Written by Aliyah Assegaf & Veronica Red Pioquinto
01 May 2024
In the previous article, the basic concepts of Green Logistics were laid out to encourage businesses to start a greener movement. For this issue, the focus will be on the driving forces that motivate businesses to adopt green logistics, the global trends associated with the practice, and real-life examples of its application.
Environmental, Social, and Economic Drivers to Green Logistics
Businesses adopt green logistics into their operations for various reasons, such as being influenced, inspired, or even pressured to conform due to guilt. This article will explore three key drivers – Environment, Economy, and Society – to show how these three are interconnected, such that one is derived from the other or even both.
Environmental issues have been on the rise for the past decades as the planet gets warmer. With mounting concerns, businesses are increasingly compelled to integrate environmental responsibility into their core values. Whether through leaders’ advocacy, regulatory requirements, or societal pressure, an expanding number of companies are embracing more sustainable business practices (Lettieri, 2021). The lack of sustainable practices in transportation, warehousing, and supply chain management has significantly contributed to the disappearances of rainforests, a thinning ozone layer, air and water pollution, and piled-up landfills. Put simply, a significant portion of the world’s environmental issues stem from the imperative to sustain economic growth (Maurer, 2014), and as such, businesses with resources at their disposal should adopt better operations.
Green logistics has economic implications for both the long term and the short term. As energy and raw material costs are on a continual rise, businesses are resorting to energy sources and materials that are less costly and at the same time more sustainable (Maurer, 2014). Green logistics initiatives include going digital to avoid paper costs, having work-from-home days to reduce energy consumption, investing in electric vehicles, automating warehouses to avoid surplus costs, and use of energy-efficient lighting. For developing markets, moving to green logistics will, in the long run, facilitate more efficient service delivery networks due to cleaner and improved transport, warehousing, and even roads.
As the world grapples with escalating environmental challenges, the general public is becoming more aware and taking responsibility to address the looming crisis. From both an economic and social standpoint, there is increasing pressure from consumers and government regulations for businesses to adopt better practices (Maurer, 2014). Therefore, for businesses to operate smoothly and thrive, they have to comply with the demands of all the stakeholders. Moreover, consumers prioritize environmentally friendly products, even if it means they will be shelling out a bit more. Consequently, businesses aligned with green logistics have an edge over their competitors, particularly in the industrial sectors, as they cater to customers' preferences for environmentally friendly practices. (Youngswaing et al., 2024).
Internal influences also contribute to how a business will behave in terms of logistics. The leadership's role and intentions are paramount in launching an efficient environmental policy and adopting a company culture that advocates environmental responsibility (Youngswaing et al., 2024 & Tay et al., 2015). Using the perspective of social drivers, businesses adopt green logistics either due to the advocacies of their top management or as a response to external pressure from consumers and regulations.
Global sustainability initiatives and their impact on logistics
Green movements have an impact on the overall operations of a business and have a significant effect on logistics. Just as there are factors that can kick-start green logistics, adopting the practice will result in several impacts.
In light of consumer demand and preferences, businesses will now need to provide further transparency (Noatum Logistics, n.d.) on their supply chain, transport, and warehousing practices. Since customers have a growing concern and awareness towards environmental issues, they as consumers feel a sense of responsibility in their own ways, and thus would want to purchase responsibly and be informed of how their purchases have an impact. Sustainability initiatives (or lack thereof) can have implications on a business’s reputation and can definitely influence consumer opinion (Joloda Hydraroll, n.d.).
Another significant consideration in logistics is cost including the ROI (Return On Investment) of sustainability initiatives (Scharf, 2023). For instance, initiatives such as a zero-waste management system would cut costs on surplus, programmed/automated warehousing can reduce the time and costs of energy used in storage and transport, and investing in electric vehicles will reduce fuel costs.
Barriers and Challenges to Green Logistics
As ideal and invigorating as green logistics sounds, implementation may not always be a walk in the park.
In a study by Tay et al., (2015), it was cited that a company’s size can determine a business’s capability to implement greener changes. Often, larger companies are more willing to commit to green logistics, most probably due to having more capacity and better room for error than those of smaller companies with fewer resources. Moreover, as mentioned earlier, top management plays a crucial role in driving green logistics. The organization’s values must align with its leaders' intentions; otherwise, the execution of green logistics may falter.
Notably, access to proper infrastructure can impact green logistics adoption. For instance, the use of electric vehicles may not always be available to all markets or nations. Thus, there is still a dependence on the use of fossil fuels. For some communities, renewable energy may cost more, and would not be practical for smaller companies with limited capacities.
An efficient logistics system entails faster deliveries. In reality, delivering products in the shortest amount of time requires the use of the least energy-efficient mode of transportation, such as air freight, which emits the most carbon (Maurer, 2014). This is a paradox that can only be resolved via innovations, which at this rate, may take time.
Something that may be considered an external barrier would be a customer’s capacity to pay (Maurer, 2014 and Tay et al., 2015). To remain economically sustainable, companies cannot always shoulder the cost of the implementation of green logistics and would need to compensate through product rates. In the end, customers will be paying more for a product, and realistically, not everyone can spend extra dollars for a similar product they can acquire for less.
Case studies of international logistics sustainability practices
- Green Logistics in Thailand’s Auto Industry (Youngswaing et al., 2024): Results have shown that green logistics in the car manufacturing industry are directly affected by government and environmental policies, the company’s financial ability, commitment to eco-friendly investment, and public environmental attitudes.
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Green Logistics in Eroski, an online supermarket (Ubeda et al., 2011): By minimizing distances and pollutant emissions in transport, as well as increasing their fleet, the trial has shown that transport and service delivery can be optimized.
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Supply Chain Management of LÖFBERGS, a coffee roastery company (SAYGILI and KARABACAK, 2022): LÖFBERGS converted to organic production on fields the size of almost 12,000 football fields without the use of any artificial fertilizers and pesticides and operated on purely renewable energy since 2021. They have also partnered with a supplier and developed a prototype of coffee packs that can be reused and recycled.
References:
Mauer, J. (2014). Green logistics. Drivers, paradoxes and optimization. https://www.grin.com/document/307963?lang=en
Tay, M., Rahman, A., Aziz, Y., & Sidek, S. (October 2015). A review on drivers and barriers towards sustainable supply chain practices. https://www.ijssh.net/papers/575-C10024.pdf
The benefits of sustainable logistics. (n.d.). https://www.joloda.com/news/the-benefits-of-sustainable-logistics/#:~:text=sustainable%20logistics%20eliminates%20more%20wastage&text=Inefficient%20transportation%20forces%20the%20business,the%20sustainability%20of%20the%20business
The impact of sustainability on logistics and SCM. (n.d.). https://www.grin.com/document/307963?lang=en
Saygili, M. & Karabakak, Z. (February 2022). Green practices in supply chain management: case studies. https://dergipark.org.tr/en/download/article-file/2251369
Ubeda S., Arcelus, F., & Faulin, J. (May 2010). Green logistics at Eroski: A case study. https://sci-hub.se/https://www.sciencedirect.com/science/article/abs/pii/S092552731000174X
Youngswaing, W., Jomnonkwao S., Cheunkamon, E. & Ratanavaraha, V. (February 2024). Key factors shaping green logistics in Thailand’s auto industry: An application of structural equation modeling. https://www.mdpi.com/2305-6290/8/1/17