One example is NI Aachen. That office’s efforts have reduced energy and water use and achieved a 95% waste-diversion rate."
Suppliers such as Onsemi can influence the direction taken by customers as they design products that use semiconductors to control energy generation and usage. “As our CEO has mentioned recently, it is not the technology breakthrough or shift,” says Chong, "it is about making sure that there are products that can make renewable energy generation and efficient infrastructure mainstream choices."
The nature of electronics presents obstacles to reducing the global draw on resources, not least in the energy consumption of advanced technologies during manufacture. In the sensor products that Elobau supplies, the bulk of the greenhouse gas emissions for which they are responsible come from the manufacture of the components before they are assembled. “This upstream area is difficult for us to control and presents the biggest obstacles,” Löw says. But this does not mean there is little company like this can do. “We see great potential in increasing the amount of bio-based and recycled plastics in the product.”
Similarly, NI’s Upshaw sees collaboration across the supply chain as being vital. “An example of that is circular design. If one company asks suppliers to make more sustainable product and packaging materials, they may not have enough order volume to make the request viable. But if many companies come together requesting change, then there’s a big enough market to build out a supply chain for those new materials.”
Barrett argues others in the supply chain are keen to get involved though the need to collaborate does present obstacles. “The need for businesses to collaborate to achieve a common mission is both a roadblock and an opportunity to drive sustainability in our sector. One company alone won’t solve these challenges. All players in the value chain must come together to play their part and contribute to the bigger picture solution. It’s a huge challenge to bring lots of disparate businesses together working towards a common mission and sustainable business model.”
At the same time, a distributor such as Electrocomponents has a position in the supply chain that can help align the interests of customers and component suppliers. “Our customers want to partner with us because we have the same, strong values and ambitions as them and because we can help them to raise standards across their supply chain. Around 78% of our suppliers tell us that ESG is important to the delivery of their strategy, and we are collaborating with them to deliver sustainable operations, products, and solutions for customers. We are at the centre of the global value chain and therefore have a great opportunity to effect real change, bringing our partners together to accelerate our positive impact and help address environmental and social challenges,” Barrett claims.
Chong says that work within Onsemi to address climate-change issues is an ongoing programme and it aims to get to net-zero carbons by 2040 and she adds: “We have the roadmap to back it up.”
Similarly, NI expects to modify its programme as time goes on. “Our 2030 Corporate Impact Strategy is designed to be iterative, and we may scale our goals and commitments as our programs evolve and mature,” Upshaw says. “For example, we plan to release our climate strategy in 2022. It also represents an incredible amount of effort - in a little over a year, we hired our first director of corporate impact to formalise and operationalise our work, created an impact council of executives to govern ESG, and brought together employees from across NI’s global sites and business functions to set our 10-year goals.”
Such ongoing work will be crucial, says Munday. “To fully embrace the shift to ESG, sustainability strategies need to be fully embedded in day-to-day practice.”
As the experience at these companies has shown, embedding those practices is feasible. As supply-chain cooperation is vital to making them effective, those practices seem set to become mainstream.