Gartner: Logistics Pros Need GHG Strategic Partnerships

October 19, 2021

Logistics leaders must pursue three strategic external partnerships to reduce greenhouse gas (GHG) emissions to contribute to their organization’s sustainability goals, according to Gartner.

“Organizations on an emissions reduction journey initially leverage optimization strategies. These strategies include modal shift, load optimization and network design all aimed at emissions reduction,” said Sarah Watt, senior director analyst with the Gartner Supply Chain practice. “However, for organizations with significant emissions reduction goals, these initial inhouse activities don’t go far enough.”

In addition to internal GHG emissions reduction activities, the three external partnerships logistics leaders should pursue to improve their organization’s emissions footprint include:

Third-Party Logistics Providers (3PLs)

While the C-suite may set ambitious emissions reduction goals for Scope 3 emissions, transportation and logistics leaders rely on 3PL partnerships to meet these expectations. Ambitious GHG reduction goals can’t be achieved through optimization alone. It will require investment in new vehicles and engine technologies to move goods.

“Before contracting a 3PL, logistics leaders should ask three questions. Firstly, does the 3PL’s ambition for emissions reduction match that of the organization. Secondly, what investments will the 3PL be making to improve emissions management, such as new vehicle technologies. Lastly, logistics leaders must understand if there is an investment gap, and if the enterprise is willing to play a part to bridge this gap,” Watt said.

Sustainability-Savvy Customers

Some GHG emissions created by customers could be avoided by offering greater transparency about emissions impacts. For example, demand for short delivery times may increase the use of airfreight. While many customers want to create less GHG emissions, they lack visibility into how their decisions can impact the environment. Logistics leaders need to challenge the assumption that faster is always better and communicate that some shipping options may take longer to arrive but are more sustainable than same-day-delivery.

Watt said: “This is not about taking away shipping options from clients to enable emissions reduction. This is about client choice of shipping options by creating visibility.”

Duane Paul, General Manager with SmartSolve added, “Only through true partnership is the achievement of GHG reductions and other sustainability goals possible. Time after time, SmartSolve has witnessed how collaborative and engaging partnerships lead to better results across the board.”

Industry Peers

For many organizations, reducing GHG emissions is a precompetitive issue. By working together, for example in an industry association, leaders from different organizations can share their experience and best practices and bring their collective effort to the challenge. This may also lead to co-investment in opportunities or collective collaboration with 3PL partners.

“It’s important to evaluate an industry association before joining. Significant time can easily be sunk into collaboration, with no clear outcome or benefit. Take an outcomes base approach when assessing where to join or to continue to engage with an industry association,” Watt concluded.

Ken Bays, Vice President Product Development with Inmar Intelligence explained, "I agree with Sarah Watt’s comments; however, I think the first step should be an evaluation of a provider’s current, internal processes. We have found that many times companies can reduce emissions by increasing visibility into their own operations. For example, product returns from online purchases continue to increase at unprecedented rates. Reverse logistics can be more costly than forward-based logistics because returns have more moving parts and are typically done in smaller quantities.

Even companies that aggregate returns before shipping may be limited by the quantity and/or locations of their returns processing facilities. One company, with east- and west-coast returns processing centers, will add significant mileage, costs, emissions and time to the returns process when compared to a company that has access to return processing facilities across the country.

By having access to more processing centers, companies can get returned merchandise back into the marketplace through return-to-stock, return-to-vendor, liquidation and remarketing, and donations. The remaining goods can be processed through waste-to-energy programs. Additionally, applying advanced analytics can help companies determine the optimal disposition method, which factors in transportation-related costs. From an environmental perspective, the value derived from these tactics is twofold. First is the reduction in mileage which directly translates into less emissions. Secondly, these approaches keep products from being sent to landfills as a point for final disposition. Landfill diversion is critical to the reduction of GHGs because landfills generate high levels of methane, a greenhouse gas that is 84 times more potent of a climate warming gas than CO2."

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