Report on Supply Chain Derisking Strategies in the Context of Global Uncertainty and Sustainable Development Goals

Geopolitical instability, dynamic trade policies, and emergent tariff disputes are compelling a strategic re-evaluation of global supply chain networks. A recent Gartner survey indicates that a majority of supply chain leaders anticipate these risks will increase their total cost to serve. In response, organizations are transitioning from globalized models to strategically derisked networks that balance resilience, cost, and growth. This report analyzes key derisking strategies, implementation barriers, and success factors, with a significant emphasis on their alignment with the United Nations Sustainable Development Goals (SDGs).

Strategic Approaches for Long-Term Resilience and Sustainability

The contemporary global trade environment necessitates a multi-faceted approach to supply chain design. The following four strategies offer distinct pathways for organizations to mitigate risk while advancing their commitment to global sustainability targets.

1. Divesting

This strategy involves the complete cessation of operations within a specific market. It is typically employed where regulatory, competitive, or political environments are incompatible with an organization’s operational and ethical standards.

• SDG Alignment: Divestment can be a decisive action to uphold corporate responsibility, particularly in relation to SDG 16 (Peace, Justice and Strong Institutions), by exiting markets with significant instability or poor governance. It can also support SDG 8 (Decent Work and Economic Growth) by ceasing operations where labor rights and working conditions cannot be guaranteed.

2. Decoupling

Decoupling involves creating distinct, self-sufficient supply chain ecosystems that operate independently of a target market. This regionalization strategy enhances business continuity and insulates operations from geopolitical shocks.

• SDG Alignment: This approach directly supports SDG 9 (Industry, Innovation, and Infrastructure) by fostering the development of resilient, regional infrastructure and industrial capabilities. By creating localized economic systems, it also contributes to SDG 8 by promoting stable employment and economic growth within the new region.

3. Diversifying

Diversification involves establishing new operations outside a primary market while maintaining a presence within it. This includes strategies like nearshoring, low-cost country diversification, and “China +1” models to balance risk and efficiency.

• SDG Alignment: Diversification is a powerful tool for advancing SDG 12 (Responsible Consumption and Production) by enabling organizations to build a portfolio of suppliers that adhere to sustainable practices. It also promotes SDG 8 by distributing economic opportunities and job creation across multiple geographies, enhancing global economic resilience.

4. Doubling Down

This strategy involves reinforcing and expanding operations within an existing market. It is most viable when the current network is highly cost-effective and alternative supply ecosystems are underdeveloped or present greater risks.

• SDG Alignment: By doubling down, companies can make significant contributions to SDG 9 by investing in the modernization and sustainability of local infrastructure and industrial capacity. This deepens the commitment to the local economy, supporting long-term goals under SDG 8, provided that the expansion is managed with a focus on sustainable practices and decent work.

Barriers to Adopting Sustainable Supply Chain Strategies

Despite the imperative to derisk, organizations encounter significant barriers that can impede the transition to more resilient and sustainable supply chain models.

• Financial Constraints: Substantial capital investment is required for network reconfiguration, which can conflict with achieving cost-efficiency goals and hinder progress toward sustainable infrastructure investments (SDG 9).
• Supplier and Labor Maturity: The lack of mature local suppliers and skilled labor in new regions can limit the feasibility of diversification and decoupling. This highlights the need for investment in local workforce development and capacity building, in line with SDG 8 and SDG 17 (Partnerships for the Goals).
• Regulatory and Policy Uncertainty: Shifting trade agreements and protectionist policies create a complex regulatory landscape, complicating efforts to build stable, long-term supply chains that support SDG 16.
• Logistical and Infrastructure Challenges: Inadequate transportation and digital infrastructure in potential new locations can impede the development of efficient and low-carbon supply chains, creating a barrier to achieving the objectives of SDG 9 and SDG 12.

A Framework for Successful and Sustainable Implementation

Effective implementation requires a structured approach that integrates derisking initiatives with overarching business and sustainability objectives. The following four-step framework is recommended:

1. Align with Long-Term Sustainability Objectives: Derisking decisions must be fundamentally linked to the organization’s strategic goals for growth, service, and flexibility, with a core focus on advancing sustainability. This includes commitments to responsible production (SDG 12) and creating decent work (SDG 8).
2. Assess Market Importance and Sustainable Alternatives: Evaluate the strategic importance of target markets alongside the viability and sustainability credentials of alternative locations. A successful strategy often requires a hybrid approach, combining diversification with nearshoring to optimize both risk and SDG impact.
3. Evaluate Barriers Through a Sustainability Lens: Analyze financial, regulatory, ecosystem, and labor barriers at both a product and geographic level. This assessment should explicitly consider the impact on the organization’s ability to meet its commitments under SDGs 8, 9, and 12.
4. Act Decisively for Resilient and Responsible Growth: A thorough assessment enables informed, strategic decisions. Whether choosing to diversify, decouple, or double down, the action must be a deliberate choice aimed at building a supply chain that is not only resilient to shocks but also contributes positively to global sustainable development.

1. SDGs Addressed in the Article

• SDG 8: Decent Work and Economic Growth

  The article connects to SDG 8 by emphasizing the economic implications of supply chain strategies and the critical role of labor. It discusses how derisking strategies are necessary for business continuity and growth in a volatile global economy. Furthermore, it highlights the challenges of “talent shortages” and the need for “skilled labor,” pointing to the importance of “workforce development” and “investment in training” to support new operational footprints, which are central to achieving decent work and sustainable economic growth.

• SDG 9: Industry, Innovation and Infrastructure

  This is the most prominent SDG in the article. The entire discussion revolves around reconfiguring industrial supply chain networks to build “resilience” and adapt to global uncertainty. The article analyzes innovative strategies like “decoupling,” “diversifying,” and “nearshoring.” It also directly addresses infrastructure by noting that “logistical challenges, such as inadequate infrastructure,” are significant barriers to implementing these new strategies, aligning perfectly with the goal of building resilient infrastructure and fostering innovation.

• SDG 17: Partnerships for the Goals

  The article implicitly addresses SDG 17 by highlighting the need for collaboration to overcome the complex barriers to supply chain derisking. It suggests that companies must “seek local partnerships to minimize risk” and engage in “collaboration with educational institutions” to address talent shortages. This call for multi-stakeholder engagement, including “cross-functional teams,” reflects the core principle of forming partnerships to achieve sustainable goals.

2. Identified SDG Targets

1. SDG 8: Decent Work and Economic Growth

   • Target 8.2: Achieve higher levels of economic productivity through diversification, technological upgrading and innovation. The article directly supports this target by presenting diversification as a key derisking strategy. It details how companies can reconfigure supply chains (“China +1,” “nearshoring”) to enhance efficiency, balance risk, and support growth, which are forms of economic diversification and innovation in operations.

2. SDG 9: Industry, Innovation and Infrastructure

   • Target 9.1: Develop quality, reliable, sustainable and resilient infrastructure…to support economic development. The article’s central theme is the need to build “resilience” in supply chain networks. It explicitly identifies “inadequate infrastructure” and “logistical challenges” as major barriers, underscoring the necessity of developing reliable infrastructure to support new, derisked supply chain models.
   • Target 9.4: By 2030, upgrade infrastructure and retrofit industries to make them sustainable. The article mentions that derisking decisions should align with long-term objectives, including “advancing sustainability goals.” This indicates that as companies reconfigure their supply chain networks, they have an opportunity to upgrade their operations to be more sustainable, directly contributing to this target.

3. SDG 17: Partnerships for the Goals

   • Target 17.17: Encourage and promote effective public, public-private and civil society partnerships. The article implies this target by recommending that organizations “seek local partnerships to minimize risk” and pursue “collaboration with educational institutions” to overcome talent shortages. These actions are examples of the multi-stakeholder partnerships needed to implement complex strategies successfully.

3. Implied Indicators for Measuring Progress

• The article implies several indicators that can be used to measure progress towards the identified targets:
  1. Percentage of companies making network changes: The article states, “Seventy-seven percent of respondents surveyed by Gartner expect to make network changes to address the impact of new tariffs.” This can serve as an indicator for Target 8.2, measuring the adoption of diversified and innovative supply chain strategies.
  2. Investment in workforce development and training: The need to invest in “supplier capabilities and workforce development” is cited as a way to overcome barriers. The level of this investment can be an indicator for progress towards ensuring a skilled workforce (related to SDG 8).
  3. Inclusion of sustainability in strategic planning: The article notes that derisking should support “advancing sustainability goals.” The number of companies that formally integrate sustainability criteria into their supply chain network design can be an indicator for Target 9.4.
  4. Number of local and cross-sector partnerships: The recommendation to form “local partnerships” and “collaboration with educational institutions” suggests that tracking the number and effectiveness of such partnerships would be a relevant indicator for Target 17.17.

4. Summary Table of SDGs, Targets, and Indicators

Source: scmr.com