Distribution groups grapple to reduce their carbon footprints
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When a package thuds on to a doorstep, customers glimpse only the final few metres of its long and complex journey through the global supply chain.
Most consumer goods delivered across the developed world are manufactured thousands of miles away before being shipped or flown to ports, moved to warehouses or regional fulfilment centres by road or rail, and then driven to a customer’s door.
As a result, every stage of the process has an impact on the environment. International trade-related freight transport is now responsible for 7 per cent of global carbon emissions, according to the International Transport Forum. And this global freight transport activity is only forecast to grow: by 2050, it will be 2.5 times its 2015 level, based on ITF projections released this year. The body also warned that freight’s absolute carbon emissions will be more than 20 per cent higher by 2050 compared with 2015, even under current decarbonisation policies, which it labelled as “insufficient”.
Among the possible solutions to decarbonise the sector are greater efficiencies to help shrink inventories and the number of deliveries, as well as switching to more sustainable fuel and energy supplies.
But the industry is particularly complex to decarbonise. Whether it contains a sofa or an iPhone, a package’s journey will usually involve several independent businesses, from huge shipping companies to freight forwarders, warehousing groups, and last-mile delivery couriers.
Given this fragmentation of the industry, there is no single body or organisation that will be able to lead decarbonisation, points out Céline Hourcade, managing director at Change Horizon, a logistics consultancy. “I think you need to be pragmatic and see how individual companies and stakeholders are going to contribute,” she says.
The biggest companies in the sector have all begun to act, by issuing a blizzard of sustainability commitments.
Shipping group Maersk is aiming to reach net zero emissions by 2050, and have the first carbon-neutral vessel on the water by 2023. Meanwhile, some of the most ambitious pledges on the use of sustainable aviation fuels have come from the air freight industry.
Amazon founder Jeff Bezos has pledged to use his ecommerce group’s “size and scale to make a difference”. The company has said it will make 50 per cent of all shipments net zero in emission terms by 2030 and hit overall net zero emissions 10 years later.
Amazon has already launched a venture capital fund to invest in companies pioneering new technologies to help decarbonise logistics, with an initial $2bn in funding.
This has invested in start-ups including a company building small, electric aircraft for use in package deliveries, a sustainable-fuel manufacturer, and an electric vehicle maker. The fund, and its futuristic investments, underline how logistics companies are hoping that new technologies will emerge to offer a ‘silver bullet’ to help them decarbonise their energy-intensive industry.
Among the biggest challenges will be making changes to intricately planned supply chains without increasing costs for consumers, who have come to expect rapid, cheap deliveries as a part of everyday life in the western world.
For now, the new technologies tend to be more expensive than older, more carbon-intensive solutions. Sustainable fuels to power cargo aircraft, for example, are up to five times as expensive as traditional jet fuel.
However, some of the most significant pressure to move on climate change is coming not from consumers but from the big corporations. They all rely on the logistics industry to get their products to market, but are also increasingly mindful of tackling their broader “scope 3” emissions, which include those emitted during transportation and distribution of their goods and services.
Ikea, Unilever and Michelin are among nine leading companies that last month pledged to use only ships powered by zero carbon fuels by 2040.
“Companies have the opportunity to make a huge impact in the fight against climate change by also decarbonising their supply chains,” says Dominic Waughray, a managing director at the World Economic Forum. “The interaction between governments and companies to seize this opportunity is an important one.”
So far, though, even leading companies have struggled to find the data they need and set clear targets for their suppliers, according to a report by the WEF in conjunction with Boston Consulting Group, co-authored by Waughray.
Consumer multinationals, for example, have tens of thousands of businesses in their supply chain to monitor, while fashion companies often use small manufacturers to make their clothes.
Still, amid the obstacles, there are opportunities. “One of our big challenges is how to get a view on the hundreds of thousands of farmers in our supply chains, but we see that as an opportunity for more and more direct farmer engagement,” said Greg Downing, an executive at US food giant Cargill, in the WEF/BCG report.
Change Horizon’s Hourcade says: “It will take time, but I think we have the right momentum right now, where so many players at every level [within the industry] know they have no choice.”