Decarbonizing the Supply Chain: Local Content Strategy for CSRD Compliance

Just a few years ago, the term Local Content was associated exclusively with the hard industrial policies of developing nations or requirements in the extractive sector. Today, however, this concept is returning to the economic mainstream of the EU and the US, becoming one of the most strategic topics in the ESG area.

At Plan Be Eco, we are observing an evolution: local content is ceasing to be merely a tool for supporting domestic business and is becoming a key metric of resilience, supply chain security, and climate transparency.

From Industrial Policy to Strategic ESG Autonomy

The modern wave of regulation has a completely different character than old-school protectionism. Currently, in the European Union, we are seeing a shift towards strategic economic autonomy. Local content no longer serves just market development but is an element of economic security.

Why is Local Content returning right now?

1. Energy Transition: Support programs for hydrogen technologies, RES, or batteries (e.g., Net-Zero Industry Act) reward production in Europe.

2. Modern Public Procurement: "Strategic sourcing" criteria increasingly award points to suppliers with a local value chain.

3. Regulatory Pressure (CSRD): The Corporate Sustainability Reporting Directive forces companies to look at the full value chain, not just their own operations.

What Exactly is Local Content?

There is no single, rigid definition, which poses a reporting challenge. In a broad sense, local content is the share of local resources in a company's activities, which includes:

• Purchasing: The share of local suppliers in expenditures (CAPEX/OPEX).

• People: Employment of the local workforce and development of their competencies.

• Technology: Knowledge transfer to local entities.

In practice, methodologies range from a simple share of costs to complex "Value Added" models, taking into account margins and taxes paid in a given region.

CBAM as a Catalyst for "Re-regionalization"

Although the CBAM (Carbon Border Adjustment Mechanism) does not directly refer to local content, it acts as a powerful accelerator. By imposing CO2 emission costs on imported goods (steel, cement, aluminum), it makes production within the EU relatively more competitive.

Companies, analyzing emission costs, conclude that it pays to buy locally to avoid the "carbon border tax." This is the phenomenon of re-regionalizing supply chains, which directly boosts local content indicators.

Local Content in Reporting Standards: GRI and ESRS

Despite the lack of a single "local content law," the reporting requirement stems from the most important ESG standards:

1. GRI 204-1: Economic Perspective

This standard requires disclosure of the percentage of spending that goes to local suppliers. This is a signal to investors about the company's operational stability and its impact on the local market.

2. ESRS S3: Social Perspective

Under CSRD, the ESRS S3 (Affected Communities) standard mandates describing the company's impact on communities. Here, local content becomes evidence that the company is not just "present" in a given region but actively supports its prosperity by generating economic value locally.

The Challenge: Lack of Standards and the Risk of "Localwashing"

The biggest barrier remains the lack of a uniform methodology. This results in:

• Data being difficult to compare across industries.

• A risk of "localwashing" – declaring localness without actual value added (e.g., when a local supplier is merely an intermediary for goods from Asia).

• Auditors are having difficulty verifying the source of origin of the goods.

How Does Plan Be Eco Operationalize Local Content?

At Plan Be Eco, we understand that the challenge is not the concept itself, but its measurability. Our approach combines supply chain data with regulatory requirements:

1. Source Identification: We help companies consistently identify where their components actually come from.

2. Link to Emissions: We link the local content indicator with real savings in Scope 3. We show how shortening the supply chain realistically lowers your carbon footprint.

3. CSRD Compliance: We translate procurement data into the language of an ESG report, providing evidence for auditors and investors.

Summary: Economic Footprint is as Important as Carbon Footprint

In the coming years, local content will become your company's "economic footprint." Industries such as energy, automotive, or heavy industry will be under increasing pressure to show where their value is actually created.

Investing in local content is not just about meeting the requirements of GRI 204-1 or ESRS S3. It is, above all, a strategy for building a secure, low-emission, and responsible business.

Want to see how your local content affects your ESG report? At Plan Be Eco, we will help you turn declarations into data.