**London**: In response to geopolitical tensions and sustainability demands, businesses are reforming procurement strategies. Concepts like reshoring and greensourcing are gaining traction, offering pathways to enhance supply chain resilience while reducing carbon emissions in line with the EU’s Green Deal objectives.
Recent discussions surrounding procurement strategies indicate a significant evolution from traditional cost management towards value creation, a shift driven by the need for stronger relationships with suppliers and a focus on resilience and sustainability. As global markets navigate through geopolitical tensions and supply chain disruptions, businesses are re-evaluating their approaches to supplier relationship management (SRM).
A pressing challenge for consumers, particularly those aspiring to make environmentally conscious choices, is the intricate landscape of global supply chains. Currently, a majority of semiconductor chips are produced in East Asia, with assembly predominantly occurring in China. This setup complicates the task of tracking the environmental and social impacts associated with these products. Moreover, China’s dominance over rare-earth elements positions it as a significant player with geopolitical leverage. There is a burgeoning interest in alternative solutions, such as the potential for smartphones manufactured within Europe. This would adhere to strict environmental and social standards and utilise recycled and refurbished components, although this vision may require substantial shifts in trade and industrial policies to become reality.
In light of the vulnerabilities exposed by recent global shocks, companies are seeking innovative strategies to enhance their supply chain resilience. The necessity for a more sustainable and reliable global value chain (GVC) has become increasingly clear. An article in The Conversation outlines these issues, highlighting that geopolitical tensions and trade disputes, particularly intensified by Donald Trump’s current term, have raised alarms regarding the risks associated with GVCs.
Corporations are now actively considering options such as backshoring—returning production to their home countries—nearshoring—relocating production to nearby nations—and friendshoring—moving operations to allied countries. These strategies have the potential to significantly reshape GVCs while supporting the transition to a low-carbon circular economy. In this context, the EU-funded TWIN SEEDS research project is analysing whether strengthening GVC resilience can simultaneously foster sustainability.
The dynamics of trade structures play a crucial role in carbon emissions. Previous shifts within GVCs, which have seen production moving to regions with laxer environmental standards, have contributed to an increase in the EU’s carbon footprint. However, the implementation of strategic nearshoring, friendshoring, and backshoring is deemed to reduce emissions from EU consumption, contributing positively to the continent’s compliance with its “Green Deal.” This legislation aims to consolidate the rules by which companies report their adherence to the EU’s environmental regulations.
One significant concern is “resource shuffling,” wherein suppliers with minimal environmental requirements redirect their exports to less regulated markets, thereby hampering global sustainability efforts. Despite this, the authors of the aforementioned article propose that reshoring five key industries—iron and steel, electric motors and batteries, chips and circuits, antibiotics, and vaccines—could substantially reduce the EU’s carbon emissions. While these sectors account for less than 1% of total trade, reorganising their supply chains holds the potential for considerable environmental benefits, especially within the iron and steel industry, where emissions reductions could reach 4%. The authors assert that while emissions might rise slightly within the EU, particularly in Eastern Europe, the global impact would ultimately be advantageous.
Additionally, the practice known as “greensourcing” focuses on selecting suppliers based on their carbon footprints and has the potential to drastically lower emissions across various industries. In the automotive sector, for instance, sourcing from the cleanest suppliers within the EU could yield a 27.7% reduction in emissions, while opting for the most sustainable global suppliers could achieve an impressive 42.5% decrease.
The EU is taking proactive steps to tackle emissions, including the introduction of a carbon tariff on imports, predominantly affecting carbon-heavy products like steel. As outlined, extending this tariff to encompass more industries could further enhance the EU’s efforts to mitigate its carbon emissions.
Overall, the restructuring of supply chains through reshoring and greensourcing represents a strategic opportunity for businesses to achieve both economic resilience and environmental sustainability. With coordinated policies, the EU aims to diminish its reliance on vulnerable supply chains while progressing towards its climate objectives.
Source: Noah Wire Services
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