Global logistics seeks out greener pastures

We all take for granted the immense network of vehicles, ships, trains and planes that move goods around and keep our store shelves stocked. But underpinning this vital component of global supply chains is a system of energy and fuel that must get cleaner if we are to tackle #ClimateChange. To commemorate Earth Day, we feature an interview with Mehran Zaker, our transportation expert, on how the logistics sector can shift to a more sustainable model. His key insight: while new innovations in batteries and hydrogen are crucial for long-term change, there are steps the sector can take right now to significantly reduce its #CarbonFootprint. Read on for more.

Why is greening transportation so important to meeting climate targets?

Transportation is a huge driver of global emissions—one third of all emissions comes from the transportation sector. That includes all modes of transport—both for people and goods. If we can make a dent there, we’d really be able to move the needle on the world’s climate ambitions.

How much of that comes from logistics specifically?

The latest data show that 10% of all emissions comes from logistics—a staggering figure. Adding to this, forecasts suggest that emissions from the logistics sector could increase fourfold in the next 30 years, in the absence of concerted action. We really need to act and improve the efficiency of freight transportation in order to reduce this impact.

What do you mean by “improve efficiency”? Many see opportunity for transformation in logistics but usually think about electricity, hydrogen or other new transportation technologies in making that shift.

The global logistics sector needs to reach net zero by 2050. This is going to be a huge transition—like any transition, it will be painful and costly. Moving from the status quo to something more sustainable requires changing behavior, new technology and requires all parties—including manufacturers and consumers—to be ready to pay a price.

It’s our job to identify the technologies which can be relatively inexpensive and quick to deploy. But if you focus too heavily on net zero—on the kind of deep transformation that might not be achievable until 30 years from now—you’ll be disappointed as an investor. We need to make sure to strike a balance between short-term and long-term goals: in the short term, reducing emissions, and in the longer term, moving toward net zero. It’s in that short-term time frame where improving efficiency comes in.

How do efficiency improvements play out in practice?

Take trucking: right now, a huge share of miles covered by any given truck is “empty”, in that the truck isn’t carrying any cargo. The truck will deliver a parcel from point A to point B and then return to point A empty. The proportion of empty miles is as high as 27% in Europe and 25% in the US. This is activity that is not contributing to the economy yet still producing greenhouse gas emissions.

You have all kinds of digital platforms popping up which aim to reduce these empty miles—technologies which aren’t transformational in the same sense as an energy innovation or new type of battery, say, but which can still make a difference. Studies show that if we reduce empty trucking miles in Europe by 10%, we can save around 32 million metric tons of CO2 per year. That’s the equivalent of eliminating 5 million passenger cars from the roads—equal to making Switzerland a car free country. The point is that we should not wait for, say, hydrogen to become a fully workable fuel before we start tackling the problem.

How exactly do those digital platforms work?

They are mostly based on machine learning algorithms that better match supply and demand. Say you have three boxes coming into point A that need to reach point B. A traditional system may direct the truck to take three trips between points A and B, grabbing each box as soon as it arrives at point A and delivering it to the same destination. Half of those miles will therefore be empty because the truck keeps returning to point A to pick up the next box. A digital solution will be able to tell the dispatcher to wait for all three boxes to arrive at point A before loading them onto the truck, so it only has to make one trip.

I’m using trucking as an example but some of the more sophisticated platforms can link up various modes—shipping, air, trucking, you name it—to maximize efficiency from end to end.

These solutions sound like they have other knock-on benefits besides just reducing emissions.

It’s true that the main USP for these solutions is the savings—they reduce man-hours, reduce fuel burn, boost transparency, put everything online—that’s the key value proposition. They’re definitely not getting as much airtime in the climate community as, for example, hydrogen. But they could serve as a crucially important climate lever nonetheless. They definitely should be getting more attention in the broader climate space.

Looking at those longer-term solutions for greening logistics, what excites you the most right now?

There’s a strong belief that electrification will continue to be the most dominant type of fuel transformation in the next several years. Battery prices are coming down, charging infrastructure is becoming more available. At the same time, there are sectors in road transportation—long-haul, multi-driver trips—where you need more continuous operations. That’s where hydrogen and fuel cells can play a role. But we believe that overall, hydrogen will still remain marginal compared with electrification and batteries.

Looking at sea freight and ocean transportation, on short and coastal trips, we believe batteries and electrification will dominate here too. There are plenty of signs of that, including some of our own investments. But when you look at deep sea transportation or ocean-going vessels, batteries are falling short and hydrogen can play an important role, whether it’s in the form of regular hydrogen, ammonia or methanol. There’s still a lot of R&D to be done and a lot of hurdles to be overcome. But we see a strong case for hydrogen in this sector.