Executive Briefings

Global Recession, Obama's Policies to Affect Supply Chains

The election of Barack Obama in the United States, the repercussions of the global "financial bailout" and a potential increase in environmental regulations will affect supply chain operations at multiple levels. The ability to quickly monitor and absorb these changes in supply chain structures will be the main agenda for 2009.

There will be dramatic change in 2009: a new party is in power in the U.S., significant government intervention will be rolled out to solve the credit crisis, and energy regulations are on the rise. These new dynamics will affect supply chains in several ways:

• Energy. There are strong indications that the U.S. will jump-start new investments on clean energy, including ethanol-based fuels. This represents both business and operational efficiency opportunities. Supply chain operations will also have access to incentives to invest in new technologies for both green energy generation and energy efficiency initiatives (including buildings and transportation).

• Emissions Regulation. The European Union Emissions Trading Scheme (EU-ETS) shows no sign of slowing down for next year. Transportation (including aviation) will be added to the EU-ETS starting in 2012. In the U.S., ongoing state level and regional emission trading schemes will most likely become federal law given that there are several drafts already under revision in Congress. In addition, following the success of the EPA SmartWay program for emission reductions on road transportation, similar government-private partnerships are being designed for other supply chain components in the U.S. It is also serving as the blueprint for programs under design in Europe, China and Latin America.

• Trade Barriers and Incentives. There have been mixed signals on how soon (if any) major changes to current trade agreements (including NAFTA) will be made by the U.S. Any major changes to existing agreements may have broader repercussions in tax and investment incentives overseas for global corporations as foreign governments react to changes in U.S. policy.

• GRC. Besides reviving the flow of credit critical for supply chain operations, the ultimate repercussions of the financial bailout may ripple into corporate governance, risk management and compliance practices.

• Increased influence from China. As credit has collapsed, a window of opportunity has opened for incumbent economic powers. Although China's economic growth is tied to that of the U.S., there is a chance that the country will revisit its relationships with other countries to diversify its risk. This implies tougher competition from Chinese firms throughout the globe.

The Outlook

This year will be a transition year on the regulatory side. All eyes are on how governments adjust monetary, environmental and trade policy to recover from a global recession and a new government in Washington. There are strong indications that the efforts will be coordinated. However, as details emerge business leaders need to keep eyes open to make the right adjustments.

There will be dramatic change in 2009: a new party is in power in the U.S., significant government intervention will be rolled out to solve the credit crisis, and energy regulations are on the rise. These new dynamics will affect supply chains in several ways:

• Energy. There are strong indications that the U.S. will jump-start new investments on clean energy, including ethanol-based fuels. This represents both business and operational efficiency opportunities. Supply chain operations will also have access to incentives to invest in new technologies for both green energy generation and energy efficiency initiatives (including buildings and transportation).

• Emissions Regulation. The European Union Emissions Trading Scheme (EU-ETS) shows no sign of slowing down for next year. Transportation (including aviation) will be added to the EU-ETS starting in 2012. In the U.S., ongoing state level and regional emission trading schemes will most likely become federal law given that there are several drafts already under revision in Congress. In addition, following the success of the EPA SmartWay program for emission reductions on road transportation, similar government-private partnerships are being designed for other supply chain components in the U.S. It is also serving as the blueprint for programs under design in Europe, China and Latin America.

• Trade Barriers and Incentives. There have been mixed signals on how soon (if any) major changes to current trade agreements (including NAFTA) will be made by the U.S. Any major changes to existing agreements may have broader repercussions in tax and investment incentives overseas for global corporations as foreign governments react to changes in U.S. policy.

• GRC. Besides reviving the flow of credit critical for supply chain operations, the ultimate repercussions of the financial bailout may ripple into corporate governance, risk management and compliance practices.

• Increased influence from China. As credit has collapsed, a window of opportunity has opened for incumbent economic powers. Although China's economic growth is tied to that of the U.S., there is a chance that the country will revisit its relationships with other countries to diversify its risk. This implies tougher competition from Chinese firms throughout the globe.

The Outlook

This year will be a transition year on the regulatory side. All eyes are on how governments adjust monetary, environmental and trade policy to recover from a global recession and a new government in Washington. There are strong indications that the efforts will be coordinated. However, as details emerge business leaders need to keep eyes open to make the right adjustments.