Is the industry ready to be net-zero carbon in the next 5 years?

Is the industry ready to be net-zero carbon in the next 5 years?

Panattoni, HFW, and Pledge have co-authored European Logistics & Supply Chain Sustainability Report 2024 which examines key sustainability metrics and indicators for businesses operating within the logistics and supply chain sector. The third year of research highlights important shifts in behaviour while also introducing new areas of sustainability research for the supply chain.

 

A new era for supply chain sustainability?

 

The primary driver of sustainability efforts is the desire for a positive environmental impact, rather than regulatory compliance. Logistics operators, retailers, and manufacturers are increasingly aware of sustainability requirements. There’s a noticeable decline in companies citing a lack of resources, skills, or leadership support as obstacles to implementing sustainability solutions. This indicates greater utilization of personnel with sustainability expertise. Additionally, fewer respondents report difficulties in quantifying benefits, understanding regulations, or needing clarity on sustainability investment options, reflecting enhanced awareness in the sector.

 

Financial and cost pressures sit alongside a desire to be sustainable

 

While inflationary pressures may be easing in Europe, sustainability remains a key focus in relation to supply chain costs. Nearly two-thirds of companies face financial challenges regarding sustainable solutions, with over half, including more than three-quarters of logistics operators, indicating that lower implementation costs would enhance their sustainability efforts. Smaller companies often lack the resources to establish sustainability programs or understand emissions reporting requirements.

 

Financial incentives, such as grants and subsidies, are crucial for encouraging sustainability improvements. Almost 20% of companies are willing to pay more for environmental certifications, valuing the benefits for sales, while 16% are hesitant to pay a rent premium for 'green' building relocations, and only 13% are uncertain about paying a premium for 'green' fleet transport.

 

Despite financial constraints and the fact that sustainability measures often lead to higher investment costs, the challenge of defining or measuring financial returns has decreased. It may indicate progress in the ability to quantify the benefits of sustainability efforts or to understand the positive impact of the transition over the longer term,” Panattoni

 

Contractual obligations are here to stay

 

Sustainability is increasingly important in the relationships between logistics operators, manufacturers, and retailers. A growing number of companies are including sustainability targets in contracts, with one-third now imposing these as obligations, up from 32% last year. Meanwhile, 38% list them as aspirations, a decrease from previous years.

 

Notably, there’s a rise in financial penalties for failing to meet targets, and over half of respondents maintain the right to terminate relationships if these targets are unmet. Additionally, two-thirds of respondents require vendors to have environmental ISO standard certification and 44% request accredited emissions calculations that comply with recognized frameworks.

 

HFW: “We see shippers increasingly working with carriers on solutions to mitigate their Scope 3 emissions in contracts and in some cases willing to pay for this.”

 

Technology can boost sustainability efforts

 

Measuring a company's environmental footprint is complex, especially with multiple logistics partners and subcontractors involved. Regulatory requirements primarily drive companies to report emissions linked to their products or services, but customer, investor, and net-zero commitments also play key roles. Since our 2022 research, more companies are utilizing technology to monitor compliance, manage electric vehicle fleets, and access financial support like subsidies and grants.

 

Pledge: “Harnessing technology for scope 3 emissions is key to achieving comprehensive sustainability goals, enabling precise measurement and impactful action to reduce emissions across the supply chain.

 

Making a difference

 

This year, there is an increased emphasis on making a positive environmental impact through landscaping, biodiversity, and investing in battery storage for renewable energy, particularly among logistics operators. Energy-saving solutions are still the top priority for warehouse sustainability, with electric vehicle charging points becoming standard in new specifications.

 

However, there remains uncertainty, and companies seek greater clarity from industry and government on future fuel choices, technologies, and the costs associated with decarbonisation targets for road fleets. The availability of grants for charging infrastructure is also vital. From 2022 to 2024, clarity regarding future fuel options has been crucial, and by 2024, the importance of investing in charging infrastructure and proximity to charging points is rapidly growing.

 

Key findings

 

  • As sustainability practices become more widespread, fewer companies, although still over 40% of all respondents, have won customers due to their actions. Similarly, fewer respondents suggest that their sustainability actions result in improved employee motivation.
  • Almost two-thirds of companies (including 80% of logistics operators) remain challenged by the financial cost of solutions, whilst over one-third see a lack of technology improving sustainable operations as a key challenge.
  • Our research this year highlights a significant reduction in the share of companies identifying a lack of resources (people) to implement sustainability solutions, a lack of skills or knowledge in their companies and a lack of support from leadership.
  • Meeting the contractual requirements of customers, suppliers and/or service providers is an increasingly important factor driving companies’ sustainability activities.

 

You can find the full report here.

 

Image source - Pexels.

 

Related Features