By Dr Seyed Ebrahimi, Principal Consultant, Sustainability Strategy, Alfa Energy
The recent publication of the UK government’s independent review of net zero, led by Chris Skidmore MP and titled ‘Mission Zero’, was a timely piece that recognised the global role the UK has taken in confronting climate change, and that more is required to reap the financial benefits. The UK was the first country from the G7 to have legally binding commitments to reach net zero by 2050 and consequently took initiative in developing a coherent governance framework to cut down on GHG emissions. This has led to a reduction of approximately 50% CO2e in the past 3 decades. Furthermore, its role as the president of COP26 cannot be underestimated. During this tenancy, around 90% of global GDP was committed to net zero targets. This show of eagerness from the global financial and investment communities further showcases the importance of the net zero transition and its economic reality.
From an operational point of view, it is acknowledged that the transition to net zero is only possible with resilient and flexible supply chains. More needs to be done to counter the threat of regions, or a hand full of countries, on accessing critical materials – dictating how, where and when raw material acquisition, manufacturing/production, and processing occurs. As such, it is important that the government, business sectors, pioneers, and customers appreciate the upstream and downstream supply chain requirements/challenges (scalability, time, and resources) of individual sectors that are crucial to reaching our net zero goals. For instance, several net zero sustainable infrastructures and technologies, from solar panels to batteries, are reliant on the supply of crucial materials (e.g., zinc, silver, lead, lithium). A standard electric vehicle would require over 6 times material extraction compared to a combustion engine. Furthermore, from an upstream life cycle perspective, the raw material acquisition and processing of critical materials necessary for a greener future are very much geopolitical issues. In other words, a few countries, or regions, control a huge portion of these minerals. As such, we would be replacing one geopolitical challenge (i.e., the supply of fossil fuels) with another bottleneck (access to critical minerals). Political disruptions and disputes, the rising price of materials (not many disparate suppliers), and conventional energy costs (required for freight) could have huge implications on the financial bottom line of renewable technologies and the scale of their deployment.
Upon these considerations, the UK should take appropriate steps to ensure access to global, diverse, and flexible supply chains, and effectively promote its growing local circular economy. This was captured in the 2022 ‘Critical Minerals Strategy’ that progresses such an initiative. However, more action from the government is required to ensure all direct and indirect supply chains crucial for delivering net zero are targeted and considered. Failing to have alternatives in the procurement of these critical minerals, could have a significant impact on the country’s ability to manufacture the essential equipment required to preserve the net zero growth and momentum.
An effective method for mitigating the above risks is the development of more resilient and circular supply chains. This could be achieved through improved processing of materials at domestic/local midstream levels, and downstream recovery, reuse, and recycling (end-of-life) capabilities. Such efforts could improve the UK’s export potential and effectively cut down on consumer-level costs. This not only helps preserve the environment (i.e., less scarce material extracted-processed, and the freight/transportation costs associated), but also indirectly helps the local economy by creating more added value and greener jobs. For instance, by 2040 the UK’s battery production sector is forecasted to reach approximately 80,000 new roles. Such an initiative to recycle material across different supply chain actors/nodes could effectively help the UK move towards a circular economy and financially reap more benefits in this process. This would also reduce the dependence on external and geopolitically unstable supply chain networks and improve the confidence of financial bodies and their investment in net zero technologies. To a certain extent, and as mentioned above, the importance of supply chain resilience and diversification is appreciated by the UK’s ‘Critical Minerals Strategy’. Nevertheless, based on institutional theory the government should review sustainability advanced sectors and identify the peer/normalised pressure existing between key actors/competitors. Accordingly, the government could make use of this insight and set a precedent for other sectors that may be behind in their selective procurement processes. For example, in the UK automotive sector, manufacturers are required to meet annual targets for their specific brands. Currently, a recovery of 95% and recycling of 85% by the average weight of each vehicle is required for the end-of-life treatment of vehicles. Other trailing sectors could benefit from such sustainable procurement policies.
Lastly, to effectively appreciate where to intervene, a greater use of technological and infrastructural supply chain assessment could be beneficial to observe short-, mid-, and long-term sustainable strategies. Without a systematic view of the issue at hand, high-tier supply chain risks or lower-end customer risks could be disregarded and derail any efforts to reach net zero by 2050.
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The article can be found here.