Decarbonizing the logistics industry

Of late, the shipping and other industries have come under the lens of decarbonization. The logistics industry is also under increasing pressure to move forward and adopt sustainable and greener practices. According to a report by Stand.earth and Clea Mobility Collective, global delivery and e-commerce companies’ last-mile emissions amount to approximately 4.5 megatons of CO2. This number is expected to rise in the coming years, so the logistics industry must decarbonize and reduce its environmental impact.

One of the primary drivers for green logistics is customer demand. As customers become more aware of the environmental impact of their purchases, they are switching loyalties to companies that can provide sustainable options. This change in customer mindset presents numerous opportunities for the logistics industry to promote sustainable solutions. For example, adopting renewable energy through sustainable aviation fuels, electric vehicles, and electric cargo planes could phase out the consumption of fossil fuels. However, a progressive and well-thought-out plan for a step-by-step deployment is crucial because not all suitable solutions and technologies are readily available or have adequate infrastructure.

The logistics industry faces complex challenges in switching to green logistics. Obstacles include higher costs associated with green technologies, lack of awareness towards green offerings by logistics companies and inadequate funding to rectify infrastructure bottlenecks. With the conversation now geared towards insetting instead of offsetting practices like reforestation, use of solar energy etc., logistics players are developing solutions to reduce their carbon footprint.

Sustainable Aviation Fuels (SAF), biofuels and electric vehicles (EVs) play a significant role in reducing the environmental impact of transportation.

Logistics companies are also deploying EVs as they are becoming increasingly viable for delivery and pickups. However, in the logistics industry, battery-powered vehicles continue to lag behind vehicles powered by traditional internal combustion engines. Short ranges, long charging times, inadequate charging infrastructure and limited payloads are why EVs are currently limited to short-haul shipments and deliveries in urban areas. Developing higher performance batteries and expanding cross-border charging infrastructures are two major challenges in this area.

The focus has shifted with companies looking at reducing not just Scope 1 and Scope 2 carbon emissions, but also Scope 3 emissions.

Scope 1 emissions refer to direct emissions from a company’s operations, such as from vehicles or machinery, while Scope 2 emissions refer to indirect emissions from the production of energy used by a company, such as electricity. In the past, many logistics companies focused on reducing their Scope 1 and Scope 2 emissions by using more fuel-efficient vehicles or switching to renewable energy sources. However, as customers become more environmentally conscious and demand greener supply chains, there is a growing trend toward addressing Scope 3 emissions as well.

Scope 3 emissions are indirect emissions throughout a company’s value chain, including emissions from transportation and downstream distribution. Addressing Scope 3 emissions can be challenging as they often involve cooperation and coordination with suppliers, customers, and other stakeholders. However, the trend toward addressing Scope 3 emissions highlights the growing importance of a holistic approach to sustainability in the logistics industry.

When we go down the path of decarboisation, it becomes clear that we need a collaborative approach between the logistics service provider and the company opting for the logistics service at every stage. Both partners must understand the need, value and commit to working together to promote a greener world.