The climate-saving power of localized supply chains

by Paige Romanick, Strategic Projects Associate

Supply chains are a significant source of CO₂ emissions for consumer companies, comprising over 80 percent of their total greenhouse gas emissions (Bove & Swartz, 2016). By partnering with local manufacturers, companies can reduce these emissions while gaining significant operational benefits.

The impact of CO₂ emissions

Carbon dioxide, or CO₂, is an abundant greenhouse gas in Earth’s atmosphere, which when emitted results in climate change (Causes and Effects of Climate Change, n.d.). As CO₂ emissions rise, so does their environmental impact—leading to consequences such as shifting weather patterns, extreme weather events, and rising sea levels. These environmental changes are not just a threat to nature but also pose significant challenges for businesses.

In addition to the direct impact environmental changes can place on businesses, companies also have to consider the upcoming impact of transition risks on their core operations (MORI & Yohei, 2017). Transition risks are the risks placed on a business as a result of the changing regulatory, technological, and market environments due to climate change. For example, a hardware company that relies on fossil fuel-based materials may face transition risks as new regulations mandate a shift to low-carbon alternatives, requiring costly adjustments to sourcing and production processes. To get ahead of such risks, many businesses are beginning to explore strategies to reduce their CO₂ emissions through localizing their supply chains, recognizing that these efforts can positively impact society and provide significant business benefits (Boyles, 2022).

The benefits of a local supply chain

In addition to reducing a company’s environmental impact, localized supply chains can provide significant logistical benefits by simplifying the relationships with their suppliers. As a result of the greater proximity, companies can meet their manufacturing partners face-to-face more frequently, building stronger and more collaborative relationships. Stronger relationships with your supply chain can increase your supplier’s ability to adapt, which is often critical for a startup to navigate the many hurdles associated with developing a hardware product. (Local Sourcing: How It Benefits the Environment, the Community, and Your Supply Chain, 2023). Additionally, by visiting manufacturing facilities, companies can improve quality control by inspecting products before mass manufacturing begins.

Beyond operational benefits, the simplicity of local supply chains can also save companies money by lowering transportation, logistics costs, and reduce supply chain risks (Bove & Swartz, 2016) when compared to international shipping, which often involves longer distances, multiple importers, and tariffs (Local Sourcing: How It Benefits the Environment, the Community, and Your Supply Chain, 2023).

Moreover, contracting with local suppliers contributes to strengthening local economies by creating job opportunities and enabling consumers to spend more within their communities.

FORGE’s CO₂ Emissions Estimator

To assist businesses in approximating the emissions their supply chains produce, FORGE is proud to share the FORGE CO₂ Emissions Estimator. By leveraging this tool, companies can gain visibility into their supply chain’s high-emission areas and take targeted steps to reduce their overall environmental impact.

If your company is interested in taking action, you can schedule a call with FORGE to connect with local, right-fit supply chain partners and make an impactful difference in reducing your CO₂ emissions.

Sources

Bove, A.-T., & Swartz, S. (2016). Starting at the source: Sustainability in supply chains. McKinsey. https://www.mckinsey.com/~/media/McKinsey/Business%20Functions/Sustainability/Our%20Insights/Starting%20at%20the%20source%20sustainability%20in%20the%20supply%20chain/Starting-at-the-source-Sustainability-in-supply-chains.pdf

Boyles, M. (2022, August 2). 7 Ways Climate Change Affects Global Businesses. Harvard Business School Online. https://online.hbs.edu/blog/post/climate-change-affecting-businesses

Causes and Effects of Climate Change. (n.d.). United Nations. Retrieved December 10, 2024, from https://www.un.org/en/climatechange/science/causes-effects-climate-change

Local Sourcing: How it Benefits the Environment, the Community, and Your Supply Chain. (2023, November 24). KETER. https://www.keteres.com/resource/what-is-local-sourcing

MORI, N., & Yohei, C. (2017). Impact of Climate Change – Transforming Business Behavior in Favour of Sustainable Development. Institute for Global Strategies. http://www.jstor.org/stable/resrep02904