Rockwell Automation, Inc. (ROK) Earnings Call Transcript & Summary

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Good morning, everybody, and thank you for joining.

Good morning.

All right. Themba, let's kick this off. So we'll start with introductions. And again, I just want to say thank you all for joining. We've got a great presentation ahead. I am Gerry Abbey. I'm the Market Research and Competitive Intelligence Manager here at Rockwell Automation. And with me today is Themba.

Good morning, good afternoon, good day, everybody, wherever you are across this beautiful world of ours. My name is Sinethemba Zulu, I go by Themba, right? And I am the Sustainability Technology Architect within our Corporate Customer Sustainability team. Thanks for having me.

All right. And today, we're going to be talking about the state of smart manufacturing report and we're going to be talking about it in the context of sustainability and ESG, really diving into the data that we got from this global study, and talking about the key findings and how they relate to you. And we have some fun poll questions throughout that you'll see today. And we'll have some nice time at the end for Q&A to answer all the questions you may have. To give you a little more insight into this global survey, it's been going on. This is the 8th year, so we've been conducting that for almost a decade. There were 1,353 global manufacturing respondents this year across the 13 largest manufacturing countries. So a very deep and wide study, full of insights, really great for benchmarking data and really great for taking that data, analyzing that and thinking about it in the context of our manufacturing community. So some of the key pieces are highlighted here, we're going to be diving deeper into them. And with that, I want to move into the first big takeaway from this year's report. So every year, we see some key challenges. Supply chain is always an issue. The parameters around it and how it's impacting people shift. Same with skilled workforce, same with many other issues, including competition, which is the thing that I really want to highlight here today. We're looking at this bar chart. And if you joined our previous webinars, you've heard some of this. And all of that in the red is growing on ease from manufacturers globally around how these different pieces are impacting their business and how they're feeling behind their competition. If you look at that second one on the left there, technology has almost doubled. So manufacturers are feeling really behind in terms of technology. And I highlighted the top 5 on the left there. You got to really talk about all of these as being connected with technology because if your technology house is in order, your skilled workforce is going to be harder to recruit and harder to mobilize for optimal value add to the business. You're going to be slower with your speed on innovation, speed to market with product and agility, have more trouble with accessing data and understanding that. And I think some of these pieces really dig right into the core of sustainability and ESG. Themba, do you have anything to add here?

Yes, yes. Yes, indeed, Gerry. Thank you so much. There is a very interesting research study that was conducted a couple of years ago by Accenture, which I found fascinating where they introduced a concept called Twin Transformers. And basically, what they outline is the connection between digital technologies and sustainability. And what they basically say in brief is that new value exists within the intersection between digital technologies and sustainability. And that companies who embrace and leverage this concept of more than 2.5x more likely to outperform their peers within the market, right? And I think this speaks through many levels and some of the challenges or differentiators, which we've highlighted on here are emphasized through this approach. And I think we will hope to dive more into how some of you listeners can leverage some of this, but it's just fascinating, digital technology and sustainability being a real driver for success within corporate business.

And thinking about that success, digging in here, there's so much to building success, hitting that 2.5x better results for your market, for your stakeholders by having those policies in place because it also impacts your workforce. And right here, we're looking at the importance of thoughtfully having your technology laid out and the impact that it's going to have. 89% manufacturing respondents in our survey this year said that they're looking to grow or maintain employment as a result of technology adoption. Breaking this down, I see a couple of key elements. The repurposing of existing workers, so that's up-leveling the people that you already have because we're in a skilled labor shortage, and you need to make the most of the people that you have. So removing redundant, repetitive tasks that can be more easily automated. So you remove some human error. You also are up-shifting the people within your organization and automating some tasks that people don't want to come on and do, and it's so hard to hire for them to begin with. And one of the other things that has been a hot topic in a lot of conversations when breaking down this data, is that need to hire more workers. And I've had in our Q&As, people talking about just want to find the right workers and keep them. I want to retain the people I have. I want to retain the knowledge, we're seeing people retire, it's harder to bring new people in, digital natives are more difficult to manage and recruit. And I think this blue bar is something that you just weighed a little on for many organizations and think about having your technology house in order, having alignment for sustainability in ESG, which we'll dive into more and being prepared to set stage for within your organization because when you align everything we're going to talk about today, it sets you off for success so that the business is growing, and that creates that need for hiring more. And once you have an organized technology across the organization, you're adopting cloud technologies, you're able to tap into a wider workforce because some of those roles can be done remotely. And certainly, with manufacturing, there are a lot that can't be, but it does open up options. It gives you more flexibility within your business, and it makes you more attractive. And moving -- did you have anything to add on that on Themba?

No, Gerry, I think you laid the foundation very well.

All right. So moving into this one, we're looking at leadership obstacles and workforce obstacles for organizations in today. And Themba, you and I were talking yesterday, some of these things, we could have been talking about 25, 50 years ago, and some of them will be talked about 25, 50 years from now, right? Technology is always, always creating similar issues with effectively managing people and resources, being able to deploy the technology that you have in the most effective possible way. One of those ones that stood out, especially right now, as you see 10,000 baby boomers a month retiring. So understanding how to manage the next generation of workers, how to understand those digital natives and have an organization that is attractive to them to come in. And a lot of that has to do with technology. And a lot of that has to do with having your sustainability in ESG house in order also, and thinking about providing purpose for that next generation of workers. I know there are a ton of stats out there. One that I really gravitate to think was either from McKinsey or Society of Human Resources Management, where 80% of digital native workers would take $10,000 less in salary for a job with purpose, a job that makes them feel a part of something like they can contribute and that they feel heard. And that's so meaningful to this generation of workers, and that is a huge mindset shift in leadership from data in past years. I mean, I don't know about you Themba, but $10,000, especially with the rate of inflation right now, it's huge.

Gerry, I'm from South Africa. $10,000 is a lot in my currency. So I mean, I totally get you.

Yes. Huge impact. And then we're thinking about workforce-related obstacles on the right-hand side. I know both of us kind of gravitated towards that red bar, the second one there, change management. Change management, people talk about all day. Change management is important with technology. But where I see a fall short is that people think it's this 1 year or 3-year thing. We're going to have change management going on. We're going to be experts in change management for our organization. We're going to introduce all these programs and this training and we're going to be great. But what's the plan for 5 years? What's planned for 10 years? What is the ongoing plan because like we said at the start of this slide, we could be talking about these things 50 years from now, 50 years in the past because technology is always adapting, shifting and changing and your organization needs to do the same. And you need ongoing change management within your organization to optimize your ability to grow, keep growing, adapt, stay ahead of the competition, be attractive to this next generation and the next generation of workers as you go through and beyond. Themba, do you have anything to add on these?

Gerry, I'd love to get the audience engaged for a moment. So I believe we prepared a polling question for them. So if I just have to read it out with our first question of the day, I'd like to find out which of the following best describes the organization's current efforts towards ESG? So when you're talking about ESG, we talk about environmental, social and governance or sustainability. Is it that you don't have any ESG policies in place? Is it that you have some programs, but they're a little bit informal? Are some of these located -- some of your locations have a formal ESG or sustainability program? Or you have a formal company-wide ESG or sustainability policy in place? And I do see we have some responses coming in.

Now let's get those responses in. Because this is one of the most interesting poll questions. We're going to share the data from the actual survey. I'm also going to speak to some of the findings that I've had for other webinars where we've talked through this data. Really interesting mix coming in so far. What do you think, Themba?

Yes. I'm really motivated by the majority of respondents saying that there is some sort of policy in place. And I must say from experience working together with our partners and our clients, all of those that we interface with industrial manufacturers, we are seeing this becoming quite a trend. And I think we will speak to some of the drivers behind this in just a second.

Definitely. All right. We've got maybe 1/4 of the audience. Let's get a couple more responses in there, and then we'll move on. I don't know that it's going to shift too much. Like Themba said, it looks like we have a lot of company-wide policies in place here. Very formalized, thoughtful approach, which is great for the data that we have to talk through here today. It's going to reinforce a lot of that [Indiscernible]. All right. Let's move on and share the results. All right. So 75% of our audience set a formal company-wide ESG sustainability policy in place. Themba, thoughts? Are you surprised by this at all?

I'm very motivated. I'm very motivated as somebody that's on a day-to-day basis looks for ways to innovate around ensuring that we do meet our sustainability goals. This is very encouraging. I like it, Mike. And I think we will have a lot of content to share and perhaps talk through, now which will support.

Absolutely. And more than our global survey results, but if you put together those top 2 bubbles where they do have a formalized policy, it's just as a company-wide, we have 77% there, so that was about 3 quarters. And the most impactful thing that I see here is that only 5% don't have any policy in place whatsoever. 95% of our 1,353 global respondents are thinking about sustainability in ESG and the importance of it within their environment. And the top paragraph here, I think, is a key indicator of some of the change that's brought about in the last couple of years. And one of those big motivating factors. Themba, I know you know a lot more than I do about these regulations. Could you speak a little bit to how these might be impacting people and motivating them for these policies?

Yes. Certainly, Gerry. Thank you so much. So with the shift towards this, our society becoming more sustainable and more ESG conscious, there's a lot of standards and frameworks that are out there, which will help us guide our progress and guide how we take action in order to meeting the goals that we do stipulated within our corporate responsibility reports and the likes. Maybe I'd like to touch on the difference perhaps between standards, frameworks and reporting because maybe this is something that we may not all be familiar with. So in the realms of ESG and sustainability, when you talk about sustainability, we talk about how do we ensure that we meet our needs without compromising the needs of future generations, right? And talking to us, talking to your partners, you might use sustainability and ESG interchangeably, but they do really complement each other, right? Sustainability isn't only about the environmentalism or the environmental impact of a business. If we talk about ESG, sustainability also comprises of those 2 other elements, social and government elements, right? So we're thinking environmental. We're thinking about how are we ensuring ecoefficiency, through our operations through our day to day rights, to the way that we behave and act In terms of social, how are we ensuring diversity. We're looking at our health and safety, our privacy, cybersecurity. If we talk about governance, right? Well, how are we performing ethically as a business. And I think some of the big drivers behind these are investor pressures. There can be regulations, which are coming out, right? A lot of this has been driven coming from the Paris Agreement a few years ago, and you will find derivatives that are industry or geography specific. For example, if I have to talk about in aspects of the USA, the SEC has made a proposal around managing disclosures regarding ESG and sustainability, which will come out soon. And then going back to standards and frameworks, right? Because you might be used to a certain acronym and then the next day, you speak to Gerry or myself and you hear another, right? What's the difference? How do you really align to some of these? So really ESG standards are what stipulates the criteria and the requirements necessary for reporting and ensuring that you are taking actionable ways to meet your goals. The frameworks themselves provide content -- context, sorry, around these, right? And they provide you what the means to categorize your activities towards achieving these goals. Some standards that you may be aware of are the likes of SASB, right? And other frameworks that come out like the Task Force for Climate Disclosures, TCFD, GRI. These frameworks as many as they are, there are some activities out there that are looking to consolidate these into one so that they are more understandable by the majority of the population and the majority of the companies that we have out there. But now in terms of the environmental aspect of everything that we are reporting towards, there's another sub derivative of this, which I'd like to speak to. So on the next slide, when we talk about.

Themba, point number 1, can I just reiterate that I love this slide and the way you just broke that down. ESG to so many it's just letters. There's this environmental, social and governance. But having this breakdown and really seen all these items in that pie chart on the right, it is deep and wide and connects to so many parts of your organization and these pieces are so meaningful for everybody within your organization. And successful organizations like you touched on with that Accenture stat are really good at tying these things together and creating a culture of success. This breeds that. I just -- I love this chart and all the data and it's so impactful. With that, I'll jump on to the next slide.

No, you're so right, Gerry. You're so right. So if you think about that environmental aspect of things, you may be -- we associate our progress with emissions or equivalent carbon emissions, right? And that is broken down into 3 scopes, right? Scope 1, Scope 2 and Scope 3 emissions. Scope 1 and 2 more or less the emissions that are most directly in our control as businesses, manufacturers and companies. So Scope 1 emissions need to be direct emissions controlled by whoever the reporting company is. And this will be things that are quantified to direct combustion. You can see this in the -- being emitted from your vehicle fleets, whatever you are burning on site to perhaps create heat within your facilities. We speak about -- when you then speak about Scope 2 emissions, it's about all of the energy or heat or different processes that we are purchasing, right? That we gather through purchasing. Then the most difficult of them all to quantify is the Scope 3 emissions, right? And this is one that really ties together sustainable companies, building sustainable ecosystems because Scope 3 emissions are about your upstream and downstream emissions associated with your supply chain. So one thing that we've seen across our partners is that our partners, investors, clientele, the different stakeholders are looking to invest more time, effort and money with companies that really embrace sustainability, right? Because of this exact fact, we are now being judged according to a different criteria. There's the economic aspect, but also the environmental and the emissions aspect of different companies. And sorry, Gerry, before I go on to the next slide, is there something you'd love to add here?

I think this, again, is a super impactful slide and helpful to talk through because I would hear so much about Scope 1, 2 and 3 emissions. And thinking about it in those terms and seeing visually how it connects with the organization is way clearer than just talking through it, and it's so important for everyone, especially when you think about Germany just introduced new supply chain legislation. There are more regulations coming besides the consumer demand and pressure around wanting to support brands that are thoughtful about their emissions, particularly thinking up and down the value chain, their supply chain, everyone that is connected.

So on the next slide, I really love this slide, Gerry, and you know I like to talking through this slide. So a couple of years ago at Rockwell Automation, we conducted an internal materiality assessment, which aim to identify what are the main aspects or categories that we could approach towards achieving net zero that would help us impact the operations of our partners, but also ourselves. And we came to identifying 3 main categories. In order for us to achieve net zero, we would look to identify activities within the portions of energy, water and waste. But what is net zero, right? Maybe I'll take a step back. So on this graphic and once again, I love Gerry, you see this big old 51 billion tonnes of greenhouse gases there in 2021. So those reported as of 2021 that within society, we are emitting or around about 51 billion tonnes of greenhouse gases. And this number in fact, also supports it and emphasized within Bill Gates's book, How to Avoid a Climate Disaster. And what he also emphasizes in his book is that the way we are operating right now as a society is just unsustainable. And you can see how -- what our projected trajectory of our current activities and growth is going to get us. So if we have to take a step today, this is how we would look to do it. And I think the foundation of this is technology. So we would look to put technology to use to help us become more eco-efficient, help us become more conscious, more data-driven around how we are processing and impacting our operations to be both most profitable, as I said, to transform is most profitable and sustainable. And I think, Gerry -- sorry, Gerry, is there anything you'd love to add here?

Yes. Like we've talked about in the past, Bill Gates is a pretty smart guys. He has dedicated half his career, the second half of his career to climate change. And regardless of how you feel about climate change, climate impact, these initiatives are very real. Governments are on board, regulations are there and pressure from businesses and regulations is going to impact manufacturers everywhere. And it's so important to pay attention to this, to be tuned in and to be thinking about how you're going to adapt your organization to align with this initiative that is global. And besides all of that, it feels good to help. And if you're on the side of helping your environment and your community and your workforce, it's a very motivating purpose-build catalyst for your organizational success. I just -- I couldn't speak to this enough. And -- if you've read books by Bill Gates, The Speed of Business is another one that came out in 2000, and he was talking about having a computer in your hand that can do everything. And people are like, how are you going to do that? And then the iPhone came out in 2007. One of his best quotes is people overestimate what can be done in 5 years and underestimate what can be done and accomplished in 10 years. And I think -- I'll end this slide. Just thinking about change, the change we've seen in the last 10 years and what's to come and the importance of positioning your business for it. And thinking about that, technology, everything is pointing back to technology. So what we're looking at on this slide is the responses from our global respondents about mitigating external and internal risks. So there were probably 30 total responses. We're looking at the top 7 here. That big red arrow right in the middle was the top choice for both internal and external risk mitigation, adopting new technology. If you look across the board here, managing, mitigating cybersecurity, driving business through software adoption, adopting software for automating processes to shift to cloud operations, everything here is touching on or directly to do with technology and manufacturers are understanding the importance of technology to move forward, the importance of technology to remain competitive. It is a catalyst for everything here, and we're going to move into another poll question to see how our audience here is feeling around technology because there's so much and that's beginning to mount pressure.

Let me read this out one for the audience. So tell me, are you experiencing any technology paralysis, right, which is an inability to make a decision to adopt technology due to the amount of available choices that they are? Do you -- so maybe taking a step back, do you have something that's identified? Are there too many options? Are they no options. What are your thoughts? I see some results coming in.

Yes, seeing a pretty even split here. Themba, I was telling you yesterday, I was presenting a couple of weeks back and got visual visceral reactions from the audience, not in their head when I started talking about technology paralysis. And in other webinars and presentations that I've given, there have been a lot of questions around it and people reaching out afterwards saying that it really struck a chord. And I think it's just such a meaningful topic of conversation now as we continue to grow with our technology. And one of the biggest things right now, I think, is data, AI and ML and trying to leverage that for success as we look towards the future. And I know you have some other points. You have something to add there, Themba?

Yes. I think, Gerry, over the past 2 years working in this role, I think I've seen really innovative ways that some of our partners and clients have approached the topic of sustainability and meeting net zero, right? And from what I've seen, digital technologies, so I think through digital technology, I think digital transformation, I think AI, I think ML, using this in many different shapes and forms, right? Across those 3 different categories, which we had described energy, water and waste. There are some commonalities in there, and I think the foundation that I have seen is around that data piece. But once again, you need to start somewhere and dependent on the company who we've been working with, it has been quite diverse.

All right. It looks like our answers are filling out, so I'm going to move and share the results. And 61% of our audience is not experiencing technology paralysis, but we're still seeing 38% that are feeling it. And if we look at the data from our survey, it's fairly similar. So last year was the first time we asked about this because in customer conversations, we just kept seeing it come up. So 25%, 24% last year and 30% this year. So about 1/3 and similar number here today feeling this paralysis. And if you're feeling that paralysis, then you're thinking back to the competitive data that we had at the beginning of this webinar. In 2023, 65% more manufacturers say they lack the technology to outpace their competition. That's huge. That is hugely impactful. And if you are delaying even a quarter, maybe you're delaying a year, you're saying, oh, we're going to get the team together, and we're going to really dig in and solve the biggest problem, but we need to get a little more money together to make this happen. What impact is that having on your organization and your competitive positioning within your industry. I think it's a big one, and it's something to really think about. And that's why in later slides, we're going to talk to as Themba was alluding to moving forward and taking that next step.

Yes. So just talking through some of the technologies that you might look to leverage in order to meet your goals, right? When you speak about smart energy, we speak about different ways to create insights, first of all, from the existing processes that will allow you to -- through data, drive actions towards achieving them, right? So this can be whether this be through energy management systems, right, by extracting new data, existing data from the operations identify inefficiencies to monitor, to report, to optimize on your operations. It can be around looking to install renewables on-site or changing out something that was a little bit more carbon-intensive to less or more green energy production. You can also talk about smart water, right? And how are we ensuring a water-positive operations, right? So making sure that we are -- sorry, consuming less than we are -- sorry, making sure that you're being more conservative around our water. And this can be through the application of AI, ML. It can be through reporting, making sure that we make the data available, looking to ensure that there's no water loss. Our quality is up. You can also look at something called the circular economy. And I think, Gerry, you have a very good way of describing this circular economy. Do you want to give us your take on that?

Yes. Let's jump forward to that circular economy slide. I'll dig into it in a minute, but I want to talk to getting started. And I think the previous slide that you were just touching on is a few great places to start when you're thinking about sustainability and ESG within your environment and getting at the data that you're going to need to meet supplier and regulator requirements. Quality is a great place to start as defined by our study. And it connects to so many different parts of the business because it was also defined as the number 1 accelerant for digital transformation, the number 1 area impacted by artificial intelligence and the number 1 outcome from smart manufacturing adoption. And when you're thinking about your competitive edge, quality is a huge component of it. And when you're thinking about how much money you're spending on technology, if you look at the lower left piece of the slide here, 23% of operating budget was the average for our responses from 1,353 global respondents on how much they're spending on technology. Regardless of how much you're spending, it's a lot of money for your organization. And I think there is a lot of pressure around it, which is some of that compounding into the technology paralysis to make best use and really be thoughtful. And Themba, I think we were talking about yesterday, sometimes we've seen organizations get burned. They have moved forward on a technology adoption and then fail, that it just didn't work out. And that's part of why we're talking through this presentation today and being thoughtful and presenting this great benchmark data like on the right-hand side of your screen here. Looking at process automation, cloud SaaS and that blue line right there in the middle, already machine learning and artificial intelligence are producing a pretty high ROI in comparison from our respondents.

And I think it's really interesting, Gerry, because this graphic that you have over here speaks through many different industries, right? And that's what we're hearing and we're seeing on the field. Whether you're a big mining cooperation, a food and beverage manufacturer or somebody in textiles or in life sciences industry, I've seen this really speaking to how the results are showing today. And I think on your next slide, Gerry, it also unpacks further around this. So talking about the circular economy, there is one that I'd love to speak about when it comes to secular economy and quality, which is although more or less, I think, 2% of total solid waste generated within manufacturing goes to landfill, about 70% of that is hazardous, right? So we need to look at how are we ensuring more efficiency? Or how are we creating less scrap and increasing our yield, right? And I think, Gerry, some of your history or your experiences talks about some of the key ways that we can start to that today.

Absolutely. And I want to point to business reason, again, because that is the biggest driver for people and organizations having a clear business reason. Gartner found in a recent study, 74% of supply chain leaders expect profits to increase between now and 2025 as a result of applying circular economy principles. So the circular economy is based on eliminating waste and pollution by designing products and processes to maximize efficiencies and extend product life. So it's really just a message that's been around forever, reuse, recycle, repurpose, and there's lots of organizations out there that can help you with a focus on this. And your organization is going to benefit because you're reducing scrap, you're reducing waste, you're using less electricity, less water, producing less waste overall. And things like to get more concrete here and going back to Themba's slide, being able to understand when you're operating during peak charge hours for electricity and maybe backing off operations during that particular time and ramping them up outside of that time so that you're making best use of your energy and managing it. And it can go across the organization in so many ways. And when we're thinking about responses for your ESG and sustainability program, product quality and safety ranks right there at the top, reducing manufacturing waste, recycling, energy management, health and safety, all these pieces that really fall right into the circular economy, principles and everything that we've talked about so far today with the ESG and sustainability. Themba, I feel like I might have missed something on this slide. Was there something you had to add?

No, sir. No, no, no. I think the next slide speaks more to it.

All right. So when we're thinking about driving this effort forward and a place to start or continue your journey for technology and for tracking and getting the data that you need for your organization. These are some great solutions. And what I really get drawn to here, Themba is those top 2 and the bottom 2. So already adopted production monitoring and QMS rank right at the top. QMS being right at the top, totally aligns with the other data that we just went through about quality being a top initiative and we've seen it as a top initiative for so many things, but especially thinking about sustainability and ESG. And production monitoring is making best use of your assets and understanding if there is upcoming downtime, being able to bring them down, be proactive with maintenance as if you look at the bottom here, you also have CMMS and asset performance management. While they're not in the top for adoption, they're at the top for planning to adopt. And I think organizations are seeing these easier pieces to bring up and get up and running with payback and ROI quickly as a great way to move forward on the technology journey, whether they're moving from paper-based or just taking the next step. These pieces, especially when you're looking at a vendor that can bring it all together and give you that modular and composable approach to build payback, to have ROI, which is also a less resource-intensive way to move forward. And when we're thinking about our workforce that also ties in so much here, Themba. Was there anything else that stood out to you from these solutions and what we've talked through?

I think the one that perhaps isn't explicitly highlighted on here is the one around energy management. I think -- that one is really powerful, something that I would expect to be already adopted, but also planning to adopt and further emphasize and mature within our different manufacturing facilities. I know that we have another polling question. I think this one might be the last one today. So I'd like to understand what are the top drivers for sustainability and ESG policies right now from our audience? Is this to improve efficiencies? Are you looking to build your presence in the community and build an ecosystem of sustainability-driven partners? Are you looking to address potential environmental issues before they start? Or are you looking for a competitive differentiator? We have some results coming in, still early days, but I see improving efficiencies is a big driver.

Yes, I'm not seeing any surprises here, Themba.

No surprises. And I think as we look at it, in some shape or form, the drivers would traverse across all of these categories, right? And they are very supportive of one another.

Now let's give it another minute. We've got most of the responses in. And it looks like a competitive differentiator is coming up there at the top. Once we reveal these results, we're also going to share the survey results, and there's a few more options there, which may have skewed the poll results if we had them all here, but we didn't want to give you data overload and then have some data paralysis within our survey here.

Don't want to lead the witness, right, Gerry?

Exactly, exactly. All right. So I think we're looking good and I'm going to advance us to share the results. And we're looking at 50% saying a competitive differentiator is the top driver for sustainability and ESG policies. Themba, if we were having this conversation last year, do you think you would see the same data?

I think I'd see something similar. I know that as the pressures came in from investors, as they came from consumers that may have been the biggest one. So to build your presence in the community might have been updated, but you are definitely, this is very insightful.

And powerful drivers for change for sure. And when we look at the data, they actually came back from the survey, very aligned with the responses here today. Improving efficiencies came in at number 1; competitive differentiator, came in at number 2. And globally, I've looked at our industry and regional cuts of this data a bunch. So in China, most of the responses were a competitive differentiator. It was right around 50% like we saw here today. And in several other countries, specifically thinking about sustainability as a competitive differentiator. I also saw improved efficiencies rank very highly in certain industries, including automotive and CPG. So both of these, competitive differentiator and improved efficiency is ranked very highly. And it's interesting to see pressure from industrials all the way over there at the end, Themba, I think you had pointed that out to me yesterday.

Yes, I did. Yes, I did. I would feel like the way investments have been -- are very much being driven towards this more double materiality piece of evaluating different companies on the ESG goals and their ability to be profitable. I'd expect that to be a lot higher. But hey, we'll see in the next round of surveys.

Yes, we're going to keep asking. And just to give context compared to last year, a lot of these middle reasons on this chart fosters a collaborative environment to build our presence in the community, address social inequalities. Those were the top ranked pieces last year. And this year, it's been more of a shift to these business drivers. And I think it's really good for sustainability and ESG efforts, as they're taking hold. And it's really positive to see that the manufacturing community is recognizing the importance of this as new regulations come out and that pressure from those net zero goals continues to push into the supply chain and connect with up and down the full value chain of organizations. And we're getting near the end of our presentation, and we want to bring value and be good for our community here. So at the end of our report, I highly recommend everybody here download the State of Smart Manufacturing report. It has all the data we went through today and a whole lot more. And it also has this getting started guide, which we've designed with everybody in mind, whether you're just starting out, you're thinking about shifting from a paper-based operation or you are a technology adoption pro, you have that change management embedded in your culture, so you're constantly iterating and looking for improvement, and you have every stakeholder from every part of your organization contributing and feeling purpose. These are still really helpful steps as you move forward and think what's next, what's our biggest problem, who do we need to get together, what's the purpose of this decision that we want to spend money on, what's the ROI expected. It's just a lot of great questions. And I don't know about you, Themba, but I really like your guide, and I really like a checklist because it makes sure that you don't miss small things. How do you feel about it Themba?

I love this, Gerry. And somebody as we've been speaking together with our partners and customers, they love it too. So once we've answered all of these questions, it helps us create a sort of foundation around, where do we start today based on our current maturity and all the people involved, what is available to us within our current reach, and how can we then build a road map towards where we want to be in tomorrow, right? We don't have to solve everything on at once, but this gives us a very good starting point. So I think this is very good.

So important. What a great point, your road map, having your road map laid out to guide your organization forward and being thoughtful to constantly iterating on it and being clear with a purpose. So we also have this checklist to help guide that right after that previous slide within the report. And with that, Themba, do you have any last thoughts before we wrap up?

Just that it isn't impossible. It is very possible, and it just takes small incremental steps, right? I think the checklist is a very powerful place to start. And once again, going back to some of the information that we shared today. So the intersection between sustainability and profitable growth is really powerful. And digital technologies are the catalyst towards achieving that. That's what I'll say, Gerry. And any last words from you, sir?

That's a great wrap. And I'll just say I really enjoyed being here today to share this data, sustainability and ESG as Themba laid all on those slides are so much more than just terms. They drive your culture forward. And as we've shown with the pressure from regulations, from your supply chain, from your customers, it's really important to be thinking and moving proactively now and getting your organization ready and like Themba pointed out, having that road map to lead you forward and be a guide as you keep moving. And also, as Themba, pointed out, there's low-hanging fruit ways to start and just take that step and take another step and find a partner that is there to support you. And yes, thank you again. Such a pleasure to be here and talking about this data. And Themba, always a pleasure presenting with you.

Thank you so much, Gerry.. I've enjoyed myself, and looking forward to hearing more from our audience. Thank you.

Wonderful chat, guys. Thank you so much for all the information. We did have a couple of questions come in, and we do have time for review. So let's start with -- as a small, medium-sized manufacturer that operates regionally, is there any -- is there really value in taking the time to create formal or even informal policies?

Themba, do you want to take this one or have me start?

I think you can give it a crack, Gerry.

Cool. Yes. I think this is a great question. Just reading through it again. And what reason is there to do it if things are working. And I think the core of this question is, is it going to disrupt our culture in a negative way, trying to introduce something because then even one little bit of change, culture is sensitive, but approaching this with that thoughtful approach, leveraging the checklist and moving forward is valuable for the future of the organization and setting up that future nail for success by taking a step towards this is all the reason in the world and then thinking about being totally aligned for everything that you're going to have to meet in terms of requirements. I always get pulled back to workforce, thinking about getting the next generation of workers into your organization and bought into your culture and feeling purpose and power within their role to contribute. It's very, very worth it. Themba, what do you think?

I'd just like to say, I think you answered that very well, Gerry. I think perhaps the one thing that I would add to this is touching on the culture, right? As soon as the workforce buys in, you're going to achieve more and more growth at a more over rapid pace, too. And just talk about the future generations and the stakeholders involved, we look to these sorts of things to identify where do we invest our time, our money and our passion. So I think it is definitely worth it and there is a lot of value in taking that time to draw out, whether it be informal, formal and aligned to something that most makes sense for your different industry or for your company.

Absolutely.

Wonderful. Let's do another one. How immediate are the regulations that you've mentioned in this webinar? Will they impact more country by country, regionally or globally?

I think this is a very good question. So there are multiple different regulations coming out. And I think they impact regionally. They also impact globally, right? And one of the ones that I did touch on earlier on in the North American context is around the SEC and their mandatory disclosures that they require different companies to report on. That, I believe, they're doing a few revisions of this, but original proposal was released just last year, right, with effect coming in 2023, 2024, around Scope 1, Scope 2 and Scope 3 emissions. In the context of different industries, you do get, as Gerry was mentioning -- Gerry, would you like to touch on the one from Germany that you highlighted earlier?

Yes. The supply chain one in Germany has already passed. We already have another regulation in the EU that was on the slide, but it's escaping my mind right now that passed in January or in the fall. And there's another one expected to roll through soon. And all it takes is really one regulation to start impacting manufacturers. And what we're seeing is multiple regulations that are going to be impacting within the country, within a region and then cascading out through the globe. So it's already started. And if you're not seeing an impact yet, maybe question some of the change that's come around your organization lately because I've had many customer conversations about why they're asking for new technology or technological change and when you get it to core of it, and talk to their upstream suppliers, we're understanding that there's downstream pressure being pushed from a net zero goal that is now needing to be quantified because of a new regulation. Like you might not see it directly, but it's already happening and already coming down the chain. And the sooner you're prepared for it, the better it's out there.

I couldn't answer that any better.

Great. We've got time for one more. As a mid-sized manufacturer that's currently doing well with workforce and supplier customer relationships, what reason do I really have to adopt ESG or sustainability policies. What I mean is things at work and our culture are good. Why should I change for us now?

I think like similar to what we've touched on already, it's important to move forward. The next generation of workers are looking for purpose in their role and having it clearly laid out for them is going to make you more attractive to that next generation of workers. And going back to Themba's earlier point from that Accenture study and a plethora of other studies out there. It's good for business to have this organization, and I'd like to take a step further that if you are organized to have a formalized sustainability or ESG policy within your organization? What else have you thoughtfully planned out for your organization? How much time do you spend on your technology road map? How much time do you spend on thinking through your people and processes? My guess is that you spend a lot of time and that you're a progressive, maybe leader within that thought of being planned out and structured and thinking about the future and how it will impact you, your people and your organization. So it's one of those things that I think truly cascades everywhere. So while you might be concerned about disruption to the present state, with a vision to the future state and what can be brought to your present. Moving forward is -- while scary because change is always a little scary for people, definitely a positive. And the data is out there is supportive, the data is there in this study and so many others, many that we referenced here today and far beyond. Themba, did I miss anything there? Did you have more to add?

I think you hit the nail on the head there, Gerry.. Maybe just as closing, just conscious of time, I invite the audience and future listeners to send us any questions that they may have coming out of the presentation, and please do feel free to engage with us whether this be via e-mail, via LinkedIn, and we can start the conversation around helping you identify any gaps that you may have, creating your road maps, as well as finding solutions toward achieving your sustainability or ESG goals. Other than that thank you very much.

Great point, Themba. Yes. Everybody, please reach out. Thank you again for joining us today. Thank you, Themba, and Shannon. And if you enjoy this webinar, we have another one on quality coming up next month. So please register, please join us, and please reach out any time. Thank you.

Wonderful. Thank you, guys. I will echo all of our sentiment. Thank you. Please join us for our next one. If you would like some more information on this, please make sure you fill out the survey at the end and click that button to be contacted, if you would like to dive a little deeper into this, and we hope to see you on our next one. Thank you so much.