Before exploring the relationship between logistics and ESG, it is worth reinforcing the concept of ESG. ESG is an acronym in English that stands for environmental, social and governance, and corresponds to a company's environmental, social and governance practices. This term has been increasingly used by companies seeking to grow sustainably in line with good practices.
But what is the relationship between logistics and ESG? Total. Efficient logistics contributes to improving the environment, there are several logistical activities that can be worked on in an inclusive manner or social responsibility actions that are led by the Supply Chain.
On the environmental front, there are several initiatives that contribute to improving the environment. In road transport, optimizing deliveries, vehicles with better occupancy or even the use of newer vehicles with up-to-date maintenance are some examples. Another option is to switch to less polluting modes, as is the case of changing from road to cabotage, or from air to sea. In some BIDs that ILOS has been conducting, we have observed that more and more contracting companies are looking for greener alternatives. In other words, those logistics operators that somehow use cabotage for part of their flows are differentiating themselves. In the last mile, it is also increasingly common to use bicycle couriers as a way of reducing pollutant emissions, in addition to being a practice that reverberates in the social pillar.
In storage, it is quite common for CDs to increasingly have a green footprint in their construction or equipment. Examples in construction include green roofs, water reuse, preference for natural lighting, among others. Electrical equipment, reuse of pallets and subsequent donation to recycling entities are among the most adopted practices.
On the other hand, initiatives such as the electrification of trucks and the decarbonization of the sea are areas that are still little explored, but which also deserve attention. Both will be topics of discussion among Supply Chain executives in the near future. The first because it brings marketing to companies, but requires investment and willingness on the part of contractors to make it happen; and the second because it will affect the entire international trade chain, as it will be a mandatory item in a short time.
On the social front, it is common for companies to have programs aimed at the communities in which they operate, such as professional courses, initiatives aimed at teaching ecological practices, volunteering actions of various types, among others. In logistics, specifically in transport, there is strong work to disseminate good driving practices, in addition to combating sexual exploitation on the roads. Programs like “In the right hand” came to spread greater awareness on the roads. In storage, inclusive programs have been applied, with several companies looking for people with some degree of disability to work in the warehouse.
The female presence has also increased significantly in the operation. In several logistics operators, women already hold leadership positions, while others have actions aimed at increasing the number of female drivers. Companies that are more advanced in ESG practices seek a balance between men and women not only in management, but throughout the team.
Finally, on the governance front, the point that draws attention is transparency in financial and ethical business management. Just as important as signaling achievements is being transparent when this is not possible, or when it is necessary to take steps backwards to then move forward.
The Lego case is an example of this transparency. The company reversed its decision to use recyclable plastic as the raw material for its products. He claimed that, to have the appropriate scale of production, it would be necessary to change everything in the factories and that, after all this, the carbon footprint would be greater. Humility and willingness to communicate this to the market were fundamental for transparency to be exercised.
In logistics, it is increasingly common to see explanations associated with the operation in investor relations reports. Recording and making clear to the market what logistics practices are and how they added value to the business has been essential to convey credibility and transparency.
Being sustainable in the three pillars of ESG requires effort, dedication and investment. In fact, as long as infrastructure and equipment are expensive or scarce, the pace of this transformation tends to be slower. On the other hand, it is a fact that this more attentive and focused look at sustainability is here to stay, and the Supply Chain can contribute effectively to this journey. The question is: what have you, as a logistics professional, been doing? And in your company, what ESG practices applied to the Supply Chain have been used?
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Monica Barros
https://ilos.com.brMonica Barros is a Managing Partner at ILOS. She has more than 20 years of experience in the Logistics area, working in companies such as Shell, Ambev and White Martins. In consulting, she has participated in several types of projects, including Strategic Planning, Development of Logistics Networks, Transport Management, Identification of Supply and Demand.
