The World Economic Forum’s Logistics and Transport Community, and Accenture, have released a 2009 report quantifying and ranking opportunities to reduce carbon in the supply chain.
Supply Chain Decarbonization examines the role the logistics and transport sector plays in reducing emissions in its own operations and by influencing shippers and buyers to undertake broader supply chain improvements.
“This report makes clear the need to look strategically at the end-to-end supply chain to include all aspects of the product life cycle, from raw materials to product disposal, when approaching the supply chain decarbonization challenge,” said Narendra Mulani, managing director of Accenture’s Supply Chain Management practice, who served as project advisor.
“Clearly, the logistics and transport sector can contribute a great deal to the reduction of carbon emissions and obtain strategic business benefits from doing so. However, the greatest strides will be achieved by collaborative end-to-end supply chain optimization that includes shippers and buyers.”
According to the report, logistics activities contribute about 5% of the 50,000 mega-tonnes of carbon dioxide emissions generated by all human activity annually. Of the 1,440 mega-tonnes of CO2 abatement potential the major opportunities present, the logistics and transport sector represent 60% of these, the report claimed.
So what’s the market, where’s the opportunity, what’s the shakeout?
There are five feasible opportunities with the greatest carbon dioxide abatement, or diminishment potential, the report suggested.
• Clean vehicle technologies (with 175 mega-tonnes CO2 abatement potential)
• De-speeding the supply chain (i. e. easing lead times and delivery stipulations, with an abatement potential of 171 mega-tonnes)
• Packaging design initiatives (132 mega-tonnes)
• Optimized networks (124 mega-tonnes)
While the remaining opportunities address emissions generated by shippers and buyers within their own operations, the report said that organizations in the logistics and transport sector are in a position to influence shippers and buyers to collaborate across the extended supply chain in an effort to achieve the greatest decarbonization impact.
Key opportunities for logistics and transport businesses include: reducing emissions using internal solutions, encouraging external shippers and buyers to change their behaviour, and actively engaging policy makers.
In terms of the internal actions the logistics and transport sector can take, the report advocates speeding up the industry-wide adoption of new technologies, fuels and associated processes by implementing these where there is a positive business case.
Optimizing networks, through reviewing large closed networks and ensuring efficient hierarchies and nodal structures, is another recommendation. Integration of optimization efforts across multiple networks -for example, integrating one’s own and customers’ networks into one model -is another approach.
Mode switches, as they occur within closed networks (postal, parcel, pallet operators), are recommended practices, as are co-loading opportunities, which would enable further collaboration between multiple shippers and/or between carriers.
“We see carbon abatement remaining relevant in a downturn -and possibly even being more desirable. As much of managing carbon emissions is about reducing energy consumption, supply chain decarbonization often brings with it economic benefits,” said the report.
Shippers and buyers should:
• Understand and reduce carbon impact of manufacturing through alternative sourcing, plan to allow slower and better optimized transport;
• Reduce packaging materials;
• Work on product carbon labelling, standards, auditing tools and use; and
• Increase shared loading.
Policy makers also have a key role to play in decarbonizing supply chains, suggests the WEC/Accenture report, which sees intervention by international regulatory bodies, governments and de facto policy-making as a necessary tool to support the emissions reduction required across the sector.
The report states that governments should “ensure that the full cost of carbon is reflected in energy tariffs across all geographies and all modes of transport, and that they work with the logistics and transport sector to develop universal carbon measurement and reporting standards, through the building of open carbon trading systems, and reviewoftaxregimestoremovecounter-productiveincentives.”