How Sustainable is the Future of Logistics?
The third Session of the Future of Logistics Conference Part II moderated by Joe Beydoun, was focused on sustainability with questions like are we doing what we need to do to build a sustainable supply chain? What targets do we need to set in order achieve our sustainability goals and can our current business models support those goals?
The panellists for the Session were:
Mary Oxley, VP Marketing & Sales - Middle East & Africa, DHL Global Forwarding
Hans Ettengruber, MD, DIMOS FZE
Lars Jensen, CEO Vespucci Maritime
Mr Beydoun began by asking the panellist about their sustainability targets and what their plans were to achieve them?
Hans Ettengruber said that sustainability has been in focus for “quite a while” and DIMOS has ensured that all the trucks they use in their operations are electric. As far as aviation is concerned using sustainable fuels is still some distance away but the industry was working on it.
Offering the DHL perspective Mary Oxley said that DHL had outlined a roadmap to be a zero emission company by 2050. To achieve true sustainability Ms Oxley said that we had to “burn less and burn clean." By optimizing operations DHL had learned to use less energy. To burn clean DHL has been focused on using a blend of sustainable aviation fuel that it hopes will be pollution free fuel by 2050.
Ms Oxley said that DHL has recently purchased 33,000 litres of sustainable fuel from KLM Air France MartinAir that they will use for the next 3 years.
Putting his “container shipping hat on” Lars Jensen said that not only are shipping companies decarbonising but putting in active efforts to speed up the process. Mr Jensen added that the container shipping sector is driven by financial motivation and sustainable fuels worked out cheaper than conventional fuels in the long run. So luckily in this situation sustainability and profitability “actually go hand in hand”.
Another thought in the shipping industry that was driving sustainability was gaining independence from a single source of energy - namely oil. Green fuels can come from various sources so shipping lines will not be dependent on oil prices to set freight rates. Mr Jensen felt that in the long term sustainable fuels will make better business sense.
As for the rapid speed of this sustainable transformation Mr Jensen said it was again driven by strong financial motivations. Creating sustainable shipping required very heavy capital expenditures that only the larger shipping lines could afford and upcoming IMO regulations could drive the small players right out of the market.
“So the faster I decarbonise the more I can solidify my competitive position in the industry,” said Mr Jensen. All the big shipping lines are trying to decarbonise as quickly as possible thus creating incidental benefits for the environment.
According to Mr Jensen the one thing that could slow down decarbonisation was the issue of availability of sustainable fuels. He informed us that to meet their future demand, Maersk has recently signed agreements with a 6 fuel providers for green methanol. This was to meet a requirement of 700,000 tonnes of green methanol a year. Extrapolated to the global shipping industry Mr Jensen said that worked out to about 800 million tonnes of green fuel a year!
So it was not just about green ships or airplanes but it was about how to produce, and make widely available, the green fuel that will be used to run them, concluded Mr Jensen.
Mr Beydoun asked Ms Oxley if she had noticed a recent trend of customers working only with logistics companies that have sustainable operations and were they willing to pay that extra bit for the same?
“Are customers demanding? Yes. And are they willing to pay for it? Yes,” said Ms Oxley and added the two sectors that saw the most demand of sustainable logistics were the fashion and electronics industries. DHL was in discussions with these customers on how to create a “circular economy”.
Ms Oxley concluded her reply by saying that ultimately it is the end users, particularly the younger end users who are driving the sustainability initiative within the industry that needs to come together in meaningful collaborations to achieve more sustainable operations.
Mr Ettengruber said that DIMOS had been providing sustainable logistics solutions to customers and they have been willing to pay for it.
Mr Beydoun then asked the panellists if they were receiving any assistance or incentives from governments across the world to become more sustainable?
Mr Ettengruber said that governments all over the world were setting up frameworks for companies to become more sustainable. But to achieve sustainability goals within certain time limits plans have to made and equipment has to be produced that will make operations greener and achieve those goals.
Lars Jensen said that there was going to be a very long transition period towards achieving sustainability. Assuming a target date of 2040 Mr Jensen said that currently there were zero TEU miles in the container shipping industry that were genuinely green and we may achieve a few thousand miles over the next few years.
Are there customers willing to pay for greener shipping? Mr Jensen said yes there are but not that many yet. So, on a 15,000 TEU ship you may have 5000 TEUs that have been paid for sustainable shipping. So to make things practical what the industry needs to work out is a framework for accounting for the green TEU miles that will allow transparency in how many potential green TEU miles you can genuinely produce? And how many you can sell to customers?
As for the governments Mr Jensen did not see them playing a big role in setting standards and the global industry would be better at defining and agreeing on the same. What the governments can do is incentivise sustainable shipping while making it tax-wise more expensive to use fossil fuels.
Agreeing with Mr Jensen Ms Oxley said that government incentives can be a major driver in creating more sustainable transport and logistics.
Mr Beydoun next asked the panellists how the logistics sector can collaborate more to successfully achieve more sustainable operations?
Lars Jensen said that the one thing critical to successful collaboration was the setting up common standards. The industry needs set up systems that the end user can trust. When he or she buys green shipping miles they can rest assured that indeed that is what they are getting and they are not victims of “green washing.”
Mr Beydoun then asked Mr Jensen as to who was watching and overseeing the setting up of these standards?
To that Mr Jensen simply replied “no one”. At the moment nobody is really and accurately counting carbon emissions per TEU shipped. “But that has to come in place otherwise it will become a free for all,” asserted Mr Jensen.
Citing an old German saying Mr Ettengruber said: “You must do good things and then talk about them.” This way companies can differentiate themselves from the competition and spread the good word on sustainability. However, Mr Ettengruber said that achieving wider sustainability really depended on our actions as individuals in our day-to-day lives.
“Standards are an absolute must,” said Ms Oxley and different players in the sector needed to “share secrets” in order to drive real change otherwise our children will be the ones who be left with “a price to pay.”
To this Lars Jensen said that one of the discussion that had never been brought to the sustainability table was that with the acceleration of decarbonisation over the next 15 to 20 years, we are going to have to scrap entire fleets of vessels all over the world!
At the moment this scrapping is not being done in a sustainable way in the main scrapping countries like India, Bangladesh and Pakistan. So in order to make our supply chains more sustainable in the future we need to plan for more sustainable ship scrapping operations.
Mr Jensen concluded by saying that he was optimistic about the future and the logistics industry was rapidly digitalising and automating operations in a sustainable way and despite daily challenges the overall direction the industry was taking "was very exciting" with a "big future."