The economic and environmental case for greenshoring
Bringing our supply chain closer to home can provide an economic and environmental boost for the UK.
The UK is the ninth biggest manufacturing economy in the world, accounting for £183bn of products and employing more than 2.5m people. The High Value Manufacturing Catapult plays a major role in that economy through our seven research centres, spanning the country from the 227-year-old University of Strathclyde to Bristol’s historic coal mining suburb of Emersons Green.
From our scientists’ work helping thousands of companies - from start-ups to long-established giants of manufacturing - commercialise their best ideas, we know that the UK has the potential for a new industrial revolution. Crucial to moving us from ninth to top of the table will be what is known as reshoring and its offshoot, greenshoring.
Reshoring is the process of bringing back the production and manufacturing of goods to the company’s original country. The reason this work was sent abroad in the 1980s and 90s was to reduce costs through cheaper labour, but increased wages in countries like China mean the financial incentive is dwindling. Indeed, EY has estimated that reshoring could be worth £15.3bn to the UK economy, equating to more than 300,000 jobs.
Greenshoring provides an additional motivation to bring production back to these isles, namely to mitigate the wider environmental costs of locating facilities abroad. Obvious industries for greenshoring include plastic and rubber products, computer and electronic goods, transportation equipment, clothing and textiles, and medical kit.
I have written before about one of the obstacles to greenshoring, which is the lack of a common carbon accounting standards to accurately measure any reductions in emissions. This is why we want to help the government oversee the implementation of a set of standards that every company can use and understand.
But it is also important to understand the scale of the opportunity.
Greenshoring shifts the focus from lowering costs to sustainable manufacturing, helping us build a green manufacturing sector in the drive to net zero greenhouse gases. Yet, the two motives – financial and sustainable - go hand-in-hand. Transportation, in particular highly polluting sea or air freight, is less frequent, reducing costs and emissions. The Skidmore Review found that global exports for low carbon goods and services could be worth £1.8tn a year by 2030, around 12 times their value today. The UK should aim for a healthy chunk of that market, but cannot achieve that by cutting environmental corners.
According to McKinsey, around 80% of emissions are derived from the supply chain. Shortening the supply chains means it is easier for companies to spot and then mitigate environmental risks.
Investors have rarely been so savvy about their companies’ sustainability credentials, they know that polluters will see their reputations damaged and sales drop. As more companies, therefore, make commitments to reducing their carbon footprints, greenshoring will become increasingly important.
Whole regions that can show they have a low carbon supply base will enjoy competitive advantages and thrive, helping to rebalance the economy. EY found that the North West of England and West Midlands would see their economies boosted by £2.4bn and £1.8bn a year respectively from reshoring.
If our regions thrive, then we develop an expertise that will be the envy of the world. Rather than offshoring our manufacturing, we will be advising other countries about how to accelerate their own attempts to meet net zero targets. Exporting knowledge does not mean one country benefits at the expense of another. Rather, it will enhance the UK’s international standing and solidify our position as a global leader, pulling other economies up to our new standards.
Greenshoring puts sustainability at the heart of any choice about manufacturing location. Handled carefully, that will make sure current and future manufacturers view the UK as a – if not, the – sustainable base for their operations. We will then all benefit economically and environmentally.
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