Harnessing AI for ESG-led Manufacturing Transformation in India

India is at a crucial juncture in its quest to become a Viksit Bharat with a $30 trillion economy by 2047, as outlined in NITI Aayog's strategic approach paper. The manufacturing sector is poised to play a vital role, with a projected contribution of $1.6 trillion in gross value added (GVA) by FY34 and the potential to create 67.7 million jobs, according to a 3One4 Capital report. However, carbon emissions generated by manufacturing could pose a significant challenge, potentially undermining India’s environmental commitments. An analysis by ResearchGate indicates that the manufacturing sector is the second-largest contributor to India’s greenhouse gas (GHG) emissions. As the country strives to become an economic superpower, it is critical to balance the rapid industrial growth with the environmental responsibilities.

The global movement towards sustainability, transparency, and social accountability makes environmental, social, and governance (ESG) parameters key metrics for business success worldwide. India's commitment to the Paris Climate Agreement, with ambitious goals to achieve net-zero emissions by 2070, and to reduce emission intensity by 45% by 2030, necessitates a strategic manufacturing policy which is robust and functional. In addition, the pressure is on Indian manufacturers to adopt decarbonization of industrial processes along with a planned transition to renewable energy, while embracing a circular economy.

Driving Innovation in Manufacturing with Artificial Intelligence (AI)

In recent times, India has implemented several policy measures to promote sustainable manufacturing. These include the National Green Hydrogen Mission and the Green Steel Mission, as well as initiatives like the Production-Linked Incentive (PLI) schemes and Zero Defect Zero Effect (ZED) certifications. Collectively, these policies aim to reduce carbon emissions, promote renewable energy, and encourage eco-friendly manufacturing practices across various industries. They provide essential support for driving sustainable manufacturing. As a result of these efforts, India is now recognized in the latest cohort of the World Economic Forum (WEF) Global Lighthouse Network within the Factory Lighthouses and End-to-End (E2E) Value Chain Lighthouses categories.

With the introduction of AI within the manufacturing industry, the speed of deploying ESG- friendly measures has increased. In the same WEF survey that recognizes companies transforming manufacturing through innovation, 77% of the top five use cases across all Lighthouses were enabled by analytical AI and 9% leveraged generative AI.

The fact that AI can reduce environmental concerns in the manufacturing sector is clear. While machine learning models can analyze energy consumption patterns in real-time, predictive analytics can forecast peak demand periods, allowing manufacturers to reduce energy wastage. Industry estimates show that every percentage saved in the manufacturing sector using AI for efficiency helps prevent ~90000 units of CO 2 emission: equivalent to removing 20 million cars from the road. A WEF report estimates that AI-driven vision systems, digital twins, and robotics can cut material waste by up to 47%.

AI can also play a role addressing the social aspects of ESG. In labor-intensive sectors AI- powered analytics can map workforce skills and recommend assignments or skill enhancement programs. With employee wellness becoming a key focus area, wearable AI devices can monitor health metrics, ensuring timely intervention in case of exertion or hazardous exposure, an intervention particularly useful in chemical and heavy manufacturing factories.

Governance, often seen as the most challenging ESG pillar, can be enhanced by AI tools that increase transparency, ensure compliance, and facilitate ethical decision-making in a regulatory landscape marked by increasing complexity. Natural Language Processing (NLP) models can scan legal documents and internal policies to meet regulatory requirements, reducing the risk of human oversight and legal violations.

Road Ahead for AI-Driven Sustainable Manufacturing Transformation

AI in ESG integration is characterized by varying scales of regulatory awareness and digital maturity. Many Indian manufacturers, especially small and medium enterprises (SMEs), lack the digital infrastructure to generate, collect, and store data in usable formats. AI integration for ESG will require a convergence of operational technology (OT) and IT, necessitating a strong cybersecurity framework to safeguard sensitive data and maintain system integrity.

While policies like Business Responsibility and Sustainability Reporting (BRSR) are good steppingstones, a cohesive national strategy integrating AI and ESG for manufacturing will help manufacturers align AI initiatives with ESG reporting requirements uniformly. Global markets increasingly reward ESG excellence and penalize those manufacturers who pose environmental and social risks. AI provides an enabling technology to help make this transformation economically viable and competitively advantageous.

Conclusion

The manufacturing landscape worldwide has rapidly evolved over the last decade. The rise of modern technologies, re-globalization, supply chain resilience, and a growing emphasis on ESG present India with a significant opportunity to emerge as global manufacturing destination. India's commitment to achieving net-zero emissions while fostering socio-economic growth can be powered by an AI-driven transformation in ESG-focused manufacturing. The pool of skilled engineers, robust digital infrastructure, well-established manufacturing base, affinity to adopt smart technologies, supportive policies, and a rapidly expanding economy, provide a powerful framework for the country to rise as a manufacturing superpower.