Green Logistics Slow to Make Progress

"Freight operators are rolling out a growing array of options for shippers looking to reduce pollution, from low-carbon aviation and marine fuels to electric trucks.

But some shipping executives say companies are proving reluctant to pay the higher prices for alternative fuels and zero-emissions vehicles that can easily double or triple transport costs.

Tim Scharwath, chief executive of DHL Global Forwarding, Freight, part of Deutsche Post AG, said talk about sustainability gains often falters when decisions reach procurement departments, where suggestions to use aviation and marine biofuels for transport are vetoed in favor of heavier-polluting but cheaper options.

"It's not happening enough," Mr. Scharwath said. "If you talk to purchasing guys they have one thing to do: to get the best deal. And they get paid for less spend."

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.

The broad changes in fuels, infrastructure and transport equipment aimed at slashing carbon emissions are expensive: The maritime industry alone will have to spend some $3 trillion to eliminate emissions over the next few decades, according to shipping services provider Clarksons. But there is little agreement across the freight business on how to cover such costs.

A recent study by Boston Consulting Group found that 82% of companies are willing to pay more for sustainable shipping, but the premium they are willing to pay falls far short of the investment needed to significantly reduce emissions.

Freight executives say electric trucks cost about three times more than regular trucks and can be particularly expensive in parts of Europe where electricity costs are high. Marine and aviation biofuels cost several times more than regular fuels.

DHL, one of the largest forwarders in the world, moves hundreds of billions of dollars worth of freight each year by ocean, air and land. The company has a target of spending up to 7 billion euros, the equivalent of roughly $7.4 billion, on decarbonization by 2030. During the past two years, it has spent 440 million euros on measures such as green aviation fuels and electric vehicles, according to company data.

DHL officials say the slow progress is caused in part by a scarcity of alternate fuels and sustainably powered aircraft, ships and trucks. They expect to significantly increase green spending in the next few years as more options become available. But Mr. Scharwath said advances will depend on customers' willingness to pay a premium.

Some shippers say they are willing to pay more. They say sustainability is increasingly important for consumers and is playing a bigger role in supply-chain decision making, but their options are limited.

Because few aircraft and ships run on biofuels, importers and exporters can't easily pick passage on sustainable modes of transportation while maintaining the pace of their supply chains. Some shippers say they hesitate to use carbon-offset programs, such as planting trees, because the benefits can take years to pay off and there are no reliable global standards." [1]

1. Green Logistics Slow to Make Progress
Berger, Paul.  Wall Street Journal, Eastern edition; New York, N.Y. [New York, N.Y]. 17 Mar 2023: B.2.