COP26 is arguably the most significant global event on climate change that sees world leaders join forces to tackle the challenge. In order to succeed, each part of the economy will have to do its bit. Logistics and supply chain are no exception and we spoke with Sarah Watt, Senior Director at Gartner, about why COP26 is important for the industry and what needs to be done to bring the sector forward. Read part of the interview and watch the full recording.
Why should supply chain organisations be interested in COP26 and what does it mean for their operations?
There are four goals that the leaders at the COP26 conference are looking to achieve. The first goal is to ensure that we meet the Paris commitments of limiting global warming to 1.5 degrees Celsius. For supply chain organizations the majority of the emissions are created in the value chain. One of the challenges here is around, first of all, getting that data and then identifying partnerships to enable improvement over time.
The second outcome of COP is around protecting local communities, biodiversity and habitats. This is important for supply chains as well because whether we are manufacturing the jacket that I’m wearing today or building other products like a car,
for example, our supply chains are fundamentally based on natural resources and biodiversity can be very important to some supply chains. Think about food and beverage organizations or agricultural based supply chains. We get ecosystem services like pollination, for example, which enables those supply chains to work effectively.
But as part of that second outcome, there’s also a comment around adaptation. We know to some extent the climate will change over a period of time. This is going to manifest itself in some of the issues that we’re already seeing, like the heat dome effect that we saw earlier this year and wildfires, for example. This has the potential to be very disruptive for supply chain organizations.
There are two other outcomes of COP that I’d like to share. One is around financing. What’s being sought is that we connect financing to carbon and reporting. This is really asking enterprises to look at those future climate change risks and get a handle on them and then report them to key stakeholders, principally investors.
Then the last outcome of COP is around collaboration. We know that some of the issues that are going to be spoken about at COP are macro issues. They can’t be addressed in one organization. Collaboration is absolutely key to achieving these emissions reduction and biodiversity goals. Obviously Supply chains have a very important role to play in that process.
In your analysis (see box on the right) you look at 3PLs who can support companies’ goals – what should companies look for in a 3PL and what expectations need to be set?
The first thing we need to talk about is expectation setting between 3PLs and shippers. We often find that shippers are looking for much more radical emissions reduction compared to 3PLs. This creates a bit of tension in the relationship because there’s this mismatch in expectation. And 3PLs are also operating within constraints. We know that new technologies are coming to market, which will scale over the coming years. If I think about road transport, we’re talking about things like electrification and hydrogen technologies. But it’s a lot more difficult when we think about other modes of transportation. When we talk about sea or air freight the solutions there are more likely to be adopted are biofuel-based because those assets are in the field for a very long time.
The question of who pays for it also comes up frequently. With any new technology there is a green premium associated with it. If you want to go out and buy an electric vehicle today, it’s typically more expensive compared to a diesel or gasoline vehicle because those economies of scale haven’t yet been achieved and they’re not priced at the same point compared to gasoline. Same thing applies in the world of 3PLs. Are these additional costs absorbed by the business or is there an expectation for the customer to take some of those costs as well?
What is the role of educating customers and changing their behaviour?
It’s not about taking choices away because one of the drivers for business obviously is customer service. We can’t have carbon savings at the penalty of customer service.It is about showing customers how their shipping choices create emissions and giving them alternative shipping options to reduce their impact.
How to nudge consumers to choose a greener and more sustainable option? What is the role of collaboration and why are companies still not working together? Is logistics really ready to be greener? Find out more in the video interview with Sarah Watt, Senior Director, Gartner.✷