What’s next for sustainable logistics?
Environmental sustainability is on the radar now more than ever. Business leaders are seeing the signs, and they’re turning to logistics for help. But what’s going to have the greatest impact? Let’s take a look at what’s on the horizon for sustainable logistics.
Sustainable logistics is a beacon of hope
For centuries, lighthouses have stood as sentries keeping watch over busy coastlines, warning sailors of perils ahead, and guiding ships safely to and from shore. Today, captains of industry must also navigate treacherous waters. But unlike seafarers of long ago, modern shippers find themselves battling a different storm: climate change.
As the winds of environmental sustainability grow stronger around the world, merely flying the flag of sustainable business will undoubtedly lead to a shipwreck. To survive, we need to raise strong, sustainable sails that keep us away from the rocks. But we also need to know which way to point the ship.
That takes us back to the lighthouse. Today, those at the helm can draw on many different sources of light to navigate the way forward, not least the technologies and innovations of recent years. We can monitor and track the trends, analyze oceans of data, and plot our future course.
We’ve been tracking sustainable logistics trends for years, and our current radar shows multiple interlinked routes to improving the environmental sustainability of the world’s supply chains. These trends are no longer beyond the horizon. We expect them to have a medium to high impact on logistics and supply chain management in the next five to 10 years.
Sustainable logistics is on our radar
Today’s logistics trends in environmental sustainability:
Reducing the amount of carbon dioxide (CO2) and carbon dioxide equivalent (CO2e) in the atmosphere is essential if we are to mitigate climate change. To make an impact, it’s clear entire sectors of the economy will need to decarbonize. Although all industries must play their part, the role of logistics is indispensable. That’s because around 90% of a product’s emissions are generated in the supply chain.
The good news is that more and more companies are setting ambitious zero-emission goals. The bad news is that they often run into a challenge early on: how to account for their greenhouse gas (GHG) emissions. Indirect emissions from their own operations (Scope 2) and from upstream and downstream activities (Scope 3) are especially problematic. As a result, many companies rely on oversimplified assumptions and secondary sources of carbon calculation data.
Scope 1, 2, and 3 emissions, according to the GHG Protocol corporate standards. They encompass all activities upstream and downstream of a reporting company.
Source: Greenhouse Gas Protocol
It's going to take more effort to show tangible progress across supply chains, especially once new rules require the disclosure of the carbon footprint of products and services. For instance, the EU Sustainable Finance Disclosure Regulation will require companies to make disclosures at both an entity and product level about how they integrate sustainability risk and promote environmental or social factors. Sensor technology (Internet of Things) and other innovations (AI-driven big data analytics) are helping make that happen, providing a more accurate picture of carbon footprints, identifying opportunities, and predicting needs.
Since supply chains are at the heart of decarbonization, no industry can reach net zero without sustainable logistics. That’s why we need to continue to be part of and shape the conversation. We must raise the red flag and make sure the ships around us take notice. But we also need to take the lead, including making hefty upfront investments in decarbonization solutions like sustainable aviation and marine fuels until electrified alternatives come to market.
Alternative energy solutions
As countries around the globe work to meet the goals of the Paris Agreement, embracing alternative energy technologies to harness, store, and use energy from renewable sources will help to stem the tide of climate change. But today’s solutions have yet to reach the economies of scale needed to completely replace conventional fossil fuels.
The world can chart a course toward a clean-energy future, but we need to see more and substantial investments in developing and scaling up energy sources powered by the sun, wind, water, geothermal, and biomass. It won’t be easy in today’s turbulent times, which is why sectors like logistics will have to have a firm hand on the wheel to lead the way.
The number of battery-powered electric vehicles globally increased almost tenfold from 1.2 to 11.3 million between 2016 and 2021.
The beauty of alternative energy is that it can be used in a wide variety of applications to advance sustainable logistics. The options are almost endless – from self-sufficient buildings and facilities running on self-generated solar power to offices, warehouses, and distribution centers sourcing energy from geothermal wells below the ground’s surface. And, of course, swift progress is being made in areas from hydrogen for middle-mile and long-haul trucks to sustainable fuels and biofuels for aviation and ocean freight.
While some alternative energy solutions are already available, many technologies that will usher in real change tomorrow are still at the pilot stage today. Investing in research and development and infrastructure will help fill the gap. But the energy storage solutions needed to bridge outages with previously generated renewables are expensive, which hinders development and implementation. High costs and lengthy time lags will also rock the boat, making it harder to construct alternative energy generation facilities.
The good news is that today’s visionaries recognize the enormous potential and opportunity for new innovations, which is why we expect rapid development in alternative energy solutions. Just look at the revolution in electric vehicle technology in the last few years alone.
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The transition to a circular economy requires nothing short of a dramatic transformation of product design, production, and recycling. We’re all going to have to pull together if we’re going to bend the one-way supply chain street into a sustainable loop. That means governments, businesses, and consumers. Everyone.
Thankfully the trend appears to be going in the right direction. Companies are reimagining entire product life cycles at the design stage and trying to maximize product reuse, repair, remanufacture, and recycling. They are shifting their supply chains from a linear approach (take, make, dispose) into a regenerative circle. We’re seeing the birth of reverse commerce or recommerce (backed by reverse logistics!), which will likely experience explosive growth in the years ahead with buyback and resell programs and reusable packaging. Repair, recycling, and resale not only extend a product's life but also avoid the emissions caused by manufacturing out of virgin material.
Second-life garments and smartphones produce 55-75% less emissions than new items made from virgin materials.
A circular economy with circular supply chains means more – not less – logistics, which is why sustainable logistics must be the carbon-neutral engine making sure the propeller keeps turning. Logistics leaders are already gathering a treasure trove of knowledge, for example, through ecommerce returns, and can help transfer best practices across sectors.
As the economy gradually transitions to circularity, logistics leaders must continue to integrate sustainable logistics practices into every link in the chain. We already see the benefits ourselves, as we reduce costs and waste in our own processes while meeting customer demands for more sustainable solutions. That said, the barriers remain high. For example, many products are still not designed for reuse and recycling, and some customers seem reluctant to change.
Public attitudes toward climate change, habitat destruction, and biodiversity loss have reached a tipping point. Individuals and groups are now working feverishly across industries, governments, and societies to minimize environmental degradation and maximize protection. These environmental stewardship efforts will require all hands on deck – from consumers changing their daily habits to investors channeling money into sustainable funds.
With supply chains accounting for around 60% of the world’s total carbon emissions and generating roughly 50% of the world’s plastic waste, the logistics industry finds itself compelled to change the way it does business. But many players are only just starting to integrate environmental stewardship considerations into their day-to-day operations, so it will likely take a few years to trickle down. Be that as it may, the logistics industry can gain a competitive edge and benefit from early compliance with new regulations, solidifying its position as a pioneer.
Millennials’ satisfaction with their organization’s commitment to sustainability can have a great impact on an organization’s retention of talent.
Environmental stewardship will not be without its challenges, either. Without scalable technologies for every supply chain segment, the necessary overhaul may prove too expensive or disruptive. It will also be hard to forecast the knock-on effects of new policies and regulations in this sphere. But logistics is in a unique position to drive and enable change here as well. By embracing a leadership role, we can inspire others, foster collaboration, and help shift the business world to more efficient, cost-effective, and sustainable supply chains.
Sailing through with sustainable logistics
As the world plots a course toward environmental sustainability, the one thing we don’t lack right now is options. That’s why it’s essential to monitor the radar, keep our eyes on the horizon, and steer the ship to more promising waters. The above trends are now clearly in view and offer beacons of hope that can guide us through the stormy seas ahead.
Published: January 2023