Asset Investment Planning Can and Should Correspond With Environmental, Social and Governance Goals

Consumer goods manufacturers, like others in capital-intensive industries, balance crucial decisions. Among them:

Should we replace or refurbish aging assets?

How do we maintain focus on cost savings and efficiency while investing in growth?

The aim is profit maximization and these decisions require complex, multi-category inputs for effective decision making.

Within these investment deliberations lies a key aspect: How will these decisions impact the environment and people? Unlike earlier approaches primarily driven by compliance, delivering on clearly defined ESG goals is a way to attract investors, appeal to consumers, and find and retain employees.

Fossil fuel consumption, emissions, waste, water usage, packaging material types and employee safety are frequently prioritized themes surrounding the environmental (E) and social (S) aspects of ESG. Investments in these areas require a concentrated effort to identify requirements, justify expenditures and align on timing of implementation. It also takes money.

Attainment of ESG related goals requires focused, ongoing capital spending, and AIP software has a critical role to play aligning investment with strategy.

The Role of AIP Software

Accommodate ESG-related insights in decision making.

When projects are tagged to sustainability and safety initiatives, they often move to the front of the line. However, few companies have capital budgets to fund them all at once, and identification might depend on tribal knowledge or aggregating large sources of information.

Operational systems, financial systems or specialized software platforms for sustainability, energy management or health and safety might be separately consulted to profile asset risk, cited to support project request justifications, or used to make determinations around spend timing. The common consolidation point for data that supports those insights was traditionally within tools like Excel spreadsheets or SharePoint sites. These tools have continued to be strained as manufacturers grow their enterprise systems, more information becomes available, and the gravity of each decision increases.

This is where AIP software shines, offering a solution to integrate strategic data (such as energy consumption, fuel types used, emissions, or safety records) and organize it in a way that decision-makers can quickly make sense of the data, weigh it against a risk profile that considers other factors like sustaining ongoing production, and feel more confident getting capital allocations approved.

Accelerated spending toward ESG goal achievement.

In the absence of AIP technology, manufacturers have reported misallocations of capital expenditures ranging between 5% and 15%. This misallocation, due largely to risk blind spots or incorrect timing of other capital decisions, takes precious dollars away from growth and ESG progress.

When confidence on spend priorities is gained, specifically around operational reliability, reallocated capital dollars can flow more confidently toward ESG objectives. This accelerated spending could allow the organization to afford production equipment with a lower carbon footprint, packaging machinery to accommodate greener materials or varied formats, alternative or renewable energy generation, more accurate sampling or quality control systems, safer machine guarding or automation controls.

Investing in AIP is a way for manufacturers to remain proactive.

Allow the entire organization to be leveraged.

It is important to consider how ESG-related goals are passed down to engineering and technical teams. Notably, are they? Accountability is one aspect; another is simplifying the process to identify impact projects.

Use AIP technology to consolidate data from across specialized systems so that ESG considerations are integrated early in as many decisions as possible. This includes line of sight to engineering and technical teams, who are more likely at the forefront of innovation, and can help surface novel solutions to sustainability or safety challenges.

Clear the path to incentive programs.

When priority projects can be identified quickly, funding opportunities can be leveraged to accelerate replacement or rehab. For example, with the recent passage of both the Infrastructure Investment and Jobs Act (IIJA) and the Inflation Reduction Act (IRA), there is nearly $500 billion in federal funding that may be directed toward clean energy development in the form of grants, loans and tax incentives.

Finding the best fit for your project can help you meet ESG goals while executing what may otherwise have not been economically feasible.

Having a grouping of data-driven spend priorities within the AIP software environment opens options like this, especially in periods of constrained capital.

AIP software can and should correspond with ESG goals, allowing more insights and proactivity in decision making, while leveraging the entire organization to clear the path to accelerated investment.

More centralization and standardization of the capital planning process through AIP software will help companies stay on track with ESG objectives and more confidently stand behind the commitments they have worked hard to define.