Logistics

How green is your supply chain?

Mamuni Das Vishwanath Kulkarni | Updated on March 12, 2018

Global giants operating in India and Indian MNCs that are committed to sustainability are likely to drive the demand for ‘green logistics' services.





Logistics companies in India are waking up to the global trend of offering green services to their customers and are showcasing what they do to reduce their carbon footprint.

Internationally, logistics firms are already offering such solutions as part of their strategy to reduce their environmental impact. Such a move was prompted by a mix of regulatory requirements and demand for such services from customers, who are keen to be seen as ‘carbon-conscious'.

World over, transportation and logistics are seen as key contributors to global greenhouse gas (GHG) emissions. Globally, the transport sector accounts for ten per cent of total carbon-dioxide emissions. In India, the sector accounted for seven per cent of GHG emissions in 2007, and this is expected to double to 14 per cent by 2025, according to the Environment Ministry.

GO GREEN SERVICES

Globally, some companies in the logistics space — such as Damco, DHL and TNT — have separate green logistics service offerings for their customers. Damco, the supply-chain arm of shipping giant AP Moller-Maersk, with annual revenues of $2.7 billion, helps its customers assess and reduce their carbon footprint through various services.

“We started offering a Packaging Optimisation Service in 2010; this can reduce total logistics costs by 10 per cent and … minimise the environmental impact,” said Mr Lars Sorensen, CEO, Damco South Asia.

Damco launched a green logistics product in 2007 that helped estimate and reduce carbon-dioxide emissions from the customer's logistics activities. It also offers a SupplyChain CarbonDashboard to its customers, delivering a quarterly graphical representation of a customer's logistics footprint at shipment, product group and mode of transport (ocean, rail, truck, barge and air) levels.

For instance, Nike Europe used Damco's supply chain dashboard to identify air transportation as the key GHG emitter in its supply chain and switched over to the cleaner alternative — ocean transport. This will help Nike meet its carbon footprint reduction goal of 30 per cent by 2020.

INDIAN SCENE

In India logistics firms have not yet seen such demand from customers. “We are yet to have customers approaching us asking for tailor-made logistics solutions that would reduce their carbon footprint. Going forward, that might be the case,” said Mr Vineet Kanaujia, GM-Marketing, Safexpress.

Safexpress recently ran a ‘Go Green' branding initiative, which included an ad campaign, direct mailers to customers and messages on the boarding passes of Jet Airways and IndiGo aircraft.

On why the company did so, Mr Kanaujia said: “Though currently our customers have other priorities, going green is likely to play an important role in their SCM decisions in the future.”

Echoes Damco's Mr Sorensen: “The concept of green logistics in India is at a nascent stage. Although logistics service providers are offering propositions that will enable clients to reduce their carbon footprint, the interest in and acceptability of these services is yet to gather full steam.”

Indian customers are not keen adapters of this concept because, unlike international firms, they are not mandated to go green by regulation. Also, such services by logistics firms do cost extra in the short run. For example, DHL charges its customers an additional three per cent ‘green premium' on top of standard delivery charges. These charges are for mapping their carbon emissions generated through transportation of each shipment; and offsetting the emissions by investing in certified carbon management programmes.

PRICE OF GOING GREEN

Mr Sorensen feels that the lack of interest on the part of customers could be attributed to the perception that implementing a green certified logistics programme will lead to higher costs.

But, logistics players feel global giants operating in India, and Indian MNCs too, are likely to drive the demand for such services.

Tata Steel's Group Director — International Logistics, Mr Amitabh Panda, recently told Business Line that the company would consciously increase use of greener modes of transport such as rail and water transport.

Tata Steel, which has a significant European presence through Corus, spends around Rs 6,000 crore towards freight expenses a year globally.

It is such customers that the logistics firms are hoping to attract with their Go Green initiatives. “Some companies that have sustainability embedded in the way they operate consider this a competitive differentiator and, for them, green logistics initiatives are aligned with their overall strategy,” according to Mr Sorensen.

Safexpress' Mr Kanaujia said that going green and reducing costs are two sides of the same coin, in the long run.

“After all, going green is about reducing excesses in the supply chain — be it through recycling packaging material, or reducing time spent on road through network planning. All these moves reduce logistics costs for the customer,” Mr Kanaujia said.

“Cost savings as a result of becoming greener and more efficient directly impacts the bottomline. Consequently, we see that there are significant financial gains for the customers in implementing greener methodologies in their supply chains,” Mr Sorensen pointed out.

Published on August 07, 2011

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