Why Sustainability Matters In Logistic Sector Business Essay

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Sustainability should form part of strategy in an organisation because it is the key to innovation. In logistics, like many globally important sectors, sustainability creates the difference between values creation and collapse of an institution. Sustainability matters to the logistics sector in many way, firstly, the sector contributes about 9% of global GDP( Delivering Tomorrow, page 16) which is a very high economic contribution to the Economy. However, regardless of its economic contribution, the sector is the largest consumer of fossil fuels and according to delivering tomorrow document, "the way forward begins by recognizing that the logistics industry is a major source of CO2 emissions." (page 36) and that Companies and stakeholders across the supply chain need to address sustainability expectations and integrate ethical, social, and environmental practices into the global logistics value chain. Further, According to the IPCC (2007), transport, including freight and personal transport, accounts for 13.1 % of global greenhouse gas (GHG) emissions. In addition, The World Economic Forum (2009) calculates that the logistics industry is responsible for around 2.8 m metric tons of GHG emissions per year, which is around 5.5 % of global GHG emissions (see figure 03)3. Road freight accounts for roughly 60 % of total emissions from the logistics and transport sector, with over 1,500 megatons of CO2-equivalent emissions.

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In addition, it is stated that, "as the logistics industry is expected to continue growing, so will its energy consumption and GHG emissions, unless changes are made. The sector needs to improve its energy efficiency and develop viable alternatives to fossil fuels, otherwise it will also find itself ever more vulnerable to the uncertainty of oil supplies, as well as the increasing price volatility of fossil fuels." (Delivering Tomorrow, page 17) and The Harvard Business School also states that "Sustainability isn't the burden on bottom lines that many executives believe it to be. In fact, becoming environment-friendly can lower your costs and increase your revenues. That's why sustainability should be a touchstone for all innovation. In the future, only companies that make sustainability a goal will achieve competitive advantage. That means rethinking business models as well as products, technologies, and processes." (Business Review, page 53)

In the same future, for most companies' long-term success will be strongly linked to more sustainable business concepts. Major trends and developments in this regard are already shaping the way towards a more sustainable logistics industry. This indeed are the major reasons why sustainability matters for the logistics sector.

What are the most significant issues in logistic industry?

The following are the issues related to the logistic Industry from different sources of information;

Climate change is probably the most significant environmental issue for the transport and logistics sector. Transport is also the source of emissions of other gases that contribute to climate change (and poor air quality), such as methane and nitrous oxide (present in exhaust emissions). (Environmental Guide for Transport and Logistics, Page 3)

Governments, companies and consumers are becoming increasingly concerned about the need for sustainability in the sector because a key concern is climate change, which is thought to be caused by gases produced from the burning of fossil fuels bearing in mind that the sector is a contributor; this is said to be leading to increased incidences of droughts, floods, and rising sea levels. Waste disposal has also become a huge problem worldwide. (Euromonitor Slides, page 1).

Delivering Tomorrow, Page 22, reports the following;

Collaboration will increasingly be seen as an enabler to attain sustainability; even erstwhile competitors will cooperate more closely. As carbon emissions reduction becomes a priority for suppliers, business customers and logistics companies, cooperative business models will expand both vertically and horizontally along the supply chain.

Business models of logistics companies will change as sustainable innovations open up new opportunities.

CO2 labeling will become standardized. CO2 labels allow customers to compare green products. Transparency will raise confidence among logistics customers and end consumers when making climate-friendly choices.

Carbon emissions will have a price tag. As reducing carbon emissions becomes more important for companies, governments and customers, it will become part of a business' accounting and decision-making process. This will increase the demand for a price to be attached to CO2 emissions Carbon pricing will lead to more stringent regulatory measures.

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Security of Supply - Fossil fuel security of supply is an issue at the top of the political and business agendas. The transport and logistics sector relies upon the use of fossil fuels in order to operate. Global demand for energy continues to grow, resulting in greater competition for a rapidly depleting supply of resources, which in turn results in increased fuel prices. The transport and logistics sector cannot rely on a limitless supply of fossil fuels, therefore demand for these needs to be reduced and alternatives considered, such as liquefied petroleum gas, natural gas, biomass based fuels, hybrid and electric vehicles and hydrogen and fuel cell vehicles. (Environmental Guide for Transport and Logistics, Page 4)

What are the challenges and opportunities in the logistic industry (i.e. differentiation between long term and short term, regulation, reverse logistics, etc.), provide examples by research done.

According to Sustainability Innovation document by the Harvard Business School, becoming sustainable is a five stage process, and each stage has its own challenges. Further it states that It isn't going to be easy and enterprises that have started the journey, study show that they go through five distinct stages of change. They face different challenges at each stage and must develop new capabilities to tackle them. Below is the five stage approach which also states the challenges and opportunities.

Stages

STAGE 1

STAGE 2

STAGE 3

STAGE 4

STAGE 5

Description

Viewing Compliance

as Opportunity

Making Value Chains

Sustainable

Designing Sustainable

Products and Services

Developing New

Business Models

Creating Next-

Practice Platforms

CENTRAL CHALLENGE

To ensure that compliance

with norms becomes an opportunity

for innovation.

To increase efficiencies

throughout the value chain

To develop sustainable offerings

or redesign existing ones

to become eco-friendly.

To find novel ways of delivering

and capturing value, which will change the basis of competition

To question through the sustainability

lens the dominant

logic behind business today.

COMPETENCIES NEEDED

>> The ability to anticipate and

shape regulations.

>> The skill to work with other

companies, including rivals, to

implement creative solutions.

>> Expertise in techniques

such as carbon management

and life-cycle assessment.

>> The ability to redesign

operations to use less energy

and water, produce fewer

emissions, and generate less

waste.

>> The capacity to ensure that

suppliers and retailers make

their operations eco-friendly.

>> The skills to know which

products or services are most

unfriendly to the environment.

>> The ability to generate real

public support for sustainable

offerings and not be considered

as "greenwashing."

>> The management knowhow

to scale both supplies

of green materials and the

manufacture of products.

>> The capacity to understand

what consumers want and to

fi gure out different ways to

meet those demands.

>> The ability to understand

how partners can enhance the

value of offerings.

>> Knowledge of how renewable

and nonrenewable

resources affect business

ecosystems and industries.

>> The expertise to synthesize

business models, technologies,

and regulations in different

industries.

INNOVATION OPPORTUNITY

>> Using compliance to induce

the company and its partners

to experiment with sustainable

technologies, materials,

and processes.

>> Developing sustainable

sources of raw materials and

components.

>> Increasing the use of clean

energy sources such as wind

and solar power.

>> Finding innovative uses for

returned products.

>> Applying techniques such

as biomimicry in product

development.

>> Developing compact and

eco-friendly packaging.

>> Developing new delivery

technologies that change

value-chain relationships in

significant ways.

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>> Creating monetization

models that relate to services

rather than products.

>> Devising business models

that combine digital and

physical infrastructures.

>> Building business

platforms that will enable

customers and suppliers to manage energy in radically

different ways.

>> Developing products that

won't need water in categories

traditionally associated

with it, such as cleaning

products.

>> Designing technologies

that will allow industries to

use the energy produced as a by-product.