ESG and Sustainability in Manufacturing: A Practical Guide 

Explore ESG and sustainability by industry, with a focus on standards, reporting, current trends, and best practices in the manufacturing sector. 

Introduction: Why ESG & Sustainability Differ by Sector

While ESG and sustainability are often discussed in abstract terms, their practical emphasis varies greatly across industries. In manufacturing, particularly in the automotive sector, the focus is on emissions reduction, supply chain responsibility, and safer, more efficient production processes. The oil and gas sector, by contrast, is under pressure to demonstrate transparency in governance and reporting, while also making credible progress on long-term decarbonization through methane reduction, carbon capture, and investment in alternative energy.

Retailers face different demands. They must ensure fair labor practices in their supply chains and safeguard consumer data, while also addressing sustainability in highly visible ways such as packaging reduction and waste management. Consumer packaged goods (CPG) companies encounter similar pressures, with added scrutiny over the sourcing of raw materials like palm oil and cocoa, alongside product-level initiatives such as recyclable packaging and reduced water use.

Chemicals companies, meanwhile, contend with some of the most stringent regulatory requirements of all, particularly regarding toxic emissions and workplace safety. Their sustainability agenda is increasingly tied to innovation in green chemistry, renewable feedstocks, and enabling circular uses of plastics.

What emerges from these examples is that ESG and sustainability, though often spoken of in the same breath, mean different things depending on the sector. Each industry faces its own combination of compliance pressures, reputational risks, and opportunities for innovation.

Nowhere is this more evident than in manufacturing, which we now take a closer look at.

ESG and Sustainability in Manufacturing

The manufacturing sector provides a vivid illustration of how ESG and sustainability priorities play out in practice. However, manufacturing covers a very wide range of subsectors, each with its own priorities. Here, we take two examples. Automotive and chemicals, while both classed as manufacturing, operate on very different models: the former as discrete manufacturing with complex global supply chains and highly visible

consumer products, the latter as process manufacturing with intensive regulatory oversight and environmental exposure. For procurement and supply chain leaders, the challenge is not only compliance but also finding ways to turn ESG into a source of value and competitive strength.

Standards and Regional Variations

Automotive manufacturers are subject to an intricate mix of global and regional standards. ISO 14001 (environmental management) and IATF 16949 (quality management specific to automotive) are foundational, while European producers must also comply with CSRD/ESRS reporting and forthcoming due diligence requirements under the CSDDD. In the United States, SEC climate disclosure rules and California’s emissions and supply chain transparency laws set the tone. In Asia, Japan’s GX League and China’s green supply chain initiatives are shaping expectations.

Chemicals manufacturers, by contrast, are primarily governed by process-oriented standards and regulations. REACH (EU) and TSCA (US) define obligations for chemical substances, while Responsible Care provides a voluntary but widely adopted global framework. ISO 45001 (occupational health and safety) is especially critical given the risks inherent in process environments. Increasingly, chemical firms are also being drawn into plastics circularity frameworks, such as the EU Packaging and Packaging Waste Regulation.

Current Trends

In automotive, the shift to electrification is the defining trend. Procurement functions are under pressure to secure resilient, ethical supply of battery materials while reducing overall carbon intensity. Transparency platforms and blockchain-based traceability are emerging as key tools. In parallel, circularity initiatives, from remanufacturing parts to recycling batteries, are moving from pilot projects into mainstream strategies.

Chemicals manufacturers are being pushed towards greener process innovation. Bio-based or recycled feedstocks are increasingly demanded by customers and regulators alike, and procurement leaders are tasked with validating suppliers’ claims while balancing cost competitiveness. Industry-wide alliances, such as those targeting plastics reuse, are reshaping sourcing priorities.   

Best Practices for Value and Competitiveness

Across both subsectors, leading procurement teams are using ESG not as a compliance box-ticking exercise but as a lever for differentiation. In automotive, best practice includes embedding ethical sourcing clauses deep into supplier contracts, deploying AI-driven supplier risk monitoring, and treating transparency as a brand asset. In chemicals, progressive firms are partnering with suppliers on joint R&D into lower-emission processes and using long-term contracts to de-risk access to renewable feedstocks.

A common thread is the integration of ESG into supplier scorecards, investment criteria, and digital procurement platforms such as JAGGAER One. Done well, this transforms sustainability from a regulatory burden into a competitive advantage, reducing risk exposure, securing customer trust, and strengthening resilience against geopolitical and resource shocks.

Why Industry-Specific ESG Matters for Reporting & Strategy

Automotive companies are at the forefront of Scope 3 reporting, particularly around emissions from both supply chains and vehicle use-phase, which often dwarf Scope 1 and 2. The granularity of data expected, especially under European rules, requires sophisticated supplier engagement and digital traceability. Ethical sourcing also comes into play, with cobalt, lithium, and rare earths in batteries now under heightened scrutiny.

In chemicals, reporting obligations are more about environmental impacts of production itself: greenhouse gas emissions, toxic releases, and water use. Social aspects, such as worker health and safety, carry disproportionate weight. Ethical sourcing remains relevant but tends to focus on feedstocks (such as bio-based inputs) rather than mined minerals.

ESG has also become a central concern for investors in both automotive and chemicals. Capital markets are scrutinizing not only compliance with disclosure rules but also the credibility of long-term transition strategies. Automotive firms that cannot demonstrate control over emissions, ethical sourcing of raw materials, and progress towards electrification risk higher financing costs and reduced investor confidence. Similarly, chemical companies face heightened expectations to manage environmental liabilities and show innovation in low-carbon or circular feedstocks. For procurement leaders, this investor focus translates directly into pressure to build transparent, resilient, and ethically sound supply chains that can withstand due diligence by shareholders as well as regulators.

Conclusion: Sector Expertise Is Essential 

Ultimately, ESG success depends on aligning strategies with industry-specific challenges rather than applying a one-size-fits-all approach. In the automotive sector, this means tackling the dual imperative of electrification and ethical sourcing of critical minerals, while ensuring suppliers can deliver increasingly detailed emissions data. For chemicals, success lies in addressing stringent regulations on toxic emissions and worker safety while investing in green chemistry and renewable feedstocks. Looking ahead, the manufacturers that treat these challenges not as compliance hurdles but as opportunities for innovation and differentiation will define the competitive landscape of the next decade. For procurement and supply chain leaders, the call to action is clear: embed ESG at the core of supplier relationships, sourcing decisions, and reporting practices to secure resilience, investor confidence, and long-term advantage. The

JAGGAER One source-to-pay platform, with end-to-end supplier intelligence supplemented by third-party data feeds from ESG and sustainability specialists such as EcoVadis, is your best bet for achieving these goals..