Regarding what businesses should focus on, the Nobel Prize-winning economist Milton Friedman once opined that:
“There is one and only one social responsibility of business–to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud.”
This quote dates to an essay published back in 1970, and much like everything else, things have changed since then. Companies have increasingly come around to the notion that this sort of thinking can work well in the short term, but to truly succeed in the long-term, companies must work to meet the needs of a diverse group of stakeholders* rather than a more exclusive group of shareholders. This change has seen a constant evolution in corporate initiatives over the years to meet this new focus. Today, the drive to increase stakeholder value focuses on three major areas: Environment, Social, and Governance (often referred to as ESG together). As it has always done in applications where efficiency, prosperity, and transparency are involved, automation plays a central role in this new philosophy.
Out of the three pillars of ESG, the environmental pillar is probably the one that is most closely related to automation for the simple fact that more efficient processes make more efficient use of materials, nicely fulfilling one part of the reduce, reuse, recycle triangle. Today’s automation, with its advanced instrumentation and controls, allows for closer control over processes, reducing the amount of material and energy needed to produce products. Further, as automation continues to improve, so too does quality, which allows for less material wasted on poor products and less energy wasted on rework. These two qualities are advantages to both the environment as a whole and the organization itself as less waste means less needless costs. Lower costs allow for more capital through higher margins or the ability to be more competitive with pricing. And yes, while larger profits can be funneled to shareholders, those organizations looking to adopt the ESG mantra are typically those looking at longer-term success rather than shorter-term windfalls.
Side two of the triangle, reuse, has been a core concept of the automation world since its inception, as most components are refurbished or repaired rather than being discarded. In fact, this core trait of the industry has caused friction moving forward as organizations face the challenge of working to interface larger, older systems with state-of-the-art centralized control systems. This is particularly apparent in the paper and power industries where producing equipment such as paper machines and reactors can be decades old, in many cases older than many of the people working on them. Even on a smaller scale, companies are working to refurbish smaller equipment rather than outright replacing these systems, reducing costs for them and the environment.
Finally, with recycling, more precise measurements and better automation have helped companies better understand the cost savings and the tools to implement recycling programs. One excellent example of this is the work being done to reduce water usage in the semiconductor industry using recycling, thanks to new water treatment processes. As with other parts, the environmental aspect of ESG has a positive impact on the environment with less water being used and disposed of and on the bottom line of the company with lower utility costs. In some cases, this initiative literally saves the operation, with water scarcity issues driving companies to improve or abandon operations in certain areas.
The social pillar of ESG focuses on the people directly and indirectly involved with organizations, and automation plays a key role in two important areas: The safety of those working in the organization, and the safety of those around it.
Safety standards have been on the rise over the years as companies realize the direct costs (e.g., insurance premiums) and the indirect costs (e.g., poor publicity) of ignoring employee safety. Automation plays a big part here, especially in higher risk jobs that involve applications that are dirty, dull, or dangerous. In these three applications, automation may help to reduce potential risk of injury to personnel. For example, advanced sensors may help to reduce risk by determining whether an application is potentially unsafe, or may be able to remotely isolate a hazardous process from personnel.
While companies have historically been good at focusing inwards, the social part of ESG forces companies to look out at the communities they are part of to ensure, at minimum, that they are not having a negative impact on the world around them. In some cases, this harm reduction can be closely related to environmental goals, such as the cleanup of the Cuyahoga River, which would randomly catch on fire.
However, in many cases this can be the literal protection of lives in the areas around the production site, as was seen in the infamous Bhopal Gas Tragedy. In these cases, using automation to tightly monitor and control the use of products in production can ensure that those communities in proximity to the company are unharmed by the operation. This type of protection takes many forms, such as advanced continuous emission monitoring systems (CEMS), spectral gas monitoring for wide area applications, and ever-evolving water treatment systems to ensure that hazardous material doesn’t escape the site.
Much of the theme of governance regarding ESG centers around accountability and transparency, both of which are addressed through automation. Automation at levels 1 and 2 can ensure compliance to environmental and safety standards, and newer, more advanced monitoring solutions mean that standards can be better defined, and compliance can be better assured.
Analytical measurements are a great example of this. Lab tests that used to rely on manual titration and colorimetry are now being replaced or enhanced with spectral and electrochemical measurements, many of which are now being done directly in the process. Where once a process was validated by a liquid turning pink, it is now monitored at the part-per-billion level within a percentage point of error. This granularity is being used by companies and regulators to better monitor applications for compliance.
At levels 3 and 4, we can see the impact of Industry 4.0 to connect the organization from top to bottom. This new age of information allows companies to directly monitor applications no matter how big or small and to ensure that key processes and policies are being followed. While key performance indicators (KPIs) have always been centrally developed, there has always been many layers between those that design them and those that implement them. With these layers comes the potential for data to be manipulated or at least delayed to the point of irrelevance. The promise of Industry 4.0 is the ability to ensure complete transparency within the organization. Data is no longer downloaded and transcribed to the point of use, it is now selected and streamed by those that need it. While this may not eliminate the risk of data manipulation, it does help to reduce it. In addition, more advanced analytics engines such as machine learning (ML) and artificial intelligence (AI) will help to identify potential areas of concern.
One area where governance and automation have significant synergy is the ability of automation to produce data that focuses on the skill of the employee rather than their identity. As companies have increased their strategic efforts on diversity, equity, and inclusion, the type of properly collected and curated data that may be provided by certain automation systems and processes can help keep the focus on employees’ performance and skill.
Sustainability and automation are tightly interlinked for new business growth. Over the past decade, many corporations pledged their commitment to sustainability and sustainable practices, with some making further commitments towards carbon neutrality and net zero. Shareholders and boards are demanding sustainability and social responsibility as key corporate values in addition to profitability from CEOs. Investors poured $120 billion into sustainability in 2021 (2x that of 2020), and analysts expect the levels to reach trillions in the next 2 decades. Gartner estimates that automation could result in a $15 trillion benefit to the global economy by 2030, and further notes that automation can help fight inflation by reducing costs and driving new revenue streams and job creation.
Automation has a key role to play in creating and executing a successful ESG strategy. The ability of automation to provide transparency and accountability ensures that policies enacted are followed, and its ability to safely and effectively manage processes ensure that companies can have a positive impact on their surroundings. The advancements provided by Industry 4.0 will allow companies to further extend their ESG goals, helping them enact stricter environmental and efficiency policies, and advanced manufacturing concepts like the circular economy.
While much of the focus is on technology, the people at the core of automation cannot be forgotten. Engineers, technicians, managers, and executives will need new tools to take full advantage of what’s to come. Standards and technical resources from ISA can help those involved in automation properly manage the sheer amount of information they face, and new training programs can help provide the skillsets that will be needed to use automation to achieve sustainability goals within an organization. Finally, companies that focus their attention on using automation and sustainability will grow financially through ESG leadership. ISA could provide guidance for those in industry that are pursuing sustainable automation.
*Stakeholders typically include internal and external sources such as employees, investors, suppliers, communities, owners, government, etc. This list will vary depending on the company, but essentially includes all those affected by the company and its operations.
About the Authors
Ryan Kershaw is a Senior Member with ISA and holds a Certified Automation Professional designation. Ryan works with Litmus Automation and is part of the Smart Manufacturing and IIoT division within ISA where he works with the Industry Maturity and Readiness Committee. Ryan lives just outside of Toronto, Canada with his wife, three kids and his dog, and much like many Canadians, uses his love of hockey to get through the winters. Connect with him on ISA Connect.
Prabhu Soundarrajan is an executive board member at ISA and has 20 years experience in Automation and ESG. He was recently elected as 2024 ISA president and has served in ISA’s executive board since 2017, holding several leadership roles in ISA as Vice President of Industry and Sciences. Prabhu is Vice-President of Innovation at Republic Services, a Fortune 300 company driving Sustainability in action. He loves Golden State Warriors basketball and golf. Connect with him on ISA Connect.