Foreword

Global supply chains, the arteries of international trade, continue to be redefined by a wide range of secular trends.

With the pandemic in the rear-view mirror, technology has, from a corporate perspective, regained its rightful place as a unifier of these forces. And as this report will make clear, not only is technology a key driver of change, it’s also an enabler of that change, influencing everything from geopolitics and the energy transition effort to the developing regulations governing supply chains.

Company treasury and procurement divisions continue to transform their operations digitally. These changes include replacing legacy payment systems with real-time alternatives, as well as deploying remote sensors and drones to support inventory management and delivery systems, improving transparency and supply chain resilience. Meanwhile, new agents of disruption have arisen, including generative artificial intelligence, or gen AI, and asset tokenisation.

The geopolitical headwinds impacting the global economy are another forceful factor redrawing long-established supply chains. Most recently, the Ukraine conflict, tensions in the Middle East and fraying US–China ties have triggered a fresh wave of policy making focused on economic security, forcing corporations to consider domestic or regional alternatives as they look to diversify their production centres and supplier hubs, and develop real-time visibility systems to track disruptions along their supply chains. This de-risking trend, which was in the making prior to the Covid-19 pandemic, is crystallising into a permanent feature of global trade.

At the same time, the global push to transition to net zero in response to a warming planet is bringing positive change to the supply chain. Heeding the voice of environmentally conscious consumers and investors, as well as responding to an evolving regulatory landscape (especially with respect to Scope 3 emissions, which track the emissions from a firm’s suppliers and customers in making and using its products), many companies are taking action. They are undertaking the challenging task of tracking and reporting on emissions across their respective supply chains, investing in efforts to reduce emissions, finding opportunities for offsets, seeking to preserve the planet’s biodiversity, and focusing on improving performance on a variety of other environmental, social and governance (ESG) metrics.

Linked to this, many banks and financial institutions are stepping up to the challenge of helping institutional clients manage these changes by offering a range of innovative products and solutions linked to sustainability. They are doing so by building in-house fintech proficiencies and establishing strategic relationships with providers of operational and technological expertise.

Fortuitously, the imperative to meet ESG metrics comes at the same time as the means to using technology to help drive a sustainable approach becomes widespread. Take carbon credits, for example, where ANZ has continued its push into the digital assets economy by enabling the tokenisation of carbon credits via blockchain technology. On the broader sustainability front, our various collaborations, including with working capital optimisation fintech, Taulia, illustrate how banks can assist clients in developing more resilient and sustainable supply chains. This involves facilitating the collection of ESG data for the purposes of certifying suppliers as ESG-compliant, in order to enable more efficient and cost-effective access to capital.¹

What has become clear in recent years is that the advent of new technologies, combined with innovative products linked to sustainability, will be pivotal in helping fund the multi-trillion-dollar effort to reduce emissions, meet the UN Sustainable Development Goals (SDGs), and build crisis-resilient supply chains that can facilitate sustainable trade.

Additionally, as the Covid-19 pandemic showed, the biggest challenges can have unexpected effects: such as a rapidly increased rate of digitisation, which has had profound effects globally, including on supply chains. While digitisation is undoubtedly bringing new opportunities to address concerns about climate change, there is still much work to be done on this front.

The first edition of this report – published in February 2022, around the time the Covid-19 pandemic started its downward trend² – made a number of observations, including about the permanence of the pandemic’s impact on the global economy as well as upcoming technological advances and geopolitical developments. This report assesses five key drivers currently reshaping the global supply chain and the trends to watch in the near- to medium-term. What is clear is that when it comes to building resilient and sustainable global supply chains there is much to be optimistic about.

Introduction

With the threat of Covid-19 easing, the initial strides made in resolving supply chain bottlenecks³ and the relative normalisation of costs in global shipping⁴ are yielding to persistent geopolitical challenges – now recognised as a significant risk and impediment to future growth.

That’s because fresh challenges have emerged, chief among them the conflict in eastern Europe, which fuelled a rise in energy prices and created a shortage of essential commodities.⁵Simultaneously, the Middle East conflict has added to shipping costs and time, impacting companies' inventory strategies and global supply chains.

On the macroeconomic front, runaway inflation has forced policymakers to raise interest rates – contributing to subdued consumer demand and a global economic slowdown.⁶ This means businesses are navigating not only supply-side constraints but also a slowdown in demand, alongside a litany of other challenges.

Subdued demand means some companies are rethinking their inventory management practices, while – from a supply chain perspective – geopolitical risks remain the most significant challenge. Aside from the conflict in Ukraine, continuing China–US tensions⁷ may affect a range of sectors from agriculture to automobiles.

At the same time, there are reasons to feel hopeful about the future. Geopolitics is fuelling a quest for alternative supply chains, which is expected to benefit a number of emerging markets in Asia and beyond, driving growth and helping alleviate poverty. Additionally, rapid advances in technology (a key driver and an enabler of other drivers), an emerging framework of supporting regulations, and a raft of supply chain finance products and solutions promise to raise visibility and transparency across the supply chain to unprecedented levels and support a range of ESG goals, including the global push to net zero.

As a result, corporations worldwide are evolving to address these changes – from building redundancies into their supplier networks to embracing digital and financial tools to strengthen operational resilience to future crises and ensure long-term sustainable growth.

Top risks to business growth in the next 12-18 months