Sustainability is a real challenge for logistics companies,
whose services need to be both clean and good value.
Logistics is one of the key engines behind worldwide economic growth and the rise in employment. In our closely interconnected world, it is only the physical network of the logistics industry that allows such international exchange. Germany’s export success would also be unthinkable without logistics, and efficient supply chains are a crucial factor in companies’ economic success. In short, logistics connects people and markets and, with a share of around nine per cent of global GDP, the sector makes a vital contribution to worldwide prosperity.
This effect can also be seen at a regional level – effective logistics is essential for North Rhine-Westphalia’s position as a top-class industrial location. Modern and efficient supply chains are a significant competitive advantage, and a leading logistics provider like Deutsche Post DHL makes a crucial contribution to this. This benefits companies on the ground and reinforces local and regional economic strength.
Today, economic prosperity is unimaginable without sustainability, and especially climate protection. Here, too, the contribution made by logistics is crucial, especially as transporting goods plays a part in CO2 emissions. Efficient logistics is strategically significant if CO2 emissions are to be reduced. After all, supply chains and logistics processes are deeply embedded in value creation in every sector. Given the increasing demand for envir-
onmentally friendly products and the strict regulatory specifications, the sector needs to pave the way for environmentally sustainable and CO2-efficient business.
The logistics industry can therefore play a major role as our society becomes increasingly orientated towards sustainability. It can use its expertise and unique role throughout the entire supply chain to provide crucial support to many sectors as they move towards low-CO2 business. In line with this, over the next few years, logistics will no longer be seen as a bulk business in which low prices are all that counts.
In order to raise awareness of ‘green’ logistics solutions and inspire further discussion, Deutsche Post DHL has published an extensive study entitled “Delivering Tomorrow: Towards Sustainable Logistics”. The study is based on extensive data and has been compiled by the company’s own specialists and renowned experts from research institutions including the Massachusetts Institute of Technology (MIT), Technische Universität Berlin and the Potsdam Institute for Climate Impact Research (PIK). As part of the study, a global survey of around 3,600 business clients and consumers is presented. This shows a growing demand for green services.
Even today, business clients around the world are realising how much logistics can do to reduce their own CO2 emissions and make their business models more sustainable. A survey of logistics customers tells us that 63 per cent of them believe that the storage and transportation of goods is becoming a key point of leverage in the campaign to avoid CO2. In addition, almost 60 per cent of the customers consider ‘green’ transportation to be an important argument in customer acquisition. The study identifies seven trends that illustrate how sustainability will change the logistics sector.
1. It comes down to logistics – it is not a bulk business. Not only is logistics the engine behind worldwide trade and structurally involved in value creation, it is also a sector that is of strategic significance in the development of a reduced-CO2 economy. Logistics’ unique role as a networking industry that connects companies from every sector and region makes the sector the natural partner for CO2 reduction throughout the entire supply chain. If companies view their supply chain as a key factor in their business strategy, they will become more aware of the potential for improvement that lies in designing that supply chain in a more environmentally friendly way. This includes everything from cost reductions to greater reliability and CO2 reduction.
2. The way to achieve technological change is for companies, financial institutions and the public sector to stand shoulder to shoulder. Although technological innovations are crucial for the development of sustainable solutions, financial requirements and long amortisation periods are a barrier to investment. Because few companies are willing to bear these costs alone, companies, financial institutions and the public sector need to work together to encourage the necessary investment. Mutual support and long-term planning from all stakeholders is vital.
3. Cooperative approaches are increasingly being seen as the route to sustainability; even competitors will work more closely together in future. Companies are increasingly realising that sustainability requires joint approaches, and many sectors are already seeing vertical cooperation between customers, suppliers and providers. However, horizontal cooperation between logistics companies – even those who are competitors in some areas – also offers plenty of potential for CO2 reduction. Shared warehouses and consolidated deliveries not only reduce excess capacity and lower costs, but also decrease emissions.
4. The business models of the logistics companies are changing as sustainable innovations unlock new business opportunities. At the same time, technologies and concepts that are currently focused on designing logistics more sustainably are opening up new business approaches for logistics companies. One example is the operation of large fleets of electric vehicles. These could become an integral part of intelligent energy networks (smart grids), allowing logistics companies to advance to become ‘energy managers’. Equally, the continuing trend towards de-materialisation – the digital distribution of documents, books and other media – also offers new business opportunities. For example, electronic letters can now be delivered just as securely and bindingly as conventional ones using solutions such as Germany’s E-Postbrief.
5. CO2 labelling is being standardised. Those who pay extra for sustainable solutions also demand greater transparency. Disclosing the CO2 consumption allows customers to compare ‘green’ products, which in turn means that consumers can bring about change through their purchase decisions. Governments are supporting this development by promoting international standards to improve transparency regarding CO2 emissions.
6. A price is being put on CO2 emissions. The increasing importance of CO2 reduction will strengthen calls for a price for emissions. Putting a price on CO2 emissions means that they will be included as a factor in companies’ calculations and decision-making processes, just like the costs of procurement or staff. This creates a vital incentive for business and logistics processes to be designed more sustainably.
7. CO2 pricing will lead to stricter regulatory measures. One of the biggest challenges involved in such measures is creating fair conditions for competition. Shared standards and rules for every stakeholder in the sector are essential. When it comes to new regulations, the more international they are, the more effective they are. For political measures in particular, such as emissions trading systems and regulatory specifications, it would be preferable for them to have a global scope in an industry like logistics, which is active around the world.
These seven trends are interconnected in a range of ways. Progress in one area encourages progress in the others. At the same time, the latest study on sustainable logistics also shows that there are still barriers to be overcome on the way to lower CO2 emissions. There is no technological silver bullet that can solve every problem overnight. The key to reducing CO2 emissions in the transport and logistics sector lies in combining solutions and technologies that are already on the market or about to achieve market readiness.
Today, leading logistics companies are already using many measures that show how sustainability, and above all a reduction in CO2 emissions, can become a central aspect of everything the company does. Deutsche Post DHL was a pioneer in this field with its GoGreen programme: it was the first to offer CO2-neutral shipment and the first logistics company to set itself a specific target for CO2 efficiency. This is how logistics can contribute to sustainability.
Dr. Frank Appel
Born in 1961, the author studied Chemistry at the university of Munich. In 1993, he gained a doctorate in Neurobiology from ETH Zurich in Switzerland. He then became a consultant at McKinsey & Co., rising to become a member of the German management board in 1999. He has been at Deutsche Post AG since 2000. Dr. Frank Appel became a member of the executive board in 2002, and has chaired it since 2008.