UK manufacturers accelerate ESG strategies

The UK has seen a 48% increase in the number of manufacturing firms setting environmental, social and governance (ESG) targets for their business, with 62% now doing so since 2021.

This is according to a report from Make UK and Lloyds Bank.

The in-depth report, which looked at the progress, opportunities and challenges faced by UK manufacturing firms looking to improve their ESG strategies, reveals 61% say they expect to expand the scale of their ESG strategy in the next two years. Firms said the reasons behind this increase include increasing pressures from the labour market, government, investors, and customers.

77% of firms are receiving ESG conditions or targets from their customers, but 48% said they have the resources required, highlighting a need for greater support for those companies. In addition, only one in four (27%) companies being asked to meet ESG requirements by their customers are getting support from them to do so.

The report also reveals that businesses are accelerating the ESG requirements of their suppliers. 74% of firms have built ESG conditions into their procurement strategies, up from 66% just two years ago. Yet 45% are not aware of their suppliers’ performance against their targets.

While 35% of manufacturers provide ESG support to their suppliers, UK manufacturing firms are two and a half times more likely to provide support to suppliers in pursuit of ESG targets than they are to receive it from their customers.

The findings come as ESG transition plan disclosures, which include how firms identify, assess, and manage environmental and social related risks and opportunities, are set to become mandatory for many UK companies later this year.

Commenting, Faye Skelton, head of policy at Make UK said: “Manufacturers are raising their ambitions and commitments to ESG as the issue moves beyond solely issues relating to human capital. Customers, suppliers, investors, and employees are now increasingly expecting that companies make the issue as core to their strategy as any other business objective. It’s now clear that ESG is becoming more than a ‘nice to have’ and rapidly rising up the boardroom agenda. As a result, those companies getting ahead of the game will clearly have a competitive advantage and those who have yet to take action risk being shut out of supply chains.”

Make UK
www.makeuk.org