It’s 2023, and the industry is finally, collectively looking toward sustainability as a serious concern. Following the concept of encouraging green initiatives, governments too are looking toward legislation and rules to make eco-friendly the norm.
With efforts like zero-carbon emissions and reducing pollution through the use of EVs and autonomous vehicles, sustainability is soon becoming a major concern for all logistics and supply chain players as well. Freight operators, too, are rolling out a growing array of options for shippers looking to reduce pollution, from low-carbon aviation and marine fuels to electric trucks. Despite these efforts, carriers and forwarders are finding sustainable supply-chain goals faltering at the procurement stage itself.
Some shipping executives highlight that companies are proving reluctant to pay the higher prices for alternative fuels and zero-emissions vehicles that can easily double or triple transport costs. Sustainability discourse tends to stutter when it comes to procurement departments, as recommendations to adopt aviation and marine biofuels are often dismissed in favor of cheaper, yet more environmentally detrimental alternatives.
Between fuels, infrastructure, and transport equipment, initiatives aimed at slashing carbon emissions are expensive. In fact, the maritime industry alone will have to spend some $3 trillion to eliminate emissions over the next few decades. Still, the freight industry has yet to agree on how to cover such high costs.
A recent study by Boston Consulting Group found that 82% of companies are willing to pay higher rates for sustainable shipping. However, the premium they are willing to pay falls far short of the investment needed to significantly reduce emissions. According to freight executives, electric trucks cost about three times more than regular trucks. They can be particularly expensive in parts of Europe where electricity costs are high. Similarly, marine and aviation biofuels end up costing several times more than regular fuels.
Due to the lack of aircraft and ships running on biofuels, importers and exporters struggle to find sustainable modes of transportation that will allow them to maintain the pace of their supply chains. Some shippers hesitate to use carbon offset programs (ex: planting trees) because the benefits can take years to pay off. There are also no reliable global standards for businesses to follow.
Key Takeaways
Purchasing departments of various companies usually have one thing to do: get the best deal. And they get paid for less spending. So it is relatively easy to ignore the expensive bio-fuel deals in favor of existing heavier-polluting options.
Some freight and logistics companies probably need more government help to spur the kind of investments needed to make sustainable transportation more widely available. Meanwhile, the gap between environmental goals and implementation highlights a growing fault line in the logistics arena as research on sustainable alternatives to traditional freight transport starts moving into real-world operations.
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