Public Incentives

Trend Definition 

What is the essence of this trend? What is its impact?

• Essence: Public Incentives, such as subsidies, tax reductions, and tax credits, are governmental policies aimed at stimulating economic growth, protecting domestic industries and tackling Climate Change 
• Impact: Public Incentives can disrupt entire businesses and require fast adjustments to processes since economic circumstances and dynamics may shift in favour of different locations and habits

Trend Drivers 

Why is this trend emerging now? What’s changing? 

• Geopolitical Dynamics: Rising tensions in geopolitics lead to governments incentivising companies to relocate their activities to their home soil to prevent the loss of IP and ensure direct access to crucial industries and input factors 
• Economic Growth Goals: Governments implement incentives to achieve economic objectives and to make their country attractive for FDIs 
• Targeted Investments: Investments in certain technologies, e.g., carbon emission-reducing technologies, can be made financially viable through governmental incentives to keep the company globally competitive 

Use Cases 

How to apply this trend? 

• Renewable Energy & Clean Production: Incentivising sustainable business practices 
  Example: Incentive programs such as the Green Deal (EU) or the Inflation Reduction Act (USA) aim at incentivising investments and deployments of green technologies and fleets, opening opportunities for procurement departments to better control costs through more sustainable sourcing  
• New Technologies: Foster clean investments 
  Example: Linde invests USD 1.8bn to build a blue hydrogen plant in Texas using the 45Q credit, a tax credit that is part of the US Inflation Reduction Act, resulting in changed procurement requirements for their planned additional US facility 

Procurement Relevance & Response Strategies 

How should Procurement adapt its Processes, Organisation, and Strategy?

• Incentive Evaluation in Sourcing: Incentives may change business cases in favour of other locations, resulting in the need for a fast adjustment of sourcing processes to maximise the benefit from these incentives 
• Supplier Development: Work with suppliers to help them understand and meet the requirements of public incentives, ensuring mutual benefits