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Decarbonizing the logistics sector: From idea to execution

February 6, 2024

Table of Contents

The journey toward a net zero future is long (and challenging). Despite the ambitious goals set by the Paris Agreement to cut emissions by 45% by 2030, progress has been slow. The logistics sector, responsible for 33% of global carbon dioxide emissions, is under added scrutiny. It's crucial for the industry to take meaningful steps towards reducing its carbon footprint.

 We have gathered the main challenges logistics companies face today in their decarbonization journey and how they can be tackled. We have also discussed the possible logistics decarbonization levers and best practices to introduce in your logistics company.

Challenges to logistics decarbonization

The challenges in the logistics sector are not just about transport and delivery. It involves various associated activities such as warehousing, international supply, order picking, or raw material supplies. All these activities contribute to global emissions. 

Limited availability of green fuels for freight transportation

Freight transportation accounts for 8% of global greenhouse gas emissions (11% if counting warehouses and ports). This is due to the fact that nearly all freight transportation runs on oil and gas. Transport equipment is also a big contributor to GHG emissions. It emits over 20% of the world’s black carbon, a potent short-lived climate pollutant. While this challenge is addressable through greener fuels, the implementation is hindered by its limited availability. 

Lack of investments for a greener supply chain

From the extraction and processing of raw materials to manufacturing, packaging, and shipping—all these faces of the supply chain contribute to enormous emissions. The challenge lies in the fact that companies cannot always directly control these emissions. But they are still the result of its operations. These challenges are often extensive and costly; tackling them requires significant upfront investments. Besides, multiple stakeholders may not see ROI in implementing greener initiatives. This further causes internal company conflicts while balancing profit and sustainability.

Inadequate logistics infrastructure

Logistics infrastructure, encompassing elements like electric vehicle charging stations and green warehouses, faces hurdles in terms of inadequacy. The lack of sufficient infrastructure for sustainable logistics practices adds to the complexity of transitioning to greener alternatives. A cross-vertical agreement between the government, carriers, and logistics companies is also lacking to put green measures in place. 

Lack of transparency into emissions data

Companies grapple to identify emissions hotspots and prioritize reduction efforts. The logistics and supply chain processes are so complex that obtaining granular, verifiable, and consistent emissions data is challenging. This challenge results in information asymmetry and inaccurate emissions calculation within complex logistics processes.

Increased last-mile transportation with the rise of eCommerce

The increased use of D2C sales channels and omnichannel (virtual and physical shops) fulfilment, coupled with fast delivery expectations, has significantly increased last-mile transportation. The more vehicles on the road, (vans, trucks & lorries), for last-mile deliveries the greater the carbon footprint. Road transport emits more emissions than other modes of transport (freight train and cargo ship). 

Last mile transportation by average emissions
Data Source: UK DEFRA 2023

Limited access to alternative fuels, low-emission vehicles, renewable energy sources, or smart systems hinders the sustainability effort of logistics operations. On top of that, conflicting interests, competing priorities, or information gaps further snowball the challenges and take logistics a step away from their sustainability goals. 

Bridging the gaps: Logistics decarbonization levers

Logistics decarbonization levers are an organization's overarching principles and mechanisms to reduce emissions and achieve their climate goals. They are the aggregated mitigation actions logistics companies can take to reach net-zero supply chains. From efficient and effective use of resources, modification of the transport structure, and making strategic choices, here are some levers for you to implement: 

1. Designing a diversified energy portfolio

The first lever requires logistics companies to shift their focus from fossil fuels to a sustainable energy mix. Currently, oil is one of the largest energy sources in the world (as shown in the infographic below), followed by coal, gas, and hydroelectric power. This needs to change. 

Chart showing energy consumption by source
Source: https://ourworldindata.org/energy

The logistics’ energy mix should be dominated by low-carbon sources of energy—renewable technologies and nuclear-powered energy sources. You can actively plan for a diversified sourcing funnel to support your future clean-fuel needs. Adopting alternative fuels can significantly decrease the carbon footprint of shipping vessels and aircraft. The concept extends to land transportation with electric vehicles.

2. Route planning

Identifying the most efficient and shortest routes helps reduce fuel consumption and carbon emissions. Logistics companies can optimize routes based on distance, speed, and emissions. Leveraging technology is also an excellent idea that can help logistics companies with real-time information and situational insights on route optimization.

3. Efficient transportation options

Logistics companies should choose carriers with fuel-efficient designs and practices. For example, choose ships with streamlined hull designs, slow steaming, or eco-friendly fuel options. Similarly, selecting hybrid vehicles run on batteries or fuel cells instead of fossil fuels. 

4. Improve capacity management

On average, the shipping containers sent from manufacturers in Asia to the United States are 24% empty. Maximizing the capacity utilization of delivery transport can reduce emissions and improve efficiency. The objective is to load delivery transport before they hit the voyage fully. Another emerging model is the “shipper collaboration" model. Here, multiple companies share transportation resources and collaborate on shipments.

5. Circular economy

Logistics can also explore possibilities for reusing resources across the production cycle. Start with a focus on sustainable packaging. Also, implement circular logistic flows for returnable and reusable packaging material. 

6. Tackle last-mile deliveries

Road freight emits more than 100 times CO2 as a cargo ship carrying the same amount of goods or products at the same distance. You can reduce the impact of last-mile emissions by opting for local fulfilment centers, increasing first-attempt delivery rates and minimizing returns. 

7. Resource efficiency

Improving energy performance requires optimizing production processes and identifying energy losses. Companies can optimize energy performance by upgrading machinery and equipment to more energy-efficient models. Moreover, they can also implement smart technologies. Automated lighting and energy-efficient conveyor systems can significantly reduce energy consumption while maintaining or improving overall operational output.

8. Carbon compensation

This decarbonization lever allows organizations to offset emissions by funding projects promoting renewable energy development or carbon sequestration. Logistics firms can engage in carbon compensation by investing in such projects. For instance, a freight company might participate in initiatives that promote sustainable forestry. It can also invest in technologies that capture and store carbon emissions generated during transportation operations.

Creating a logistics decarbonization action plan 

Decarbonization in logistics is a long-term project. Following a step-by-step action plan can help you stay on track. 

Step 1: Measure emissions

What isn’t tracked can’t be measured. What can’t be measured can’t be fixed.The very first step towards decarbonization is tracking your emissions. Quality data can help you measure GHG levels across assets and facilities. You can select a logistics decarbonization software that can measure the emission levels at different supply chain stages. The insights into the sources and their respective quantities empower you with the intelligence that can lead to lower carbon emissions and operating costs. 

Step 2: Set targets

Defining a clear target is crucial in developing a detailed emission reduction plan. Gauge where you stand among the leaders and laggards in your industry. Then, establish the baselines and benchmarks to implement solutions that will reduce emissions.

Step 3: Prioritize cost-effective abatement decarbonization levers

This is where you decide which decarbonization levers to implement, when, and how to implement them. Prioritize, combine, and sequence levers based on cost and abatement potential. 

Step 4: Develop your decarbonization roadmap

Following a careful identification and prioritization of abatement levers, you should develop a roadmap. It should outline the initiatives, actions, and solutions to address the identified areas. The roadmap should also include the collective impact of various reduction strategies and actions on their emissions profile over time.

Step 5: Logistics decarbonization report

The next step is to report, disclose, and communicate emission reduction efforts to the stakeholders. Regular reporting updates stakeholders on emissions, decarbonization strategies and progress toward set targets. You should also choose the ESG disclosure framework that best aligns with your company objectives. 

Logistics decarbonization best practices by pillars 

Decarbonization in logistics involves a multifaceted approach. Achieving the bottom line of "people, planet, and profits" involves implementing sustainable procurement, transportation and warehousing practices. 

Here are some best practices to follow:

1. Procurement

This phase of the supply chain involves sourcing materials and services. Here, companies can contribute to sustainability in several ways:

●     Select suppliers with low carbon emissions

●     Conduct rigorous sustainability audits

●     Provide financial incentives to suppliers for sustainability efforts

Real-life example:

Ikea has moved towards a circular agenda. It aims to use only renewable or recycled materials by 2030. These efforts help Ikea reduce emissions throughout its supply chain by reducing waste. 

2. Transportation

There are three main modes for transporting goods from one place to another. Implementing sustainability best practices in all three modes is equally essential. 

A. Shipping

Ports and vessels should uniformly implement IMO (International Maritime Organization) rules on the reduction in carbon intensity of international shipping. Companies should also implement energy efficiency measures at their level. 

Real-life example:

The Port of Long Beach is also named the “world's greenest container terminal.” It mandates at least half of all cargo ships to use shore-side electricity. The port uses dockside power hookups to reduce emissions.

B. Aviation

The sector's mitigation relies on engine improvement, aircraft design, and green fuel. Many countries are also modifying airport operations. Incorporating carbon offsetting programs and adopting biofuels are also gaining traction.  

Real-life example:

Singapore Airlines and AirAsia have implemented initiatives to reduce cabin waste on board. Waste management significantly contributes to reduced emissions. 

C. Road transport

This entails shifting cargo to low-emission transport options, investing in the electrification of road transport and managing last-mile deliveries. 

Real-life example:

Delivery companies like UPS and FedEx have started integrating electric delivery vans into their fleets.

3.Warehousing

Forward-thinking companies are developing strategies aligned with customer demands for nearshoring and local sourcing. Other ways to reduce the carbon footprint include replacing diesel forklift trucks with multifunction electric ones. Additionally, redesigning warehouses and distribution centers to minimize environmental impact is gaining traction.

Real-life example:

Ocado, an online grocery retailer, has highly automated warehouses. It utilizes robotics and AI for warehouse management. This automatic handling emits fewer polluting gasses and lessens the traffic of traditional forklifts. 

Decarbonization in the aviation industry

Zuno Carbon: Helping you navigate your decarbonization journey

Modern engines, low-carbon fuels, reduced freight demand and more efficient practices can reduce freight emissions. However, faster progress is needed to achieve our global climate goals. 

Very often, companies cannot adopt these measures due to a lack of visibility into their carbon footprint. Companies must understand where the emissions are coming from to build a resilient supply chain and embrace sustainability as an integral part of their core strategy.  

Zuno Carbon helps you calculate and measure your end-to-end carbon emissions, report ESG performance and decarbonize your value chain. Our platform, Veridis, empowers you with the right insights to set decarbonization targets and tailor your action plan to achieve those targets.

Book a demo with us today to learn how we can help you get started with your decarbonization journey. 

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Frequently Asked Questions (FAQs)

How do you decarbonize logistics?

Decarbonizing logistics requires a step-by -step approach and leveraging different levers like route optimization, alternative fuels, reducing energy consumption and more. Since logistics is a multifaceted industry, every touchpoint from the place of production to last-mile delivery, should work towards reducing emissions.

What are the five pillars of decarbonization?

Here are the five pillars of decarbonization:

  1. Using energy efficiently
  2. Electrification
  3. Alternative low-carbon fuels
  4. Capture, utilization, and storage of CO2
  5. Reduced emissions of non-CO2 GHG
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