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The global pandemic was a hard restart that had a rippling impact throughout the global innovation industry, forcing electronics manufacturers to give more attention to meeting ESG goals. What does this mean for electronics manufacturers all over the globe, especially in terms of profitability, ethical practices, and sustainability?

COVID-19 has accelerated the demand for industries to revisit and review long-established systems of how businesses are run and operated to adjust to new realities emerging, especially when it comes to areas related to ESG—environmental, social, and governance issues. This has become especially true for the innovation industry, which has many players and moving parts that often intersect and connect.

An example of an important sector from the innovation industry is the electronics manufacturing services (EMS) sector, which according to Industry Week is a business sector worth $500 billion. Many EMS companies have felt the need to make big adjustments in terms of their role in the innovation industry and how they interact with other sectors such as OEM’s (original equipment manufacturers) so that these companies can grow, remain competitive, and contribute better to the lifeblood of the fast-evolving innovation industry.

(Also read: COVID-19 and the Future of Electronics Manufacturing)

The adjustments these companies need to make are aligned with ESG goals, and it’s become imperative that these companies meet these goals to thrive and survive. Investors that keep these companies alive have become more reliant on ESG ratings to steer their decisions, but ESG goals are complex and difficult to measure. When one factors in the many players involved in the electronics manufacturing sector, it becomes a gargantuan task.

Enter the Institute for Interconnecting and Packaging Electronics Circuits, or the IPC, the global trade association that helps every kind of electronics manufacturer build better electronics. They do this by standardizing practices, providing certification and training, as well as being stewards for those in the electronics industry. Recognizing their role in taking the lead so that those in the industry understand ESG goals better, the IPC launched a massive initiative called ESG for Electronics.

According to John Mitchell, President and CEO of IPC, only 25% of company executives the IPC spoke with felt that their company had a clear understanding of ESG, which has raised concern for the association since companies are under a lot of pressure to collect data and submit reports compliant with ESG. The initiative aims to provide more clarity by “providing industry-specific definitions, benchmarks, self-assessments, and recommendations”.

Halsey Schreier of Forbes.com describes ESG as a framework that helps investors understand companies better by letting them gather insights into how companies behave, react and adapt based on various environmental, social, and corporate governance factors.

The IPC’s initiative becomes relevant when we take into account how the data collected to build these insights are gathered. The data must be uniform so that it would be easier and more efficient for companies to report on whether they are meeting their ESG goals. Through the guidelines submitted under ESG For Electronics, more companies will be better adjusted to navigate and adjust their practices to face post-COVID realities and needs.

Industry leaders are now leaning into more environmentally sound practices. The push for sustainability grows stronger, possibly motivated by economic concern rather than real concern for the environment. Sustainable investing, according to Forbes.com, is estimated at over $30 trillion.

Sustainability and the reduction of greenhouse gasses (GHG) are a top priority for electronics manufacturers. Minimizing waste of resources and consumption has become one approach to address these. A good example is seen through companies that lessen obsolescence by investing in more sustainable product design, ensuring the longevity of use for a long time, and allowing for re-purposing of materials long after the device has outlived its use.  

Investment experts like John Tennaro, head of ESG and impact investing at CIBC Private Wealth, a wealth management firm, think that “there will be a stronger focus on the social element of ESG.” According to Forbes.com, top corporate executives are “increasingly being held accountable for corporate practices that promote good stewardship”. This includes how employees are treated within the company culture, and whether a company has a healthy and inclusive framework that encourages cooperation.

The Pressure to Do Better

Living in a post-pandemic world has made electronics manufacturers more self-aware of the role it plays in the innovation industry. We have all become aware that those within the industry are held accountable for what they produce because of its large impact on the environment, and how this ultimately affects how we live. Some do better than others, and as the writer, Georg Kell says in his piece for Forbes.com, “these trends are irreversible and global in scope.”

Corporations that adopt better ESG practices make it better for everyone because the decisions being made are based on factors that safeguard the environment, ensure integrity in business practices, and take care of people who work to improve our way of life. Embracing ESG becomes the key not just to a new normal, but to a better normal.

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