Zomato’s strategy of being net carbon zero through REC certifications is one of the oldest ways companies have been trying to make sense of sustainability norms.
It is also one of the reasons carbon credit markets have historically struggled: pushing the buck of the pollution in some other part of the world where we can’t see or understand it.
Making any industry sustainable is an uphill struggle, especially one that is as fast-paced and intricate as logistics.
If we need to look beyond net carbon zero certifications, REC and audit of these value chains. We fundamentally need to shift from viewing sustainability as compliance and focus on optimization through sustainability.
Till that happens the industry’s performance requires a commitment to go beyond simple reporting and certification and look towards optimization.
Brief intro to the logistics sector
The global logistics industry is a vital part of global commerce, currently standing at $8trillion. India, with its $317.3 billion contribution, is a significant player, influencing sectors like agriculture, manufacturing, and services. However, this industry comes with a hefty environmental price tag.
Logistics is responsible for a staggering one-third of global CO2 emissions and is expected to become the world's highest carbon-emitting sector by 2050 if nothing changes.
When people talk about logistics, the focus is always on transportation. However, while critical, it is one part of the logistics chain. When we talk about implementing sustainable logistics, decision-makers need to realize that we need to talk about the whole value chain.
Value chain of logistics and terminology
Typically in any delivery scenario, 4 key players are responsible for the transportation to source to ensure timely delivery
Source – The delivery will originate at a source location at a manufacturer or aggregator level.
GHG emissions - Here the carbon footprint of the source partner will be calculated by three main components
a) Production of the product
b) Storage of the product
c) Wastage created in manufacturing and storing the product if any.
Integrated supplier or aggregator –Here the GHG emissions of the integrated supplier consist of 3 components
a) The supplier's footprint for offering the services
b) The transporter footprint
c) Waste generated in the process.
Destination customer –Here the GHG emission at the customer end will be purely in terms of wastage and disposal and recovery of the same.
This chain is further subdivided in terms of Full load, Partial load and Courier all of which have different ways of attribution through GHG.
When designing any strategy for carbon neutrality, organizations need to factor in these stages and understand for each stage of emissions what possible solutions and projects can be implemented. For example: at the source level, the focus could be better warehousing, shorter supplier chains, better sourcing, minimizing wastage etc. But at the customer end the focus is only on waste minimization and recovery. Integration of EVs may solve only transportation problems but remaining contributors to GHG across the world need to be further addressed.
Pressure for sustainable logistics
Adoption of EVs in transportation, focusing on minimizing wastage, etc., are great ways of making logistics sustainable. But soon it will not be enough. With growing worldwide regulations, it is clear most economies are forcing logistic companies to think of optimization and behaviour change as a way of achieving Net Zero. Some of these new regulations include:
● France and Spain banned the use of shorter flights, aka, distances that can be covered in 2.5 hours or less by train, to bring down each country’s emissions.
● China and the EU have pledged to ban the use and manufacture of fossil-fuel-powered vehicles within the next 15 years and replace them with EVs and hybrids.
● International Maritime Organization (IMO) 2020 restricting the use of sulphur in ship fuels to reduce pollution
Additionally, the consumer base has been growing more eco-conscious. Zomato recently made headlines, with the company’s claims of ‘more than 100% plastics recycled’ and ‘100% green deliveries in 2024’ being met with scrutiny from shareholders asking for definitive proof via audits. Changes like these are driving those who work in the sector to look for alternative ways to meet sustainability goals within the margins at an industry level.
Challenges in implementing sustainable logistics
1. You think and we will deliver –The quick growth of e-commerce in India and one-day delivery is one of the largest issues the transportation sector at large is facing in countries like India today. With the rise of instant gratification, there is an urge to meet delivery deadlines whether or not they are cost-effective and if they achieve partial or full load standards. Though effective short term, in the long run and at a unit economics level, this lack of standardization at the customer end will make GHG emission per segment higher and the shipment by itself more costly.
2. Availability of data –Transportation companies are struggling with authenticating and analyzing data across multiple deliveries. Hence for any system to be able to calculate emissions reliably, it needs to be able to integrate data seamlessly from multiple platforms without adding costs in the form of IOT etc which may eat into margins that these companies will make unless there are dual uses for the same.
3. Current data metrics –Currently, the data calculation for emission happens at the time of billing taking value chain calculation. However, the industry works point to point and hence this alignment in terms of core GHG metrics in terms of calculations still needs to happen.
4. Lack of region-specific standards –Current platforms use DEFRA, USEEIO or HBEFA as industry-specific emission factors. However, these are only meant for classification in Europe and America. There are currently no region-specific emission factors making computation inaccurate.
5. Evolving ecosystem –While EV and other options in terms of sustainable packaging, pellet-based systems, recycling through recollection or upskilling are rapidly evolving. The same needs to be proved at the economics of scale level for rapid adoption.
How can technology be a transforming force?
a) Tackling the biggest problems –Contrary to popular belief, the largest contributors of GHG emissions in logistics aren’t air transport (which contributes 7%), but roadways and railways: over 75% collectively, despite having only 27% of the global transportation. In fact, sea-based transportation, despite accounting for 72% of global transportation, only contributes 20% of the sector’s GHG emissions.
Hence the first point of optimization of railways and roadways, based transportation through dedicated data analytics, route and load optimizations keeping GHG in mind could be a starting point for technology platforms.
b) Improving value chain visibility –The first need would be to break down data from a value chain actionable perspective on a single decision-making platform. Here one of the best ways it can help is by creating ESG-based platforms that streamline implementing sustainable practices. Said platforms can be built on efficient data-collection processes that assimilate data from multiple sources, to gain a better understanding of what practices work best under which conditions - what works for India may not work for other countries.
At Impactree, we have created just that through RUBICR - a data platform that uses ESG metrics to tackle some of these complex value chain challenges and ease reporting and decision-making.
By providing end-to-end emissions tracking across their entire supply chain, as well as customizable dashboards based on where they are located and the standards they adhere to, organisations can get the right results to the right person at the right time to improve their performance by identifying opportunities to implement sustainable practices.
Additionally, ESG-based platforms can also facilitate the adoption of sustainable packaging solutions, reducing waste and minimizing the use of harmful materials. By tracking the lifecycle of packaging materials, companies can identify opportunities for recycling and reuse.
New features like custom scripts to clean up data errors based on identifiable indicators, or supplier ratings so companies can better choose their business partners, are also features that can improve profitability.
Conclusion
When talking about embracing sustainable logistics, it is clear that any commitments and strategies should go beyond simply reducing carbon footprints. It also means reinventing operations to be efficient, cost-effective, and environmentally responsible, which involves the establishment of rules or structures designed to ensure ethical conduct, honesty, and accountability.
Want to know more? DM us @impactree.ai
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