Joe Biden's Made in America Mandate— Boon or Boondoggle?
While the full impact of President Biden’s “Made in America” executive order remains to be seen, procurement officials are bracing themselves for the inevitable adjustment that will come along with the enactment of this mandate.
As a brief retrospect, Biden issued an executive order on January 25 to push federal agencies to buy more products made in the United States. The mandate is positioned to boost US manufacturing because it requires the federal government to give preference to domestic producers. It also removes a good portion of the price suppression that accompanies global cost competition.
But what does this mean for the supply chain and for procurement officials attempting to adjust to a soon-to-be new normal? Is this new mandate a welcome shock to the system, or yet another hurdle to be overcome?
Cost, Competition and Opportunity
Mike Chaney, a retired supply chain executive with Procter and Gamble, said that the emphasis on shorter supply chains paves the way for several benefits, including lowered costs and fewer disruptions.
“There’s been a trend over many years of driving down the cost in a supply chain,” he said. “The effort to drive down the cost has caused us to drive money out [of the country] and to develop long and unresponsive supply chains. The benefit of having a shorter supply chain is that you have the chance to be more responsive.”
Procurement professionals should take this mandate as an opportunity to consider the other factors vital to their supply chains and see where they can build upon what’s already working. While cost is a vital component of decision-making, so too is ensuring that your supply chain is diverse enough to see your organisation through challenges.
A great way to ensure that diversity is by selecting US-based suppliers that are actively searching for new ways to take advantage of this mandate. The higher the demand for US-based suppliers, the more likely it is that organisations will begin innovating within their industry. This, in turn, will drive competition up and thus positively impact the quality of service. Everyone wins.
An Essential Balancing Act
That’s not to say innovation does not come at a cost. One of the most pressing challenges of procurement in this post-mandate age is going to be attempting to balance a lot of different factors. Procurement leaders are going to have to prioritise organisations their supply chain needs and limitations with other factors, such as cost.
The solution is to remain strategic about what can be supplied from US-based organisations while still maintaining your old supply base, Chaney said. That is the key to the delicate balancing act.
Diversifying your supply chain is still just as important as it was before; the difference is that now your organisation may have more US-based options available to it, making it easier than ever to add multiple suppliers to your rosters.
Although the exact impact of the “Made in America” mandate has yet to be realised, the chief thing procurement officials should begin considering is where to source new domestic suppliers.
Making sure that you have accurate, up-to-date data is vital to this process. Your search for domestic suppliers should be all-encompassing to ensure you have the best results. Having updated and accurate data is an integral part of that process. Once you have your hands on this data, the sky is the limit in terms of who you can work with and where.
When evaluating potential domestic suppliers, don’t just look at what they currently offer, but what they have the capability to produce. Working with suppliers to expand their offerings not only positions you well for a long-term partnership but creates business opportunities for the suppliers. They have you to thank for that, which will generate a better working relationship.
Ultimately, the “Made in America” mandate is a good thing for the supply chain, provided procurement officials are prepared to pivot. Organisations with access to updated, accurate supplier data are perfectly positioned to make the most of this new avenue for domestic suppliers, while companies without such data now have yet another incentive to collect and utilise it.
“Use the president’s initiative to build a stronger supply chain and a stronger procurement,” Chaney said. “Don’t overreact to it, but use it to build a stronger product supply strategy. That’s the way you win.
Stephany Lapierre, CEO of TealBook
Stephany Lapierre is the founder and CEO of TealBook. Her mission is to deliver a ‘Trusted Source of Supplier Data’ that powers a $20B and growing procurement software market. Prior to tealbook, Stephany spent 10 years building a successful strategic sourcing and procurement consulting firm. Based on that experience, she built and launched tealbook, the only Big Data company that provides a self-enriching and automated data stream across all supplier-related technologies adopted by the enterprise, providing instant supplier identification and elevated industry knowledge to F1000 companies.
Stephany is a sought-after speaker and innovator. She has been recognized as one of the Top 100 Most Influential Women in Supply Chain, an influencer and has received numerous awards as a female tech founder and for her innovative approach to using AI to improve supplier decision.
A Watershed Moment for Sustainability Commitments
Last month saw a landmark ruling where Royal Dutch Shell was instructed to significantly step up its 2030 climate commitments and slash absolute emissions by 45% compared to 2019 levels. This ruling represents a considerable advance on Shell’s stated aim to cut 45% of its emissions intensity compared to 2016 levels by 2035 – a target which provided leeway for increasing emissions as long as the relative carbon emitted per unit of energy produced fell. Now, this imposes a much larger climate obligation on Shell in calling for an urgent absolute reduction.
A ruling that sent ripples through the oil, gas, and energy sector
A watershed moment, this ruling is sure to cause significant alarm amongst fellow oil and gas giants who recognise – for perhaps the first time – that national courts can compel organisations to accelerate their reduction of harmful emissions under the Paris Agreement. Not only does it have "far-reaching" consequences for Shell itself and may even curb the potential growth of the company, but the decision is also likely to set a legal precedent for other energy companies and corporations. According to Thom Wetzer from Oxford University, who heads up the sustainable law programme: “all companies in the energy industry and all heavy emitters will be put on notice and have to accelerate their decarbonisation plans.”
This court mandate applies to not only the Shell group’s own operations but notably also to all the suppliers and customers of the group – strongly implying that Shell is being asked to tackle its Scope 3 emissions. Consequently, it is clear that Shell cannot meet the ruling’s demands alone; to make an impact across all carbon emissions scopes, Shell and other large businesses must immediately look towards forging new, productive partnerships with supplier stakeholders. Failing to do this not only means missed targets and mounting legislative action but also the reputational damage that this will cause to its brand and the company.
Activist investor warns of existential business risk
Reports on the Shell ruling were almost immediately followed by news of a coup attempt in American oil and gas corporation Exxon Mobil. Due to concerns surrounding Exxon’s strategic direction, hedge fund Engine No. 1 ousted sitting board members, stating that the climate crisis poses an "existential threat to the business", which the board has been reluctant to confront.
This small hedge fund accused Exxon of "a failure to take even initial steps towards evolution" and of "obfuscating rather than addressing long-term business risk", partly due to a historical lack of energy industry experience in Exxon’s board. This signalled an imminent shift in the company’s sustainability strategy, which was well received by the market, with Exxon’s shares rising 1.2% the day after the event.
The drive to reduce Scope 3 emissions
And if that wasn’t enough of a shakeup, this was followed by American multinational energy corporation Chevron’s shareholders voting 61% in favour of a proposal to cut Scope 3 emissions at their AGM, signalling frustration with the company’s slack approach towards climate change. Chevron has thus far failed to match its competitors’ net-zero targets with any commitments of its own.
For those less familiar, corporate emissions fall into three categories: Scope 1, 2, and 3. Scope 1 covers emissions from sources that an organisation directly owns or controls. Scope 2 refers to emissions from purchased electricity, steam, heating, and cooling that the reporting company consumes over the course of its operations. And Scope 3 is everything else – all other indirect emissions that occur within an organisation’s value chain, both up and downstream.
Why is this significant? Until now, Scope 3’s heady combination of difficult-to-manage and thus far easy-to-ignore has led large companies to abdicate responsibility for their value chain and sweep its emissions under the carpet. However, the Shell ruling indicates that this approach is no longer viable for big business. With courts stepping in and dictating climate policy to corporations as well as governments, the pressure is mounting on all heavy emitters to tackle their true impact and reduce Scope 3 emissions.
As organisations like Shell, Chevron and Exxon are considered responsible for the actions of their entire ecosystems, sustainability performance becomes contingent on supplier behaviour. The clearest example of this lies in Scope 3 emissions which, for many organisations, considerably exceeds the CO2 they emit directly.
Therefore, the time for green-washing and lip service is now over as pressure mounts from all stakeholder groups for large corporates to take decisive action on sustainability in the supply chain. However, businesses cannot turn promises into concrete progress without actively collaborating with stakeholders across the value chain.
For every five weeks that pass, we lose 1% of the decade
2030, the deadline for achievement of UN SDG-related climate commitments, is fast looming, and with every five weeks that pass, we lose 1% of the decade. The imperative to take immediate action has never been clearer. It’s now down to procurement, wider business leaders, and their associated supplier ecosystems to put sustainability strategy into action by:
● Defining, aligning, and communicating their corporate sustainability goals to focus suppliers, partners and the wider stakeholder groups on how they can make an impact.
● Collaborating systematically through technology using transparent processes that develop trust with suppliers and partners.
● Harnessing the innovation and IP within the supplier ecosystem, turning ideas into projects that can be managed and reported on transparently, and adding clear value trackers to prove impact.
Working closely with stakeholders in the supply chain is an infamously complex process, but it can be made that much simpler using Supplier Collaboration & Innovation (SC&I) technology. This ensures strategic alignment between buyer and supplier and provides comprehensive relationship governance and real-time performance visibility. This allows companies and their suppliers to work on sustainability initiatives more cohesively and develop innovative ideas through collaboration.
Here at Vizibl – through our SC&I platform combined with our knowledge and expertise – we are helping large enterprise organisations in the energy sector better leverage their supplier relationships and move closer to meeting those lofty 2030 sustainability goals.