Sustainability has been defined by United Nations World Commission of Development and Environment as “Meeting the needs of the present without compromising the ability of future generations to meet their own needs”. The definition covers a wide spectrum covering economy, society and environment. Environmental sustainability is one of the most common phrases is discussion on sustainability. The recently convened COP 28, the supreme body of United Nation on climate change, acknowledged that progress is too slow across all areas of climate action – from reducing greenhouse gas emissions, to strengthening resilience to a changing climate, to getting the financial and technological support to vulnerable nations. For the first time this forum recognized the need to transition away from fossil fuels.
It’s now a pressing concern for the majority of corporate organizations as well, given the escalating environmental degradation. Sustainability also has become a cornerstone in shaping the future of supply chain strategies within the constantly evolving landscape of global business. Sustainable development has also spurred numerous sustainable logistics initiatives aimed at mitigating the adverse impacts of logistics, while enhancing positive environmental and social outcomes. Whether it’s long-haul heavy-duty transportation or intra-city distribution, freight transport systems are known to yield significant negative externalities in their day-to-day operations. These include emissions of pollutants, traffic congestion, accidents, noise pollution, visual disruption, infrastructure strain, and wastage of resources.
According to few global studies activities related to supply chain emits 60% of global emission and in a business these activities hold 5.5 times more intensity than rest of business. As per data of 2020 released by Niti Ayog, Indian freight market handled 4.6 billion tonnes of goods and emits 220 million tons of carbon di oxide and is estimated to increase by 451 % to 1214 million tons by 2050. Out of which freight sector will be the largest contributor. In order to meet the sustainability goal and keep the emission low from freight movement, Government has already initiated multiple initiatives including specific changes in regulations.
Few large logistics players have incorporated sustainability visions and goals into their operations to enhance efficiency while simultaneously reducing costs and emissions. Widely adopted practices include EV adoption, energy efficient warehouses, optimized packaging to minimize waste and improved vehicle configuration in trucking. Some other initiatives include digitization and standardization in order to enhance asset interoperability, route optimisation etc.
Although there are numerous initiatives of sustainability, which a logistics company can adopt, major initiatives of sustainability adoption practices in logistics can be classified in four buckets.
Eco Friendly Vehicle adoption: Most discussed and hyped initiative in logistics industry is adoption of electric vehicles (EV). India had approx. 2.3 million operating EV at the end of FY 23. 50% of them are two-wheeler owned by individuals followed by 46% three-wheeler. Out of these three-wheelers, most are passenger vehicles and share of electric cargo commercial vehicle is significantly small. Total number of deployed electric cargo vehicles is still in thousands only. Barring few EV centric in city distribution company, none of the large player has 5% of fleet of electric vehicles. On the other hand, a lot of work is going on in hydrogen ecosystem development. Although hydrogen vehicles are in testing stage, but possibility of direct transitioning from ICE vehicle to hydrogen vehicles exists for long hauls / heavy commercial vehicle, skipping the EV transition. EV is expected to be significant in intra city segment due to charging infrastructural constraints.
Eco friendly mode adoption: Apart from transitioning to EV, shift in modal mix is other option towards sustainability. Unfortunately, our modal mix is tilted towards road transportation, which is less environment friendly compared to rail and waterways. Although rail freight is growing continuously, but its share is not improving in overall transportation modal mix. With a vision to improve multi modal connectivity Ministry of Road Transport and Highways (MoRTH) has planned 35 Multi Modal Logistics Park (MMLP). Multi modal logistics will not only give benefit in terms of cost of logistics, it will also improve the efficiency. Out of planned MMLPs, 4 has been awarded to private players for development so far. As these projects require significant capital and large adjacent land with long pay-back period, full fledge development and transitioning of freight to multi modal network will take time. Railways has performed very well in containerised cargo movement, but containerisation level in domestic movement is still very low.
Sustainable warehouse adoption: In addition to transportation logistics, warehouses and distribution facilities also significantly impact the environment. As a sustainability initiative warehousing segment has adopted multiple initiatives like energy-efficient technologies, LED lighting, motion sensors, and solar panels, which reduces energy consumption and carbon emission as well. As most of these initiatives are neither Capex heavy nor increases Opex heavy, which leads to favourable situation for better adoption rate for such initiatives in sustainable warehouses.
Sustainable Technology adoption: Various new technologies like Artificial intelligence (AI), Machine Learning, IOT, Blockchain, and data analytics are revolutionizing the logistics sector, driving efficiency improvements and minimizing environmental footprint. These tools support by way of optimising routes, identify waste, redefining processes etc and directly yield positive impact in terms of savings. A use case from ABC express shows that on a long-haul route of 3000 Km distance there may be differential of 22% fuel consumption only on account of driving pattern, which can be regulated and monitored through use of technology. Adoption of such technology is not wide spread in logistics, but it’s expanding rapidly. As cost of technology is becoming more affordable for SMEs through models like SaaS or Pay per use.
Understanding about need of sustainable development and availability of expertise are two major challenges for unorganised and SME players. To some extent, force from customers for sustainable initiatives puts pressure on smaller organisations. Even the organisations, who are having awareness or willingness to adopt sustainable initiative has limited expertise in implementation and measuring of such initiative. Even none of the regulatory norm for reporting or disclosure on sustainability is mandatory for any logistics organisation.
So far, we see good intent and initiation towards sustainable initiatives in logistics industry, but on implementation and execution front a long way is yet to be covered. The logistics industry remains pivotal in shaping a sustainable future. Companies will advance towards a greener and more resilient logistics and supply chain. Sustainable logistics will be possible by collaboration of logistics service providers, logistics service users, policy makers and society.