Global Supply Chains Forced to Change Rapidly

Three quarters of businesses worldwide are overhauling their supply chains by working with more rather than fewer suppliers to mitigate risks in an increasingly fragmented global environment.

Research unveiled by Economist Impact and DP World at the World Economic Forum highlights this strategic pivot, driven by geopolitical uncertainty which is likely to grow with the ‘America first’ policies of the new administration in the United States.

The fifth annual Trade in Transition study surveyed over 3,500 supply chain executives across the world. The findings reveal firms are being forced to adapt at speed to rising protectionism and shifting geopolitical alliances.

Countries perceived to be non-aligned, such as Vietnam, Mexico, India, the UAE or Brazil, are emerging as vital trade hubs. A significant 71% of executives agree these countries mitigate trade risks, while 69% view them as critical for addressing gaps created by global conflicts.

Around 40% of firms are increasing their US-based sourcing and a further 32% are adopting dual supply chains to mitigate against geopolitical risks. Friendshoring — relocating supply chains to politically aligned countries — complements these strategies, with about 34% of businesses pursuing this approach to navigate tensions between global powers.

Economic challenges remain a priority, with 33% of executives citing prolonged inflation and high interest rates as chief concerns. By leveraging neutral hubs, diversifying suppliers and adopting advanced technologies like AI, businesses are better positioned to navigate this era of economic and geopolitical complexity.

Speaking at the launch of the report at the World Economic Forum in Davos today, DP World Group Chairman and CEO Sultan Ahmed bin Sulayem, said:

“Global trade today is more complex than ever, demanding agility, resilience, and innovation. At DP World, we empower businesses with the global infrastructure, local expertise, and advanced technology needed to thrive in this evolving landscape across fragmented markets. The latest research by Economist Impact provides invaluable insights into the future of trade in this new era. With it, we aim to foster dialogue, innovation, and resilience within the global supply chain ecosystem, empowering businesses to adapt and thrive in an increasingly dynamic world.”

John Ferguson, Global Lead, New Globalisation, Economist Impact, added:

“In 2025 and the foreseeable future, global trade will be shaped by three forces: shifting geopolitics, climate change, and a new wave of AI and automation. Yet, businesses are not retreating from international trade but are stepping up to the challenge. Firms that stay agile and cost-efficient will have the edge. Firms that also combine risk management with AI experimentation and openness will be best placed to win in this new chapter of globalisation.”

Click here to view the full report.

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Emissions Data Sharing in Logistics Value Chain

Today at the World Economic Forum Annual Meeting in Davos, Smart Freight Centre and the World Business Council for Sustainable Development (WBCSD) released a new guidance, titled “End-to-End GHG Reporting of Logistics Operations”, to advance the quantification and sharing of logistics emissions and support the logistics industry on their journey to net-zero emissions. The two organizations are united in a mission to increase transparency on logistics emissions and work towards a net-zero logistics sector.

The objective of this guidance is to enable companies to better understand and track their logistics emissions on a granular operational level and seeks to quantify the footprint of end-to-end logistics emissions, from supplier to final customer, with focus on primary data calculations. Special focus was dedicated to multimodal logistics solutions, including ocean, road, train and air transportation. It sets out the data requirements, introducing a data quality index and the associated assurance requirements to support businesses in the implementation of their decarbonization strategies.

This guidance builds upon and complements two existing frameworks. The first being Smart Freight Centre’s Global Logistics Emissions Council (GLEC) Framework 2.0 – the globally recognized methodology for accounting and reporting of logistics emissions. The second being the WBCSD’s Pathfinder Framework – the guidance for accounting and exchange of product life cycle emissions.

Supported by the World Economic Forum, and McKinsey Sustainability as its knowledge partner, in partnership with over 30 leading global organizations, this consortium is taking the next steps in achieving net-zero logistics by launching an actionable and implementable guidance. Different use cases and associated business challenges in quantifying logistics emissions submitted by participating companies acted as a key reference in addressing different aspects of logistics operations.

In practice, the guidance provides solutions to core challenges faced in reporting of logistics emissions: reporting at a customer required level and from network operations; the combination and comparison of Scope 3 data with varying levels of granularity and differing reporting methodologies used; and, finally, a recommended assurance process to increase trust and confidence. This guidance is a springboard to further increase carbon visibility by enhancing emission data sets and the exchange of emission data that can be deployed in the industry.

Globalisation: Manufacturing Moves Closer to Home

New research has revealed the emergence of major shifts in globalisation, as companies rush to move manufacturing closer to home to protect against supply chain disruptions while increasingly protectionist policies are breaking the world into trade blocs.

The latest Trade in Transition study, commissioned by DP World and led by Economist Impact, captured the perspectives of company leaders as they navigate the latest disruptions to global trade – from the conflict in Ukraine to inflation and extended covid-lockdown policies in some markets.

Its key finding is that 96% of companies confirmed they are making changes to their supply chains due to geopolitical events.

The change has been swift. In the space of just a year, the number of companies shifting their manufacturing and suppliers– either to their home markets or nearby – has doubled compared to 2021. This is driven mainly by efforts to reduce costs and the risk of disruption. But the shifts are not even. While 27% of companies said they were decreasing the length of their supply chains due to geopolitical events such as the war in Ukraine, another 33% plan to expand into more stable and transparent markets.

Inflation threat

The persistent threat of inflation was cited by 30% of the executives as having the most significant negative impact on trade over the next two years. Inflationary pressures are seen in input costs — from supply shortages – and transport, through high energy costs and shipping capacity constraints. In a scenario of monetary tightening, companies across Europe, North America and Asia-Pacific anticipate exports to be 1% lower than under a business-as-usual situation due to decreasing production and demand.

If inflationary pressures continue, exports in the Middle East and South America are expected to be hardest hit, declining by 3.52% and 2.74% respectively. Only Africa is expected to see its exports rise by 0.26%.

A fragmenting world

The fragmentation of the world into trade blocs was also cited by 10% of respondents as limiting the growth of international trade. Beyond the war in Ukraine, US-China tensions and cyber warfare are preventing the efficient functioning of economies worldwide. This is leading to increasingly protectionist policies such as the US Infrastructure Bill and the CHIPS and Science Act, which aim to incentivise and prioritise US and North American manufacturing. Similar protectionist policies are popping up all over the world, leading to further fragmentation of the global trade system.

Businesses are finding ways to respond and grow. Altering supply chains either through diversification, regionalisation, or reshoring to build resilience is one response.

The global survey of 3,000 company executives found that companies in North America and Europe are most likely to outsource more than half of their services within their region. This is followed by 40% of companies in South America, 36% in the Middle East, 32% in Asia-Pacific and 18% in Africa, outsourcing within their regions.

The widespread and increasing adoption of technology is another way to build resilience into the supply chain. Some 35% of respondents said they were currently implementing Internet of Things (IoT) solutions to facilitate the tracking and monitoring of cargo, while another 32% of companies are adopting digital platforms to enable direct business with customers or suppliers.

Speaking at the launch of the report at the World Economic Forum in Davos today, DP World Group Chairman and CEO Sultan Ahmed Bin Sulayem said:

“The report is tangible evidence of how globalisation is changing as companies are forced to adapt to new challenges. By bringing production closer to the final customer, firms can reduce the number of touch points involved in the supply chain and build greater resilience into the flow of cargo around the world. But the trade environment is always changing. The next challenge that will alter these trends is an economic slowdown looming over regional markets. Agility, real-time visibility and end-to-end supply chain capabilities will be critical to ensuring companies can continue to find new efficiencies in an increasingly challenging environment.”

John Ferguson, Practice Lead for New Globalisation at Economist Impact, added:

“The shift to regionalisation and reshoring has been sharp, but unsurprising given the triple threat of higher costs, increased risks and government incentives or requirements to do so. Furthermore, businesses in previous decades have only had to focus on the economic aspects of trade, being price, quality and delivery. Now they have to account for other non-economic factors such as resilience and sustainability. All of which is having a drastic shift in supply chains, which we are witnessing both in the survey results and global trade patterns shifts”.

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