Feb 19 2024

Decarbonising Transportation and Logistics in the Supply Chain: Strategies and Solutions for a Net-Zero Future



Decarbonising Transportation and Logistics in the Supply Chain: Strategies and Solutions for a Net-Zero Future

In the race to a net-zero future, the transportation and logistics sector is both a major challenge and a major opportunity. On the one hand, the movement of goods and materials around the world is a significant driver of greenhouse gas emissions, contributing to climate change and air pollution. On the other hand, decarbonizing transportation and logistics can unlock massive benefits for businesses, society, and the planet, from reducing costs and risks to spurring innovation and creating new jobs.

Consider this: according to the World Economic Forum, the global logistics industry is responsible for around 6% of total greenhouse gas emissions, with freight transportation accounting for the lion's share. This includes emissions from trucks, ships, planes, and trains that move goods and materials across borders and continents, often burning fossil fuels and emitting pollutants along the way.

At the same time, the demand for freight transportation is only expected to grow in the coming decades, driven by factors such as population growth, urbanization, and the rise of e-commerce. In fact, the International Transport Forum predicts that global freight demand will triple by 2050, putting even more pressure on the sector to decarbonize.

So how can companies effectively decarbonize transportation and logistics in their supply chains, while also meeting the growing demand for faster, cheaper, and more efficient delivery? Here are a few key strategies and solutions:

Electrification of transportation

One of the most promising strategies for decarbonizing transportation is electrification - that is, replacing fossil fuel-powered vehicles with electric ones. Electric vehicles (EVs) have the potential to significantly reduce greenhouse gas emissions and air pollution, especially when powered by renewable energy.

In the logistics sector, electrification is already gaining traction in areas such as last-mile delivery, where companies like Amazon, UPS, and FedEx are investing in electric vans and trucks to reduce their carbon footprint and improve air quality in cities. For example, Amazon has pledged to purchase 100,000 electric delivery vans from Rivian, a startup that is developing purpose-built EVs for the logistics industry.

But electrification is not just limited to road transportation. There are also opportunities to electrify other modes of freight transportation, such as rail and short-sea shipping. For example, the Port of Los Angeles is working with partners to develop a zero-emission freight corridor that will use electric trucks and trains to move goods from the port to inland distribution centers.

To accelerate the adoption of EVs in logistics, companies can work with transportation providers and technology partners to pilot and scale electric fleets, as well as advocate for policies and incentives that support the transition to zero-emission vehicles.

Efficiency and optimization of logistics networks

Another key strategy for decarbonizing transportation and logistics is to improve the efficiency and optimization of logistics networks. This means using data, technology, and advanced analytics to streamline routes, reduce empty miles, and optimize load capacity, among other strategies.

For example, companies can use transportation management systems (TMS) and real-time visibility platforms to optimize route planning and reduce fuel consumption. They can also implement collaborative shipping and load-sharing programs to reduce empty backhauls and increase asset utilization.

In addition, companies can leverage emerging technologies such as artificial intelligence (AI) and machine learning to predict demand, optimize inventory levels, and reduce waste in the supply chain. For example, the startup Transmetrics uses AI to help logistics companies forecast demand and optimize their fleet and resource management, reducing costs and emissions in the process.

By improving efficiency and optimization in logistics networks, companies can not only reduce their carbon footprint but also improve their bottom line, by reducing costs and increasing asset productivity.

Modal shift to lower-carbon transportation

Another important strategy for decarbonizing transportation and logistics is modal shift - that is, shifting freight from higher-carbon modes such as air and road to lower-carbon modes such as rail and water.

For example, shipping goods by rail instead of truck can reduce greenhouse gas emissions by up to 75%, according to the Association of American Railroads. Similarly, using inland waterways and short-sea shipping can be a more energy-efficient and lower-carbon alternative to road transportation for certain routes and goods.

To enable modal shift, companies can work with logistics providers and transportation authorities to identify opportunities to shift freight to lower-carbon modes, as well as invest in infrastructure and technology that supports intermodal transportation. For example, the Port of Rotterdam is developing a "modal shift" program to encourage shippers to use rail and barge instead of trucks for hinterland transport.

Modal shift can also be supported by policy measures such as carbon pricing, which can make lower-carbon modes more cost-competitive with higher-carbon ones. For example, the European Union is considering a carbon border adjustment mechanism that would put a price on the carbon content of imported goods, potentially incentivizing a shift to lower-carbon transportation.

Sustainable fuel and energy solutions

While electrification and efficiency are important strategies for decarbonizing transportation, they are not sufficient on their own to achieve net-zero emissions in the sector. To fully decarbonize logistics, we also need to develop and scale sustainable fuel and energy solutions that can power long-distance and heavy-duty transportation.

This includes solutions such as sustainable aviation fuel (SAF), which can reduce lifecycle greenhouse gas emissions by up to 80% compared to conventional jet fuel. SAF can be produced from a variety of feedstocks, including waste oils, agricultural residues, and even captured CO2, and is compatible with existing aircraft engines and infrastructure.

Another promising solution is green hydrogen, which can be produced from renewable energy and used to power fuel cell electric vehicles (FCEVs) for long-haul trucking and other heavy-duty applications. Companies like Nikola and Hyundai are developing hydrogen-powered trucks and fueling infrastructure, with the goal of creating a zero-emission freight network.

To accelerate the development and deployment of sustainable fuel and energy solutions, companies can collaborate with suppliers, customers, and other stakeholders to create demand signals and invest in R&D and infrastructure. They can also advocate for policies and regulations that support the transition to low- and zero-carbon fuels, such as blending mandates and tax incentives.

Collaborative and systemic solutions

Finally, to truly decarbonize transportation and logistics in the supply chain, we need collaborative and systemic solutions that go beyond individual company efforts and address the broader challenges and opportunities in the sector.

This includes initiatives such as the Clean Cargo Working Group, a collaborative effort among shippers, carriers, and logistics providers to measure and reduce the environmental impacts of global freight transportation. The group develops standardized tools and methodologies for calculating and reporting emissions, as well as best practices and benchmarks for sustainable logistics.

Another example is the Global Maritime Forum's Getting to Zero Coalition, a multi-stakeholder initiative that aims to accelerate the decarbonization of the maritime industry and deploy commercially viable zero-emission vessels by 2030. The coalition brings together companies from across the maritime value chain, as well as governments, IGOs, and other stakeholders, to develop and implement a roadmap for the transition to zero-emission shipping.

By collaborating and working towards systemic solutions, companies can not only accelerate their own decarbonization efforts but also help to create a level playing field and drive the broader transition to a net-zero transportation and logistics sector.

The road ahead

Decarbonizing transportation and logistics in the supply chain is a complex and multifaceted challenge that will require sustained effort and collaboration over the coming decades. There is no silver bullet solution, and different strategies will be needed for different modes, routes, and goods.

But the imperative for action is clear. As the global economy becomes increasingly interconnected and the demand for freight transportation continues to grow, we must find ways to move goods and materials more sustainably and efficiently, while also creating new opportunities for innovation and value creation.

By investing in electrification, efficiency, modal shift, sustainable fuels, and collaborative solutions, companies can not only reduce their own carbon footprint but also help to accelerate the broader transition to a net-zero transportation and logistics sector. They can also position themselves as leaders in the low-carbon economy, and build more resilient, agile, and future-proof supply chains.

Of course, the road ahead will not be easy. Decarbonizing transportation and logistics will require significant investments in technology, infrastructure, and human capital, as well as policy and regulatory support. It will also require a willingness to challenge the status quo and reimagine traditional business models and practices.

But the benefits of this transition are immense - not just for the planet and society, but for the long-term competitiveness and profitability of the companies that embrace it. By decarbonizing transportation and logistics, companies can reduce costs, mitigate risks, enhance customer and stakeholder trust, and create new sources of value and innovation.

As a sustainability and supply chain professional, I believe that the time for incremental change is over. To meet the urgent challenge of climate change and build a more sustainable, resilient, and equitable world, we need nothing less than a transformation of the global transportation and logistics sector.

This transformation will require bold leadership, deep collaboration, and a shared vision of a net-zero future. It will require companies to think beyond their own operations and work across the value chain to drive systemic change. And it will require all of us - as individuals, as organizations, and as a global community - to do our part and take action.

The road to a decarbonized transportation and logistics sector is long and challenging, but it is also one of the most important journeys of our time. By working together and leveraging the power of innovation, collaboration, and leadership, we can build a cleaner, more efficient, and more sustainable supply chain - and a better future for all.

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