How Logistics Companies are Increasingly Adopting Sustainability Practices

August 28, 2022 | By Gulf Business

With businesses being increasingly urged to reduce their carbon emissions and adopt more sustainable business models, the logistics and transportation industry is under tremendous pressure to follow suit, and for good reason.  According to the Sustainable Freight Buyers Alliance (SBFA), freight transport accounts for 8 per cent of global CO2 emissions. By 2050, direct CO2 emissions from the logistics sector is set to rise by 42 per cent.

The alliance, a bridge between freight buyers and freight decarbonisation initiatives to support the industry’s transition to net-zero freight transport, states that decarbonising freight transport is critical to achieving the global goals of net-zero greenhouse gas emissions by 2050.

Is that a tall order? Dr Shereen Nassar, Global Director of Logistics Studies, Edinburgh Business School, Heriot-Watt University Dubai, says decarbonisation targets can only be addressed when companies relook at their traditional working methods. “Logistics and transport sustainability goals need to be developed and integrated within the business model and strategy to ensure accountability and compliance with environmental, social and economic requirements by all the stakeholders, including governments, non-government organisations (NGOs), citizens, investors, customers and companies themselves.”

Transparency is critical when it comes to reporting emissions, which is mandatory in certain countries. Bodies such as the Global Logistics Emissions Council (GLEC), an industry-led partnership is driving emission reduction across global logistics supply chains through global guidelines for reporting and reducing logistics emissions that work for business.

The council is led by the Smart Freight Centre, an international non-profit organisation focused on reducing greenhouse gas emission from freight transportation. The centre and the World Business Council for Sustainable Development recently reiterated their commitment to increase transparency on carbon emissions and work towards a net-zero logistics sector. Supported by the World Economic Forum, with McKinsey & Company providing analytical insights and advisory guidance, and in partnership with over 25 global organisations, this consortium is taking the next steps in achieving net-zero logistics by co-developing an actionable and implementable framework to quantify the impact of GHG (greenhouse gas) logistics emissions from the supplier to the final customer; from end-to-end.

The adoption of sustainable practices across the sector is gaining momentum. Dr Nassar says that logistics companies are increasingly working towards it, from reducing the overall amount of packaging used, to enhanced delivery schedules that can be fulfilled in lesser trips.

“Retailers are now becoming more conscious of the kind of logistics service providers they use. As a result, electric, hybrid and low carbon emission vehicles are becoming increasingly important in the logistics fleet. In addition, reusing and recycling are integral to a sustainable supply chain. As a step further toward sustainability, initiatives are growing for the transformation from a linear supply chain toward a closed-loop and circular supply chain model that are key to sustainability. This model requires close partnership with supply chain partners to establish sustainable practices throughout the supply chain to support a circular plan for the full lifecycle of a product and its packaging,” adds Dr Nassar.

Challenges still exist
Despite the willingness to go carbon neutral and achieve net-zero targets, there are hurdles. The Covid-19 pandemic led to a rise in e-commerce; and while customers want sustainable products, they want them immediately and, at reasonable prices. This means more deliveries, traffic
congestion and even more emissions.

According to a study by the World Economic Forum, by 2030, last-mile delivery emissions are set to increase by more than 30 per cent in 100 cities globally. Additionally, these commutes could increase by 21 per cent, taking up to 11 minutes longer due to the extra traffic on the road. And while companies are taking to using electric delivery vehicles, it’s expensive to replace traditional commercial vehicles with hybrid or electric vehicles (EVs) to add to the possibility of inadequate infrastructure to supporting electric vehicles. Low emission modes of transport such as rail could also mean longer lead times and higher costs.

Companies that use carbon offsets (a way to compensate for your emissions by funding an equivalent carbon dioxide saving elsewhere) to meet decarbonisation targets are being scrutinised for a host of reasons such as the quality and price  of the offsets. These issues may dampen the resolve of logistics providers to go carbon neutral immediately, but as EVs become more mainstream and hydrogen powered vehicles join the ecosystem, the pressure will ease. Plus, solutions such as night delivery and pick-up and drop-o centres, will also yield benefits.

Taking the lead
Setting good examples are the early adopters of decarbonisation, which include logistics companies, such as Maersk, which have made sustainability a strategic goal. Maersk has committed to setting targets as laid down in the Science-Based Targets initiative (SBTi), a global coalition established in 2015, which aims to enable companies to set emission reduction targets in line with leading climate science.

Christopher Cook, managing director, Maersk UAE, Qatar and Oman, says, “We have taken 2020 as the baseline year, and set near-term targets for 2030 and a net-zero target for 2040. This means that by 2040, we want to achieve net-zero across our business and 100 per cent green solutions for our customers. Initiatives have also been launched to achieve these targets. In fact, our first vessel to run on green fuel will be operational in 2023 – seven years ahead of the initial commitment of 2030. We have ordered 12 larger container vessels with a capacity of 16,000 TEUs (twenty feet equivalent units) that will run on green methanol. Delivery starts in 2024.

“We are also tying up with several companies and countries to source the right fuel for these vessels, as that will be the biggest challenge in the coming years. We believe getting to decarbonised logistics is the right thing to do, and we must act upon it now. Even our customers expect us to support them in decarbonising their supply chains, and our vision matches our customers in that sense.”

Scandinavian company Scan Global Logistics is also using sustainable fuel to enhance its air freight operations. Mads Drejer, the company’s global chief operations officer and chief commercial officer, says, “We have recently invested heavily in sustainable aviation fuel (SAF) and are now in a position to offer it to our customers globally. This fuel has the potential to reduce carbon emissions by up to 80 per cent.”

The company’s digital CO2e platform also enables customers to calculate their existing footprint of transportation emissions. Drejer adds, “As one of the first providers of this service in the world, we can also offer a consolidated report to our customers, allowing them to also include transport not handled by SGL into the same report to enable efficiency. This helps simplify the CO2 reduction journey for our customers.”

Regional logistics giant Aramex has doubled down on its decarbonisation commitments by pledging to SBTi in 2021. Alaa Saoudi, chief operating officer at Aramex, says, “We have been dedicated to decarbonisation for over 10 years. We have committed to reach carbon neutrality by 2030, and to become net-zero by 2050. By setting science-based carbon emission targets, we are accelerating our climate action goals.

The company has made investments towards the deployment of solar panels and the introduction of electric vehicles to its fleet. “In addition, we have made the switch to innovative and reusable packaging to reduce plastic pollution and its negative impact on the physical environment and wildlife,” said Saoudi.

DHL Global Forwarding’s decarbonised range of GoGreen Plus products for air and ocean freight is aimed at making its operations more sustainable. Its Green Plus Service provides real emissions reductions through carbon insetting, a process through which a company offsets its emissions through a carbon offset project within its own value chain.

Emissions are reduced by replacing the amount of conventional fossil fuel needed with sustainable fuel. Customers can easily pick and choose which parts of their supply chain they want to truly decarbonise. Finally, more efficient processes can also contribute to sustainable operations.

These include fast order fulfillment, which is bound to influence trip volumes, says Soham Chokshi, CEO and co-founder of Shipsy. “To reduce carbon footprint and build sustainable supply chain operations, businesses must embrace smart logistics management tools. Such tools can help companies achieve sustainability goals by reducing miles travelled, increasing first attempt deliveries, eliminating empty miles, decreasing trip volumes, improving resource utilisation and curbing paper usage.”

With all these opportunities on offer, logistics service providers can easily go the distance towards a sustainable future for the sector.



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