Expert insights

COP 28: What’s next for sustainability in supply chains?

12/12/2023
Mathieu Friedberg, CEO, CEVA Logistics

In a historic show of collaboration, the CEOs of CMACGM, Maersk, Hapag-Llyod, MSC, and WalleniusWilhelmsen issued a joint declaration on Friday, Dec. 1, during the 2023 UN Climate Change Conference in Dubai. Their joint commitment during COP28 presents a united path to decarbonize an industry that accounts for approximately 2-3 percent of global GHG emissions.

Their plan proposes four foundational elements for the International Maritime Organization (IMO) as it finalizes regulations and objectives along the route to net zero by 2050. The unique moment of coming together highlights the critical nature of climate change and a global supply chain in desperate need of its own change.

This week marks a great moment for the maritime shipping industry. In addition, there are many other positive examples across the global supply chain of changing habits and concrete steps that are making a difference today with an eye on the future.

As CMA CGM Chairman and CEO RodolpheSaadé said this week: “Climate change is a general concern not a matter of competition.” The sooner everyone along global value and supply chains grasps this concept—from consumer to raw material producers—the better chance we have of ensuring a sustainable future. The challenge requires everyone to invest and do their part.

COP 28 CEVA Logistics

 

Changing expectations from consumers

Consumer expectations around sustainability continue to increase. Sustainable purchasing is no longer a niche, with a recent Deloitte survey finding nearly half (46 percent) of consumers across 23 study countries purchased at least one sustainable good or service during just one month of 2023. And businesses are working to reduce their carbon footprint, in order to measure up to this consumer demand.

Heavily polluting last mile deliveries are a huge turn-off for many, as they provide direct evidence of sustainability, or the lack of it, on consumers’ doorsteps. In fact, Descartes’ second annual home delivery sustainability study of 8,000 consumers across Europe and North America reports that over a quarter (27 percent) of consumers have already stopped shopping at a company in response to poor environmental delivery practices.

The push from consumers to decarbonize should come as no surprise, given the way environmental concerns hit the front pages in 2023. As a result, more and more consumers are holding businesses accountable when it comes to making changes.

While last mile may be where it’s most visible, sustainability needs to be a focus throughout the supply chain. And this is where logistics providers and carriers can step up and play a central role. As Deloitte points out, “… Partnerships are likely to be critical. When asked what’s needed for success in sustainability innovation, companies most often point to new technologies and support from third-parties.”

We’re uniquely aware of this truth at CEVA. We face the same challenge as our customers, as we continue our efforts to decarbonize to meet our climate goals.

 

Sustainability throughout the supply chain

As part of the CMA CGM Group, CEVA’s is committed to achieving net zero carbon emissions by 2050. To accomplish this goal, our near-term sustainability activities fall into three areas of focus:

  1. Making our warehouses more sustainable
  2. Electrifying our ground fleet
  3. Working with carriers and customers to reduce CO2 emissions

We’re already making great strides in all of these areas. Our CEVA warehouses will have switched to 100% LED Lighting by the end of this year; we aim to use 100% low-carbon electricity within the next two years, and we’re quickly electrifying our ground fleet operations.

We offer multi-modal transport solutions, to take advantage of lower emissions from sea, rail or canals, wherever possible. In a world-first, we transported the Ferrari F1 team’s equipment kits via rail in North America recently – reducing their emissions by 90% compared to air transport.

We’re also working with an alliance of companies in Europe to develop an open-to-all, relay network of truck stations that could accelerate the decarbonization long-distance road transport in Europe. The European Clean Transport Network Alliance just recently started a proof-of-concept project of five stations spanning the length of France to test the idea over the next two years. The aim would be to expand across Europe, adding more stations to the existing motorway network and bringing low carbon trucks, smart charging and optimized scheduling to long-distance trucking. The need for public-private collaboration goes without saying as the infrastructure costs for such stations—while reasonable—are significant.

All of this is great news, and we will continue to push forward with these initiatives. However, more than 90 percent of CEVA’s carbon emissions are indirect emissions from subcontracted transport—air, ground and ocean carrier partners—which presents a separate challenge.

Part of the answer has to be working directly with our suppliers to support them to decarbonize in turn. We need to provide detailed carbon reporting for our customers, which includes information on transport sourced from our suppliers. So where possible, we’ll choose suppliers who are equally dedicated to reducing their impact on the planet. This week’s announcement at COP 28 by shipping executives is a major step forward for maritime transport.

 

The cost of decarbonization

Oil is the cheaper route. So decarbonization will cost. UN figures estimate decarbonizing shipping alone requires investment of more than $1 trillion, once the price of updating fleets, developing and funding alternative fuels is taken into account.

The costs associated with decarbonizing air freight are even higher, McKinsey estimates that achieving carbon-neutral growth through 2030 would require $40-50 billion annual investment, increasing to around $175 billion by 2050. And this doesn’t include the capital investment in updating aircraft.

So choosing more sustainable solutions will come with a price tag. And we’re going to need to work with our customers to understand those costs, and their appetite to engage with them. What increases are consumers ready to bear in their desire for more sustainable products and more sustainable logistics? Because the potential costs of inaction are much higher. It’s imperative that we wean ourselves off our dependence on fossil fuels, both as individual consumers, as businesses and collectively as an industry and a society.

A further challenge comes around the availability of low carbon fuels. Every sector will need them. Until the production and distribution scales dramatically, they will come at a premium of their own. We need investment to scale the technology to meet the future demand, so that low carbon fuel quickly becomes affordable and available for regular use. In addition, we need the means to encourage such production through regulatory support, financial aid and demand commitments.

 

Clear carbon reporting

Another piece of the puzzle is clear carbon reporting. We need to be able to demonstrate the carbon cost of particular transport choices. While we have clear mechanisms to measure CO2 for air and ocean transport, thanks to a limited number of factors and companies, when it comes to ground alternatives, the situation is far more challenging.

We work with more than 20,000 different suppliers, some of whom are major carriers, but others are might only own two or three trucks and are unlikely to be ready to take on the same level of CSR commitments, including accurate and standardized reporting. It’s difficult to get complete and accurate data on shipments (weight and distance) by road, except pre- and post-carriage. As a result, producing reliable, automatic CO2 reports is a challenge.

As an industry, we need a common methodology around how we measure CO2 emissions. One that’s straightforward for everyone to implement, regardless of the size of the operation. This is going to require further investment in developing IT solutions and a standardization of the reporting structure.

 

Collaboration at every level

We’re taking steps toward this kind of standardization thanks to working with the Smart Freight Centre—a non-profit organization that brings together freight forwarders, shippers and carriers with the aim of decarbonizing freight transport. As a collaborative platform across the whole supply chain, we can work together toward clear reporting, knowledge sharing and, ultimately, concrete solutions.

Collaboration among potential business rivals is a balancing act between transparency and protecting sensitive information. However, we must join forces in order to work at a pace that will bring lasting change. Organizations large and small within the supply chain need to do what ocean carriers are committing to do. Joint efforts to standardize reporting, share innovation and scale the technology needed to decarbonize effectively is what will truly allow us all to change an industry and meet the expectations of both our transport customers and their end consumers.

The shipping CEOs’ announcement at #COP28 in Dubai is an encouraging show of commitment and teamwork that puts competitors and industries on the same side—a sustainable supply chain for the future.