Green Logistics: Competitive pricing remains the next big challenge

Green logistics, the practice of making logistics operations more environmentally responsible, has increased in popularity in recent years as firms seek to reduce carbon emissions and meet sustainability goals. The transportation sector largely contributes to greenhouse gas emissions, and logistics businesses are increasingly attempting to reduce their environmental impact.

The Indian government is also taking initiatives to encourage sustainable logistical methods, such as improving emissions regulations and incentivising the use of electric vehicles. These measures are designed to expedite the country's adoption of green logistics methods.

Implementing green logistics practices often requires a considerable initial investment. For instance, purchasing fuel-efficient vehicles, retrofitting existing fleets, and installing green technology can come at a significant cost.

So how can India transit to green logistics, and what problems do players confront in making daily logistics more sustainable and cost-effective?

Green Logistics: From the players viewpoint
Logistics organisations are becoming more ecologically conscious by optimising their transportation routes. Logistics organisations may design the most effective routes for their cars using GPS and other technology, lowering fuel consumption and pollution.

With sustainable business practices and a commitment to society and the environment, the Deutsche Post DHL Group makes a positive contribution to the world. DHL Group aims to achieve zero-emissions logistics by 2050.

“We have successfully implemented green solutions at our warehouses such as LED lighting, motion sensor systems, solar panels, rainwater harvesting, waterless urinals among others to ensure minimum environmental impact from our warehousing operations. Our sustainable packaging solutions such as stretch wraps, biodegradable void fills and reusable cartons help ensure waste management through packaging. Through our transport operations we drive increased efficiency and the use of cleaner fuels within our fleet and with our subcontractors. We plan to have 100% usage of green fuel and electric vehicles for Intra-city distribution by 2025. To this effect, we have already started to deploy 2, 3 & 4-wheeler electric & alternative fuel vehicles for our intra-city distribution,” said Vikas Anand, Managing Director, DHL Supply Chain India.

Maersk takes its responsibility to customers, society, and the environment seriously as a worldwide leader in logistics and transportation. As a result, Environment, Social, and Governance (ESG) is central to their mission, an essential component of the business strategy, and a precondition for success as a global integrator.

“Sourcing technologies that are still not widely available and which need scaling up for competitive pricing means that we have an impact by adopting sustainable solutions today.”

Vikash Agarwal, Managing Director, Maersk South Asia

“To demonstrate leadership, we have committed to ambitious targets across the dimensions of environment, social and governance, including our industry-leading commitment to net zero carbon emissions across the business by 2040. Our target is aligned with the Science Based Targets initiative (SBTi) 1.5-degree pathway by 2030. We aim to achieve Net Zero across our business and provide 100% green solutions to our customers by 2040. This covers all our solutions across ocean shipping, landside transportation, warehousing & distribution and so on,” said Vikash Agarwal, Managing Director, Maersk South Asia.

Mahindra Logistics has developed a number of sustainability projects centred on resource conservation, carbon neutrality, and circularity. As part of the same, they are developing a robust electric ecosystem for the supply chain and enterprise mobility companies, which includes net zero warehouses, the deployment of eDeL, a range of electric vehicles for last mile delivery operations, and electric people mobility via Meru Cabs.

“Additionally, Mahindra Logistics has been encouraging partner fleets to adopt CNG-powered cargo and mobility vehicles. The company targets to have 20% of the warehouses solar powered by the end of FY2024 and is investing in energy efficiency, and renewable energy. In keeping with our pledge and strategy to achieve carbon neutrality by 2040, Mahindra Logistics has not only joined SBTi but has also been successful in getting their validation of its targets for carbon emission for 2021,” said Ankur Singhai, Vice President, E-commerce and Last-mile Delivery Business, Mahindra Logistics.

Another option is to use cleaner fuels, such as electric or hybrid automobiles, which can emit less pollution than standard diesel or gasoline-powered vehicles.

“Varuna Group is committed to engaging in environmentally sustainable practices as a logistics firm. These practices include offering training on green education and sustainability best practices at the warehouse level, implementing renewable energy systems and usage of natural day-lighting, adopting water-saving practices, promoting recycling and reuse, utilising SRI coating paint and thermal-coated bubble sheets, and designing efficient docking bays,” said Vivek Juneja, Founder and Managing Director, Varuna Group.

NimbusPost implements environmental sustainability by associating with carrier partners who share a commitment to sustainability and regularly assess environmental impact to identify areas for improvement.

“Some of our leading courier partners such as Blue Dart and Shadowfax have been consistently putting their efforts forward towards green logistics. Blue Dart announced India’s first end-to-end GoGreen Carbon Neutral Service across international and domestic markets, back in 2011. Similarly, Shadowfax aims to turn 75% of its fleet into electric vehicles by the end of 2024, as a part of its zero-pollution campaign,” said Naveen Mathur, AVP, NimbusPost.

Challenges & solutions on-route to sustainability
One of the biggest challenges for businesses implementing green logistics is dealing with large investments, whether they are connected to expenses to install sustainability measures in warehouses or transport operations. This difficulty often necessitates a purposeful effort to choose sustainability measures over environmentally damaging ones, despite the extra expenses, as well as corporate alignment and dedication to green operations.

“The major obstacles faced by businesses while switching to green logistics can be implementing green logistics methods that can require great investment in new technologies, equipment, and infrastructure. This can be a major barrier for small and medium-sized businesses that may not have the resources to make these investments. Adopting green logistics methods may also require major changes to business operations, which can be difficult to implement and may face resistance from employees and stakeholders. Limited availability of green technologies can be a challenge as some green technologies, such as bio-fuels and vehicles, may not be widely available in certain regions or may be prohibitively expensive,” said Mathur.

“Using data and analytics from our carbon reporting can enable sustainable decisions for our customers’ supply chain. The objective of our reporting tool is to identify carbon hotspots and areas of operational improvement within our customer’s supply chain and help reduce the environmental impact of logistics.”

Vikas Anand, Managing Director, DHL Supply Chain India

One of the major barriers that organisations face when implementing green logistics is the expense of deploying new technology and procedures. Transitioning to electric vehicles, for example, or making warehouses more energy-efficient may need significant financial expenditures.

“Sourcing technologies that are still not widely available and which need scaling up for competitive pricing means that we have an impact by adopting sustainable solutions today. However, we are committed to our purpose of improving life for all by integrating the world. And this means we are willing to go the extra mile to make this happen. We are confident that eventually adopting sustainability will have a positive impact on the financials of the company in the long run,” said Agarwal.

According to Singhai, “Given the current boom in tech logistics, there is a need to look at sustainability from multiple lenses. The industry and its leaders will have to come together to make sustainable logistics a reality. Hence, mindset is the biggest obstacle that companies should overcome.”

“The biggest challenge that we have faced is that of a ‘chicken and egg situation’. When we decided to start transporting our ocean cargo on green-fuelled vessels, we realised that the technology existed and that we could order such vessels. But since they were not in operation in the global fleet anywhere, there was a challenge to source the fuel for these vessels. Without enough demand for the fuel, the fuel suppliers were not ready to invest in providing the fuel. That is when we decided to commit by ordering the vessels and establishing partnerships to source the fuel. The technology and fuel are still expensive till the right volumes are achieved, and therefore competitive pricing remains the next big challenge for us,” Agarwal added.

“Lack of awareness & information on an organisation’s carbon footprint is another critical challenge that businesses typically face while implementing sustainability measures. Some businesses might even lack the technology to track carbon footprint and then eventually make the information actionable. Both these challenges can be mitigated via using carbon reporting tools to identify carbon hotspots and areas of operational improvement,” said Anand.

Initiative to implement green logistics
In India, logistics businesses are progressively using technology to support environmentally responsible and sustainable operations. Electric vehicles, solar power, IoT sensors, packaging optimisation, and green warehouses are some of the green logistics technologies employed by logistics companies in India.

The shipping industry accounts for around 3% of world emissions. And that is where the biggest problem lies. Maersk agreed to begin strong decarbonisation efforts with ocean transport. Maersk took the lead in the shipping sector in 2018 by committing to decarbonising shipping operations by 2050 and developing scalable solutions to assist the whole industry in reducing its greenhouse gas footprint.

“In January 2022, we moved our pledge to fully decarbonise our operations a decade ahead, from 2050 to 2040. We have therefore charted a roadmap with a near term goal to have industry-leading green customer offerings across the supply chain by 2030, before getting to net zero in 2040. Our 2030 targets include a 50% reduction in emissions per transported container in the Maersk Ocean fleet. And for that, we need both – green fuels and vessels that can sail on green fuels. As of today, we have 19 vessels on order which will be able to run on green methanol. The first of these vessels will be on the water this year, in 2023. Additionally, we have partnered with nine global suppliers of bio/e-methanol to source the green fuel needed for these vessels annually,” said Agarwal.

NimbusPost has adopted the route optimisation programme, which makes use of data analysis and algorithms to determine the most efficient and sustainable transportation routes, as part of its commitment to reducing the environmental impact of logistics.

“A key component of effective green logistics is data analytics, which can provide valuable insights into areas where emissions and waste can be reduced. Furthermore, industry-wide collaboration and cooperation, including the establishment of industry standards and best practices, can accelerate progress towards a more sustainable future,” said Mathur.

Apart from increasing efforts to have carbon neutral operations, DHL also enables visibility of sustainability measures to their customers through carbon reporting.

“Using data and analytics from our carbon reporting can enable sustainable decisions for our customers’ supply chain. The objective of our reporting tool is to identify carbon hotspots and areas of operational improvement within our customer’s supply chain and help reduce the environmental impact of logistics. Connected control towers are the nerve centres of our entire transport operation. Through our network design, routing & scheduling techniques, we optimise our transport operations leading to effective usage of our owned and leased fleet & reduction of carbon emissions,” Anand added.

“The logistics industry is becoming more environmentally conscious, and the government is paving the way towards green initiatives through initiatives like Gati Shakti, National Master Plan, the GST reduction, and the Sagarmala Programme.”

Ankur Singhai, VP, E-commerce and Last Mile Delivery Business, Mahindra Logistics

Mahindra Logistics is investing in its facilities and vehicles. The new state-of-the-art warehousing facilities of Mahindra Logistics are designed in line with its sustainability standards, including liquid discharge management, renewable energy, waste management requirements and state-of-the-art automation.

“The estate incorporates market leading sustainability and environmental initiatives including solar power generation and distribution for warehouse and common infrastructure energy provision. With our fleet of electric vehicles - eDel - we are turning early adopters and aim to lead the EV cargo space market by developing an electric delivery ecosystem that supports both fulfilment and B2C logistics. This entails enhancing supply chain efficiency and cost effectiveness while significantly reducing carbon footprint,” said Singhai.

As a 3PL logistics and warehousing company, Varuna Group understands the potential detrimental effect that technology may have on the environment. As a result, they have taken aggressive efforts to integrate cutting-edge technology with eco-friendly logistical approaches in order to reduce carbon impact.

“Our commitment to sustainability is reflected in the installation of solar panels across our sites, reducing the environmental impact of our operations. Additionally, we've implemented turbo fans and an innovative dock design that includes dock levellers to regulate warehouse temperature, thereby reducing heating and cooling requirements. We also leverage real-time data intelligence to achieve sustainable fleet operations. These are just a few of the many initiatives we've implemented to promote sustainability and efficiency in our daily operations while safeguarding the environment against harmful effects,” Juneja added.

Future of green logistics in India
As environmental and climate change concerns develop, green logistics is becoming an increasingly essential element of India's transportation industry. The need for sustainable transportation solutions has grown crucial, especially given India's fast economic expansion and the resulting increase in demand for products and services.

As a result of the Covid-19 lockdown, there has been a growth of Ecommerce and direct-to-consumer channels, outpacing logistics and delivery services across the country. While this is beneficial to the startup community, the negative externalities in terms of carbon impact are concerning.

“Green logistics in India is expected to grow significantly in the coming years. Logistics account for 14.4% of India's GDP, and its growth is projected to continue at a 10-12% CAGR, reaching $380 billion by 2025. India is the third-largest carbon emitter globally, producing 2.35 gigatonnes of carbon emissions in 2021. The logistics industry is becoming more environmentally conscious, and the government is paving the way towards green initiatives through initiatives like Gati Shakti, National Master Plan, the GST reduction, and the Sagarmala Programme,” said Singhai.

“The major obstacles faced by businesses while switching to green logistics can be implementing green logistics methods that require great investment in new technologies, equipment, and infrastructure.”

Naveen Mathur, AVP, NimbusPost

The ESG scenario in India is quickly changing, increasing demand for sustainable solutions and their integration throughout the supply chain. The increased purchasing power of younger consumers, along with a movement in consumer desire to pick brands for social and environmental values, notwithstanding cost premiums, has resulted in an overall change in the Indian consumer's buying patterns.

“EV has taken the world by storm with the global market being projected to grow by 24.3% in less than a decade. On the other hand, the market size of India Electric Vehicle industry is projected to grow from $3.21 billion in 2022 to $113.99 billion by 2029 with a CAGR of 66.52%. Initiatives such as the Gati Shakti NMP have been planned to combine all the multimodal connectivity projects that will enhance the efficiency of the movement of people and goods. This along with the constant efforts by the government to promote electric vehicles or alternate fuels such as natural gas or green hydrogen as the better transportation fuel will only decrease carbon emissions,” said Anand.

The need to reduce carbon emissions from deliveries and shipping has encouraged consumers to prefer companies implementing green logistics strategies over traditional ones, according to a recent study published in the Journal of the Transportation Research Board by Singapore University of Technology and Design (SUTD).

“India has huge potential when it comes to green logistics. It is not only in terms of consuming green logistics and reducing the overall carbon footprint in the country, but it is also in terms of being a supplier of green logistics. We believe India could be a key partner in transitioning from traditional maritime fuels to more climate-friendly sustainable solutions such as e-methanol. We are in a good and constructive dialogue with potential partners exploring a strategic partnership about opportunities for green methanol production in India,” said Agarwal.

"Our commitment to sustainability is reflected in the installation of solar panels across our sites, reducing the environmental impact of our operations. We also leverage real-time data intelligence to achieve sustainable fleet operations.”

Vivek Juneja, Founder and Managing Director, Varuna Group

Overall, green logistics is a developing trend that is assisting the logistics sector in reducing its environmental effect. Green logistics is expected to be a focus for the sector in the coming years as corporations grow more concerned of their environmental effect.

The industry can adopt green logistics by using both hydrogen and electric vehicles. In order to fulfil India's 2070 net-zero goal, 79 percent of trucks should be electric and the remaining 20 percent should operate on hydrogen, according to the Council on Energy, Environment, and Water (CEEW). As they use power generated from renewable hydrogen, fuel cell electric trucks can also be introduced to the market.

The initiative can change the game for logistics, where costs are currently at 13-14% of GDP in India. Led by the NITI Aayog, the National Industrial Corridor Development Corporation Limited (NICDC) is developing this platform by gathering all the milestones under the Unified Logistics Interface Platform (ULIP), to help the logistics sector grow.