Sustainable logistics: definition, approach and relevance

“Sustainable logistics” refers to the practices and processes aimed at improving the sustainability of supply-chain activities, ranging from the supply of raw materials to the transformation processes, the storage, the packaging, the distribution and the management of the end of the lifecycle of products.

This concept is not limited to environmental footprint, but also involves the economic and social sustainability of companies’ logistics activities. The scope is to reduce as much as possible the negative externalities linked to companies’ activities for the environment, the economy and the society at large.

Sustainable logistics is becoming more and more relevant in the transition from a linear economic model (based on extraction, transformation, distribution and consumption cycles) to a circular model of industrial economy, whose main goal is to improve the quality of raw materials and final products.

The macro-areas related to sustainable logistics are many and quite diverse. Among the most relevant, we find:

• Logistics of territories and urban logistics (last mile)
• Reverse logistics
• The optimization of warehouse logistics
• The infrastructural development
• Product and process engineering
• The reduction of energy consumption, scraps and waste
• Information Technology applied (logistics 4.0)
• The adoption of certifications, standards and international guidelines
• Supply-chain optimization (traffic balance)
• The use of intermodal and combined transport solutions
• The upgrade of truck fleets and the use of environmentally friendly vehicles
• Communication towards stakeholders and final consumers
• Sharing economy applied to logistics processes (fleet, warehouse and data sharing)

What are the necessary steps to implement a sustainable logistics model?

The approach to improving logistics processes follows a recurring scheme, which requires:

• Mapping and engagement of stakeholders
• The measurement of performance indicators (KPIs)
• The definition of goals and priorities
• The adoption of a detailed action plan and governance
• The evaluation and communication of the results achieved

Stakeholders engagement: mapping and engaging stakeholders enables to identify materiality fields, that is to say relevant areas within company business that may generate positive or negative externalities. This is a systematic process of dialogue and engagement which is fundamental to correctly plan company policies and strategies.

Measuring: to get closer to a more sustainable logistics model it is important to measure the status quo. The process starts with defining the key parameters, from the consumption of raw materials, energy and fuel to the calculation of carbon footprint of the final products.

The second step is to analyze the impact of different processes involved in the supply, production and distribution cycles. Once the roles and relevance of different operations are fully understood, priorities and objectives can be effectively identified.

Definition of goals: after the preliminary analysis of processes, the company can start looking at the desired outcomes. Each goal can be associated with a different degree of complexity, intended as the effort needed to achieve the expected results (taking into account available resources).

Likewise, it is possible to identify multiple levels of urgency related to corporate strategy, competitors’ activities and stakeholders’ expectations.

Definition of priorities: the combined evaluation of these three dimensions (impact, complexity and urgency) allows decision makers to identify priority objectives, which will in turn enable the planning of initiatives and interventions to be listed in the action plan.

Action plan: this is the plan with actions needed to achieve the expected results and a consistent organization. An effective action plan features detailed and measurable objectives, as well as the main milestones on the roadmap. A good plan provides a timeline and opportunities to evaluate progress, organizational responsibilities and performance indicators, which will allow project managers to evaluate objectively the outcome of the different implemented activities.

Evaluation of outcomes and iterations: the final step of the cycle allows the company to appreciate its achievements (and possibly to engage and communicate the results to its stakeholders), evaluating potential shortcomings and errors and planning corrective actions.

Once the cycle is completed, the process can be repeated to move towards more ambitious and complex goals.

The role of freight transport processes

The weight of transport operations in determining the environmental footprint of industrial activities is often underestimated, due to several factors which limit and distort the perception of the relevance of these activities:

The externalization of logistics processes

The perception of logistics as a mere cost, to be reduced as much as possible

The limited visibility and the complexity related to an effective communication to customers of the initiatives related to supply-chain sustainability

These three factors are interconnected and intertwined, and can determine whether a cycle can become virtuous or vicious, depending on the company’s strategic choices.

On one side, we find those companies which keep on considering logistics processes as mere costs that do not generate any value for the company and its customers. These companies will tend to compress these costs as much as possible, selecting suppliers and services based on the lowest price, trying to limit the consumers’ visibility on these elements.

On the other side, we find the more sophisticated companies, the higher level of recognition on the contribution of the logistics sector to their value chain. These companies will tend to consider investments in logistics as strategic and necessary to protect their competitive advantages. In such case, the logic behind the selection of their suppliers  goes beyond the cost, but also their capability to generate value through innovation, service quality and the continuous improvement of operations.

The pressure towards a higher sustainability of corporate activities is also influenced by the awareness of customers and end users, which can be expressed directly, through their purchase choice, and indirectly, through their support to political and legislative initiatives. For more on this, see UNIBicocca – SOS LOG presentation “The customer becomes the actor – Il consumatore diventa consum-attore” (Italian language).

Today, this awareness is focused on the most tangible elements, such as packaging, raw materials, production processes and product lifecycle (from durability to right to repair and disposal of products at the end of their lifecycle). As mentioned above, the relevance of logistics processes is often less evident, and therefore easier to overlook.

Ignoring this element would be however a short-sighted choice, for at least two reasons. Firstly, the consequences of an inefficient logistics process are paid by the whole community, in terms of road congestion, road accidents, pollution, extra costs and negative externalities. In the second place, it is easy to imagine that the focus of customers will soon also be on the less tangible elements, generating requests, expectations and regulatory limitations which might find many companies unprepared.

From the problem to the solution: sustainable logistics as a competitive asset

Where should those companies which want to contribute to improving the status quo start from?

Increase the attention and the resources dedicated to actively manage logistics activities: structure the organization to increase the awareness on key logistics choices, keeping control on the decision-making process when working with external partners such as freight forwarders and logistics operators.

This approach does not prevent the company from outsourcing most logistics activities (for example through a long-term partnership with one or more logistics operators), but it calls for the identification of an internal representative, as an instance a supply chain manager, who can take responsibility for the transition process towards a more sustainable logistics.

For smaller companies, which might find hard to appoint a supply chain manager, it is fundamental to choose logistics partners capable of driving and promoting sustainable and responsible logistics choices.

Expand the perspective, from pure cost to the benefits related to process optimization and responsible use of resources: the reorganization of the supply chain (achievable for example through an increased use of intermodal transport and road-to-rail modal shift) can generate substantial benefits, related to an optimal use of available resources, an improved organization of processes and an evolution towards modern and efficient organizational models.

Engage customers communicating effectively values, commitments and results: to capitalize on the efforts put in place to achieve a sustainable logistics model, it is important to intercept customers’ expectations, deploying a coherent and effective communication strategy. To do this, companies can work with associations, such as SOS LOGistica, committed to the promotion of green logistics best practices through dedicated projects and activities aimed at pursuing a true environmental, economic and social sustainability.

One of SOS LOGistica projects,called “Sustainable Logistics Trademark” is the first Italian trademark which sets a standard and enables companies to measure their maturity level regarding sustainability (economical, societal and environmental) and effectively communicate it.

Choose reliable partners, which can support and guide the company along the supply-chain transformation process towards a more sustainable model: the Contship Italia Group has more than  50-year of experience in the development of smart intermodal solutions, the goal of which is to support the Italian and European logistics system.

Working with shipping lines, freight forwarders and cargo owners, Contship develops reliable and efficient intermodal solutions to connect Italian ports with the main logistics hubs in Italy and Europe.