MHI Solutions Improving Supply Chain Performance
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The supply chain community should expect 2025 to be a year of greater focus on sustainability. While a number of U.S. government policies are likely to be shaped by the new administration, other sustainability stakeholders have been applying consistent pressure across the economy and supply chains.
The general public, along with institutional and activist investors, have been important in driving sustainability initiatives. Plus, credit rating agencies and insurers have been applying financial pressures around emissions and sustainability metrics, as well as climate risk disclosures. This confluence of interested parties is likely to apply pressure on companies across supply chains, including material handling businesses, to report on emissions and sustainability factors as well as make progress on them.
The year ahead is likely to see a number of big pushes, with key themes likely to include a stronger emphasis on renewable energy sources; electric vehicle (EV) and zero emission vehicle (ZEV) mandates; EV alternatives; battery materials mining, production and recycling; increased demands from institutional and activist investors; and stricter reporting requirements.
U.S. regulatory and financial emissions reporting rules have been up in the air for some time, and that remains a question mark. Nevertheless, there are many pressures driving sustainability and the Organization for Economic Cooperation and Development (OECD) emissions progress that are only likely to increase for operators. For example, pressures around asset insurability and climate risk are poised to grow following the extreme weather events that caused massive economic and operational damage in 2024.
Renewable Energy Sources
Power has become a really big deal, not just in the energy transition, but because of our greater reliance on technology and the AI revolution. The demand for power has been constantly growing, but the increased use of and potential for AI technologies are likely to drive power demand up significantly in the years ahead. This power demand, coupled with OECD emissions‑reduction priorities, is likely to engender further expansion of renewable power generation. Solar power closely matches peak power load times, which is helpful because the population consumes the most power during the day when people are awake. But it’s a different story for wind power generation, which often generates more power at night, which is during off‑peak demand when most people are asleep. To maximize the benefits of off‑peak power generation, the number of large‑scale battery storage facilities is likely to expand so that off‑peak wind power can be stored and then dispatched during peak periods of demand.
We also expect companies to be more proactive with their power generation in the year ahead. Due to the stress and demand in some power markets, companies operating in power markets with increasingly stressed grids build their own power generation behind the meter and off the grid. In other words, faced with the risks of increased costs, greater uncertainty and a higher probability of power interruption, companies may be motivated to build their own off‑grid power generation assets. While building off‑grid combined cycle gas turbines is not feasible for most companies, installing solar panels or wind turbines could be a highly effective means of securing power while also reducing a company’s emissions footprint.
Both off‑grid corporate power installations and large‑scale battery use will help reduce or abate emissions, allowing companies and the country to demonstrate more effective stewardship of energy and environmental resources while also having positive economic and business impacts.
Electric Vehicles and Zero‑Emission Vehicles
Social, regulatory and corporate support for electric vehicles (EV) and zero‑emission vehicles (ZEV) are likely to increase. While there has been a major focus on electric vehicles, battery supplies are relatively scarce. Mining, production and recycling of these key materials are all poised to rise significantly in the year ahead. Although electric vehicles are unlikely to be a sufficient solution for emissions reduction across the entire economy, they are likely to be a critical part of the solution.
Various government policies are likely to incentivize the use of electric vehicles across economies, but there are some sectors of the economy where EVs make more sense. The biggest financial and environmental ROI for electric vehicles is likely to be seen in the use of batteries in light‑to‑medium duty short‑haul commercial and corporate vehicles with high utilization rates that operate near a central location or depot to which they often return. That may sound like a somewhat limiting list, but a lot of vehicles fall under that description, including corporate cars, vans, pickup trucks, on‑site industrial equipment, buses and even tugboats.
Consider the economic and emissions logic for each of the attributes. An economical use of batteries in vehicles with high utilization rates is critical because battery materials are scarce. The practicality of batteries in light‑to‑medium‑duty vehicles is logical because batteries are heavy. After all, the effective use of heavy‑duty vehicles (like big rigs) would be greatly impeded by frequent charges of large, heavy batteries. Furthermore, these issues would be further compounded in heavy‑duty long‑haul situations. Finally, the focus on prioritizing the use of batteries in vehicles that operate near a central location or depot to which they often return allows for regular charging or rotation of vehicles that are charged with ones that need to be charged.
The big idea is that more EVs are coming. However, they are unlikely to be the only part of the solution, and other ZEVs are going to attract more investment and attention over time. For example, there is tremendous hope for hydrogen fuel cell vehicles and other technologies, but the infrastructure is lacking, and true green hydrogen is not cost‑competitive with hydrocarbon fuels.
Until green hydrogen becomes more economical, ongoing EV adoption will necessitate significant growth in EV charging infrastructure, especially for passenger vehicles. There are likely to be significant ongoing investments in public and private charging stations, which will make personal EV ownership and corporate EV use more convenient and appealing.