For decades, U.S. companies outsourced manufacturing to low-cost countries, primarily Asian, and helped knit our global economy. But the recent reversal of this trend has been equally as dramatic.  Beginning with the substantial tariffs on Chinese imports under the Trump administration and compounded by the effects of the COVID-19 Pandemic, more manufacturing and material-handling companies have relocated assets back to the U.S. and Mexico, resulting in an exodus from Asia.  

U.S. imports from China are down 24 percent from the same period one year ago, according to the Census Bureau. Even more notably, in December 2022, Mexico overtook China as the largest exporter of goods to the U.S. This shift has led to a reduction in costs for supply chains, a decrease in the time it takes for goods to reach consumers, and it has also created investment into new markets where plants and distribution centers have been relocated.  

With many companies relocating assets into the U.S., this shift marks a stark reversal in the maturation of global supply chain ecosystems. These U.S. companies are also realizing greater profitability and flexibility by aligning their new operations with statutory sustainability incentives. 

Carbon Reporting Imperatives are Not Going Away 

Mitigating environmentally damaging business practices is top of mind for business leaders and local economies alike. The Paris Agreement of 2015 set the stage for ambitious carbon emission reduction across 196 nations, including the U.S. State governments like California, have reiterated their commitment to the agreement by enacting similar reporting and carbon reduction policies at the state level. In fact, California is requiring all businesses with over $500 million in annual revenue to disclose their carbon emissions beginning in the calendar year 2025. As a result, many large companies are requiring carbon emissions reporting from their upstream and downstream manufacturing and distribution partners to complete their own statutory carbon reporting obligations. The “web” of carbon reporting mandates continues to expand. 

Realizing Profitability While Incorporating Sustainability Goals 

Fortunately, corporate renewable energy and sustainability efforts are incentivized by local, state, and federal tax incentives that help offset the cost of adoption. A typical South Carolina company reducing its carbon emissions through a renewable energy infrastructure investment and taking advantage of various tax incentives and mechanisms can recover a significant amount of their total investment costs within a short span. Notably, the tax credits offer direct pay and transferability, which allows unprofitable companies to monetize their tax credits, as well. To create the most synergy for your firm, we recommend combining your carbon accounting work with an accounting firm that also specializes in obtaining these tax credits and incentives. 

With over $2 trillion in tax incentives available to supply chain professionals through 2030 as a reward for sustainability improvements, now is the time to take advantage of the opportunity to both optimize the location and costs of your supply chain assets while also reducing your carbon footprint and collect tax credits to fund these investments along the way.  

Jason Hodel is industrial manufacturing & consumer goods leader at Cherry Bekaert.