Logistics is an essential part of any business, which can’t be overlooked as a lot of competitive edge depends on it. Integrating sustainability in this sector means that we are minimising the resources (fuel) consumed and negative impact (emissions) on the environment. In this article, we are focusing on the macro issues faced by the heavy commercial logistics in India and how we can tackle them.
One could think achieving sustainability will be in conflict with the goal of making profits, though this is far from reality. The truth is that the road to sustainability ends up in many other lucrative things like efficiency, reduction in costs and larger profit margins. This idea can be evinced with a practical example. Since 2002 Proctor and Gamble has been trying to integrate sustainability in its operations and the results that it has achieved are nothing short of phenomenal. It has halved its impact on environment across energy usage, carbon dioxide emissions, waste disposal and water usage. It did all this and also saved $1 billion in costs, achieving higher levels of efficiency.
The CAGR in Indian CO2 emissions from transport sector due to fossil fuel combustion has been around 4.5% compared to 1.16% in OECD countries and 1.04 in North America in the previous decade. Developing countries in general are lagging behind when compared to their developed counterparts. A major part of Indian logistics industry is comprised mostly of fragmented small scale units operating individually, small trucking companies perceive sustainable logistics and green practices to be alien concepts because of lack of knowledge and awareness about the viability and benefits that these practices can generate.
Railways have predominantly played a critical role in the logistics sector in India, particularly for iron & steel, mining, textile etc. However, gradually with time the share of railways in transportation has reduced drastically from 89% in 1951 by more than two thirds presently. On the other hand, the share of roadways has increased sevenfold. This leads to a major concern that the exponential growth in commercial fleets on the roads leads to proportionate increase in the emissions, which in case of railways is up to five times less. A study was conducted recently, the “carbon footprint analysis” by the Dedicated Freight Corridor Corporation for the Eastern corridor in India shows that moving goods by rail would be much more environment friendly despite the higher load it would have to handle. The corridor is expected to generate 60% less carbon emissions when compared to a scenario where the freight is transported through existing roads network.
Oil accounted for over 25% of India’s total primary energy supply in 2016, with over 40% powering the transport sector. In line with the target set by Prime Minister, Mr Narendra Modi, India intends to reduce dependence on oil and gas imports by 10% by 2022, and better logistics management can definitely contribute. One of the ways could be to adopt other means like bio fuel to power at least a part if not the entire fleet of trucks. VRL Technologies which is the largest player in logistics is increasing its reliance on alternative bio-fuel which helps them save INR 5-7 on each litre consumed. This can result in significant emissions cuts and hydrocarbon dependence in the long run. Currently bio-fuel comprises 12% of total fuel consumed by VRL which is expected to increase with time.
Overall, there is immense potential to make our logistics sector more sustainable. Among critical to-dos, a road map should be adopted to restore railway’s status as the primary mode of transportation. Another important task is to establish dedicated freight corridors that ensure efficient freight movements.
(This article has been written by Mr. Naitik Sharma, M.Sc. Economics, Madras School of Economics)