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Senate Bill 1 Becomes a Reality: How Will the Supply Chain Adapt?

Senate Bill 1 Becomes a Reality: How Will the Supply Chain Adapt?

January 2023

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California has been going through a lot in recent years. Winter storms have left areas ravaged by floods and excessive amounts of rainwater. Last year’s wildfires were so bad that they undid more than a decade’s worth of emissions policies.

These are dramatic weather events that upset lives and soak up the headlines. And yet, one of the most dramatic changes that we’ve seen in years quietly took place (literally) as the year began.

A years-old bill has banned 70,000 big rig trucks from the state’s roads, fulfilling the final stages of a government policy that was fifteen years in the making.

Senate Bill 1 Goes Into Effect

The history of Senate Bill 1 goes all the way back to 2008. At that point, the California Air Resources Board, or “CARB,” instituted a set of regulations governing the improvement of air quality. These clean air regulations became law nine years later, on April 28, 2017, as the Road Repair and Accountability Act of 2017. The legal document also went by the less complicated title Senate Bill 1 (SB1).

Among other things, Senate Bill 1, in effect, banned unapproved rigs over 14,000 pounds that weren’t compliant with, and I quote directly from the document, “applicable air pollution control technology requirements pursuant to Division 26 (commencing with Section 39000) of the Health and Safety Code and regulations of the State Air Resources Board adopted pursuant to that division.”

Bans started in 2020 with non-compliant vehicles from 2004 and older. In 2021, the model year for vehicles impacted by the regulation shifted to 2007. As of 2023, any non-compliant vehicle that is 14,001 pounds or more and is a model from 2010 or earlier must operate outside of California.

As mentioned, there are certain exemptions and permits (with fees attached) that are technically available. By and large, though, as of this past New Year’s day, California has banned roughly 200,000 vehicles, including 70,000 big rigs (via MSN), from operating within its borders.

The Impact Senate Bill 1 Could Have on Supply Chains

Before we start speculating, I want to clarify that the number of trucks banned by the momentous event is technically only a small fraction of the approximately 1.58 million vehicles that were already upgraded to comply with the bill. Still, there’s no doubt that the absence of 70,000 trucks from the supply chain is an event that will be felt across the state.

California, and the U.S. as a whole, are still grappling with an endless cycle of supply chain worries, many of which started with the pandemic. In 2022, Russia’s invasion of Ukraine complicated things on an international basis. Domestically, recent concerns over a railroad strike drew direct intervention from the U.S. government at the end of the year.

2023 promises to be just as unpredictable as the last few years have been. China’s sudden reversal of its “zero-Covid” policies could be helpful for supply chains over time, but the enormous Asian economy will also be creating a fresh wave of demand for consumer products, as well. This could siphon a lot of available resources away from the already strained supply chain in other areas of the world.

An all-but-certain recession (or at least a further economic pullback) would only make matters worse. Taken as a whole, this may not be the best time to add in the extra factor of self-inflicted stress on the supply chain.

Nevertheless, it should at least be pointed out that the bill provided multiple years for these changes to take place. Most companies had the resources they needed to make necessary adjustments and upgrades, and the vast majority of trucks in the state will be able to continue operating per usual—at least for the present.

Preparing for a Clean-Yet-Stressed Future

California is clearly ahead of the curve when it comes to carbon footprints and clean air. However, its stance on emissions has raised a lot of questions—especially as far as the short-term supply chain is concerned. It’s a situation that many members of the supply chain C-suite (both in America and around the world) will be watching with intense interest in the year ahead.

“California’s stance on emissions has raised a lot of questions— especially as far as the short-term supply chain is concerned.”

MSN adds that there are additional proposals with more stringent and ambitious goals. One aims to remove all diesel and gas trucks from California by 2045, starting with the busiest areas of the supply chain, such as sea ports, railways, and warehouses.

As transportation and supply chain companies look for ways to adapt, they should start by investing in stability and success at the very top of their org charts. Enterprises in the supply chain sector must fill their executive positions with capable, dependable individuals who can think on their feet and make wise decisions in uncharted waters.

At Stanton Chase’s Los Angeles office, we’re intimately familiar with the talents and skills required to lead at the top of the supply food chain. If you’re suffering from a lack of talent or poor retention in the C-suite, contact us so that we can put our network, resources, and experience to work preparing your company for the challenges that lie ahead.

About the Author

Peter Deragon is a Managing Director at Stanton Chase Los Angeles. He is also the Global Practice Leader of our Supply Chain, Logistics, and Transportation Practice Group. Additionally, Peter is active in the CFO Practice Group and financial services, where he started his career.

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