Environmental, social, and governance (ESG) regulations will play a large role in the coming year amid government, investor, and customer scrutiny of supply chains and manufacturing. Look for this to be one of the top trends in 2022 that businesses should be watching closely.
Governments and other stakeholders are paying close attention to corporate ESG initiatives. As companies respond to growing public demands for social justice and smaller carbon footprints, hastened government regulations are fast-tracking already ambitious targets.
Motivating forces
China accounts for more than 50 percent of the world’s steel and aluminum production while possessing a near-monopolistic dominance in the production of magnesium and silicon.
In the lead-up to the winter Olympics, the Chinese government imposed stringent regulations designed to reduce energy use and lower pollution, which forced many raw material manufacturers to reduce or halt production. Driving these new regulations at a time of global spectatorship situated China as a leader in emissions reduction.
Emissions reduction goals lead decisions from over 90 individual companies and organizations as a move to get ahead of public opinion, future legislation, and potential impacts. The commitment to be a part of the U.S. Department of Energy’s Better Climate Change program signals that companies prioritizing their environmental approach may gain a competitive advantage as global climate change activism grows.
Regulations with consequences
The EU recently announced a proposal to make large companies verify that their manufacturing facilities and suppliers around the globe are free from human-rights abuses and environmental standards breaches. Companies in the EU will be forced to pay fines or face lawsuits from the victims of unethical supply chains. The drafted proposal also includes a provision potentially linking executives’ pay to a company plan to ensure the business is making efforts to limit global warming.
This proposal mirrors the one announced by Germany last year to increase due diligence procedures within their global supply chains.
Environmental accountability: pledging green
In the U.S., the California Air Resources Board (CARB) approved amendments to its current rule for Transport Refrigeration Units (TRUs) operating in the state. The 2022 amendments will require a variety of actions designed to reduce pollution and accelerate the transition to zero-emission technologies. Key elements of the newly adopted requirements will begin as early as December 2022 with an end goal that all truck TRUs operating in California will be zero-emission by December 2029.
While we may not see heavy restrictions in every country or powerful setbacks in every industry, new regulations and changing public opinion will continue to affect manufacturing and supply chains across the globe.