Going the distance: how logistics companies can ‘win’ on sustainability

Many T&L firms have long seen sustainability in terms of compliance. Today, many are starting to move from a ‘compliance mentality’ to a ‘continuous improvement’ mentality. This shift started before the Covid-19 pandemic and is likely to outlast it. Success in the ‘continuous improvement’ era will be measured in lower emissions and the reduction, reuse, and recycling of materials.

As we emerge from the pandemic, sustainability transformation will be boosted by policy. The EU made €750 billion available in May 2020 for climate-related support, which is likely to be available for T&L firms that have strong potential to transform themselves through sustainability improvements and innovation.

Longer term, the T&L companies set to win on sustainability will likely cover the following five factors.

1. Find and nurture the right data and analytics talent
   At the start of their sustainability journey, companies are unlikely to know how they will reduce emissions, or which of the array of technologies - robotics, blockchain, big data collection and analytics - is likely to be most effective and efficient for them. Those that win will either recruit for the skills to help them make informed choices, or partner with institutions, universities or companies that can help. “Bigger companies tend to have their own R&D teams,” says Remco Schoonderwoerd, Partner, Transport & Logistics, Mazars, “but in Holland, for instance, the younger or medium-sized companies rely on being near universities to access talent.”Schoonderwoerd also points out how technical skills can also help companies become more resilient to disruptions such as pandemics. “Companies with access to cybersecurity or advanced IT skills find it easier to make remote working easier and more secure,” he says.
2. Mine data from new and unexpected parts of the business
   “Data collection is often vital to sustainability because it helps companies see inefficiencies that may have been invisible or taken for granted in the past,” says Michael Rofman, Partner, Mazars. Companies need to look in unexpected places to find data that reveals those gaps. That might entail turning facilities into smart buildings that track energy use and identify continuous efficiency improvements, for instance, or using advanced geofencing techniques on the road to improve turn times and reduce idling and the associated emissions.
3. Make the most of existing relationships
   Bringing clients into the discussion enables second and third tier companies to identify innovations and make investments that might be cost prohibitive in the short run but are cheaper and greener in the long run.“Ships go back and forward every day from the Rotterdam harbour to the nearby Heineken factory, bringing full and empty bottles,” says Schoonderwoerd. “We will soon see the first-ever battery powered ship to do so.” This is an innovation which the shipping provider was only able to afford because it approached Heineken, articulated its sustainability ambitions, and agreed a longer-term contract. “Sharing its ambition with a client the size of Heineken gave the company the security of knowing that its significant investment in new battery-powered ships would yield a return over a longer period,” he says. “Otherwise it would have been too expensive.”Companies increasingly committed to sustainability will cooperate in other ways too. Travelling under capacity – with empty space on trucks, trains, or ships – is a familiar challenge for logistics companies, but it is now relatively straightforward to find a willing buyer of that space if companies recognise the collective challenge and the benefit of cooperation. “Increasingly,” says Rofman, “you can find other cargo to pick up on your return route and choose one at the right load rate, going in the right direction, so you don't need to head back empty.” A similar pattern holds true for warehouse space. “Whereas in the past there seemed to be an advantage to owning warehouses so you had secure access to space, the benefits of collaborating to rent space now seem greater, as it offers flexibility to respond to short-term fluctuations in demand, such as from Covid-19,” he says.
4. Adopt a mindset of bold experimentation
   “Companies that win on sustainability will not be afraid to experiment with investments in sustainability innovations which might fail, in the knowledge that some will succeed,” says Schoonderwoerd. A few Dutch logistics companies, for example, have reduced their emissions by putting in place a tool to monitor their truck drivers’ behaviour, which encouraged them to brake more smoothly, reducing tyre wear among other behavioural driving changes, thereby reducing emissions by 10%.“We are hearing about buildings introducing drone parking on the roofs, cargo vessels collecting more data on fuel for continuous improvement, and trucks being driven in convoy with a human driver at the front and a convoy of autonomous trucks behind,” says Schoonderwoerd. “Seven out of ten new ideas will fail, but it’s worth it.”Experimentation can apply to operations too. “One of my clients is asking its clients whether they could do more to reuse their waste in a revenue-generating way, to try making a low margin route more cost-effective,” says Schoonderwoerd.
5. Recognise the end of ‘business as usual’
   Each company is different in terms of size, footprint, location, and position in the market, so companies that win will put in place structures and processes to figure out what makes sense for them. That could involve setting up discussions with clients, co-creating initiatives with adjacent companies, or simply tasking a working group within the company to brainstorm, find new ways of working, or partner with universities and others.Ultimately, sustainability winners will fully internalise the idea that business as usual is no longer enough. “Clients, customers, investors and the markets will increasingly judge logistics companies on their sustainability performance,” says Rofman, and meeting these rising expectations will require moving from compliance to continuous improvement - from seeing sustainability as a box to be ticked to recognising it as an opportunity for experimentation, innovation, and discovery in the coming years and decades.