Manufacturers in the UK are intensifying their environmental, social and governance (ESG) commitments, as revealed by a report from Lloyds Bank and manufacturing body Made UK.
The report, titled “ESG in manufacturing: growth, supply chain cooperation and the future of sustainability in the industry,” indicates that the number of firms establishing ESG targets for their businesses has increased by 48%, with approximately two-thirds (62%) of manufacturers doing so since 2021.
Among the reasons cited by companies for their heightened focus on ESG are responses to growing labour market demands, government regulations, investor expectations and customer pressures.
The report, which examines the progress, opportunities and challenges faced by UK manufacturers aiming to enhance their ESG strategies, also reveals that more than three-quarters (77%) of firms receive ESG requests from their customers. However, it highlights that just under half of companies claim to have the necessary resources, underscoring the need for greater support.
The report observes that companies are intensifying their ESG requirements for suppliers, with nearly 74% of them incorporating ESG criteria into their procurement strategies, up from 66% two years ago. Nevertheless, it points out that 45% are unaware of their suppliers’ performance against these targets.
Huw Howells, head of infrastructure, energy, and industrials at Lloyds Bank, emphasised the importance of mandatory and standardised ESG disclosures to channel capital toward firms that have a positive environmental and social impact. He stressed the need to address barriers and unintended consequences arising from these requirements, stating: “Lloyds is committed to supporting SMEs, as they are vital to the UK economy, in their transition to net zero.”
The findings indicate that ESG is rapidly ascending the boardroom agenda and is poised to offer companies a competitive edge. ESG transition plan disclosures are slated to become mandatory for many UK companies later this year.
Fraye Skelton, head of policy at Make UK, commented: “Manufacturers are elevating their ambitions and commitments to ESG as the issue expands beyond environmental concerns alone. Customers, suppliers, investors and employees increasingly expect companies to prioritise ESG as a core part of their strategy.”
She added: “ESG is no longer just a ‘nice-to-have’ but is swiftly climbing the boardroom agenda. Consequently, companies taking proactive measures will undoubtedly gain a competitive advantage, while those delaying action risk exclusion from supply chains.”
