A more geopolitical world may choke supply chains

Article by Alicia García-Herrero published in the Newsletter Focus #11 of the Esade Center for Corporate Governance.

1. Where do we stand?

The current geopolitical landscape has triggered unprecedented disruptions in the global economy. Market fragmentation, the politicization of economic decisions, and growing protectionism have redefined the way companies operate, especially beyond their own borders. Economic security and strategic autonomy have become top priorities for governments and, consequently, key pillars of business strategy.

Supply chains in particular have been affected by the so-called “securitization” of resources and raw materials. This means that access to critical inputs no longer depends solely on economic factors, but also on political decisions that prioritize self-sufficiency. This self-sufficiency is justified in terms of resilience, which has taken precedence over efficiency—a concept that for decades had been the cornerstone of supply chain management. The shift from efficiency to resilience has been even more abrupt in high-tech and high-value-added sectors.

2. What can companies and governments do?

The shift from efficiency to resilience may seem costly for shareholders and consumers, and at times even excessive. But the reality is that, after shocks such as the pandemic or Russia’s invasion of Ukraine, companies must accept that efficiency will not regain its former primacy any time soon. In light of this, the only viable response is to adapt and embrace resilience as a central objective of business strategy—especially in technology-intensive sectors.

To increase the resilience of their value chains, companies should adopt a strategic approach based on diversification, while continuing to prioritize digitalization and sustainability to remain competitive. Diversification means reducing dependence on a single supplier or geographic region by creating alternative supply networks and fostering strategic partnerships with emerging markets. This ensures operational continuity in the face of global disruptions. At the same time, digitalization improves supply chain visibility and efficiency through artificial intelligence, data analytics, and automation. Technologies such as blockchain can strengthen traceability and reduce risks related to fraud or unexpected disruptions. Moreover, sustainability has become a key pillar for both resilience and competitiveness. Investing in renewable energy, adopting circular production models, and reducing carbon footprints not only mitigate climate risks but also enhance a company’s competitiveness and reputation. Additionally, companies should integrate geopolitical analysis into their decision-making processes by continuously assessing regulatory and commercial risks. Developing contingency plans and forming multidisciplinary crisis management teams will further strengthen their ability to adapt to disruptive events.

3. How boards of directors can help

Given the growing global uncertainty and the numerous shocks that have hit economies around the world—from debt crises to pandemics, and even military conflicts and terrorism—boards of directors are spending more and more time understanding the potential impact of these disruptions on their business models. More broadly, boards are now placing greater emphasis on strengthening their strategic outlook regarding factors that could affect their operations and markets. Building geopolitical analysis capabilities to anticipate risks and opportunities has become crucial. One of the most important areas of focus—especially for manufacturing companies—is global supply chains.

Among the key solutions being discussed in boardrooms are market diversification and strategic alliances. In other words, it is essential for Europe and its companies to seek new partnerships and reduce dependence on dominant markets such as China or the US, by promoting sector-specific agreements and strengthening regional value chains. Collaborating with emerging markets can offer a viable alternative in times of trade tension, as can working with mid-sized powerhouses such as Australia, Canada, Japan, or South Korea.

The latest major disruption hitting supply chains is Trump’s trade policy, which involves high tariffs on an increasing number of countries, restrictions on the use of US technology by foreign firms, and efforts to attract investment into the US as part of a broader reindustrialization strategy. Understanding these trends and anticipating their sectoral and corporate impact is more important than ever.

Finally, climate disruptions are increasingly affecting supply chains, calling for strategic planning to mitigate these impacts and ensure operational continuity. Investment in sustainable infrastructure and adaptation technologies will be critical in the coming years.

4. Europe’s role in the new global configuration

Europe faces significant challenges in shaping its geopolitical positioning. Its lack of full internal market integration limits its ability to compete with more cohesive economies like the United States and China. Creating a more robust single market would allow the region to strengthen its economic autonomy and reduce its vulnerability to external shocks.

One of the most promising strategies is to expand sector-specific agreements with key countries. For example, strengthening cooperation with Turkey and Mediterranean countries could generate new opportunities for European industry. Likewise, advancing initiatives such as the European Industrial Deal would help consolidate an innovation and production ecosystem capable of competing on the global stage.

5. Conclusion

Value chains have never been subject to more shocks and uncertainty. In a world made more uncertain by many forces—including geopolitics—companies, and especially their boards of directors, must focus on these changes and enhance their ability to anticipate them. The ability to translate information into informed decisions and concrete actions will define resilience and competitiveness in today’s environment. Only through a systemic, evidence-based approach will it be possible to build efficient, sustainable long-term strategies.

In other words, the business world must abandon traditional paradigms and adopt a forward-looking mindset. The key to business success in the 21st century lies in the ability to adapt to a constantly evolving environment in which geopolitics and economics are increasingly intertwined. Organizations that succeed in integrating these factors into their strategic planning will be best positioned to thrive in a world defined by uncertainty and rapid transformation. In the specific case of supply chains, prioritizing resilience over efficiency will be the defining strategy under current conditions.