Jabil's Global Category Intelligence Archive

Global Category Intelligence

Q4 2024

SUSTAINABILITY

CHALLENGES

Manufacturers and supply chains grapple with complex challenges as the world accelerates toward a more sustainable future. The imperative to reduce greenhouse gas (GHG) emissions and meet stringent environmental goals has created a pressing need for innovative solutions and strategic planning.

• Standardization: No universally accepted standards for measuring and reporting GHG emissions can lead to inconsistent data and reporting. 

• Technology and Infrastructure: The availability and adoption of low-carbon technologies and infrastructure, such as renewable energy and electric transportation, can be uneven across regions and sectors. 

• Evolving Regulations: As governments worldwide implement stricter regulations on GHG emissions, companies must stay abreast of changing requirements and ensure compliance, which can be resource-intensive. 

• Consumer Demand: Growing consumer demand for environmentally friendly products pressures companies to reduce emissions throughout their supply chains. 

• Climate Risk: Climate-related events, such as extreme weather, can disrupt supply chains and impact emissions profiles. Companies need to incorporate climate risk into their planning and risk management strategies. 

• Cross-industry Cooperation: Reducing emissions often requires collaboration across industries and sectors, which can be challenging to coordinate and implement. 

• Access to Capital: Companies in economically disadvantaged areas may struggle to access capital for sustainable investments, such as energy-efficient equipment or renewable energy sources.

• Job Displacement: The shift toward greener technologies can lead to job losses in traditional, high-emission industries, such as fossil fuels and heavy manufacturing. This displacement can disproportionately affect certain regions or communities.

• Skill Gaps: As supply chains adopt new technologies to reduce emissions, there is a growing demand for workers with specialized skills in renewable energy, energy efficiency, and environmental management. The lack of skilled labor can be a significant barrier. 

• Transition: A major socio-economic challenge is to ensure a "just transition" for workers and communities affected by the shift toward a low-carbon economy. This involves balancing environmental goals with the need to protect jobs and livelihoods. 

• International Agreements and Policies: The elected administration's approach to international climate agreements, such as the Paris Agreement, will also impact GHG emissions regulations. A commitment to international agreements may lead to stricter domestic policies. 

• Green Energy Integration: Manufacturers struggle to integrate renewable energy into operations due to costs, intermittency, and process redesigns. This transition requires substantial investment and can affect supply chain reliability.

• Geopolitical Factors: Political tension, trade disputes, and resource nationalism can impact access to raw materials needed for green technologies and influence adopting sustainability practices across different regions.

REGULATORY LANDSCAPE

As sustainability challenges grow, suppliers must navigate an increasingly complex regulatory landscape. This section provides an overview of critical regulations and policies that directly impact supply chains and shape the future of manufacturing.

CBAM – Carbon Border Adjustment Mechanism

• EU regulation aims to prevent carbon leakage (when another country undermines a country's efforts to reduce emissions) by equalizing carbon costs between domestic and imported products. 

• Importers must purchase certificates corresponding to the carbon price that would have been paid if the goods were produced under EU carbon pricing rules. 

• It primarily affects non-EU manufacturers exporting carbon-intensive goods to the EU, including iron, steel, cement, aluminum, fertilizers, electricity, and hydrogen. 

• CBAM aims to create a level playing field for EU and non-EU manufacturers, incentivize global partners to establish carbon pricing policies, and reduce global carbon emissions.

• Implementation began with a transitional period on 1 October 2023, focusing on

• Data collection and reporting. Full implementation with financial adjustments is set to start in 2026.

• During the transition, importers must report emissions embedded in their imports without financial obligations. This allows businesses to adapt and prepare for full implementation. 

• To ensure WTO compatibility, the mechanism will be phased gradually alongside a phase-out of free allowances under the EU Emissions Trading System (ETS). 

• Manufacturers exporting to the EU should prepare by accurately measuring and reporting their products' carbon footprints and potentially investing in cleaner technologies to reduce emissions. 

• Manufacturing suppliers may need to provide detailed emissions data to their EU customers and consider strategies to reduce their carbon footprint to remain competitive. 

CSRD – Corporate Sustainability Reporting Directive

• EU law will significantly expand the scope of sustainability reporting for companies that meet the criteria for applicability in the manufacturing sector. 

• This regulation requires businesses to disclose detailed information on their material environmental, social, and governance (ESG) issues within their operations and value chain. 

  • This requires a double materiality assessment approach, considering social, environmental, and financial impacts.

• Under CSRD, manufacturers must provide comprehensive data on how their operations and supply chains impact the environment and society via carbon emissions, resource use, human rights, and more. 

• The directive also introduces third-party data verification auditing requirements and mandates using standardized reporting formats, enabling supply chain transparency and more robust data collection systems. 

• As CSRD aims to enhance corporate accountability and drive sustainability improvement, it will push companies to scrutinize the entire lifecycle of procured materials, from raw material sourcing to end product delivery, to meet these new disclosure obligations. 

• Timeline for compliance—these dates refer to the start of the financial year for which companies must begin reporting under CSRD standards. The actual reports will be published in the following year:

  • 1 January 2024: Large public-interest companies (with over 500 employees) already subject to the Non-Financial Reporting Directive (NFRD)

  • 1 January 2025: Large companies not previously subject to the NFRD

  • 1 January 2026: Listed Small and Medium-sized Enterprises (SMEs) and small and non-complex credit institutions and captive insurance companies

  • 1 January  2028: Non-EU companies with significant EU operations (subject to certain thresholds)

CSD / CS3D – Corporate Sustainability Due Diligence Directive 

• While CSRD shares many requirements with CS3D, CS3D requires companies to create detailed plans to mitigate environmental and human rights impacts across their operations and value chain.

• Affects large EU and non-EU companies with significant EU operations based on employee count and turnover thresholds. SMEs in high-impact sectors may also be included. 

• Member states have until July 2026 to transpose the directive into national law; based on company size, there will be a three- to five-year phase-in process. 

• Non-compliance may result in significant fines, exclusion from public procurement, and potential civil liability for damages caused by failures in due diligence.  

ESPR – Eco-design for Sustainable Products Regulation

• EU framework that went into effect on 18 July 2024, imposing stricter sustainability requirements across product lifecycles. 

• Mandates that manufacturers design products focusing on durability, repairability, and recyclability, which will necessitate changes in material selection and production processes. 

• ESPR also requires greater transparency regarding products' environmental impact, including detailed reporting on resource use and emissions, affecting supply chain management and data collection. 

• Additionally, the regulation introduces new obligations for product end-of-life management, compelling companies to ensure that products can be efficiently recycled or reused. 

• Aim to reduce environmental footprints and promote circular economy principles; supply chains in the manufacturing sector must adapt to these new sustainability standards, from design to disposal.

EU Battery Regulation 

• The EU Battery Regulation is a landmark legislation that promotes a sustainable and circular battery value chain within the European Union. Implemented in phases from 2024 to 2030+, the regulation aims to:

• Level the playing field: Create a more competitive environment for battery manufacturers and suppliers.

• Foster a circular economy: Encourage the reuse, recycling, and recovery of battery materials.

• Reduce environmental and social impacts: Minimize the negative effects of battery production, use, and disposal.

• Key Provisions:

  • Carbon footprint reporting: Companies must disclose the carbon emissions associated with their batteries, promoting transparency and accountability.

  • Enhanced recycling: The law mandates higher recycling rates and the use of recycled materials in new batteries, encouraging a circular economy.

  • Traceability: Implements robust traceability systems to track the origin and lifecycle of battery materials, ensuring compliance and mitigating risks.

  • Battery types: This section covers many battery types, including those used in portable devices, vehicles, and industrial applications.

  • Recycled content: Sets increasing minimum levels of recycled materials in battery production.

  • Performance standards: Establishes battery performance, durability, and safety benchmarks.

  • Ease of repair: Requires devices for easier battery removal and replacement.

  • Due diligence: Mandates due diligence for raw material sourcing, ensuring ethical and sustainable practices.

  • Information exchange: Introduces an electronic system for sharing battery information, facilitating transparency and compliance.

The EU Battery Regulation represents a significant step towards a more sustainable and circular European battery industry. The regulation aims to promote a more responsible and resilient battery value chain by addressing key environmental and social concerns. 

EPR – Extended Producer Responsibility 

• Extended Producer Responsibility (EPR) is a policy framework that holds producers, importers, and sellers accountable for the end-of-life management of their products. It shifts the responsibility for recycling and disposal from consumers to manufacturers, encouraging more sustainable practices and reducing waste.

• Key Elements of EPR:

  • Producer Responsibility: Producers are legally obligated to manage the end-of-life of their products, often through participation in Producer Responsibility Organizations (PROs).

  • Product Stewardship: Producers must implement product reuse, buyback programs, and recycling initiatives to ensure responsible disposal.

  • Data Collection: Producers must gather and report packaging and product sales data to PROs, which is used to determine fees.

  • Increased Costs: Compliance with EPR regulations can lead to increased costs for producers, including product redesign, data management, and participation in PROs.

• Global Implementation:

  • United States: Several US states, including California, have enacted EPR laws for various product categories.

  • United Kingdom: The UK is implementing a phased approach to EPR, with full implementation expected by 2025.

• Challenges and Opportunities:

  • Collaboration: Effective EPR implementation requires collaboration between producers, suppliers, and recycling facilities to optimize logistics and supply chain operations.

  • Cost Management: Producers must carefully manage the costs associated with EPR compliance, including fees, product redesign, and data management.

  • Innovation: EPR can incentivize product design and materials innovation, promoting more sustainable and recyclable products.

EPR is a critical policy tool for promoting circular economy principles and reducing waste. By holding producers accountable for the end-of-life of their products, EPR can drive positive change and create a more sustainable future.

The Greenhouse Gas Protocol 

The GHG Protocol is the globally recognized standard for measuring and managing greenhouse gas (GHG) emissions. It provides a framework enabling public and private organizations to quantify and report their carbon footprint accurately.

• Key Benefits:

  • Standardization: The GHG Protocol ensures consistency and comparability across industries and regions, facilitating effective emissions management.

  • Credibility: Compliance with GHG Protocol standards enhances an organization's credibility and reputation as a responsible corporate citizen.

  • Business Opportunities: Many large manufacturers and retailers now require their suppliers to adhere to GHG Protocol standards, creating new business opportunities for those who can demonstrate their commitment to sustainability.

• Essential Components of the GHG Protocol:

  • Scope 1, 2, and 3 Emissions: The protocol defines three emission categories: direct emissions (Scope 1), indirect emissions from purchased electricity (Scope 2), and indirect emissions from the value chain (Scope 3).   

  • Calculation Methodology: The GHG Protocol provides detailed guidance on calculating emissions for various activities and industries.

  • Verification and Assurance: The GHG Protocol encourages independent verification of emissions reports to ensure data accuracy and credibility.

By adopting the GHG Protocol, organizations can gain valuable insights into their carbon footprint, identify opportunities for emissions reduction, and demonstrate their commitment to sustainability. The GHG Protocol is a vital tool for driving a low-carbon future.

Global Plastics Treaty Negotiations

The plastics industry is rapidly transforming, driven by increasing regulatory pressure and technological advancements. Its future is marked by uncertainty and opportunity. 

• The packaging industry is rapidly changing; guidance that used to change every decade or every few years must be reviewed every few months. 

• Regulations are rolling out country-by-country in the EU and state-by-state in the US, meaning the industry has difficulty navigating the resulting patchwork of new laws. 

• Emerging AI-based recycling technologies improve material recovery through increased yield and effective handling of more materials. The same technologies enable extended producer responsibility programs because they can granularly measure waste streams. 

• Dominant technologies and approaches have not yet emerged. The market will likely remain fragmented, driven by regulation, metrics, and appropriate application variability. 

• Overall trends are for plastic reduction ("source reduction"), improved design for recyclability, a transition away from single-use plastics, and a renewed interest in reuse models. 

REACH – Registration, Evaluation, Authorization, and Restriction of Chemicals

• REACH is an EU directive that impacts suppliers who provide chemical substances to EU manufacturers. The REACH authorization process ensures that risks related to Substances of Very High Concern (SVHCs) are managed and promotes replacement with safer alternatives when feasible.

• Manufacturers using SVHCs must apply for authorization to continue use after the "sunset date." Suppliers should be aware of these dates. 

• The application process requires detailed substance use, alternatives, and risk management information. Suppliers may need to provide this data.

• Socio-economic analysis may be necessary, demonstrating that benefits outweigh risks. Suppliers can contribute relevant market information. 

• Authorization is time-limited and subject to review. If it is not renewed, suppliers should prepare for potential market changes. 

• Costs can be significant. Suppliers may need to consider price adjustments or develop alternative substances to remain competitive. 

• Suppliers should stay informed about REACH updates and consider joining consortia to share costs and information for authorization applications. 

• Non-EU suppliers must ensure their EU importers comply with REACH. This may involve providing substance information and supporting documentation. 

By embracing technological advancements, collaborating on international standards, and promoting sustainable practices, stakeholders can work towards a more circular and sustainable plastics economy.

RoHS – Restriction of Hazardous Substances 

RoHS is a European Union directive that limits the use of certain hazardous substances in electrical and electronic equipment (EEE). The goal of RoHS is to protect human health and the environment by minimizing the presence of toxic substances in electronic products.

• An EU directive limits the use of specific hazardous substances in EEE. This applies to categories such as household appliances, IT equipment, consumer electronics, lighting, electrical tools, toys, and medical devices. 

• Suppliers must ensure products comply with RoHS, often requiring material declarations, testing, or certifications. Non-compliant products cannot be sold in the EU market and may result in lost business or contracts with manufacturers. 

• Exemptions exist for certain applications where substitution is not feasible. Suppliers should be aware of relevant exemptions and their expiration dates. 

• RoHS has influenced similar regulations worldwide. Compliant suppliers may have an advantage in global markets. 

• Regular updates to the directive may add new restricted substances. Suppliers should monitor changes, adapt accordingly, and proactively demonstrate compliance to maintain competitiveness. 

RoHS has influenced similar regulations in other regions worldwide, making compliance with RoHS a competitive advantage for suppliers targeting global markets.

SBTi – Science-Based Targets Initiative 

• SBTi is a global organization that helps companies set ambitious GHG-reduction targets aligned with the 2015 international treaty, the Paris Agreement. By providing standards, tools, and guidance, SBTi ensures that corporate climate action is grounded in scientific evidence.

• Corporate climate action organization, which develops standards, tools, and guidance to help companies set greenhouse gas (GHG) reduction targets aligned with climate science and the Paris Agreement. 

• To be recognized as SBTi compliant, companies must follow the GHG Protocol Corporate Standard, Scope 2 Guidance, and Corporate Value Chain (Scope 3) Standards and submit targets for validation.

• Companies that commit to SBTi targets often require their suppliers to align. This pressure can drive suppliers to adopt more sustainable practices to maintain business relationships. As a result, suppliers may need to provide detailed emissions data, improve transparency, and set their science-based targets. 

  • Suppliers that do not meet SBTi standards risk losing contracts or business relationships with manufacturers, who instead choose suppliers that use renewable energy or adopt low-carbon technologies. 

  • Manufacturers might also need to overhaul their production. This could involve investing in energy-efficient machinery, switching to renewable energy sources, or optimizing logistics to reduce transportation-related emissions.

By adopting SBTi standards and aligning their suppliers, companies can play a crucial role in addressing climate change and building a more sustainable future. The SBTi provides a clear pathway for businesses to set ambitious targets and take meaningful action to reduce their environmental impact.

US Securities and Exchange Commission (SEC) Climate Disclosure

• Key Provisions:

  • Climate Risk Disclosure: Companies must disclose their climate-related risks, including physical impacts (e.g., extreme weather events) and transition risks (e.g., policy changes or technological advancements).

  • Mitigation and Adaptation Strategies: Companies must disclose their strategies for mitigating and adapting to climate change, including quantitative and qualitative information on financial impacts.

  • Phased Implementation: The regulation has a phased implementation timeline, with larger companies required to disclose climate-related information earlier than smaller entities.

  • Greenhouse Gas (GHG) Emissions: Large filers must disclose Scope 1 and 2 emissions by 2027, with additional requirements for advanced filers by 2029.

• Implications for Suppliers:

  • Data Collection and Verification: Suppliers may need to enhance their data collection and verification systems to comply with the SEC's climate disclosure requirements.

  • Increased Costs: Collecting and reporting emissions data can increase suppliers' costs and administrative burdens.

  • Business Relationships: Suppliers that provide consistent and accurate emissions data may have a competitive advantage in maintaining business relationships with manufacturers subject to the SEC rule.

The SEC Climate Disclosure Rule represents a significant step towards enhancing transparency and accountability in the corporate world regarding climate-related risks. Suppliers must be prepared to adapt their practices to meet the new requirements and ensure continued participation in the supply chain.

GREENHOUSE GAS REDUCTION

Market Trends

• Expectations around GHG reduction have evolved from a trend to a fundamental business requirement driven by regulations like the upcoming CSRD mandate in 2026. Customers need to know their Scope 3 Category 1 (products and services) emissions to accurately disclose their overall carbon footprint. 

• As a result, the market demand for carbon footprint data and emissions management solutions is surging, presenting challenges and opportunities for manufacturers. 

• Many companies, including software providers, are rapidly building capabilities to measure and report on Scope 3 emissions, but the maturity of these offerings varies greatly. 

• Only a few players have the strong, efficient capabilities to provide comprehensive product-level carbon footprints, especially for complex electronics. 

• Scope 3 emissions data collection and reporting have become a new frontier as companies move beyond the more mature Scope 1 and 2 emissions disclosures. 

• Companies are shifting from spend-based emissions calculations to collecting primary data from suppliers and using tools like product carbon footprinting (PCF) and life cycle assessments (LCA) for more accurate Scope 3 Category 1 reporting. 

• Companies increasingly request allocated emissions data specific to their business operations and products rather than overall corporate emissions. This requires a significant shift in business operations toward more granular data collection and reporting strategies.

• While regulations like CSRD drive increased Scope 3 disclosure requirements, customer demands have historically been the primary driver for enhanced emissions data collection and reporting.

• Beyond compliance, companies use emissions reporting as a risk mitigation and reputation management tool, showcasing their broader ESG efforts to stakeholders.

Challenges

• Aligning stakeholders within an organization on the meaning and implications of net-zero or carbon neutrality goals is a significant challenge, as the costs and impacts can vary greatly. 

• Companies are making ambitious Scope 3 reduction commitments and targets, but the manufacturers and suppliers responsible for taking action may face greater challenges and unknowns in determining the true costs. 

• The multi-layered nature of Scope 3 emissions across 15 different categories, from upstream transportation and distribution to employee commuting, makes cost estimation complex and requires building new ecosystems and capabilities. 

• The lack of mature innovation and solutions for certain emissions reduction strategies, such as recycling and material reuse, contributes to the uncertainty around associated costs. 

• Trade implications, policy changes (like those discussed above), and regional variations add further complexity to accurately projecting the costs of meeting Scope 3 emissions targets.

• Unlike Scope 2, where renewable energy costs are clearer (e.g., in manufacturer-OEM relationships), Scope 3 requires collaborative consensus across the value chain. Sustainable target achievement depends on equitable distribution of financial burden among multiple stakeholders rather than burdening a single entity.

Offsetting and Decarbonization Strategies

• Renewable energy is fundamental to Scope 2 emission reduction strategies, as a lack of access to renewable power sources can make it challenging to achieve reduction targets and carbon neutrality. 

• Companies are exploring options like on-site solar panels, renewable energy credits (RECs), and power purchase agreements (PPAs) to incorporate more renewable energy into their operations and decarbonization plans.

• For impactful Scope 3 decarbonization, it is critical to identify and address the highest carbon-emitting materials and components within products. Product-related emissions comprise 50-90% of a company's total Scope 3 footprint. 

• Responsible sourcing of materials—such as rare earth metals—and collaboration across the value chain enable material reuse and circularity. 

• Beyond just recycled content, sustainable material selection is a game-changer for consumer product companies' decarbonization strategies, including transitioning from single-use plastics to biodegradable and recyclable alternatives.

• Calculating the carbon savings and avoided emissions from the circular economy, recycling, and reuse operations allows companies to quantify their impact, demonstrate progress toward decarbonization goals, and unlock potential financial incentives for emission reductions.

Enhancing Supply Chain Resilience

• Reducing Scope 3 emissions can enable the development of more sustainable and circular economy practices across the supply chain, enhancing responsible sourcing and transportation of products and materials. 

• Scope 3 emission reduction requires visibility, disclosure, and connectivity of carbon data, which can improve risk mitigation and compliance and build stronger relationships between suppliers and customers. 

• Aligning stakeholders across the value chain on Scope 3 emission reduction, eco-design principles, and a collaborative "carbon currency" mindset fosters greater supply chain resilience and cooperation.

Supplier Engagement

• Industry alliances must shift from theoretical discussions to practical implementation, focusing on use cases and pilot projects demonstrating real-world impact. 

• Industry groups advocate a "crawl, walk, run" approach, emphasizing gradual, scalable solutions that leverage each stakeholder's strengths and expertise.  

• Industry alliances are increasingly important platforms for emissions reduction, bringing together diverse global stakeholders across the value chain. These collaborations help:

  • Identify gaps in current practices

  • Develop efficient, scalable solutions

  • Implement circular economy practices

  • Advance sustainable design principles

  • Promote responsible sourcing

• Supplier engagement strategies:

  • They prioritize supplier awareness and education about carbon emissions and their importance, emphasizing collaboration rather than competition.

  • Recognize the control dynamics in the supply chain, with OEMs and brands often dictating product design and supplier selection. Align engagement strategies with these key decision-makers. 

  • Advocate for standardized data collection methods to reduce the burden on suppliers facing multiple, varied requests for emissions information. 

  • Leverage existing global repositories for emissions data, like the Carbon Disclose Project (CDP), while acknowledging their limitations in terms of cost, timeliness, and data accessibility. 

  • Emphasize a collaborative, non-judgmental approach when engaging suppliers, framing emissions reduction as a shared journey rather than a pass/fail test. 

• Risk Management Strategies

  • Many companies are setting ambitious carbon reduction targets without clear implementation plans, highlighting the need for robust risk management strategies.

  • Major consulting firms are developing software tools to help organizations identify, prioritize, and manage climate-related risks. 

  • Control is a key risk management consideration: companies assess their ability to influence carbon reduction across their supply chain and product lifecycle. 

  • Cross-functional collaboration is becoming crucial, with finance, supply chain, operations, and sustainability teams working together to align strategies and mitigate risks. 

  • Organizations are leveraging government funding and green financing to offset costs and reduce financial risks associated with sustainability initiatives. 

  • Companies are systematically developing "audit checklist" approaches to track and manage their progress toward carbon reduction goals. 

  • Growing awareness of the risks associated with customer demands for specific carbon standards leads to more collaborative approaches between manufacturers and clients.

• Integrating Emissions Data

  • Integrating carbon footprint data into supply chains is becoming as essential as tracking financial metrics. 

  • Identifying and addressing high-emitting materials enables businesses to establish baselines, commit to reduction targets, and make more strategic procurement decisions.

  • This integration is driving the evolution of a data-driven circular value chain, allowing organizations to understand and mitigate risks more effectively. 

  • However, the lack of a standardized, centralized repository for emissions data is forcing many organizations to develop their solutions or partner with others, potentially creating new silos. 

  • The industry trend is moving toward platforms that deliver comprehensive carbon footprints for products, logistics, and transportation, though a universally adopted standard has yet to emerge.

• Third-Party Verification and Certification

  • Third-party verification of GHG emissions data is crucial for ensuring accuracy, reliability, and credibility in the manufacturing supply chain. 

  • Independent auditing of GHG emissions inventories involves an external firm assessing your organization's data collection and reporting processes.

  • Verification is particularly important for Scope 3 emissions data, which often involves complex supply chain interactions and estimates. 

  • Benefits of third-party verification for suppliers include: 

    • Improved credibility and reputation with customers, investors, and regulators.

    • Enhanced ability to meet upcoming carbon regulations and set achievable targets.

    • Identification of risks, opportunities, and areas for improvement in emissions calculations.

• The verification process helps suppliers clarify their GHG emissions inventory, increase the reliability of reported data, and develop a competitive advantage in the market.

• Customers, investors, regulators, and media are increasingly interested in verified GHG inventories, and verified data can improve stakeholder opinions and relationships.

• Verification also helps identify areas where emissions calculations can be refined. For Scope 3 processes requiring estimates, verification guides employees in selecting the most accurate calculation methods. 

• Long-term benefits include verified inventories, which provide a solid foundation for setting and achieving credible emissions reduction targets, and regular verification, which ensures continuous improvement in data accuracy and reporting processes. 

• By focusing on these aspects, suppliers in the manufacturing space can better understand the importance and benefits of third-party verification for their GHG emissions data, positioning themselves as responsible and reliable partners in the supply chain. 

KEY CERTIFICATION STANDARDS

CDP (formerly Carbon Disclosure Project)

• Offers a platform for companies to disclose their environmental impacts and strategies related to climate change, water security, and forest management. 

• CDP has developed a methodology for scoring organizations based on their environmental disclosure and performance, encouraging transparency and accountability.

• Many large companies require their suppliers to report through CDP, making it increasingly important for manufacturers to participate and disclose their environmental impacts.

Cradle to Cradle Certified™

• Evaluate products based on their environmental and social performance throughout their lifecycle, including material health and reutilization. 

• Can drive innovation in product design and manufacturing processes

Ecolabels

• Ecolabels are certification schemes that provide consumers information about a product or service's environmental impact or sustainability. 

• The certifications (i.e., ENERGY STAR, EPEAT, TCO Certified) are increasingly recognized as a benchmark for sustainable products, driving suppliers and manufacturers to adopt low-carbon processes to meet criteria. 

• Ecolabels follows ISO 14024 standards, which outline the principles and procedures for third-party environmental labeling. These standards ensure credibility and consistency across certifications.

• By aligning with ecolabel standards, companies can enhance their marketability and ensure compliance with growing regulatory and consumer demands for GHG disclosure and reduction. 

• Ecolabels are critical in helping manufacturers gain a competitive edge by signaling adherence to stringent environmental standards. This not only aids in reducing Scope 3 emissions but also builds trust with customers who prioritize sustainability in their purchasing decisions.

EcoVadis

• It comprehensively assesses a company's sustainability practices in four key areas: Environment, Labor and Human Rights, Ethics, and Sustainable Procurement. 

• This is extremely relevant for manufacturers, who often participate in complex supply chains, as it can help them meet their customers' sustainability requirements.

Environmental Product Declaration (EPD)

• A standardized, third-party-verified document that communicates transparent and comparable information about a product's lifecycle environmental impact.

• This is articularly relevant for manufacturers as it comprehensively assesses a product's environmental performance, including raw material extraction, energy use, chemical substances, emissions, and waste generation.

• Increasingly requested by customers and specifiers in various industries, EPDs can give suppliers a competitive edge and help them meet growing market demands for environmental transparency and sustainable product offerings.

ISO 14001

• Provides a framework for organizations to manage their environmental responsibilities systematically. 

• Can help improve efficiency, reduce waste, and demonstrate environmental commitment to customers.

Science Based Targets Initiative (SBTi)

• Provides frameworks, standards, and tools for companies to set science-based emissions reduction targets to limit global temperature rise above pre-industrial levels to 1.5°C.

• For manufacturers looking to reduce their emissions in line with climate science, this standard can be particularly important for those in energy-intensive industries.

Scope 3 Reporting Standards

• Scope 3 emissions are calculated using the GHG Protocol standard, which provides the world's most widely used greenhouse gas accounting standards. 

• GHG Protocol provides equations to use for each Scope 3 category and provides the most reliable sources of emission factors. 

• Two types of assurance for Scope 3 emissions are available, limited and reasonable:

• Limited assurance establishes that the company has the correct controls, processes, and frameworks in place to increase confidence in the data.

• Reasonable assurance takes this a step further and ensures that statements are reasonably stated and are materially correct by undertaking detailed testing.

COMMUNICATION & REPORTING

• Transparency in greenhouse gas (GHG) emissions reporting is critical for effective communication with stakeholders. It enhances the documentation of progress and targets, helping companies track and demonstrate their sustainability efforts. 

• By being transparent, organizations can better identify risks and opportunities, increasing awareness of the environmental impact of their activities and reinforcing their credibility.

• To effectively communicate carbon footprint information to stakeholders, companies should consider the following strategies:

• Define the goal/purpose of collecting carbon emission information. 

• Communicate short-term achievable targets alongside long-term aspirations. 

• Detail how progress toward targets and goals will be achieved.

• Address challenges and risks in accounting for and reducing emissions. 

• Highlight achievements and impacts related to climate targets.

• Release information in an annual sustainability report and other relevant external reports (e.g., CDP, EcoVadis, Responsible Business Alliance).

• Ensure transparency and accuracy to allow stakeholders to assess sustainability performance and hold companies accountable. 

• Foster collaboration by communicating shared burdens, costs, and responsibilities among stakeholders.

PRODUCT DESIGN

Overall Trends

• Integrating carbon impact considerations throughout the entire lifecycle of a product, from design to end-of-life, is becoming critical for sustainable manufacturing. 

• Product carbon footprints (PCFs) and lifecycle assessments (LCAs) are becoming fundamental requirements for doing business, especially in the consumer product and automotive industries. These tools help identify carbon "hotspots" in products, allowing for targeted design improvements. 

• Customers are increasingly focused on "design for anything" (DFx) approaches, particularly design for sustainability (DFS). This includes embedding principles such as recyclability, reusability, disassembly, and circularity into the product design process.

• While many software tools and platforms are available, a lack of standardization and centralized collaboration across industries and regions creates challenges for suppliers.

• There's a significant shift in design process ownership, with contract manufacturers taking on more design responsibilities. Some brands are adopting an open-minded approach, asking manufacturers for design input, while others are setting strict guidelines.

• The ecolabel process is also seeing a shift in ownership, with some brands asking manufacturers to manage this aspect. This trend aligns with the increasing focus on Scope 3 emissions and upcoming regulations like the Corporate Sustainability Reporting Directive (CSRD). 

• Advanced design tools incorporating environmental impact data are becoming crucial. Manufacturers with sophisticated designs for sustainability systems that can run "what-if" scenarios are positioned to take a larger role in the sustainable design process. 

• The push for more sustainable material processing and circularity is spanning multiple industries, as companies seek to mitigate their overall environmental impact and reduce Scope 3 emissions. 

Emerging Technologies 

• AI-powered technologies are being applied across the product lifecycle, from automating recycling processes to informing eco-design decisions, driving continuous improvement in sustainable manufacturing. 

• AI is also emerging as a key enabler for optimizing material sorting, identifying optimal material blends, and designing products for improved circularity and recyclability. 

• Beyond just recycling, the focus is shifting toward establishing closed-loop material flows and enabling greater component reuse to increase avoided emissions from the product lifecycle.

• Traceability and transparency around recycled content and reused materials are becoming important, with some exploring blockchain-like approaches to track material flows.

• AI-driven innovations in resin recycling are enabling a shift from landfill diversion to active tracking and recirculation of materials, optimizing blending and compound identification for improved circularity in plastic manufacturing. 

• Several innovative companies are developing environmentally friendly processes for precious metal recovery from electronics, enabling greater component reuse and offering sustainable alternatives to traditional recycling and refining methods.

• Elsewhere, innovative chip and component reclamation companies are developing efficient, scalable thermal and liquid-based processes to extract and refurbish embedded chips and printed circuit board (PCB) materials. 

• These reclamation technologies enable the reuse and reintegration of valuable components back into the manufacturing process, reducing waste and avoiding emissions compared to traditional disposal. 

• While the approaches vary in scalability and cost, the industry is seeing increased collaboration as manufacturers seek to leverage the unique strengths of specialized reclamation providers.

• Collaboration between companies with complementary expertise is emerging as a key strategy for developing and scaling sustainable technologies in the manufacturing sector. 

Case Studies and Best Practices

• One closed-loop example demonstrates a patented process for recirculating post-industrial materials, driven by CBAM regulations and customer needs, now offering sustainable material options industry-wide. 

• Upstream collaborations involve manufacturers working with raw material suppliers to develop recycled content sources, creating circular economy solutions before materials reach downstream processes. 

• Downstream partnerships, such as those with cloud providers, focus on de-manufacturing to maximize parts and materials reuse from decommissioned products. 

• These collaborations emphasize continuous improvement, with ongoing engagement to identify new opportunities for avoided emissions and process optimization. 

• Material compliance partnerships foster transparency and visibility across the supply chain to meet regulations like RoHS and REACH. 

• Effective collaborations often yield both environmental benefits through emissions reduction and financial advantages via cost savings or new revenue streams.

CIRCULAR ECONOMY

• A circular economy is a production and consumption model that aims to eliminate waste and maximize resource efficiency throughout a product's lifecycle. It involves designing products for longevity, repairability, and recyclability while implementing systems for reuse, refurbishment, and recycling of materials and components. 

• This model contrasts with the traditional linear "take-make-dispose" approach, instead creating closed-loop systems where materials and products are used for as long as possible. 

Economic and Competitive Advantages of Circular Economy Practices

• Adopting circular economy practices can create a sustainable source of materials, mitigate future supply risks, and optimize logistics to dramatically reduce costs. 

• Circular business models unlock new revenue streams by tapping into secondary markets for refurbished, remanufactured, and recycled products and components. 

• Redeploying parts or components back into the customers' supply chain or manufacturing line can significantly reduce costs by minimizing the need for new raw materials, lowering production expenses, and decreasing waste management costs.

• Circular economy principles can benefit not just the brand but also suppliers by expanding the pool of available materials and components.

Designing for Circularity Strategies

• Designing products for disassembly, repairability, reusability, and recyclability is fundamental to enabling a circular economy. 

• Incorporating circular design principles from the conceptual phase is critical, as it avoids the challenges and higher costs of trying to retrofit products for end-of-life circularity. 

• Circular design must consider not just the product, but the entire ecosystem and infrastructure required to enable reuse, repair, and closed-loop recycling.

• Ease of disassembly is another important part of the ecosystem that needs to be considered during the product design phase. 

• One example of this concept would be moving away from strong adhesives to ensure that products with sustainable materials can be properly separated and reused at end-of-life. 

Material-Specific Trends

• Consumer packaging companies are increasingly focused on bioplastics and eco-friendly composites as they move away from single-use plastics and toward alternatives that are biodegradable or more recyclable. 

• Reusable packaging must still adhere to fundamental design and engineering principles. This includes passing rigorous durability tests such as shock and drop resistance, heat tolerance, and overall longevity. 

• The definition of "circular" in reusable packaging is still evolving. While any reuse contributes to circularity by delaying landfill disposal, there's a need for clearer guidelines on how many reuse cycles constitute a truly circular product.

• While ferrous metal recycling is a more mature industry, nonferrous metal recycling processes are still emerging. Metal mills face challenges in certifying post-industrial or post-consumer recycled content percentages, unlike the more established practices in plastics.

• Another notable trend is the convergence of supply and demand for recycled metals in unexpected sectors. Some cloud providers are exploring partnerships with mills to certify post-consumer recycled steel from data center racks, with interest from a major appliance manufacturer as a potential consumer. 

• Significant R&D is being conducted in the electronics sector on more sustainable PCBs. Innovations include flexible PCBs and moisture-resistant variants.

Establishing or Optimizing Circular Economy Infrastructure

• The maturity of circular economy infrastructure varies significantly by industry, with consumer electronics being more advanced than sectors like solar panels and lithium-ion batteries. 

• Economic barriers to scaling circular electronics include regulatory challenges with cross-border transport and IP restrictions that limit repair and reuse. 

• The innovative use of AI is enhancing circular practices through optimized sorting, grading, and monetization of recovered materials, as well as integrating circularity into product design. 

• Bringing together diverse stakeholders, including brands, suppliers, recyclers, and policy-makers, is key to establishing standardized, scalable circular economy systems.

Key Considerations in Developing Reusable Packaging

• Consumer buy-in is crucial when developing reusable packaging standards, as manufacturers must balance creating durable, functional items that meet sustainability goals with aesthetics. 

• Reusable packaging must still adhere to fundamental design and engineering principles. This includes passing rigorous durability tests such as shock and drop resistance, heat tolerance, and overall longevity. 

• The definition of "circular" in reusable packaging is still evolving. While any reuse contributes to circularity by delaying landfill disposal, there's a need for clearer guidelines on how many reuse cycles constitute a truly circular product. 

• Reusable packaging standards must consider end-of-life scenarios and address what happens when the product can no longer be reused. This includes considerations for recyclability or other sustainable disposal methods. 

• Collaboration between industry forums and standardization bodies is key to developing reusable packaging standards. 

Case Studies on Circular Collaboration

• A major telecommunications company implemented a closed-loop system for their equipment, repairing and refurbishing products up to three times before harvesting parts and materials for recycling. This approach extends product life cycles and maximizes resource utilization before final material recovery.

• The healthcare sector is driving innovation in reusable packaging, as seen with Qfinity's auto-injector system. Thanks to a spring-loaded, reusable drive unit and small-single-use, pre-filled disposable cassettes, this reusable medical device cut the cost per injection by 65% and carbon footprint by 80%. 

• Another innovative collaboration in healthcare involves reprocessing partial implants used in hospitals. After rigorous sanitization and quality testing to meet federal regulations, these implants are returned to medical facilities for reuse, significantly reducing medical waste and creating a closed-loop system for specialized medical devices.

• Another innovative collaboration in healthcare involves reprocessing partial implants used in hospitals. After rigorous sanitization and quality testing to meet federal regulations, these implants are returned to medical facilities for reuse, significantly reducing medical waste and creating a closed-loop system for specialized medical devices.

• One appliance manufacturer is exploring circular economy initiatives by investigating ways to reuse and recirculate resins back into their products or the broader market. This project also involves sourcing post-industrial recycled resin for their product lines.

• A cable company partnered with a circular economy solutions provider to centralize their reverse logistics ecosystem, mitigating landfill risks and preventing products from entering the secondary market. The collaboration resulted in new revenue streams through data wiping and reselling hard drives, and recycling plastics into construction materials.

• An electronics manufacturer implemented a closed-loop system for telecom equipment. Products are disassembled, specific chips are reclaimed and re-tinned for reuse, and the remaining materials are sent to R2-certified recycling partners. This process maximizes component reuse while ensuring responsible disposal of other materials.

• A manufacturing facility in Ireland developed a closed-loop system for post-industrial resin waste. The facility either reprocesses the resin for direct use in injection molding or repurposes it for other applications like plastic milk crates, demonstrating effective on-site waste reduction and material recirculation.

• While industry coalitions like the Ellen MacArthur Foundation, the Circular Electronics Partnership (CEP), and PACE (Platform for Accelerating the Circular Economy) are producing valuable white papers in space, there's a growing need to move beyond theory to practical application. Use cases and small-scale pilots involving diverse stakeholders across the value chain are becoming increasingly important.

KEY TAKEAWAYS

Opportunities

• Rising demand for carbon footprint data and emissions management solutions

• New revenue streams from circular economy practices and recycled/refurbished products

• Enhanced collaboration across the value chain for sustainability initiatives

• Use of AI and advanced technologies to optimize sustainability efforts

Challenges

• Complex, shifting regulations (e.g., CBAM, CSRD, CSDDD)

• Lack of standardized emissions reporting and circular economy practices

• Difficulty measuring and reducing Scope 3 emissions

• Balancing sustainability goals with economic viability

Risk Assessment

• Non-compliance with emerging regulations may lead to fines, market access loss, or reputational damage

• Growing pressure for transparent sustainability practices from customers and stakeholders

• Climate-related disruptions in the supply chain

• Economic uncertainties tied to sustainability costs

• Geopolitical factors affecting climate-related policies

Strategic Implications

• Invest in systems for robust emissions reporting

• Incorporate sustainability into product design and manufacturing

• Build partnerships to address Scope 3 emissions

• Explore circular economy practices for cost savings and new revenue

• Use third-party verification for credibility in sustainability efforts

Stakeholder Impact

• The sustainability landscape in manufacturing is evolving rapidly, creating challenges and opportunities for industry players.

• Suppliers: Increased pressure to provide emissions data and adopt sustainable practices.

  • To stay competitive, suppliers must proactively embrace sustainability by adapting to new regulations, investing in green technologies, and fostering collaboration across the value chain. 

  • Key focus areas include reducing emissions, adopting circular economy practices, and ensuring transparent sustainability reporting. 

  • Suppliers can meet regulatory demands and enhance their market positioning by embedding these elements into their core strategies.

• Manufacturers: Need to balance sustainability goals with production costs and efficiency. Navigating this complex landscape requires a strategic and incremental approach. 

  • A "crawl, walk, run" strategy enables manufacturers to build their sustainability efforts gradually. 

  • The first step is to streamline supplier information requests, starting with establishing a baseline for emissions before implementing reduction initiatives. This phased approach allows for a systematic and manageable integration of sustainability measures.

  • Manufacturers should act now by evaluating their sustainability performance, identifying key areas for improvement, and crafting comprehensive plans to meet evolving regulations and stakeholder expectations.

  • By focusing on foundational actions and progressively enhancing capabilities, companies can build a solid framework for long-term sustainability while balancing immediate regulatory pressures and market demands.

• Customers: Growing demand for environmentally friendly products and transparency

• Investors: Increased focus on ESG performance in investment decisions

• Regulators: Continued development of stricter environmental regulation