Sustainability, and profitability, in the costly territory that is the 'final mile'
The rapid increase in online shopping in has fuelled the debate on sustainability on the ...
Covid-19 might have put businesses’ environmental concerns on the back burner, temporarily, but the issue is not going away – and increasing numbers of shippers are asking their forwarders for help.
“Businesses have a lot to focus on right now,” said Frank Clary, vice president sustainability for Agility. “But coming out of Covid, none of these issues will have gone away.”
The good news is that cutting emissions often goes hand in hand with cutting costs; something companies are even more interested in than usual.
Agility has a ‘green team’, offering customers an in-depth analysis of their supply chains, in terms of CO2 emissions and costs, and helps them learn from it.
“It could mean more consolidation, or mode switching, or mixing,” said Mr Clary. “Often it’s a bit of each.
“There are a lot of inefficiencies that are low-hanging fruit. Forwarders have been doing this all along, but the sector has improved efficiencies. There are constant efficiency gains to be made.”
And that can save money too.
“There is no specific metric for what can be saved in money and saved in CO2, but the greater the speed of transport, the more carbon-intensive it is. So air freight is dramatically more carbon-intensive than other modes.
“The IMO and ICAO have set goals, and Agility is participating in the ‘Getting to Zero Coalition’ working group. It’s a multi-sectoral approach, and I think in 10 to 20 years we will see some zero emissions fuels, with the biggest innovation in air freight. But we need to bring a large amount of biofuels on line.”
The Covid pandemic has also highlighted – again – the vulnerability of supply chains, particularly those deemed to be in the national interest, and has re-invigorated the search by some companies for shorter supply chains, or near-shoring – which also boosts environmental credentials. But not all supply chains are suited to the change, warned Mr Clary.
“In some cases, near-shoring will happen. It’s based on efficiencies and cost, and there is no single silver bullet.”
But customers are increasingly asking suppliers about their environmental policies.
“The number of customers who ask grows each year, and there are areas they want us to engage in.
“We used to get about 10 to 12 questions on disclosures, but now the big companies are requiring even more engagement, while other customers are asking us what they can achieve, and how can they make efficiencies.
“The customers mostly looking at it tend to be consumer-facing.”
But how much clout can a forwarder have in terms of booking with environmentally friendly carriers; especially when cost remains the key concern?
“Our customers don’t want to pay more. However, we have the ability to influence. We buy a lot of space. And we can give business to carriers that are interested in engaging.
“There are big global providers, and there are mom and pop shops. It’s a bit of a tall order to ask a mom and pop trucking company to disclose, or cut emissions, but if they are a big box carrier, we can engage them, although they might ask for more business before engaging fully.”
While Agility offers advice on greening infrastructure, one of the best things companies can do is better planning and information sharing, said Mr Clary.
“It requires little investment, but it does take some time. In manufacturing, it’s about order management and product sales, and getting stuff to market in advance, with the rest of the product right behind in ocean. Things like that can save quite a bit, and you can always find those efficiencies.
“We have a supply chain planning tool and other apps for analytical work and supply chain design.”
But it’s not just customer advice: Agility’s other strand in its two-pronged sustainability strategy is to cut its own emissions by 25% by 2025, from a 2017 base line, and it is on track to do so. It has, for example, recently invested in a pre-order of 1,000 trucks for the new Hypertruck Electric Range Extender, a long-haul, fully electric powertrain.
“The Hyliion technology is so game-changing that all companies, especially those with consumer-facing brands, will be forced to adapt,” said Tarek Sultan, vice chairman and CEO of Agility. “It’s a triple win: protect the environment, keep customers happy and benefit shareholders by improving the bottom line. We look forward to bringing significant cost savings and greater efficiency to our customers.”
But Agility has also invested in solar power, with its Singapore office now running entirely off renewable energy. And where solar power is not feasible, Agility buys renewable energy credits. It is also aiming for zero waste by 2030, and eliminating excess paper and plastic.
But can companies afford the initial investment in solar, or other renewable energies?
“No CFO really wants to make a big investment in the environment, but it can make sense, “ said Mr Clary.
He added: “And companies can excel in optimising assets through technology, and those investments are paying off.”
Sustainability is not just about the environment. Agility also focuses on community, youth leadership, technology and education, as well as having a humanitarian logistics programme which works with the World Food Programme, and helps at-risk people plan for emergencies.
“We also consider ourselves a leader in fair labour and human rights, through training. There are lots of opportunities to improve labour practices in emerging markets, and it is of high importance to us. Child labour isn’t such an issue for us, but migrant labour is. Our customers tend to look at manufacturing, mining and minerals sourcing and production.
“The good customers look at that and manage their risks – there’s not enough being done, but we are doing what we can.”