Offshoring & The Environment
As MSCI’s Canadian Council noted in a letter sent recently to Prime Minister Justin Trudeau, the industrial metals industry is committed to sustainability and to reducing greenhouse gas emissions. In fact, according to a recent study, energy demand to produce new (primary) aluminum is down by more than 25 percent since 1995. Another report found the North American steel industry has reduced its energy intensity per ton of production by 35 percent since 1990 and its greenhouse gas emissions intensity by 37 percent over the same time period.
In a recent column that appeared in Assembly magazine, Harry Moser from The Reshoring Initiative agreed manufacturing CEOs are committed to “greening” their operations. Moser noted that, according to a PricewaterhouseCoopers survey of CEOs, 87 percent of industry executives believe it is important for their companies to reduce their environmental footprint.
This belief tracks with consumer demand for more environmentally-friendly operations. Moser points to a recent Nielsen study that found almost half of U.S. consumers would change their buying habits in order to reduce their impact on the environment. Three-quarters of consumers in the millennial generation said they would change their buying behavior if it meant their dollars went to companies committed to reducing their carbon footprint.
Moser argued that one of the best ways to reduce greenhouse gas emissions is to keep manufacturing jobs in North America. Moser said, “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.”
Won’t moving operations away from countries like China and India raise costs, however? Moser says, “[W]hen 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.” Moser concludes, “TCO will enable companies to identify products for which reshoring will provide major environmental benefits while maximizing shareholder returns.”
MSCI represents more than 285 HQ companies with more than 2,300 locations in North America and around the globe. While Moser’s article provides important food for thought about environmental cost assessments, there are many factors that go into executives’ decisions about where to locate operations, including the cost of labor and production, and levels of taxation and regulation. As the premier trade organization representing the industrial metals supply chain in North America, MSCI will continue to support policies that protect our environment without imposing reactionary and impractical regulations and taxes on our members. We also will demand parity between nations across the globe and the United States and Canada, which is why one of our core principles regarding environmental policy is that international climate change agreement mandates should include countries like China and India.
Click here to read Moser’s full column. MSCI is grateful to Assembly Magazine for permission to link to Moser’s article.