Sustainable Logistics: Beware the Tsunami

Sustainable logistics is like a tsunami that is building far out at sea. Right now, the impact of sustainability on the lives of most logisticians is nonexistent. But eventually that tidal wave reaches the coast and things are never the same.

tsuanami

In an analysis completed last June by the Governance & Accountability Institute, seventy two percent (72%) of the companies included in The S&P 500 Index were found to have published a sustainability or corporate responsibility report. In 2011, just under 20% of S&P 500 companies engaged in sustainability reporting.

But many companies are in the early stages of their sustainability and social responsibility efforts. Companies begin with a materiality assessment. In other words, companies focus resources, strategy and reporting on the sustainability issues of the most significance to both commercial success (internal stakeholders) and a broader set of external stakeholders.

When it comes to sustainability, procurement professionals have been impacted by corporate social responsibility (CSR) programs far more than logistics professionals. Procurement is being tasked to make sure that their core providers of direct materials are treating their employees fairly, operating in safe environments, not engaged in bribery or other correct practices, and are producing manufacturing impacts with a low carbon footprint.

Manufacturing, which often has large material impacts, and product development are also increasingly impacted. But when I talk to my 3PL contacts, it is clear that at most companies sustainable logistics is not currently material. Potential clients for warehousing and transportation services ask about sustainability, but it is a nice to have, not a need to have.

Which logistics professionals will be impacted first by sustainability?

  1. Logistics executives working at big public companies will be impacted more quickly than smaller companies, who will in turn be impacted more quickly than private companies.
  2. Companies that own their own fleets will be pushed to reduce CO2 and other noxious emissions from transportation far more quickly than companies that use carriers to move their goods. Scope 1, emissions generated by the company itself, are always tackled before indirect emissions, emissions generated by supply chain partners.
  3. Certain industries are far ahead of others in their sustainability efforts. In high-tech, for example, leading companies have highly commendable CSR programs. In industries where large players have advanced CSR programs, the rest of the industry feels pressure to catch up. In high tech, for example, reverse logistics and landfill reduction efforts have become the norm among large companies.
  4. When sustainability has ROI, it becomes easier to justify sustainability projects. A company with their own fleet can both reduce their freight costs and achieve CO2 reductions through the use of transportation management systems. (See, The Carbon Disclosure Project: The Best Companies Make Use of Transportation Management Systems). In high tech, products are returned and valuable rare earth materials and high end plastics composites are demanufactured and harvested. This keeps material out of landfills but it also has a good ROI (See, 3PLs, Remanufacturers, and the Business of Sustainability).

In conclusion, the sustainable logistics tidal wave is still a long way out at sea. But beware, it is coming.