Tag Archives: cop16

“COP-Out”- The Durban Climate Talks and the Tragedy of the Climate Commons. Will Business Innovation Save the World?

15 Dec

Feeling a bit like the holidays for sure.  And I feel like humanity just got “scrooged”.   A year ago, I wrote about the COP16 U.N. Climate Conference in Mexico City and how governments were playing “kick the can” with climate policy. I noted that there was “some progress on establishing more robust means to appropriate and distribute micro-finance funds to support development of technologies in developing countries that lack the dollars themselves to manage their own greenhouse gas footprints.”  I also noted that many companies, rather than countries were taking unilateral initiatives to reach deep into their supply chain to develop innovative, new products that are less impacting to the environment and that can help developing-nations likely to be hit hard by global warming.

Based on what has (or has not) transpired at the recently wrapped up COP17/CMP5 in Durban the past two weeks, I am left feeling that global consensus on this issue, while not completely out of the question, is getting closer.  But the incremental, baby step pace of progress is (according to most climate scientists) insufficient to avert seemingly unstoppable rise in year over year average global temperatures.  It’s not the science that appears in question, rather it appears that there appears to be ongoing hesitancy to bear accountability and resolute responsibility on the part of those who carry or deny the mantle of developed nation status (hint: United States, China, India).  Despite the last minute efforts of the 194 nations in attendance and working past the official end of the conference, hopes for a meaningful and comprehensive global agreement appeared to be faltering.

As an example, the recent article in the Guardian stated that “The EU has found it hard to push through its “roadmap” that would establish an overarching, legal agreement committing all countries to emission cuts”.    So, the EU got what it wanted.  Also, according to an African delegate, “The US has what it wants. There is no guarantee that the new agreement will legally bind governments to cut emissions.”  The U.S. indeed got what it wanted. China and India continue to maintain they are still too undeveloped on the whole to be accountable in the same manner as western, industrialized nations and also claims they are implementing what they have already pledged to do at prior UN conferences.  Um…show me.

The one big victory I did hear that came out of the past two weeks was on an agreement on establishing a $100 billion/year climate fund to help developing countries address climate change.  But before we celebrate that breakthrough, there’s a small outstanding issue …there is no clear mechanism for how that money will be raised. In the recent words of GOP candidate Gov. Rick Perry… “Oops”.  In addition, rich countries would be allowed to offset their emissions by making payments to poor countries which protected their forests.  Is this a bilateral effort or are poorer counties expected to bear 100% of the burden of making that happen.  What is thought to be enough isn’t.  Tim Gore, policy adviser for Oxfam, stated “Governments must really get to grips with the climate crisis.”  That’s an understatement if I ever heard one.  Gore summed up his take on the winners, losers and likely impact on the poorer nations here.

So, while COP17 by most measures succeeded where prior UN gatherings failed, the agreements on which progress will be measured (using the 2015 and 2020 yardsticks established at Durban) may not be swift enough to stem the slow bleed that climate change is bringing on around the world.

Supply Chain Sector Gets Some Attention

Going into the climate conference, two key supply chain sectors, aviation and shipping, were targeted for discussion. According to the Civil Air Services Navigation Organization, “After a number of days of tough negotiations on aviation, there was still no decision on some of the key aspects of Common But Differentiated Responsibilities (CBDR) and how they relate to aviation and shipping, and the ability for countries negotiation under the UNFCCC to tell negotiators at ICAO what to do.

In the final agreed Durban Platform text on aviation, there was a brief placeholder text:  “International aviation and maritime transport Agrees to continue its consideration of issues related to addressing emissions from international aviation and maritime transport;”

Basically, there was no agreement was reached …end of story.  That being said, I have written countless posts on the administrative and technological advances underway by large intermodal shippers and transporters and the aviation industry to quell fuel use and has been exploring how to develop sustainable aviation biofuels, including in developing countries to meet the Climate Fund goals established in Durban.  Aviation and transportation stakeholders have concluded that “agreement amongst nearly all countries [is] that [International Civil Aviation Organization] ICAO is the most appropriate place to deal with aviation emissions. The industry will continue to engage with ICAO to ensure that an ambitious work program can deliver an outcome on aviation emissions by the next ICAO Assembly in 2013”.

Moving past Durban

The Huffington Post summarized the main outcome of COP17, the so-called “Durban Platform”, including the “establishment and empowerment of an “Ad Hoc Working Group” to develop a new protocol and to “complete its work … no later than 2015 in order … [for the new protocol] … to come into effect and be implemented from 2020.” The new protocol is to be a “legal instrument or an agreed outcome with legal force” with this critical stipulation: “applicable to all Parties.” Nowhere in this agreement do the words “common but differentiated appear.” (Full details in this draft document: “Establishment of an Ad Hoc Working Group on the Durban Platform for Enhanced Action.”)”

Writer and author Marc Gunther summed up the positive and negative spins on the Durban conference, and suggested that perhaps the evolution of climate negotiations will transcend universal treaties, relying more on regional, collaborative agreements and technological advances as the primary means of progress.  Gunther nails the takeaways by suggesting that “First, those companies that worry about climate change need to bring their voices more forcefully to the policy arena; they can’t assume that governments are on the right track. Second, companies ought to prepare for climate change–when they site new facilities, for example–because it’s unavoidable.”

The Durban Platforms emphasis on more dialogue, more planning and lack of clear immediate is tragic.  Not for the planet.  No sane person can look me in the eye and say with a straight face that seven billion people, with all their wants and needs, have not affected the global ecosystem.  But despite all the perversities and ravages that we’ve inflicted on Earth, the planet will survive.  But for us, the larger mass of humanity, we hold our own fate in our hands …and we are blowing it.  Why?  Because there are nations (the EU, United States, China and India among them) that cannot…or will not…move past their “self interest”.  They are just kicking the can down the road.

The Tragedy of the Commons

In 1968, ecologist Garrett Harding published “The Tragedy of the Commons in the journal Science. I was introduced to Hardin’s theory many times during my undergraduate and graduate environmental law studies. His highly controversial and criticized theory presented a hypothetical situation involving herders sharing a common parcel of land, on which they are each entitled to let their cows graze. Hardin theorized that it was in each herder’s “self interest” to put more cows onto the land, even if the quality of the common is damaged for all (through overgrazing). The herder receives all of the benefits from an additional cow, while the damage to the common is shared by the entire group. Further if all herders make the same choice, the common will be depleted or even destroyed, to the detriment of all.  Systems ecologists called this an exceedance of “carrying capacity” resulting in other tragedies likie overfishing, depletion of forest resources, water supplies and arable land.   And while the acts of an individual or one corporation may singularly have little impact, the cumulative effect can be overwhelming and often leave irreversible impacts.

Hardin’s theories have been widely criticized from an economic point of view.  Political scientist Elinor Ostrom, the first woman to win the Nobel Prize for Economics (2009), showed that the “Tragedy of the Commons” (its overuse and destruction) doesn’t happen, at least when all the people who share the commons can get together and talk about it.   Ostrom found that, when there are no internal or external forces preventing the “commoners” from a free, open and robust discussion of how they should agree to govern and limit their use of it so it doesn’t get overgrazed and thus ruined for all, then the commons goes on thriving.

And that, dear friends and readers is the tragedy of the Climate Conference in Durban…the political process and governmental self interest appeared once again come up short, co-opting the outcomes “to the detriment of all”. As noted in a National Public Radio broadcast in 2009, “Every nation wants to act in its own interest but that may not be the same as the global interest.”

Innovation, Technology and a Collective Conscience

I believe now, as I believed and wrote about during COP16 in Mexico City and after COP15 in “Nope”nhagen that governments were putting off today what we can technologically achieve now. What happened?  Has humanity lost its mojo…or is something else going on?

In a fascinating article by venture capitalist Roland Van Der Meer, Holding Off the Tragedy of the Commons, he describes some of the underlying factors that he believes have contributed to the global decline in natural resources, and lack of environmental stewardship…and it comes down to innovation.

Both governments and corporations are institutions that exist for the reason of self promulgation, actualization, and advancement (to further itself, to continue to exist, to not change). The methodologies that they deploy and back is their best practice, it is what they believe, what they will hold on to and how they will exist and thrive. And this is the failure point. It is not meant to change. Its very survival depends upon the lack of change.

What is missing is a catalyst for change. Why change? Because what worked best 100, 50,  20 or even 10 years ago is no longer the best methodology or practice.

The institution is good at doing what it was designed to do and it stubbornly holds on to that design at the expense of its own destruction or the method it protects. Change is needed.

The incumbent companies and regulations are stuck in a process and framework which prevents and disincentivizes change. They even go further to lock out or block change because it would lead to their own destruction…. it is our collective resources that are at stake. We need to be open and create the new enterprises that will create, invent and adapt in the basic resources areas.

I believe, as do organizations like the Responding to Climate Change (RTCC) that the private sector can “pick up the slack” in tackling climate change where government agreements have (up to this point) failed.   However, to effectively incentivize innovative technologies, the private sector must continue to be a part of the larger policy debate.  There is a way out of the mess we have made and one of my personal life influencers, Amory Lovins, has a plan.  In his new book, Reinventing Fire- Bold Business Solutions for the New Energy Era offers “actionable solutions for four energy-intensive sectors of the economy: transportation, buildings, industry, and electricity”. The Rocky Mountain Institutes Lovins states “business can become more competitive, profitable, and resilient by leading the transformation from fossil fuels to efficiency and renewables. This transition will build a stronger economy, a more secure nation, and a healthier environment.” Imagine if this approach can be applied at a global level, with a combination of government/business and monitored, measurable multi-national collaboration and a collective common conscience. What have we got to lose?

When it comes to real action on climate change, the upside of heretical innovation is huge…and the downside unthinkable.

Solving the Sustainable Sourcing & Green Supply Chain Management Puzzle: A 2010 Rewind

22 Dec

2010 is nearly ‘in the books’, and I vowed that I would not fall prey to the endless lists and recounting of annual accomplishments.  However, never in my 30 years in the sustainability and environmental business has there been so much attention paid to the influence of supply chain management and its role in the greening of business.  2010 has been truly remarkable in a number of key areas of green supply chain management from a number of perspectives, including: policy and governance, operations and optimization, guidance and standardization and metrics.  The green pieces of the supply chain and sustainability puzzle appear to be nicely falling into place.  Key themes that I can glean from this most incredible year are:

Big Industry Movers and Government Green up the Supply Chain- over the past year, observers and practitioners read nearly weekly announcements of yet another major manufacturer or retailer setting the bar for greener supply chain management.  With a much greater focus on monitoring, measurement and verification, Wal-Mart, IBM, Proctor and Gamble, Kaiser Permanente, Puma, Ford, Intel, Pepsi, Kimberly-Clark, Unilever, Johnson & Johnson, Herman Miller among many others made a big splash by announcing serious efforts to engage, collaborate and track supplier/vendor sustainability efforts.  Central to each of these organizations is how vendors impact the large companies carbon footprint, in addition to other major value chain concerns such as material and water resource use, and waste management.  Even government agencies here in the U.S. (General Services Administration) and abroad (DEFRA in Britain) have set green standards and guidelines for federal procurement.  More and more companies are jumping on the green train and the recognition is flowing wide and deep.

Supply Chain Meets Corporate Social Responsibility- Adding to many companies existing concerns over environmental protection, large products manufacturers such as Nestle, Corporate Express, Danisco, Starbucks, Unilever and the apparel industry stepped up in a big way to address human rights, fair labor and sustainable development in areas in which they operate throughout the world. Each of these companies and others like WalMart have embraced the “whole systems” approach that I’ve previously written about in this space and that underscore transparency and collaboration the “value” in the supply chain.  Each company recognizes that to be a truly sustainable organization, it must reach deep beyond its four walls to its suppliers and customers.

Emerging Sustainability Standards Embrace Supply Chain Management- This year, the international Organization for Standardization (ISO) unveiled its ISO 26000 Corporate Social Responsibility guidance document.  In addition, two prominent organizations, UL Environment and Green Seal unveiled and vetted two sustainability focused product (GS-C1) and organization (ULE 880) standards, both of which may markedly affect supply chain behaviors in the future.  Central to all these standards and guidelines is how important supply networks are in supporting the entire product ‘value chain”, not only from an environmental perspective, but from a social and community focused perspective.

Transparency and Collaboration Take on a Green Hue– in April, I had the honor of addressing C-suite supply chain managers and practitioners at the Aberdeen Supply Chain Summit in San Francisco.  A central theme of this conference involved the critical importance of collaboration throughout supply networks to enhance efficiencies and optimize value.   My talk (linked here) focused on how the most successful greening efforts in supply chains (like those used by Unilever, Herman Miller and Hewlett Packard) were based on value creation through the sharing of intelligence and know-how about environmental and emerging regulatory issues and emerging technologies.  Suppliers and customers can collaboratively strengthen each other’s performance and distributing cost of ownership.  Practitioners have found “reciprocal value” through enhanced product differentiation, reputation management and customer loyalty. And the continuing Wikileaks controversy is boldly reminding the business world that accountability and transparency and corporate social responsibility is vital and may even be a game changer in how products and services are made and delivered to the global marketplace.

Logistics Turning to Greener Solutionsnumerous studies and surveys conducted by peer organizations this year underscored how sustainability among carriers and shippers was central in the minds of most logistics CEO’s.  Whether it was by land, air or sea, shipping and logistics embraced sustainability as a key element of business planning and strategy in 2010.  I also had the pleasure of visiting briefly with FedEx’s Vice President, Environmental Affairs & Sustainability (@Mitch_Jackson) this fall and learned of the myriad of operational innovations and sustainability focused metrics that the company is tracking throughout its operations and maintenance activities. And UPS even mentioned its efforts to manage its carbon footprint in its catchy new brand campaign “I Love Logistics”.  Finally logistics companies are partnering with manufacturing to support reverse logistics efforts designed to manage end of life or post consumer uses of products or resources.

Lean Manufacturing Meets Green Supply Chain as manufacturing continues its slow rebound from the Great Recession, companies are recommitting themselves to implementing less wasteful production as a way to leverage cost and enhance savings.  Parallel efforts are in play also to incorporate more environmentally sustainable work practices and processes.  Enhancing this effort to lean the product value chain is recognition of upstream suppliers and vendors work practices and possible impacts they may have on manufacturing outputs. Lean efforts have been demonstrated to yield substantial environmental benefits (pollution prevention, waste reduction and reuse opportunities) as well as leverage compliance issues.  More and more, companies are exploring the overlaps and synergies between quality-based lean  and environmentally based ‘green’ initiatives.

Supply Chain and Climate Action Rounding out the year, the climate summit in Cancun (COP16) produced modest results (given the low expectations all around, what was accomplished looked huge by comparison to Copenhagen).  Activities at COP16, especially by the private sector were geared toward identifying key linkages between supply chain sustainability and climate change.   Perhaps the biggest news to emerge from the two-week conference was an effort by apparel manufacturers to enhance supply chain social responsibility and an internet database that will list the energy efficiency of most ocean-going vessels, in a scheme designed to reduce shipping emissions by nearly 25%.  As I noted, this effort is important not only because it recognizes shipping and transport as a backbone” of commerce (as other industry sponsored programs have recognized already), but because of the value of transparency in enhancing supply chain efficiencies.

Looking Forward to 2011

Yes indeed, it’s been a big year for supply chain management and its intersection with sustainability.  I see little for 2011 that will slow down this upward green trajectory, and naturally I am glad.  I am glad that more businesses “get it” and don’t want to be viewed as laggards in leaning towards a business ethic that values sustainability and socially influenced governance. I am glad that more companies are seeking out green innovation through new technologies and being ‘first movers’ in their respective business spaces.

And I am glad that you (my readers) and I am here to be part of the change.

Sir Bransons Climate Challenge to Sea Cargo Shippers- Carbon Accounting Successes & New Tools

7 Dec

In prior posts I have discussed the importance of transportation and logistics as critical elements in anchoring a sustainable supply chain (see separate posts here and here).  Last week I discussed the key linkages between supply chain sustainability and climate change.   No comes a bit of encouraging news from the Cancun Climate Summit (COP16), still in progress through this week.  A free internet database was announced over the weekend, the focus of which will list the energy efficiency of almost every ocean-going vessel, in a scheme designed to reduce shipping emissions by nearly 25%.  This effort is important not only because it recognizes shipping and transport as a backbone” of commerce, but because of the value of transparency in enhancing supply chain efficiencies.

“By eco-labelling clean and dirty ships, we hope to change the mindset in shipping and begin making gigaton-scale reductions in emissions,” said Peter Boyd, director of Carbon War Room.  The Carbon War Room was a co-founded by Sir Richard Branson.  Using publicly available data on the engine size and CO2 emissions of nearly 60,000 ships, exporters and importers, as well as holidaymakers on cruises, will be able to choose between ships that run on cleaner fuels and have other technologies designed to reduce environmental “loads”.

The initiative, called Shippingefficiency.org, rates ships on a scale from A to G in a similar fashion to ratings given to fridges or washing machines. According to the site, the Energy Efficiency Design Index (EEDI) ratings for an individual ship are calculated by assessing the values for that ship to overall average values for all ships of that type (e.g. bulk carriers) and to other ships of a similar size within this type. It will “allow supermarkets, oil and mining companies, food importers, retailers and manufacturers” to specify that their goods are sent from point to point by the least polluting ships.

The “Dirt” on Sea Shipping…

The shipping industry has been challenged for decades to find ways to efficiently deliver the majority of goods from point of manufacture to point of use.   Ocean transport carries more than 90 percent of the world’s traded goods and contributes between 3 percent and 4 percent of global emissions.  Shipping has been slow to address carbon emissions, choosing to focus on containment and control of other critical pollutants such as sulfur dioxide (SOx) and nitrogen oxides (NOx)[1]. According to the International Maritime Organization (IMO), the UN body that governs shipping, the industry has an opportunity to make substantial money by reducing the first 250 million tons of its CO2e.[2]

Shipping has a number of inherent institutional issues that hamper demand for widely available fuel-efficient technologies.  For instance, the worlds shipping fleet has been driven for years by engines designed to burn the cheapest, dirtiest “bunker” fuel, passing on the cost. Nearly 15% of the world’s ships account for about half of all the industry emissions.  In addition, most shipping lines traditionally pass on most of the fuel costs to charterers, providing few incentives to build more efficient ships (often referred to as the “landlord and tenant scenario”).  In addition, shipyards worldwide always charge an often cost prohibitive premium to operators for new designs and technologies

Also, its shipping-attributed pollution can pose serious human and environmental health risks.  For instance, particulate matter emissions from ships have been reported to contribute to an estimated 60,000 premature deaths annually (with most deaths occurring near coastlines in Europe, East Asia, and South Asia), as reported in a 2007 study published in Environmental Science & Technology.

…and What the Industry is Doing About It

Mr. Branson’s announcement in Cancun adds another initiative to the increased attention being paid to the transport industry in managing pollutants, including greenhouse gas emissions. As I recently noted in a recent post on shipping and logistics, Inbound Logistics Magazine earlier this year released its Top 50 Green Partners listing earlier this year.  Eight of the companies and organizations listed were ocean carriers.  These appear to be true leaders in implementing improved operational practices designed to lower the environmental impact of their operations.

Also, back in the early 2000’s, the Business for Social Responsibility (BSR) launched the Clean Cargo Working Group (CCWG). The group consists of over 60% of the leading multinational manufacturers (shippers) and freight carriers and forwarders (carriers).  The group is dedicated to” integrating environmentally and socially responsible business principles into transportation management”.  Unlike the new EEDI rating, the CCWG methodology is the only existing standardized approach to calculate CO2 emissions for ocean going container vessels. The data is put in the form of emissions factors to enable shippers and liners calculate carbon emissions in a consistent manner.  This allows trade routes to be compared. In addition, the CCWG annually benchmarks member lines’ environmental performance, further increasing focus and reducing environmental footprint.

Other collaborative efforts that cover other transport modes include EPA’s SmartWay Transportation Partnership, Ecological Transport Information Tool, and the GreenShip Project.  Each of these and other transportation-focused groups have made strides in developing tools and methods for different parts of the sector.

Case Studies

Reducing emissions is technically feasible using current technology, and, in the case of efficiency measures to reduce fuel consumption, can contribute cost savings that make it economically attractive with appropriate financing of upfront costs. Of those emission reductions, the first approximate 25% of reductions could be achieved “profitability”, according to the IMO GHG Study.

Big Players Getting it Done: At a transportation conference convened this past summer by the U.S. Department of Transportation, Federal Highway Administration, Lee Kindberg of Maersk Lines (one of the top 50 Green Partners reported by Inbound Logistics) reported that “… vessels are becoming more energy efficient and reducing emission. This is due to technologies, operations, the speeds we operate at, and the vessel sizes as there definitely are economies of scale. …Since 2002 [Maersk] reduced our CO2 emissions per container per kilometer by 20% and set a goal of an additional reduction of 25% by 2020.  In addition Kindberg indicated that the company was switching to a distillate fuel instead of the heavy fuel oil, resulting in sulfur oxide emission reductions of 95%, particulate matter emission reductions by 86% and the NOx emissions reductions by 6% to 12% depending on the vessels.  Reducing ship speeds, reducing ship drag, or ballast water optimization and treatment systems has also increased ship efficiencies along with improvements in ship procedures, crew training and performance measurement using independent third party environmental certifications like ISO 14001.

The Little (Hybrid) Tug That Can: Major cargo seaports are also collaborating with companies to introduce new technology to comply with stricter air quality regulations.  The world’s first hybrid electric tugboat, Foss Maritime’s Carolyn Dorothy which works in Southern California’s San Pedro Bay at the Port of Long Beach, California, emits 73 percent less soot (tugs are known high soot contributors), 51 percent fewer nitrogen oxides and 27 percent less carbon dioxide than a standard tug of comparable size.  The tug also can claim improved fuel efficiency and a quieter operation, all contributing to a lower environmental footprint.

Conclusions/Food for Thought

This past weekend’s announcement at Cancun and the slew of industry cross-sector, multi-modal collaborations are encouraging.  Whether it’s sea shipping, air cargo, rail or road transport, all modes play a vital key to solving part of the climate change puzzle.  As Maersks Kindberg stated this year at the FHWA conference, “We have to keep in mind that it’s the total lifecycle footprint that matters. Transportation is often only a small part of the total …If you focus on improvements and actually incorporate the carbon impact into business decisions, you can actually make real progress on both and perhaps also improve your business.’

It’s clear that all the nodes of a supply chain (from design to manufacturing and from point of use to end of life) and all the modal components in between want to be part of the solution, not part of the problem.  Businesses are stepping up to the challenge.

As we head into the final week of climate negotiations at Cancun, are the world’s climate negotiators up to the task?


[1]According to the Carbon War Room, the shipping industry is the largest emitter of NOx and is also one of the largest emitter of SOx.  It’s been estimated by the IMO that demand will increase, and CO2e emissions from ships will reach 18% of all manmade Greenhouse gas emissions by 2050 under “business as usual”.

[2] The IMO GHG Study 2009 estimates that eco-efficiency technologies could reduce CO2e emissions from shipping by between 25% and 75% with substantial monetary advantages.

Seeking Links Between Supply Chain Sustainability, Logistics & the U.N. Climate Conference (COP16)

30 Nov

As the world’s nations converge on Cancun this week for the two week UN Climate Change Conference (COP16) a few statistics are in order to put the supply chain and related logistics industry into perspective.  It’s a pretty sure bet (given poor results at COP15 in Copenhagen and recent Congressional elections here in the U.S.) that it’s unlikely that any major binding agreements will be reached on setting measurable and verifiable targets for greenhouse gas (GHG) emissions cuts for industrialized nations.  What is at least hoped for is that there will be some progress on establishing more robust means to appropriate and distribute micro-finance funds to support development of technologies in developing countries that lack the dollars themselves to manage their own greenhouse gas footprints.

Logistics and Transportation Share a Big Piece of the Carbon Pie

But the fact remains that logistics is a major source of CO2 emissions, accounting for 13.1% of global greenhouse gas emissions, according to the Intergovernmental Panel on Climate Change (IPCC, 2007) – although, this figure also includes passenger transportation.  The “transport sector’ sector as a whole is responsible for 24% of global CO₂ emissions!  So as the logistics industry grows and expands to respond to the ever changing demands by global commerce, so will energy consumption and GHG emissions related to daily logistics.  To that end, in a report issued this fall by Deutsch Post/ DHL, “Delivering Tomorrow: Towards Sustainable Logistics[1], a study of more than 3600 companies found that “two-thirds, i.e. 63 % of business customers, believe companies will regard transportation as a key lever to reduce their carbon footprint”. And while the report suggests that low-carbon logistics solutions and flexible transport modes are not yet widely available, there are a few market-ready technologies or solutions today that can meet the specific needs of the transport and logistics sector.

“We want to take a significant step forward to improving carbon efficiency and do our part to facilitate a low-carbon economy,” says Chief Executive Officer of Deutsche Post DHL Frank Appel. Deutsche Post DHL was the first logistics company worldwide to commit to a carbon efficiency target – 30 percent improvement by the year 2020 compared with 2007.  Other companies such as UPS and FedEx are implementing similar programs designed to optimize operations in a sustainable manner.

The report also cited that “70 % of respondents believe that legislation is needed in order to bring about a substantial shift towards a sustainable logistics industry.” The study shows that carbon pricing mechanisms can likely accelerate a market-based dynamic toward more sustainable solutions. Once there is a real price tag attributed to carbon emissions, the environment will be an integral part of investment decisions.    Customers in Asia in particular appear quick to accept that sustainable solutions may cause higher prices, according to the study. For example, 84 percent of consumers in China, India, Malaysia and Singapore say they would accept a higher price for green products – compared to only 50 percent in Western countries.  This type of hesitancy on the part of Western countries falls in direct line with the ‘foot dragging’ that has occurred at past climate conferences.

The report concluded by suggesting seven key developments that are likely to take place that can largely be influenced by the ways that logistics can affect global commerce:

1. Logistics counts – it is not a commodity. Logistics is not only a chief catalyst of global trade and a defining component behind value creation – it is also a business of strategic importance in the move towards a low-carbon economy.

2. Technological change will be achieved through a concerted planning and implementation effort between private companies, governments and financial institutions.

3. Collaboration will increasingly be seen as an enabler to attain sustainability even between perennial competitors. This will especially be the case as greenhouse gas emissions reduction becomes a priority for suppliers, business customers and logistics companies.

4. Business models of logistics companies will change as sustainable innovations and technological advances create new opportunities.

5. Carbon labeling will become standardized. Carbon ‘tags’ offer ways for customers to compare environmental impacts of products. This increased product ‘transparency’ can raise confidence among logistics customers and end consumers when making climate-friendly choices.

6. Carbon emissions will eventually have a price tag, whether it’s mandated by law or not. Already, carbon accounting has become part of companies accounting, decision making and corporate reporting practices in many market sectors. Increasing movement in this direction, with possible government or free market intervention will only increase the demand for a price to be attached to CO2 emissions.

7. Carbon pricing will lead to more stringent regulatory measures.  However companies will only accept a price tag on carbon emissions if governments ensure a level playing field across industries (and more challenging will be across economies).

Companies are not Waiting Around

Already, big product manufacturers and retailers like Unilever and Walmart are reaching deep into their supply chain to stock shelves with less harmful products.  Gavin Neath, senior vice president for sustainability for Unilever says that this approach not only helps the company cut costs, but create new products that are less impacting to the environment and expand in developing-world markets that are likely to be hit hard by global warming, he said. With efforts to secure a global climate treaty barely inching forward “big companies like ours, which have very extensive supply chains, reaching across all continents and 60, 70 countries, can make a difference,” Mr. Neath explained.

That brings us back to COP16.

UPS Carbon Neutral Shipping Program (courtesy Logistics Management Magazine)

It’s been suggested by some practitioners and policy makers that at COP16, a binding agreement is more likely to occur when countries take ownership of their entire life-cycle emissions and when such agreements are based on data that attributes emissions fairly.   It’s also been proposed that national inventories be generated by adopting measurement tools that follow the principles established by existing carbon accounting methodologies already used by corporations and at a product level.   Supply chain wide carbon accounting (at the product design, manufacturing and distribution levels) is a vital ingredient to achieve this result.

I’ll be watching COP16 developments closely in Cancun these next two weeks and will offer additional insights about what potential policy driven outcomes these negotiations may have on supply chain logistics.


[1] The study on sustainable logistics was developed with experts from MIT, Potsdam Institute for Climate Impact Research, National University of Singapore and the Technische Universität Berlin, Deutsche Post DHL, and manufacturers/retailers like Fujitsu, Henkel, HP, Unilever, and Walmart.