Sustainable Supply Chains for the Energy Transition

We need to build resilient and sustainable value chains for the energy transition and critical raw materials (CRMs) to ensure the success of the transition of the European economy. Transparency along the value chain is essential to limit disruptions due to environmental concerns, human rights issues and other challenges. At the same time, we need to address competitiveness concerns of companies in these sectors. The clean energy transition and successful decarbonisation of our economy depend on it in an era of reshoring, protectionist trade measures by EU trading partners and significant geopolitical tensions.

As the second largest economy worldwide, the European Union is in the best position to address these issues, as the policy framework for doing it, in principle, is already in place. Now we need to take advantage of existing policies and enable companies to make the energy transition work. A successful implementation in the EU and with its global partners can lead the way in proving once and for all that ambitious climate action and a strong and resilient economy are two sides of the same coin, anywhere in the world.

To achieve this, it will be essential to:

• Enhance our understanding and our ability to manage risks in the EU’s critical supply chains (for the energy transition) by boosting transparency and sustainability due diligence;
• Address industry needs through a progressive industry perspective on making the climate transition and policy implementation work in practice, sector by sector;
• Support policy implementation and adjustments of the Carbon Border Adjustment Mechanism (CBAM), The Critical Raw Materials Act, and the proposed “Omnibus Simplification Package”;
• Reduce specific risks of rerouting trade flows in relation to the EU’s (and other emerging) Carbon Border Adjustment Mechanisms or EU Deforestation Regulation (EUDR);
• Support alignment and regulatory cooperation with key trading partner countries of the EU in the CBAM-sectors (Cement, Electricity, Fertilisers, Iron&Steel, Aluminium, Hydrogen);
• Fill capacity, information, data and communication gaps within and outside of the EU.

If we want to show that cooperation, trade and the sustainability transformation are possible and can provide key buildings blocks of future-proof competitiveness, we need two things: we need to take legitimate competitiveness concerns seriously and we will require a redirection of thinking, toward understanding how supply chain sustainability builds resilience and competitiveness.; and how trade and international co-operation support the transformation of our economies.  More policy coherence, simplification and support for policy implementation, and an international level playing field will be essential, but in the current political climate, showing how frontrunners make existing policies work in practice and turn them into a competitive advantage might be just as important.