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Sustainability Integration In Logistics Cannot Be Ignore Anymore

Featured in July, 2017 Edition By Alok Raj Gupta
Logistics is an essential part of any business, which can’t be overlooked as a lot of competitive edge depends on it. Integrating sustainability in this sector means that we are minimising the resources (fuel) consumed and negative impact (emissions) on the environment. In this article, I am focusing on major factors which can drive sustainability integration in the logistics sector in India.

One could think achieving sustainability will be in conflict with the goal of making profits, though this is far from reality. However, the truth is that the road to sustainability ends up in many other lucrative things like efficiency, reduction in costs and larger profit margins.

There are four major areas which need attention, especially in the Indian context in order to boost sustainability inclusion in logistics sector – energy, emissions, waste and compliance.
Essence of Sustainability in Logistics Sector

Reduce energy consumption: This directly relates to the volumes of hydrocarbons burnt to power the vehicles. Choice made by the shippers determines this, to a great extent. Over the years, share of railways in goods transportation has gone down significantly, replaced by high fuel-intensive truck fleets. Two aspects of logistics management are worth noting here, First, optimization with respect to the routes and cargo volumes per carriage. Shipping multiple items by consolidation could be less damaging than shipping 20 different items in 15 different trucks across multiple states. Essentially, the less time must carry a savings equal to or greater than the cost of using the less efficient method. Second, fuel efficiency, which in turn translates into choice of fuel (bio-fuel vis-à-vis diesel) and vehicle’s engine efficiency. Oil accounted for over 25% of India’s total primary energy supply in 2016, with over 40% powering the transport sector. In line with the target set by Prime Minister, Mr. Narendra Modi, India intends to reduce dependence on oil and gas imports by 10% by 2022, and better logistics management can definitely contribute. One of the ways could be to adopt other means like bio fuel to power at least a part if not the entire fleet of trucks. VRL Technologies which is the largest player in logistics is increasing its reliance on alternative bio-fuel which helps them save INR 5-7 on each litre consumed. This can result in significant emissions cuts and hydrocarbon dependence in the long run. Currently bio-fuel comprises 12% of total fuel consumed by VRL which is expected to increase with time.

Reduce Emissions: The CAGR in Indian CO2 emissions from transport sector due to fossil fuel combustion has been around 4.5% compared to 1.16% in OECD countries and 1.04% in North America in the previous decade. Developing countries in general are lagging behind when compared to their developed counterparts. Railways have predominantly played a critical role in the logistics sector in India, particularly for iron & steel, mining, textile etc. However, gradually with time the share of railways in transportation has reduced drastically from 89% in 1951 by more than two thirds presently. On the other hand, the share of roadways has increased sevenfold. This leads to a major concern that the exponential growth in commercial fleets on the roads leads to proportionate increase in the emissions, which in case of railways is up to five times less. A study was conducted recently, the “carbon footprint analysis” by the Dedicated Freight Corridor Corporation for the Eastern corridor in India shows that moving goods by rail would be much more environment friendly despite the higher load it would have to handle. The corridor is expected to generate 60% less carbon emissions when compared to a scenario where the freight is transported through existing roads network. Streamlining transportation options through high-efficiency means, such as ocean transportation or transportation in electric vehicles, enables a shipper to create an effective, sustainable solution to transport many goods across great distances.

Reverse logistics: This relates to making logistics sector part of the circular economy, which will take care of recovery. Rretrieval of parts, recycling of products and disposal of packaging waste have been almost non-existent in India. With the rise of e-commerce, there is a proportionate rise in packaging waste. Though many e-retailers no longer provide paper receipts to enhance their green-image, they still do not provide consumers with the option of disposing of packaging material is still unavailable at large. Mandatory legislation regarding these aspects exists in the E.U., for example, pushing both consumers and businesses in the direction of sustainability.

Government compliance: Depending upon the laws of the land, companies could face many different environmental regulations and statutes for the production and shipment of goods. Failing to fall in line with a certain level of sustainability, by a specific degree, one could face the brunt in the form of fines, penalties and additional criminal or civil consequences. The statutes could be in the form of how old the fleet is, condition of engines, emission certificates etc.

A major part of Indian logistics industry is comprised mostly of fragmented small scale units operating individually, small trucking companies perceive sustainable logistics and green practices to be alien concepts because of lack of knowledge and awareness about the viability and benefits that these practices can generate. Therefore, there is immense opportunity and potential to make our logistics sector more sustainable. Among critical to-dos, a road map should be adopted to restore railway’s status as the primary mode of transportation. Another important task is to establish dedicated freight corridors that ensure efficient freight movements. Enforcement of government compliance and imposition of carbon tax are other aspects to consider.

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