United States of America

Supply Chain Considerations and Climate Change

Introduction

Supply chains face serious threats from climate change. Climate-related disruptions have the potential to damage key facilities, disrupt travel and cut off key resources or products integral to global supply chains. Maximizing existing resources and efficiently utilizing and protecting remaining natural resources can help alleviate the most serious impacts of these threats. The principles of a circular economy offer one solution to improve supply chain issues. The circular economy-oriented approach to meeting demand for products and services in the United States and around the globe can be instrumental to the move toward a net zero economy.

Climate and the Supply Chain

As discussed in more detail in the section on Trade Policy, climate change poses numerous risks to supply chains. These risks range from more frequent pandemics, to increased natural disasters (hurricanes, flooding, etc.), to decreases in productivity. Following the Covid-19 pandemic, supply chain disruption became an important and urgent issue for producers, consumers, and governments around the world. As companies sought out more resilient supply chains, some companies incorporated principles of a circular economy to meet consumer demand during the pandemic. For example, in response to manufacturing and supply-chain shortages, the health sector relied on the use of sterilization agents to decontaminate N95 masks and give them a second life.[6] In a world where global supply chains are becoming less reliable, finding ways to reuse or recycle materials is a method by which governments and companies can make their domestic supply chains more resilient and less subject to costly interruptions.

Efforts to curb climate change also is creating demand for new supply chains. For example, the global shift towards electrification has resulted in the transportation industry’s shift to electric vehicles and clean energy transportation. Technological advances in battery storage and electrification require resources which were not historically produced in the volumes needed to meet new demand. Recent investment in electric vehicles (EV) has spurred the development of numerous new supply chains, including the sourcing of critical minerals like lithium, nickel, cobalt, manganese and graphite, which are required to produce EV batteries that power these vehicles.

What is the Circular Economy?

According to the U.S. Environmental Protection Agency (EPA), a “circular economy keeps materials, products, and services in circulation for as long possible.”[1] The main objective of a circular economy is to reduce waste generation. There are typically two major ways to do this. First, proponents of a circular economy might seek to reduce resource use by redesigning the way materials, products, or services are produced to create a more efficient and less wasteful system.[2] Alternatively, efforts to recycle, reuse, or recover waste can also advance the goals of a circular economy.[3] For example, the shoe manufacturer, Thousand Fell, makes it shoes from sustainable material such as coconut husk, sugar cane and recycled plastic bottles.[4]

Redesigning materials and reducing waste can lead to more sustainable consumption and align with the goal of efficiently using natural resources. Sustainable resource consumption can reduce shortages for resources that are in limited supply and high demand. Reduced consumption of resources and increases in efficiency can also lead to dramatically lower greenhouse gas emissions.[5] This was directly recognized by the federal government when it made the circular industrial sector one of its priorities for the Net-Zero Game Changers Initiative.

Legal Considerations for the Circular Economy

Laws advancing the circular economy can take many forms. Some will be explicitly targeted at promoting a circular economy and others simply advance circular economy goals such as reducing waste, advancing consumer protection, or more traditional environmental goals.[7] The EPA and other federal agencies endorse and have applied circular economy-oriented thinking since 2009, with varying degrees of success.[8] In addition to promulgating regulations promoting circular economy principles, the federal government has funded waste management and recycling programs through the Bipartisan Infrastructure Law.[9] Lawyers interested in helping clients protect supply chains and move towards the principles of a circular economy might help their clients obtain funding through this legislation.

An example of legislation that conceptualizes the circular economy is the Save Our Seas 2.0 Act. This Act addresses the increasing quantities of plastic waste in the U.S. and its role in ocean pollution. This legislation is a prime example of how Federal strategies and programs should be implemented to combat ocean plastic pollution because it seeks to fund existing recycling programs while also identifying innovative uses for existing plastic waste and create new end-use markets for recycle plastics to address the threat of plastic pollution.[10]

The American Bar Association provides guidance for lawyers as to how they can be involved in advancing the goals of a circular economy. This includes the advancement of sustainable agriculture[11], using the Toxic Substances Control Act to produce greener chemicals,[12] working on Environmental Social and Governance (ESG) reporting and investing,[13] addressing federal recycling standards[14], helping to secure better energy storage,[15] and accelerating the move to mandatory requirements for plastic pollution.[16]

In advancing the aims of a circular economy, lawyers should also remain aware of common shortcomings often associated with laws and policies in this area. First, there is the definitional challenge.[17] In implementing circular economy-oriented policies it is often difficult to describe the scope of the policy’s objectives. For example, is recycling an input one single time sufficient to call that effort a part of the circular economy or does the product need to enter into an infinite use cycle? What are the objectives of a given program? Does it apply to the global system, or to a country, industry, or firm? How many actors must be involved? A program that is too limited in scope can also pose a problem.

Planning for a truly circular economy requires addressing many elements of the problem including waste, production processes, reuse, recycling, etc.[18] Circular economy goals should also incorporate and prioritize justice considerations if they hope to become a solution to the current environmental justice issues driven by modern resource extraction.[19] The increase in demand for raw materials (i.e., nickel, cobalt, etc.), and the supply chain that has resulted from the increased demand, has also lead to concerns about human rights abuses arising out of raw mineral extraction (as discussed elsewhere in this Atlas).[20] In that regard, the newly introduced Inflation Reduction Act (IRA) makes funding available for EVs contingent on EV battery supply chains being based in North America.[21] Moving the base of these supply chains to the United States could address human rights concerns and address shortfalls in the supply by improving recycling or reuse of materials through a circular economy oriented supply chain.

While a reliance on domestic supply chains will no doubt bring considerable economic benefit to the U.S. economy,[22] the introduction of new supply chains is not without costs. As outlined above, resource extraction, particularly in association with EV batteries, has been directly linked to human rights issues, such as unsafe working conditions, forced evictions, child labor and environmental degradation.[23] In the U.S. this is considered to be an environmental justice issue.[24] Environmental degradation is particularly salient for Native American communities. The majority of nickel, copper, cobalt, and lithium (key materials used for battery production) in the United States is within 35 miles of Native American reservations.[25] Addressing demand for these resources without further degrading the environment, perpetuating human rights abuses, or damaging the communities located near these resources should be a top priority. Advancing the aims of a circular economy is one way to meet these challenges.

Finally, lawyers in this field should remain aware of unintended consequences like creating lucrative secondary markets for waste that actually incentivize greater resource extraction and waste generation.[26]

Conclusion

The move towards a circular economy can be both beneficial for business, justice, and the global climate. Lawyers seeking to solve supply chain problems or put forward new government policies can benefit from incorporating the aims of a circular economy into their work. In doing this, they should remain vigilant against embracing vague polices and partial solutions by prioritizing a holistic approach which reduces waste by extending the life of the resources needed for a green and circular economy.

[1] ‘What is a Circular Economy?‘ (EPA) <https://www.epa.gov/circulareconomy/what-circular-economy> accessed 24 April 2024.

[2] Ibid.

[3] Katrien Steenmans & Feja Lesniewska ‘Limitations of the circular economy concept in law and policy‘ (Front. Sustain, vol. 4, 06 April 2023)

[4] <https://www.thousandfell.com/pages/about-us> accessed 24 April 2024.

[5] Ibid.

[6] Etienne Kechichian & Nidal Mahmoud, ‘The circular economy can support COVID-19 response and build resilience‘ (World Bank Blogs, 18 May 2020) <https://blogs.worldbank.org/en/psd/circular-economy-can-support-covid-19-response-and-build-resilience> accessed 24 April 2024.

[7] Steenmans & Lesniewska (2023).

[8] See e.g., the EPA’s Draft National Strategy to Prevent Plastic Pollution and the Draft National Strategy for Reducing Food Loss and Waste and Recycling Organics; and Erinn G. Ryen & Callie W. Babbitt, ‘The role of U.S. policy in advancing circular economy solutions for wasted food‘ (Journal of Cleaner Production, vol. 369, 01 October 2022).

[9] ‘The Bipartisan Infrastructure Law: Transforming U.S. Recycling and Waste Management‘ (EPA) <https://www.epa.gov/infrastructure/bipartisan-infrastructure-law-transforming-us-recycling-and-waste-management> accessed 24 April 2024.

[10] ‘Save Our Seas 2.0 Act‘ (S. 1982 – 116^th Congress (2019-2020), 2019) <https://www.congress.gov/bill/116th-congress/senate-bill/1982/text> accessed 24 April 2024.

[11] Gregor Allen MacGregor, ‘Returning Circularity to the Soil: National Opportunities for Sustainable Agriculture‘ (American Bar Association, 30 August 2022)

<https://www.americanbar.org/groups/environment_energy_resources/publications/natural_resources_environment/2022-23/summer/returning-circularity-the-soil-national-opportunities-sustainable-agriculture/> accessed 24 April 2024.

[12] Lynn L. Bergeson & Richard Engler, ‘Optimizing the Toxic Substances Control Act to Achieve Greener Chemicals‘ (American Bar Association, 30 August 2022)

<https://www.americanbar.org/groups/environment_energy_resources/publications/natural_resources_environment/2022-23/summer/optimizing-toxic-substances-control-act-achieve-greener-chemicals/> accessed 24 April 2024.

[13] Craig D Galli et al, ‘ESG Reporting and Investing: The “Nudge” Needed to Stumble Toward a Circular Economy‘ (American Bar Association, 30 August 2022)

<https://www.americanbar.org/groups/environment_energy_resources/publications/natural_resources_environment/2022-23/summer/esg-reporting-and-investing-nudge-needed-stumble-toward-circular-economy/> accessed 24 April 2024.

[14] Laura M Berkey-Ames, ‘The Case for Federal Recycling Standards: Risk, Rewards, and Our Green Future‘ (American Bar Association, 30 August 2022)

<https://www.americanbar.org/groups/environment_energy_resources/publications/natural_resources_environment/2022-23/summer/the-case-federal-recycling-standards-risk-rewards-and-our-green-future/> accessed 24 April 2024.

[15] John Habib, ‘A Better Network: Storage as the Keystone of Renewable Energy’s Success‘ (American Bar Association, 30 August 2022)

<https://www.americanbar.org/groups/environment_energy_resources/publications/natural_resources_environment/2022-23/summer/a-better-network-storage-the-keystone-renewable-energys-success/> accessed 24 April 2024.

[16] Paul E Hagan et al, ‘Accelerating Circularity for Plastics‘ (American Bar Association, 30 August 2022) <https://www.americanbar.org/groups/environment_energy_resources/publications/natural_resources_environment/2022-23/summer/accelerating-circularity-plastics/> accessed 24 April 2024.

[17] Steenmans & Lesniewska (2023).

[18] Ibid.

[19] Ibid.

[20] Ibid.

[21] Alessandra R. Carreon, ‘The EV Battery Supply Chain Explained‘ (Rocky Mountain Institute, 05 May 2023) <https://rmi.org/the-ev-battery-supply-chain-explained/> accessed 24 April 2024.

[22] To date, nearly $40 billion has been invested across the EV battery supply chain over the past 5 years. Further, the increased demand for renewables has led to a significant demand for access to raw materials. See: Samuel Block, ‘Mining Energy – Transition Metals: National Aims, Local Conflicts‘ (Morgan Stanley Capital International, 03 June 2021) <https://www.msci.com/www/blog-posts/mining-energy-transition-metals/02531033947> accessed 24 April 2024.

[23] Katie Surma, ‘Corruption and Rights Abuses Are Flourishing in Lithium Mining Across Africa, a New Report Finds‘ (Inside Climate News, 15 November 2023) <https://insideclimatenews.org/news/15112023/lithium-mining-africa-human-rights-violations-corruption/> accessed 24 April 2024.

[24] ‘Environmental Justice‘ (The White House) <https://www.whitehouse.gov/environmentaljustice/> accessed 24 April 2024.

[25] Block, (2021).

[26] Ibid.