Why Design & Component Engineers Must Prioritize ESG Initiatives

ESG—which stands for environmental, social, and governance—exists for two reasons: 

1. To hold corporations accountable for their impact on human beings and the environment
2. To help establish internal mechanisms in businesses to mitigate those effects

ESG began as an outgrowth of corporate social responsibility (CSR), but in recent years has evolved to become a vital framework used by consumers, investors, and major governing bodies to evaluate corporations and the ethics of their business practices.

ESG is now the driving force behind a raft of pending or fully enacted regulations at the national and international levels, including the Corporate Sustainability Reporting Directive (CSRD), the Corporate Sustainability Due Diligence Directive (CS3D), and the German Supply Chain Due Diligence Act (SCDDA). 

To address this perspective shift, companies are starting to approach ESG’s three pillars with a corresponding level of seriousness. A 2023 McKinsey Global Survey found that ESG topics were on the agenda for nine out of ten respondents, with many citing it as an opportunity to promote growth, satisfy regulatory requirements, and meet consumer expectations. Manufacturers are now reviewing their supply chains for human rights abuses and negative environmental impacts. They’re also becoming more critical about the direct and sub-tier suppliers that contribute to their supply chain. In fact, many manufacturers are starting to hold their suppliers accountable to the same ESG principles they uphold as part of doing business with them. 

Right now, the responsibility for upholding ESG principles rests primarily on strategic sourcing and compliance professionals. However, it's arguable that this burden shouldn’t solely rest on those managing supplier relationships and part procurement. In fact, incorporation of ESG principles start at the inception of the product lifecycle with the engineers.

Why ESG principles should be a part of the engineering process

Design and component engineers play a crucial role in integrating ESG principles. After all, they are responsible for the creation and maintenance of commodities and their components. Whether designing from scratch or working with existing designs, engineers have the chance to reimagine manufacturing processes, explore innovative product designs, and integrate sustainable, circular materials into their company’s products.

While impending ESG-inspired directives put pressure primarily on executive leadership and sourcing and procurement teams, it’s engineers who stand to make the biggest impact by designing and creating commodities with ethical requirements in mind. 

Ways to implement ESG initiatives into product design

Incorporate decarbonization strategies 

One way engineers can tackle this challenge is through embracing decarbonization strategies. Decarbonization refers to the process of reducing or eliminating carbon dioxide emissions produced by human activities, including industrial processes. 

According to the U.S. Department of Energy, “The crosscutting decarbonization pillars are energy efficiency; industrial electrification; low-carbon fuels, feedstocks, and energy sources; and carbon capture, utilization, and storage.” These four pillars—which are inextricably related to the environmental dimension of ESG—should lie at the core of every business’s climate change strategy, as they work to cut down their greenhouse gas emissions and attain the ultimate end-goal of reaching carbon neutrality. Although emissions objectives and approaches to decarbonizing are often managed by a company’s leadership, engineers play a critical role in conceptualizing how these principles can be adopted and implemented at various design and manufacturing stages. 

For example, maybe a wireless technology company is looking to increase its adherence to ESG. To achieve that end, executive leadership has set its sights on utilizing more renewable energy sources in its operations. While that mandate may be disseminated throughout the company, it falls on the organization’s component and NPI engineers to think about how to incorporate solar, wind, or hydro power into their manufacturing processes. Specific considerations may include the types of parts being included in schematics and designs, equipment used during manufacturing, and potential modifications to the production process that integrate renewable energy sources. 

Embrace sustainable materials 

Sustainable materials are materials that are produced with either low environmental impact or by using renewable energy sources. In many cases, they’re manufactured using recycled materials and can themselves be recycled when they reach the end of their useful life. A more sophisticated description can be found at Rutgers University’s Center for Sustainable Materials, which defines the concept as “materials used throughout our consumer and industrial economy that can be produced in required volumes without depleting non-renewable resources and without disrupting the established steady-state equilibrium of the environment and key natural resource systems.” 

Using sustainable materials can have a substantial impact on an organization’s efforts to adopt ESG and meet imminent ESG reporting requirements. These materials can:

1. Reduce a company’s carbon footprint, especially as it pertains to Scope 3 emissions
2. Shrink the volume of waste they produce
3. Contribute to a larger, more enduring climate change strategy

And when it comes to the nuts and bolts of identifying and incorporating sustainable materials into a company’s manufacturing processes, engineers have a level of control and influence that’s difficult to match. 

When they are developing, drafting, or modifying engineering BOMs (bills of materials), engineers have the opportunity to integrate more sustainable materials into their company’s new or existing products. This might mean thinking about how to replace certain components for substitutes that are recyclable or produced with minimal environmental impact, or brainstorming designs for new products that incorporate materials like aluminum, hemp, and recycled plastics. 

It’s worth acknowledging that design and NPI engineers working for electronics manufacturers may not be able to drastically change the way the current generation of phones, computers, modems, and industrial equipment are built. But over time, as ESG gains prominence in the eyes of regulatory agencies, investors, and even prospective employees, there will be a growing emphasis on engineering departments to take more decisive measures. Ultimately, they’ll be tasked with swapping out single-use, non-biodegradable materials and resources procured through destructive extraction practices for parts that better reflect our population’s evolving ideals. 

Utilize lifecycle analysis and other advanced sustainability tools

One of the innumerable new concepts to be conceived and propagated over the past decade or so, in this era of heightened environmental awareness, is the idea of sustainable materials management (SMM). The EPA defines SMM as a “systematic approach to using and reusing materials more productively over their entire life cycles.” SMM compels organizations to examine the full lifespan of their products and the materials they use to manufacture them. This entails considering everything from the environmental costs of extraction to the waste produced at a commodity’s end of life. 

One of the most advanced methods currently available for implementing SMM into a company’s operations is a technique called life-cycle assessment (LCA), or life-cycle analysis. An LCA measures the total environmental impact of a specific product, process, or service, analyzing each stage of its life-cycle and the corresponding energy use, carbon emissions, waste streams, and other material consequences. Because they’re comprised of many long, complex mathematical calculations, LCAs run the risk of being interpreted and applied in a broad variety of ways. Fortunately, the International Organization for Standardization (ISO) has established best practices for carrying out LCAs through its 1400 series of environmental management standards.

These cradle-to-grave analyses have serious implications for the role engineers can play in ESG implementation. First, an LCA functions as a comprehensive blueprint encompassing the full scope of a given product’s relationship to the environment. This complete picture allows engineers to identify every possible opportunity to deploy SMM and decarbonization strategies throughout manufacturing operations. They can use an LCA to recognize potential modifications along their material supply chain, rethink specific production processes based on emissions figures, or consider whether raw materials with high extraction costs can be utilized at lower volumes. 

More specifically, all the LCA data can help inform decisions about product redesigns and future models. The breadth and depth of information these assessments confer ensures that engineers and manufacturers are able to make strategic, efficient changes that reduce their environmental footprint and set them up for optimal ESG reporting compliance. 

Reduce components that generate waste and increase risk

Consumer and industrial electronics can have hundreds, sometimes even thousands of individual components. For downstream manufacturers, this can mean a comparable number of direct and sub-tier suppliers. These direct and sub-tier suppliers create a vast and intricate supply chain that often spans multiple regions and continents. While this hyper-globalized supplier network has historically resulted in high efficiency, low production costs, and speedy manufacturing cycle times, the ESG framework also reveals some of this system’s key drawbacks. 

Excessively complex products with multitudes of components and the labyrinthine supply chains to match leave a sprawling environmental impact that affects everything from energy usage and carbon footprint to habitat loss. Moreover, this longstanding model also poses threats to ESG’s social pillar. Organizations with greater numbers of suppliers are at a heightened risk of becoming complicit in unethical or illegal labor practices, unsafe working conditions, and negative impacts on local communities. While these consequences are by no means guaranteed, manufacturers beholden to large value chains must carry out exhaustive due diligence measures to protect against them. 

One way design and component engineers can mitigate the environmental and social risks inherent to large, resource-intensive supply chains is by reducing the total number of components in a given product. Component simplification is, in some ways, a logical progression of the “eco-friendly” design philosophy that has proliferated since the 1990s, as engineers and designers began thinking about ways to incorporate sustainability and design for environment (DfE) principles into their work. By finding ways to cull unnecessary, redundant, or outmoded parts from their engineering BOMs and manufacturing processes, engineers can satisfy multiple ESG pillars and begin establishing a new paradigm for how companies think about product design. Further, they’ll simplify their supply chains in a way that reduces energy and waste and leaves their businesses better-positioned to address the rising tide of ESG reporting obligations in the U.S. and Europe. 

Engineers: the new vanguard of ESG initiatives

Throughout recent years, ESG mandates have largely been the responsibility of two groups: executive leadership and sourcing and procurement professionals. Executives, the thinking goes, should steer their companies toward ESG objectives through new strategies and initiatives. Sourcing and procurement teams should carry out supply chain due diligence efforts required to understand the company’s risk profile and scope of vulnerabilities. But as this framework evolves into a constellation of regulatory directives distributed across the world’s major markets, a third group—engineers—will become integral to the adaptation process. 

While strategic sourcing experts can obtain the necessary documentation and conduct the risk assessments required by some of the forthcoming sustainability acts, they have considerably less control over the systemic changes that can meaningfully move the needle on a company’s ESG impact. To do that, manufacturers need their engineering divisions to start thinking seriously about the environmental and social repercussions of how they conceptualize, design, and build their products. Implementing a new philosophy at the design and component engineering levels—where lasting change takes time, ingenuity, and feats of genuine innovation—will require more than just whipping together action plans and meeting ESG reporting requirements. But the potential payoff for companies, industries, and society more broadly, is immense.