Decarbonization in Logistics

I don't know how aware everyone is, but humanity needs to stop global warming, caused mainly by the burning of fossil fuels and deforestation. It is no longer a question of acting voluntarily out of good nature, but rather out of urgent necessity. People are already being affected, and the effects of warming could be increasingly worse and irreversible if countries and companies do not commit to achieving decarbonization goals.

Logistics has a lot to do with all of this. Moving products is one of the biggest reasons for pollution on the planet. There are many changes needed to reverse this situation. The actions range from new fuels, new renewable energy sources, new equipment, new types of vehicles, to new supply chains closer to people. Improving the productivity of operations goes without saying, with fewer vehicles running empty, more appropriate modes, waste reduction, reduction of materials, use of returnable and recyclable materials.

If your company has not yet started the decarbonization journey, it is worth starting immediately. And for those that have already started, the path is long, and will need to be traced in conjunction with the advancement of other links in the supply chain (those that will develop new sources of energy, fuels and new vehicles and equipment), in addition to the assistance of specialized companies.

But a lot depends solely on your company.

Here is a minimum step-by-step guide to implementing a decarbonization journey, with a focus on logistics:

GOVERNANCE:

Have an area responsible for decarbonization, who reports to the company's senior management
To size the company's current carbon footprint (if possible in the 3 scopes¹ and detailed by logistics activity, with reports available to the public)
Have goals of decarbonization with a defined deadline (preferably available to the public), defined together with the company's senior management and presidency
Have a budget established to achieve this objective (as many of the projects will not have a financial return)
Have projects with a defined schedule, responsible parties and metrics, necessary to achieve the established decarbonization goal
monitor regularly monitor the carbon footprint and achieve targets, redefining actions and adjusting reduction actions.

ACTIONS:

The decarbonization actions in logistics that your company can apply are summarized on two fronts.

I) REDUCE EMISSIONS: this front is the most important and involves the effective reduction of the amount of harmful gases the company emits into the environment. Some of the actions on this front will depend on the technological development of other links in the chain, but much can already be done. In logistics, we are talking about actions that involve, for example:

(a) vehicles and equipment: fleet renewal with less polluting vehicles and engines, use of electric vehicles (and in the future hydrogen vehicles), less polluting storage equipment. In the last mile, use of bicycles or electric vehicles.

(B) Energy: reducing energy use in warehouses by taking advantage of ambient light, green roof, solar panels.

(C) Moving materials: reduction, reuse and recycling of transport and handling materials such as boxes, pallets, and correct disposal of waste.

(D) Transport Modes: prioritization of less polluting modes (example: use of cabotage for long distance movements close to the coast)

(E) Logistics network: optimizing the location of factories and distribution centers to serve the market has great potential to minimize emissions and reduce costs, as it can reduce fuel consumption. At this point, however, it is worth paying attention to the country's tax distortions, which end up leading to greater cargo transit due to the positioning of facilities in locations that are not logistically optimized, but which offer tax benefits. The imminent tax reform could change this scenario.

(f) Local supply chains: use of local suppliers or those closer to production and consumption, reducing the distances to be covered by inputs and, consequently, reducing emissions by reducing fuel consumption.

(g) Productivity: improving productivity has always been one of the main objectives of logistics managers. Productivity actions have the incredible potential to reduce costs along with reducing emissions. Examples of actions to gain productivity with reduced emissions are those that reduce diesel consumption for the same amount of cargo moved. Among them we can mention: driver training to reduce diesel consumption. Adequate routing of delivery vehicles to reduce mileage driven. Planning the use of vehicles to make better use of cargo in the trunk. Load consolidation to avoid running with incomplete vehicles. Sharing of cargo vehicles between companies, use of freight and return, avoiding vehicles running empty. Such actions are in the daily lives of logistics managers, and the good news is that technologies are increasingly available to increase productivity, from software such as TMS to telemetry equipment to analyze drivers' direction and indicate the need training and preventive maintenance.

II) COMPENSATE EMISSIONS / PURCHASE OF CARBON CREDITS: this front involves carrying out actions that offset the emissions that were generated by the company. These are practices that have a reverse impact, sequestering carbon from the environment and reducing the company's footprint, such as planting trees.

But companies are not always able to carry out these compensation projects directly on their own, and end up looking to buy carbon credits on the market. These credits are certificates that prove that a certain amount of carbon has stopped being emitted by another company or country. In other words, your company compensates for its emissions by paying for the carbon reduction that another company achieved.

In many cases, even when carrying out projects to directly reduce emissions, purchasing carbon credits ends up being the only way for a company to achieve NetZero (or carbon neutral).

Finally, it is worth highlighting that several of the decarbonization actions in logistics and supply chain will have associated costs. And this is the most delicate point in the entire implementation of decarbonization. If the objective of companies is to generate profit, why invest in decarbonization actions that increase costs? In this case, the role of governments and society becomes essential. Decarbonization must have the force of law, so that all companies need to pursue it, and it will no longer be a voluntary action. And society must do its part, only accepting to buy from companies that work to decarbonize the planet.

Some countries in the world are already extremely advanced in their decarbonization rules, and Brazil has been advancing with its specific legislation.

There is no shortage of reasons for your company to structure itself for decarbonization. Let's decarbonize the planet together.

¹ The greenhouse gas emission scopes are measurement standards defined in the GHG Protocol. Scope 1 is the company's own direct emissions, scope 2 is indirect emissions from energy use. Scope 3 are indirect emissions from raw material suppliers, contracted transporters, waste disposal, among others.

References:

Decarbonization in Logistics

Maria Fernanda Hijjar

Accuracy in Planning: Calculating Indicators for Operational Efficiency

Brazilian port movement reaches new record in 2024

Logistics and supply chain in the next 30 years

Rio de Janeiro

São Paulo