U.S. manufacturing: The greener choice
Offshoring has negatively affected the environment
U.S. consumers are increasingly concerned about how their buying habits affect the environment. In fact, a recent Nielsen study found that 48 percent of U.S. consumers would change their buying habits to reduce environmental impacts.
Digging deeper, millennials are more likely than baby boomers to change their buying habits (75 percent vs. 34 percent). They’re also willing to pay more for environmentally friendly ingredients (90 percent vs. 61 percent), organic ingredients (86 percent vs. 59 percent), or socially conscious products (80 percent vs. 48 percent).
These shoppers should consider buying U.S.-made products, since cheap imports have an expensive environmental price tag. Shifting production from offshore to the much less polluting U.S. would help the global environment. Local production for local consumption is clearly the greener choice.
Offshoring’s impact on the world environment has been significant through higher carbon emissions and other pollution from developing countries and from long-distance transport. Companies actually increase pollution by offshoring production to developing, less regulated countries and then importing those products back into the U.S.
As noted in a report from CDP Worldwide, “Supply chains are responsible for up to four times the greenhouse gas emissions of a company’s direct operations, and yet half of major companies’ key suppliers don’t provide requested climate data to their corporate customers.” For example, according to the former head of the Environmental Protection Agency, about 77 percent of Apple’s total carbon emissions come from the company’s far-flung global supply chain, which mostly comprises manufacturing sites that Apple neither owns nor directly operates. Similarly, a study published by the National Academy of Sciences found that “per unit of GDP in 2006, China emitted six to 33 times as much air pollutants as the United States.” Clearly, production in the U.S. is less polluting.
Most manufacturing CEOs are concerned about good corporate citizenship. According to a survey of CEOs by consulting firm PricewaterhouseCoopers, 87 percent say it’s important for their companies to reduce their environmental footprint.
Ironically, however, shifting production offshore, especially to China, has negatively affected the environment. A recent study entitled “Targeted Opportunities to Address the Climate-Trade Dilemma in China” by Zhu Liu, Ph.D., of Harvard University is one of many studies that reach this conclusion. By shifting production from China to the consuming market, the U.S., companies can reduce the environmental impact of electricity generation, industrial production and goods transport. The quantity and types of packaging needed to transport those goods will also be significantly reduced. And, less environmentally responsible countries will have added incentive to achieve higher environmental standards sooner.
Because decisions on where to source products are based on the ex works price, companies believe they have no choice but to offshore. However, when companies shift to the total cost of ownership (TCO) price, they will make better decisions for the environment, society and corporate performance. TCO accounts for all costs associated with the product. By using TCO analysis, manufacturers can factor in sustainability objectives and minimize environmental impacts. TCO will enable companies to identify products for which reshoring will provide major environmental benefits while maximizing shareholder returns.
Shifting to a local-for-local business model will reduce CO2 levels and achieve higher environmental standards sooner. Scientists are only now beginning to calculate the negative effects that offshoring is having on the environment. Many companies that offshored to take advantage of lower wages fail to recognize the microeconomic, macroeconomic and environmental costs that TCO analysis considers.
If you want to reduce your environmental footprint, we suggest sourcing or manufacturing locally for faster delivery, higher quality and greater sustainability.