Profiting with Purpose: ESG Investing in Manufacturing

By: Sarthak Belekar, Priya Kumari, Anurag Bajpai and Shweta Shukla

ESG: A Blueprint for Successful Businesses

Welcome to a world where sustainability is a successful strategy, not a trend. Join us while we explore how Environmental, Social, and Governance (ESG) practices are changing manufacturing.

ESG leaders are flourishing and redefining success standards. Imagine: they earn 12.9 percent internationally, while their laggard peers earn 8.6 percent. What a 50% performance jump! And guess what? ESG leaders are outperforming laggards in the US manufacturing hub with a 20.3 percent return compared to 13.9 percent for laggards.

Wait, it's not just one region. ESG leaders outperform laggards across continents, from Europe to Asia. There's more to it than chasing tech stocks. This holistic approach to business redefines success.

Unveiling the Power of SEBI Mandates

The Indian securities market is undergoing a green revolution, driven by SEBI's focus on ESG! Here's why this is exciting news for investors:

1. Informed Decisions: SEBI's push for transparency through BRSR reports empowers investors. Studies like a 2023 MSCI ESG Research analysis show companies with the highest ESG ratings outperformed those with the lowest by an average of 4.2 percentage points annually over the past decade.
2. Sustainable Returns: SEBI nudges companies towards sustainable practices, which can translate to significant cost savings. A 2020 McKinsey report estimates companies can save up to 30% of operational costs through sustainability, potentially leading to higher investor returns.
3. Aligning Values with Growth: SEBI facilitates the launch of ESG-focused investment options. A 2022 Global Sustainable Investment Alliance report revealed the global sustainable investment market reached a staggering $38.8 trillion in 2020, highlighting the growing investor interest in ESG.

The Power of ESG: How Sustainability is Driving Manufacturing Success

In the vast and varied world of manufacturing, some shining stars have turned the principles of Environmental, Social, and Governance (ESG) into their secret sauce for success. Let's take a closer look at a few standout examples that showcase the power of ESG in action.

Case Study

Nestlé, a global leader in the food and beverage industry, is committed to shaping a waste-free future through its sustainable packaging strategy. The vision is clear: none of Nestlé’s packaging should end up in landfills or as litter. To achieve this ambitious goal, Nestlé focuses on several key initiatives:

Less Packaging – Reduce:

Nestlé aims to use less packaging material, including a reduction of virgin plastic by a third by 2025 compared to the 2018 baseline. The company actively advocates for better regulation of post-consumer resources and supports the development of collection and recycling schemes worldwide.

Less Packaging – Reuse and Refill:

To eliminate disposable packaging, Nestlé invests in innovative, alternative delivery systems. The goal is to reduce reliance on single-use plastics and promote reusable options.

Better Packaging – Redesign:

Nestlé collaborates with industrial partners to develop new packaging materials and solutions. The Nestlé Institute of Packaging Science plays a crucial role in designing the next generation of sustainable packaging materials.

Better System – Recycle:

Nestlé actively works to stop plastic waste across its global operations. The company’s packaging strategy is science-based and aligns with industry-leading research efforts. Currently, 86.8% of Nestlé’s total packaging is recyclable or reusable, and 80% of its plastic packaging is designed for recycling. By prioritizing sustainability, Nestlé contributes to a healthier planet and a circular economy.  

Win-Win for Wallets and the World: Why ESG Matters in Manufacturing

The future of Indian manufacturing is bright, but for investors seeking long-term success, one factor is key: ESG. Companies that prioritize ESG often see reduced waste and happier employees, leading to lower costs and a stronger brand. This makes them not only good for the planet but also attractive investments for a sustainable future.