The pursuit of sustainability will transform the logistics industry, both in terms of its business model and the range of advanced solutions service providers will use, according to recent research.

The logistics industry will be key to comprehensive carbon reduction efforts in most sectors due to its unique expertise and positioning along the supply chain, according to a recent study from Deutsche Post DHL, titled Delivering Tomorrow: Towards Sustainable Logistics.

Based on comprehensive research by international experts and a survey of 3,600 business customers and consumers worldwide, the 150-page Deutsche Post DHL report, released in October, found that 63 percent of business customers believe logistics will become a strategic lever for CO₂ abatement. In addition to its strategic economic importance, logistics will increasingly be seen as essential to achieving lower carbon emissions across the economy.

For most companies in the future, “long-term success will be strongly linked to more sustainable business concepts,” Deutsche Post DHL says.

That represents not only a challenge for logistics service providers, but also an opportunity, according to the Deutsche Post DHL report.

“In today’s economy, many customers are unwilling to pay a premium for green transport,” John Pattullo, CEO of CEVA Logistics, said in a presentation at this year’s German Logistics Congress. Nonetheless, Pattullo made clear, “the logistics industry must support change towards sustainable services.”

Deutsche Post DHL forecasts several key developments as logistics becomes more sustainable. Among them:

• Companies, governments and financial institutions will drive technological change concertedly. “Given the higher price tag attached to new technologies, mutual support and long-term planning by all key players is essential,” the report states.
• As logistics providers — “a chief catalyst of global trade and a defining component behind value creation” — strive to incorporate sustainability into their business, their business models will change as sustainable innovations open up new opportunities.
• Collaboration, including among competitors, will increasingly be viewed as a sustainability enabler. As carbon-emissions reduction becomes a priority for suppliers, business customers and logistics firms, cooperative business models will expand both vertically and horizontally along the supply chain.
• CO₂ labeling, which allows customers to compare green products, will become standardized. Transparency will raise confidence among logistics customers and end consumers when making environmentally friendly choices.
• As carbon emissions reduction becomes more important to companies, customers and governments, it will become part of business’ accounting and decision-making processes, which in turn will increase the demand for a price to be attached to CO₂ emissions.
• Carbon pricing will lead to more stringent regulatory measures, as businesses will only accept a price tag on carbon emissions if governments ensure a level playing field.

Compared with other industries, third-party logistics (3PL) companies are already ahead of the game.

Despite the global recession of 2008 and 2009, many large 3PL providers increased their respective commitments to developing more sustainability programs during that time, according to a separate report this year. The report, authored by a supply chain management professor at Northeastern University and sponsored by Penske Logistics, indicates that CEOs were dedicated not only to providing customers with more environmentally friendly services, but also to applying such practices internally within their organizations.

“They appear to be planning for the long-term by recognizing emerging customer preferences and providing services consistent with them, even in the current market downturn,” Robert Lieb, a professor of supply chain management at Northeastern University, said of 3PLs.

None of the CEOs involved in the survey had scaled back their company’s commitment to sustainability goals due to the recession. In fact, 63 percent of respondents reported expanding the existing sustainability programs in 2008 and 71 percent said they launched completely new sustainability initiatives during the same period.

Moreover, organizational dedication to sustainability programs yielded overwhelmingly positive results for 28 out of the 35 chief executives surveyed for the Northeastern/Penske study, including reduced operating expenses, positive impacts on company employees, substantial savings in fuel costs, and even reduced fuel costs by 40 percent, as noted by one CEO.

Resources

Delivering Tomorrow: Towards Sustainable Logistics
Deutsche Post DHL, Oct. 13, 2010

Sustainability is Key for Future Success of the Logistics Industry
Deutsche Post DHL, Oct. 13, 2010

CEVA Demands Industry Collaboration for Sustainable Logistics
CEVA Logistics, Oct. 21, 2010

Penske Logistics Debuts 3PL CEO Sustainability Report
Penske and Northeastern University’s College of Business Administration, April 22, 2010