Decarbonization

Greater awareness of climate change is pushing policy makers to do more, and citizens are increasingly supportive of this, although environmental protection measures may raise the cost of living. Logistics organizations should anticipate new regulations, prepare for compliance, and recognize the opportunity for first-mover advantage.

Transportation is profoundly impacted by electrification legislation which is rapidly developing. It incentivizes the production and purchase of electric vehicles (EVs) and in some cases even bans the use of combustion engines. Examples include the US Inflation Reduction Act providing EV incentives, China’s New Energy Vehicle (NEV) mandate ensuring automaker production levels, and the UK’s Road to Zero Strategy cleaning up road transport by 2030.

Another crucial lever in the decarbonization of the supply chain is packaging, given its pollution potential, resource utilization, and carbon footprint. Many regulations aim to minimize harm from non-recycled material leaking into the environment, decrease greenhouse gas emissions associated with packaging functions, and improve the circularity of recycled materials throughout the supply chain.

The EU's Packaging Directive sets recovery and recycling targets for packaging waste and encourages minimization of packaging volume and weight, designing for reuse and recycling, and reducing hazardous substances in packaging materials. California’s Rigid Plastic Packaging Container (RPPC) law mandates these containers have recycled post-consumer content, are reusable, or are sourced from recycling programs. In Japan, the Containers and Packaging Recycling Act requires businesses to sort and recycle containers and packaging. Manufacturers and importers of products are responsible for packaging recycling, which promotes the effective use of resources.

Decarbonization is also supported by the rise of zero-emission zones (ZEZs), designated areas restricting or banning vehicles that emit pollutants. These zones help cut emissions, improve air quality, reduce noise, and encourage the use of clean transportation alternatives like electric vehicles, bicycles, and public transport.

Norway's capital city Oslo, as an example, has implemented a car-free zone with the intention of achieving a fully electric taxi system by 2024. The city also employs a combination of toll rings and differentiated parking fees based on vehicle emissions. Also, the Californian city of Santa Monica now has a Zero Emission Delivery Zone where electric delivery vehicles, cargo bikes, and walking deliveries are prioritized.

In summary, rules and regulations are increasingly affecting all parts of the supply chain.

As supply chains are responsible for around 60% of global CO² emissions, there is significant scope for improvement in logistics operations. Logistics organizations need to understand the carbon impact of each facet of their operations as the foundation to drive change and accurately track results.

Available levers to achieve carbon reduction and eventually neutrality include electrification, carbon-neutral building design, and sustainable fuel sources such as liquified natural gas, sustainable aviation and maritime fuels and hydrogen power cells . Logistics organizations can also cut emissions by optimizing the transportation mode mix; shipping via ocean and rail instead of air and truck is more carbon-efficient, if time-to-delivery can be extended.

Measuring the total delivery time traveled and determining optimal routing for last-mile fleets is another way to shrink the carbon footprint. The German software developer Greenplan provides ways to track, measure, and evaluate the carbon impact of logistics activities.

A further way to optimize operations is to ensure logistics facilities are carbon neutral. At DHL, we aim to leverage the latest green technologies to have carbon neutral buildings across our businesses worldwide. Back in 2021, DHL pledged to design all new buildings with a zero-carbon footprint, increased green electricity and heating, fuel e-vehicle fleets with local renewable sources, and implement smart facility management systems.

The initial costs of these and other environmentally friendly solutions may be higher than wasteful alternatives. But customers demand greater sustainability in the supply chain. As CO²e emissions become more identifiable, commoditized, and framed as operating costs, logistics players are finding ways to make the necessary investments while also reducing the financial and environmental cost of logistics operations.