Why Investors Should Probe Corporations’ Hyperlocal Manufacturing Efforts

Feb 27, 2024

Plastic Resin pellets in holding hands.
Investors are increasingly concerned about how war in the Middle East could affect supply chains — and with good reason. At Davos, business leaders warned that attacks by Yemen’s Iran-allied Houthi militants, including against U.S. ships, “could affect supply chains for months and lead to a shortage of tankers needed to transport fuel,” Reuters reports.

It’s not only disruptions stemming from wars that corporations have to worry about. Traffic through the Panama Canal has been sliced due to drought. And perennial problems including labor shortages, tensions with China and cyber vulnerability continue to take a toll as well.

Businesses have been working to recoup losses from supply chain woes they suffered throughout the Covid-19 pandemic, which lowered stock values. The latest developments serve as a strong reminder that sourcing goods from across the world brings risks to companies and investors.

Meanwhile, domestic shipping is becoming more expensive as well. Package delivery giants have hiked prices by as much as 8% and are increasing surcharges, Supply Chain Dive reports.

Businesses could spare themselves, their customers and their shareholders many of these costs by stepping up their investments into a solution that often gets far too little attention: hyperlocal manufacturing.

Hyperlocal manufacturing allows businesses to have greater direct control than ever over their supply chains by sourcing and manufacturing parts and goods created nearby, with no need for delivery companies to travel long distances. It’s become more of a viable solution as additive manufacturing makes more types of products available for 3D printing. But it’s also viable as a solution for traditional manufacturing.

The more they look for manufacturing close to home, the more businesses become both financially and environmentally sustainable, attracting investors across the board — including those who want to support companies that demonstrate environmental stewardship.

A growing number of shareholders are interested in climate-focused investing. They want to see businesses acknowledge and reduce their carbon footprints. This includes the environmental impact of shipping. “Billions of tons of cargo are transported around the world each year by trucks, planes, ships, and trains. This transportation makes up 8% of global greenhouse gas emissions,” MIT reports.

Sometimes, hyperlocal manufacturing can offer yet another benefit. It can help companies reduce the costs and carbon footprint of their recycling programs.

Ironically, many corporations add emissions to the atmosphere by having their recyclables shipped long distances. Recycling trucks are among heavy-duty vehicles, which have disproportionately high emissions, Waste Dive reports. Regulators are looking to “rein in emissions from heavy-duty vehicles.”

If companies can find ways to instead have recyclable materials processed locally and used to manufacture products they need, they’ll maximize the benefits and the savings for shareholders.

I discovered this after I was brought in as CEO of GreenLabs Recycling in Concord, Mass. We originally focused on working with local life sciences companies to recycle plastic parts that were ending up in landfills or incinerated. Traditional waste haulers don’t recycle plastic that looks like a lab product, fearing contamination. They either reject it outright or trash it when it arrives at their facilities. Some companies ship their plastic long distances — even all the way across the country — to recycling facilities.

After recycling the plastics we collected, we used the resins to manufacture products for general use. Then MIT, one of our life sciences clients, asked me, “Why don’t you manufacture a lab product to sell back to us, creating a circular economy?” So we created a benchtop hazardous waste bin.

When I tell investors about this, their eyes often light up. As I know well from having co-founded Greentown Labs, the largest climate tech incubator in North America, investors can be a powerful driving force in helping companies discover solutions for cost savings and environmental improvements.

No one is better equipped than shareholders to help businesses discover hyperlocal manufacturing opportunities. In earnings calls and other interactions, ask executives about their hyperlocal strategies in all the areas they serve. Ask whether they’ve done deep-dive analyses of their manufacturing needs to determine what could be sourced close to their facilities. Find out whether their recycling company can coordinate with local injection molders to create a hyperlocal recycling and manufacturing ecosystem.

The companies that show knowledge and leadership in this arena will be strengthening their operations and protecting their investors through challenges ahead — involving both supply chains and environmental efforts — in the years to come.

Sam White is CEO of GreenLabs Recycling, which collects and recycles non-hazardous plastic from research facilities in Greater Boston, providing recycling solutions to help make science sustainable. He can be reached at [email protected].

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.