How green logistics can revolutionise our supply chains

In the modern supply chain, green logistics refers to implementing environmentally sustainable practices within transportation and distribution processes. The focus is on reducing carbon emissions, minimising waste, optimising routes, and adopting eco-friendly technologies and fuels. 

In the global context, green logistics plays a critical role in mitigating climate change, meeting sustainability goals and adhering to increasingly stringent regulations. Moreover, it addresses consumer demand for eco-conscious products and services, positioning companies for long-term competitiveness and responsible corporate citizenship in an environmentally conscious era.

The World Bank's Logistics Performance Index for 2023 reveals that the adoption of digitalisation in supply chains, particularly in emerging economies, is leading to significant reductions in port delays, up to 70% faster compared to developed countries. Additionally, there is a growing demand for green logistics, with 75% of shippers actively seeking environmentally friendly options when exporting to high-income nations. 

This shift towards digitalisation and sustainability is reshaping global logistics practices, offering more efficient operations and eco-friendly choices for businesses involved in international trade.

Many large corporations around the world are actively embracing green logistics to reduce their environmental footprint while also reaping significant cost benefits. 

Here are a few examples, along with the associated benefits:

Amazon, one of the world's largest e-commerce companies, is investing heavily in green logistics. They've committed to using 100,000 electric delivery vans by 2030 reducing carbon emissions. The cost benefits include lower fuel and maintenance expenses for electric vehicles and a positive public image. Environmentally, this initiative contributes to reduced air pollution and greenhouse gas emissions.

The furniture giant IKEA is focused on sustainable logistics practices. They've optimised their supply chain to reduce transportation distances, leading to lower fuel costs and emissions. Additionally, they use rail transport for long-distance shipping to reduce their carbon footprint. This approach saves money and aligns with their environmental commitment to zero emissions by 2030.

Optimising product profitability from production to delivery is crucial in today's supply chain management landscape. Effective logistics management is paramount, given evolving customer demands, global competition and globalisation. Elevating logistics performance is central to a nation's ability to integrate into global value chains, sustain economic growth and enhance overall competitiveness globally.

The logistics sector is a paramount concern for Bangladesh, with the country witnessing a decline in its global ranking on the World Bank's Logistics Performance Index (LPI). In 2018, Bangladesh slid to the 100th position, down from its previous standing of 82nd in 2016. A detailed analysis of the LPI reveals that Bangladesh outperforms Pakistan in crucial areas like tracking, tracing and timing. 

In comparison with Sri Lanka, Bangladesh surpasses Sri Lanka in terms of international shipments and excels in tracking and tracing, along with timing. However, when evaluated against the likes of India and Vietnam, Bangladesh falls significantly short. Notably, Bangladesh's customs performance ranks the lowest among regional economies, including India, Sri Lanka, Pakistan and Vietnam.

Bangladesh faces mounting demand for freight services, yet its transportation infrastructure is strained and deteriorating. Insufficient investment in railways and waterborne freight, coupled with pollution, perilous roads and climate change concerns, render the current system unsustainable. 

This issue is crucial, given Bangladesh's dense population of over 170 million, impacting not only the nation but the wider South Asian region. An assessment of sustainable freight transportation is imperative.

Green logistics – which reduces pollution, improves road safety and combats climate change – is crucial for Bangladesh's economy. Aligned with UN Sustainable Development Goals, it helps achieve clean energy, climate action and infrastructure development targets. This promotes economic growth, environmental preservation and overall well-being in the country.

Implementing green logistics practices in Bangladesh can boost its economy, especially in the FMCG and RMG sectors. Eco-friendly transportation cuts costs enhances competitiveness and aligns with international sustainability standards. It also reduces pollution, lowers maintenance costs, fosters innovation and creates jobs – making Bangladesh more appealing for investment and trade.

Green logistics can optimise routes and vehicle efficiency to cut fuel consumption and emissions, like UPS with routing software. Warehousing can use energy-efficient technology and eco-friendly construction to reduce energy use and waste. Packaging can reduce material waste and environmental impact, as seen with Coca-Cola's light-weighting approach. Green logistics leads to efficiency, cost savings and eco-friendliness in various business operations.

Technology and green logistics are deeply interconnected, with technological advancements playing a crucial role in driving sustainability and efficiency within the logistics industry.

One key area of synergy is transportation optimisation. Advanced routing and scheduling software, powered by artificial intelligence and real-time data, enables companies to plan more efficient delivery routes, reducing fuel consumption and emissions. 

Another example is the integration of Internet of Things (IoT) devices in supply chain monitoring. IoT sensors can track environmental conditions, such as temperature and humidity, to ensure the safe transport of perishable goods. This not only reduces food waste but also minimises the environmental impact associated with spoiled products during transit. 

Furthermore, blockchain technology is being harnessed to augment transparency and traceability within supply chains, a development that is instrumental in upholding sustainable and ethical practices.

Green logistics, occasionally known as eco-logistics, encompasses the comprehensive measures taken to minimise the environmental impact of logistical operations while upholding uncompromising quality standards. Prioritising the reduction of energy consumption and the adoption of cleaner practices stands as a foremost objective, a commitment shared by both the Paris Climate Agreement and the United Nations' Sustainable Development Goals.

Within the framework of Industry 4.0, green logistics emerges as a pivotal domain in the pursuit of a more interconnected world that safeguards the well-being of the communities it serves. It places a paramount emphasis on quantifying the carbon footprint associated with all logistical activities and proactively managing and diminishing these emissions with greater efficiency.

Mohammad Ashraful Islam Khan, President of The Supply Chain Street and previously Head of Supply Chain Advisory Services at KPMG Bangladesh.

Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinions and views of The Business Standard.