Spearheading Efficiency and Sustainability in Global Supply Chains
How G20 nations can play a pivotal role in facilitating the adoption of sustainable logistics practices.
The logistics sector is crucial in facilitating global trade and fostering economic growth, contributing to over a tenth of the global gross domestic product. With an increasingly interconnected world, growing urban population, and increasing consumer demand for goods, the sector is expected to grow from US$8.9 trillion today to US$18.2 trillion by the end of this decade. However, the logistics sector is responsible for 10 percent of global emissions and generates significant air pollution. As the world strives for a sustainable future, addressing the environmental impact of the logistics sector is crucial.
The G20, comprising 19 influential countries and the European Union, represents two-thirds of the global population, 80 percent of global economic output, and 80 percent of global CO2 emissions. The G20 nations hold substantial economic power and can play a pivotal role in facilitating the adoption of sustainable logistics practices.
RMI’s report The Green Logistics Playbook: Sustainable Supply Chain Best Practices for G20 Leaders outlines strategies for G20 stakeholders — policymakers, corporations, and financial institutions — to promote sustainable logistics practices by embracing four key strategies: (1) sustainable logistics operations, (2) effective policy frameworks, (3) improved infrastructure, and (4) financial investments.
1. Reimagining logistics operations: Logistics operations encompass coordinating goods transportation, warehousing, and various administrative tasks. To reduce carbon emissions in the transportation of goods, businesses must minimize vehicular movement and encourage the use of environmentally friendly transportation options. Improving warehouse efficiency and incorporating cutting-edge technologies can mitigate inventory loss. Furthermore, adopting innovative technologies can optimize administrative procedures associated with both transportation and warehousing.
Best practices to reduce carbon emissions from logistics operations include eco-driving programs, sustainable and efficient packaging techniques, efficient vehicle selection, and implementing environmentally conscious warehousing practices. More broadly, businesses can establish sustainability goals and invest in research and development to further advance efforts in reducing their environmental footprint.
2. Introducing policy, regulatory, and awareness measures: Effective policies and government initiatives — such as regulations, incentives, subsidies, standards, and awareness campaigns — are critical for advancing sustainable logistics. Logistics policy development requires collaboration among diverse entities at various levels of government. The national government plays a crucial role in establishing overarching regulatory guidelines, defining standards and objectives, and conducting public awareness initiatives. Both national and state governments can offer financial and non-financial incentives, while municipal authorities can focus on creating local policies related to land utilization and infrastructure expansion. The government can also collaborate with private sector and civil society stakeholders to launch large-scale consumer awareness campaigns for sustainable logistics.
3. Redefining logistics infrastructure development: Efficient logistics infrastructure enables the efficient movement and storage of goods, and is essential for streamlined operations. This involves a network of physical assets like logistics parks, warehouses, consolidation centers, and transportation networks such as roads, railways, ports, and airports. Logistics parks can serve as a centralized hub for warehousing, distribution, and transportation, reducing inefficiencies in the dispersed logistics sector. Long-term industrial and land-use plans that demarcate zones for factories and warehouses can effectively segregate industrial areas from residential areas.
Additionally, the government can focus on upgrading road infrastructure, which includes constructing bypasses and ring roads to redirect commercial traffic away from urban cores and enhancing connectivity between warehouses and urban centers. Furthermore, governments can establish dedicated zero-emissions trucking corridors equipped with necessary charging infrastructure to promote the adoption of zero-emissions vehicles.
4. Unlocking investments by mobilizing finance: To address the high capital requirements and risks inherent in logistics projects, public-private partnerships are crucial. Under a public-private partnership, the government and the private sector jointly share the financial and technical risks of large-scale projects. Additionally, multilateral development organizations can provide favorable financing options for logistics infrastructure initiatives in developing nations. This entails below-market interest rates, extended repayment horizons, and flexible terms, such as grace periods for loan repayment, until sustainable logistics projects generate profit.
As the logistics sector charts a path toward sustainable practices, the G20’s pivotal role cannot be overstated. Positioned as a global collaborative forum, the G20 can drive sustainability by establishing a dedicated sustainability task force. This task force can serve as a guiding beacon for emissions reduction initiatives in the logistics sector, and open the doors of cross-border collaboration, fostering a spirit of shared knowledge and collective progress. Adopting these practices can ensure efficient movement, storage, and distribution of goods, and minimize air pollution, CO2 emissions, adverse public health impacts, energy consumption, and costs associated with the logistics sector.
By championing sustainable logistics and supply chain practices, the G20 nations can embark on a transformative journey, carving a path toward a more equitable, resilient, and environmentally conscious global economy. Together, G20 nations can be advocates and architects of a future that inspires positive change for future generations.