Industry Talk

Regular Industry Development Updates, Opinions and Talking Points relating to Manufacturing, the Supply Chain and Logistics.

The Impact of ESPR for U.S. Supply Chain C-Suite Executives

Europe has often been a trendsetter across myriad sectors. EU nations such as Belgium, France, Spain and the UK have been among the first to ban mobile phone use by students during school hours to improve academic focus and mental health. Higher EU safety standards and strict laws have resulted in some of the lowest levels of food contamination in the world. And a recent scientific study credits a number of European countries for reaching ambitious 2030 targets for sustainable energy years ahead of schedule.

In the larger push toward sustainability and ecological sovereignty, Europe aims to drive global supply chain transformation, creating new opportunities and upholding higher standards across sectors from apparel to technology. Within the framework of the European Green Deal, the EU’s ambitious new Eco-Design for Sustainable Products Regulation (ESPR) establishes key objectives for environmental design and labeling, requiring all companies that want to do business in the EU to adopt its previously implemented Product Environmental Footprint (PEF) method in order to maintain access to the massive European market. The PEF method, which assesses a range of systemic impacts beyond carbon footprint, requires far greater transparency and the end of corporate greenwashing, compelling U.S. and other firms towards more sustainable practices.


Benefits and Challenges of a New Era

Although the European Parliament’s new regulations were approved by EU member states only this past January, some U.S. institutions are already helping accelerate this necessary transition.

New York University’s Center for Sustainable Business has taken the traditional business concept of return on investment (ROI) and evolved it into return on sustainability investment (ROSI), a methodology “to bridge the gap between sustainability strategies and financial performance, helping to build a better business case for both current and planned sustainability initiatives.” NYU identified nine key performance drivers that may be boosted by sustainability strategies: innovation, operational efficiency, sales and marketing, customer loyalty, risk management, employee relations, supplier relations, media coverage, and stakeholder engagement.

The challenge in embracing this bold new paradigm is being seen in its piecemeal application. According to BCG (Boston Consulting Group), companies are setting sustainability goals, but many find it difficult to realize gains in terms of their overall impact. “Organizations often try to solve the sustainability challenge separately, instead of embedding it into their business model,” writes BCG, while companies which effectively build for the future are taking “a more holistic approach to sustainability” yielding both financial and nonfinancial benefits.


A Path Toward Sustainable Practices

The tech industry’s impact on the environment is clearly seen: from the voracious demand for the manufacturing of new and next-gen products to the disposal of obsolete electronic devices. Across the entire supply chain, U.S. companies can take a long view on the EU’s environmental labeling and design regulations – as well as the road toward future viability – by navigating a more responsible and profitable path:

1. Adapting to Regulatory Changes: U.S. technology firms cannot operate in a vacuum and must learn to understand the complexities of ESPR, incorporating the PEF method into product development, design, manufacturing and delivery. This will require significant adjustments in how companies assess product lifecycle impacts, including sourcing, production and disposal, ensuring compliance with stringent EU eco-standards. Among the first changes must be broader corporate responsibility beyond carbon emissions, or more accurately greenhouse gas emissions, encompassing methane, nitrous oxide and other gasses. These represent a fraction of human-caused effects on the planet, which also include fine particle emissions, resource depletion, and ecosystem degradation. This more comprehensive eco-assessment resonates with a big-picture corporate strategy.

 2. Gaining a Competitive Advantage: While compliance with the EU’s ESPR may pose initial challenges, it also offers U.S. firms the opportunity to differentiate themselves and gain, or retain, a valuable toehold in the European market. Some U.S. companies may simply deem it too hard or onerous to comply with these regulations and choose to focus their efforts on the domestic American market or other parts of the world, suffering the loss of a 27-country coalition that accounts for about 14% of the world’s trade in goods and is home to nearly 450 million people. Instead, by rising to this challenge through careful measurement and adjustment, U.S. companies can strengthen their overall capabilities, gain an advantage over lesser competitors, and elevate their public image.

 3. Investing in Innovation: A shift towards the PEF method encourages U.S. technology companies to invest in sustainable innovation, exploring new materials, technologies and processes that reduce environmental impact. This push towards eco-design not only aligns with modern regulatory requirements, but also drives the industry towards more sustainable practices, contributing to the shared global effort against environmental defilement and climate change. By reducing direct (Scope 1) and indirect (Scope 2) emissions, as well as supply chain (Scope 3) emissions, companies not only stand to compete in the valuable European market, but according to BCG, to mitigate business risks from climate-related disruptions, increased regulation and other factors, “becoming more resilient even as they reduce costs.”

The benefits of embracing more sustainable practices are amplified by a joint study from McKinsey and NielsenIQ, recognizing enhanced sales growth for products perceived to be environmentally and socially responsible. While Europe has taken the critical step of boosting planetary stability through scientific rigor and governmental action, American companies have the opportunity to leverage the power of their collective strength to deploy this new systemic approach on a large scale, helping lead the ecological transition of humanity.


Author Bio: Christophe Girardier is an expert in environmental issues and a seasoned entrepreneur in consulting strategy across retail, industry and services. He serves as CEO and co-founder of Glimpact, the first digital platform to fully evaluate the environmental impact of organizations and products based on the OEF/PEF standards adopted by the European Union as part of the European Green Deal.