Industrial Insights | December Reflections

An image of Dan Goodson, Head of Practice - Industrial

European Green Transition Progress

Efforts in Europe to decarbonise the energy supply will accelerate, leading to the launch of new renewable energy projects. Reforms aimed at expediting the permitting process for construction will advance, contributing to the decline in coal consumption as the UK and France phase out coal-fired power plants. Despite progress, carbon emissions reduction may fall short of the necessary levels to achieve net-zero goals. Ensuring competitive energy costs remains a priority, but European gas prices, although declining, will likely remain higher than pre-pandemic levels, affecting the competitiveness of energy-intensive industries, especially in Germany. As the energy crisis diminishes, country-specific energy price support measures will phase out, and the EU will focus on reforming its electricity market, encouraging renewable energy installations and stable power purchase agreements.

Carbon Border Adjustment Mechanism (CBAM)

The CBAM, aimed at imposing tariffs on high-emission products entering the EU, will conclude its first reporting period, aiming to discourage high-emission industries from relocating outside Europe to evade climate regulations. However, it faces criticism as a protectionist tool by some trading partners. Levying duties are set for 2026.

De-risking from China

Efforts to reduce reliance on China for critical raw materials necessary for the green transition will be substantial. An anti-subsidy probe into Chinese electric vehicles (EVs) by the European Commission may result in tariffs on Chinese imports, potentially leading to retaliatory trade measures. Despite these measures, trade and investment ties with China will remain significant.

Electric Vehicle (EV) Development

Investment in EV production and purchase support will continue, with major gigafactories for EV batteries opening in Norway, Italy, and France. Subsidies under the Green Deal Industrial Plan will encourage more firms to invest in this sector. Some EU countries might impose local content requirements for EV subsidies to support domestic producers. Legislation mandating fast-charging stations along major EU transport corridors by 2025 will boost EV infrastructure, although only a few countries have high enough EV sales to consider phasing out petrol and diesel car sales by 2035 feasible.

How will this affect the Procurement?

The transition toward a green economy presents a significant opportunity for the procurement discipline. Procurement practices will pivot toward sustainability, actively seeking suppliers aligned with eco-friendly principles, offering renewable energy solutions, and promoting recycled materials.

Procurement professionals will take the lead in directly sourcing renewable energy and negotiating agreements with providers to meet sustainability targets. They will prioritise compliance with evolving environmental regulations, including mechanisms like the carbon border adjustment, while effectively managing associated risks.

The rise of green technologies, such as electric vehicles and renewable energy systems, will drive procurement strategies. This involves actively sourcing EV fleets, charging infrastructure, and sustainable manufacturing equipment.

Transparency within supply chains will be a key focus. Procurement specialists will ensure suppliers maintain transparent and traceable processes regarding the environmental impact of their products and services and collaboration with suppliers will deepen to drive sustainability initiatives and foster enduring strategic partnerships.

We have already seen the embracing of the acquisition of new skill sets in renewable energy markets, environmental regulations, and supplier impact assessments.

While sustainability takes precedence, cost-effectiveness and efficiency will continue to be crucial. Procurement should aim to harmonise sustainability goals with cost-efficient practices amidst potential fluctuations in energy prices and technology adoption.

What have we seen?

The Procurement Heads Industrial team has seen a steep increase in demand for ESG-skilled procurement professionals over the past 6 months.
This has been particularly prevalent in the construction and infrastructure markets, a market that is really leading the way in terms of ESG focus and visibility.

From a candidate’s perspective, many are looking for roles where they can really make a difference and have a social impact. This is a strong indicator that procurement will be the leader of change within ESG and drive the step change to a cleaner and more responsible future.

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