In the last 12 months, sustainability has risen rapidly to become a significant competitive issue for medium to large European and global freight forwarders, as their customers increasingly push them for evidence of their environmental policies and capabilities in new contracts. While some have been proactive, an absence of international standards or direction from governments, limited availability of green fuels, and an unwillingness among many customers to pay a premium for sustainable services have left many freight companies unclear how to respond, reports Will Waters   

Increased attention on global climate change, heightened by last autumn’s COP26 Summit in Glasgow, has generated a new wave of interest, enthusiasm and urgency among businesses, investors, governments and consumers in developing and adopting sustainable business practices and policies. With governments committing to fresh climate-change targets and a clamour from consumers and investors for change, freight forwarding and logistics companies have been left with a sense of needing to respond, but many unclear exactly how, and how fast.

With many governments still working on translating their latest respective climate-change targets into deliverable actions for businesses and investment in infrastructure to support them, many forwarding and logistics companies are left to respond to the requests of their various customers and to a certain extent second guess how the market will look in two to five years’ time. And with mixed messages from customers about whether they are willing to pay extra for green solutions, and a shortage of green fuel options, the responses from freight businesses are understandably mixed.

Nevertheless, initial research from FORWARDER magazine indicates that many large and medium-sized European freight forwarders are now making significant moves to understand, invest in, and develop sustainability measurement and improvement policies and initiatives, as their customers increasingly push them for evidence of their environmental policies and capabilities in new contracts.But there remains considerable inconsistency in what they measure and offer – including options to offset carbon emissions – in part due to a lack of standardisation of methodologies internationally and still emerging technology capabilities to measure and track actual or estimates of emissions caused by shipments.

But in the meantime, many future-facing large and medium freight forwarders are pushing ahead with their own initiatives and calculation methods or using technology and processes provided by emerging specialists such as EcoTransIT or Searoutes, as technology firms and sustainability specialists continue to develop off-the-shelf capabilities and standard methodologies are established.

Until now, it has remained less of a priority for freight forwarders based in some other parts of the world and for small forwarders and small import-export companies. But new digital tools are becoming available that promise to be affordable for most companies with a central transport management system (TMS) to plug into and measure their customers’ shipments’ carbon footprints, including a ‘white-label’ product soon to be offered by one forwarding network to its members. And even relatively small-scale customers are beginning to ask questions about their suppliers’ green credentials.

Awareness rising among freight firms

However, Andy Cliff, director of Straightforward Consultancy – which acts as an external freight and logistics consultant for mainly SME UK import-export companies and forwarders – says the priority for many smaller customers at the moment remains “survival, after two bruising years…” He says sustainability, emissions and the environment “are nice ideas for them, but not a priority for small customers – for example, importers that ship less than 1,000 containers a year, or less than 250 tonnes of air freight per year.”

But he has observed it becoming an issue for slightly larger companies – for example, he recently got a 10-page questionnaire from an importer that has an import business turnover of around £1.5 million a year “asking ‘how green you are as a supplier?’, but it was basic questions like: ‘do you have an environmental policy’? ‘Do use green vehicles’? It was more for companies that supply physical goods to them in their upstream supply chain,” he notes.

Cliff says measuring and reducing emissions “is definitely now a real issue for major public (publicly listed) companies – for example, those that might import several thousand containers per year, or certainly those that import 10,000 containers a year or more. For those companies, it is now more than just CSR, but is about real environmental policies and having a commitment to it,” he notes. “So, it depends on the type and size of customer.”

Responses of logistics providers

This heightened focus is starting to be reflected among the responses of logistics providers and freight forwarders – or at least in how they talk about sustainability. Although the big companies have been talking for some time about environmental measures, until recently there was a suspicion that in some cases it remained more about window dressing – where companies “want to be seen as having environmental policies and initiatives, because their competitors have”, Cliff highlights.

With many customers now under strong pressure from their own customers, there seems to be a need for third-party logistics companies (3PLs) above a certain size to provide real sustainability responses. But given their role as an intermediary rather than a physical provider of the transport, that response may need to be about offering more sustainable alternatives to their customers, alongside the traditional options.

Whatever their motives, research by Forwarder suggests that many Europe-based medium to medium-large freight forwarders have now developed or are developing plans to measure and report the carbon baseline of their businesses and offering at least a crude analysis of a shipment’s carbon footprint – for example, by trade lane, weight and transport mode.

Some, particularly on the smaller end, are still only or mainly reporting on the carbon emissions or baseline of their own business activities, not of customers’ shipments. And most are not yet offering granularity or accurate shipment-level data, but may be looking to build that in the next two to five years.

However, many large multinational (MNC) forwarders, for example with annual revenue exceeding US$500 million, and many with a turnover of $50+ million, now offer or at least describe offering fairly broad and more sophisticated sustainability policies, including plans or the ability to report and analyse carbon footprints at a shipment level, and may offer the option to offset this. That measurement may only be approximate, by trade lane, weight and transport mode, with companies mostly not yet offering accurate shipment-level data, but looking to develop this and offer data and options at the point of booking in the next two years.

Frontrunners

Unsurprisingly, it is some of the largest MNC forwarders such as DHL, Kuehne + Nagel, and DB Schenker that are making the loudest noise in terms of their sustainability offering to customers.

For example, DHL has an established group-wide ‘Go Green’ strategy, with ambitious carbon reduction targets for 2025, 2030, and 2050 – including within its DHL Global Forwarding division, which offers a variety of Go Green products and “service options for minimising and/or avoiding logistics-related emissions, waste and other environmental impacts along your entire supply chain”. This includes an instant online Carbon Calculator function estimating carbon emissions of various shipment scenarios – although some have questioned the accuracy of these kinds of tools.

Other green initiatives from the largest MNC forwarders include expanding the use of zero- or low-emissions vehicles, energy efficiency improvements to buildings and facilities, better route optimisation, and use of greener fuel for intercontinental transport – such as sustainable aviation fuel (SAF).

Limited availability of green fuel

DB Schenker is among those that have introduced SAF on certain lanes, although CEO Jochen Thewes acknowledges there are challenges to this and many other green-fuel schemes – including a ten-year ramp-up phase until SAF is widely available at scale to airlines, and limited availability of alternative fuels for other modes. And currently, shippers often come to contract talks with good green intentions but are reluctant to pay extra for sustainable solution, he has observed.

Climate-neutral target

Thewes, who is aiming to make DB Schenker “a sustainability leader within the logistics sector” and climate-neutral by 2040, highlights a UN study indicating that freight transport emissions represent currently about 10% of all energy-related emissions and 40% of global transport emissions, with these having grown continuously over the past years.

This means the transport sector currently has a significant role in the whole climate-change picture, with heavy carbon footprints whatever mode of transport you look at. “We have to be honest: there is a big gap between the goal of an emission-free transport system and what is doable today,” he noted in an interview late last year. “We have to close this gap step by step. That is our job, and we are working on this.”

Thewes believes that collaboration among supply chain stakeholders is important for improving efficiency and eliminating waste, and that data today allows shippers to choose more sustainable logistics, albeit probably at a higher freight rate. He believes the importance of data must grow, stressing that stable and efficient supply chains require reliable planning.

And shipper-forwarder negotiations, focused in the past on rates and transit times, should now include a range of sustainable transport options, even if those greener options cost more today than the more carbon-intensive alternatives, he believes – although investment in green technology promises to produce cheaper carbon-cutting alternatives in the future.

Good planning and advice

One simple piece of advice is for shippers to try to organise their intercontinental supply chains as much as possible to use ocean freight – since its emissions profile is so much lower than that for air freight with the current fuel options available. But Thewes observes that a maritime hub’s inland infrastructure is equally important for ocean freight to be sustainable, preferably via rail, which requires governments to invest in rail infrastructure. But governments and operators also need more sustainable solutions and fuel for the 75% that moves via other transport modes, mainly on road.

He says there will always be a tension over shippers’ decisions on what is best economically versus what is a better solution for the environment, but part of logistics companies’ role is advising them how to optimise their supply chain around their CO2 footprint by choosing the right providers and the right transport links and on-carriage option.

Common sustainability standards

But he believes all stakeholders need to be using the same sustainability measurement for global logistics, requiring someone to create “international standard procedures on carbon accounting for freight transport”.

At COP26, Thewes signed a Statement of Support by the World Economic Forum for the development of one industry standard for book and claims carbon credit accounting for all modes of freight transport. The goal is to establish a credible mechanism that supports shippers to reduce their Scope 3 emissions and enables the credible allocation of green premiums to further invest in freight value chain decarbonisation in a joint effort.

Progress needed this decade

Although action on cutting carbon emissions is a long-term project, he says sustainability is now “a top priority on the boardroom agenda, whether for our competitors, our partner airlines or shipping lines, but also for the customers.”

“Our job is to deliver solutions that work and support our customers’ business needs. No matter how clean or green a technology is, if we can’t sell it to our customers, it’s useless.”

Free carbon offsets

One option offered by Kuehne + Nagel as a cost-free green alternative for customers is that it is offering to offset at no extra cost to customers the carbon emissions of any shipments quoted and booked via its myKN portal – thus also offering customers an incentive to do the quote and booking process online, which saves KN admin costs.

Cliff says this is probably a relatively low-volume channel currently. He observes that although some of the big forwarders talk a lot publicly about their climate ambitions and capabilities, as a customer representative he has not seen many examples of forwarders actively pushing these solutions to their customers – or at least not to the smaller companies that he generally represents.

Broader logistics sustainability challenge

UK-based logistics sustainability consultant Kelly Hobson is concerned sustainability has become just the latest buzzword for many, but says ‘future-facing business leaders understand sustainability is an opportunity to lead, gain competitive advantage, grow market share, drive operational efficiencies and retain talent.’

Nevertheless, Hobson acknowledges that “there is much confusion within the business world currently in understanding what sustainability actually looks like. Many focus on climate change and specifically carbon footprint; however, there is more to consider across environmental and societal impact, including recognising internal initiatives such as supplier assessments and waste management”.

Whether companies are engaging at the moment often depends on their size and intent to embrace change, she confirms. And it may also depend what sectors they serve.

Pressure from retailers

‘Retailers are under a lot of pressure from their customers. Larger retailers are leading the way and that is creating a ripple effect down the supply chain,’ Hobson notes.

She believes there will be an increasing need to measure carbon emissions this year, partly driven by government targets to achieve Net Zero. But ‘until legislation and incentives are introduced for businesses, it is very difficult for them to commit to a Net Zero target.’

Initially, for companies new to sustainability matters, their sustainability effort will involve establishing their ‘carbon baseline’, followed by developing plans and options for improvements that are aligned to science-based targets.

Greenhouse gas focus

She highlights that there are simple ways already to generate approximate greenhouse gas emissions calculations for shipments, for example using the UK government’s website and inputting weight, vessel and distance information. But she says the important part is what a business does with that information.

She believes shipment-level measurement is relatively straightforward for a freight forwarder with a central TMS, with calculations possible based on the origin point, weight and vessel information. But she doesn’t see many freight forwarders yet calculating emissions using real-world actual data at a shipment level. Vessel details are difficult to gain access to and generalised calculations are mostly being used to provide an overview.

However, the most important action for all businesses to take is to understand and implement programmes that reduce their energy consumption, she believes.

Driving demand

Several freight insiders have said the greatest push towards sustainability in freight transport and supply chains is coming from customers, especially publicly listed companies where there is demand from shareholders or end customers – especially from retail and fashion verticals. On the other hand, when it comes to paying extra for green services and options, the messages from customers are less clear.

And companies, including freight forwarders, that are owned or backed by private equity are said to be sometimes less active in developing real long-term sustainability measures – more focused on short-term financial turnaround plus some ‘eco window dressing’ prior to sale, one logistics source said.

As such, the messages received by logistics companies from their customers remain somewhat ambiguous and unclear.

Nevertheless, other freight sources say forward-thinking mid-sized to large companies in Europe have been developing solutions independently ahead of demand from customers, in anticipation that it will be a competitive issue increasingly in the next 12-24 months.

Freight sustainability specialists

A significant number of major freight forwarding and logistics firms have signed up to use one or other of the major freight sustainability software providers to help them measure and manage their sustainability performance, and that of their customers and their customers’ shipments. For example, the customer list of EcoTransIT, regarded as one of the most sophisticated and widely used freight sustainability software providers worldwide, includes many of the world’s top-tier and second-tier freight and logistics providers, plus some smaller groups, including: Bertling, Bolloré Logistics, Blue Water Shipping, ColliCare, Cargomind, Dachser, DB Schenker, Delmar, DHL, DSV Panalpina, Expeditors, Explect, FM Logistic, Franco Vago, Gebrüder Weiss, Gefco, Geodis, GN-Transporte, Greencarrier, Group7, Hellmann Worldwide Logistics, Hillebrand, Hoyer, Hupac, JAS, Kühne + Nagel, Leman, Logfret, Mainfreight, Marquard & Bahls, Martin Bencher Group, Morrison Express, Nippon Express, OIA Global, Ovrsea, Posti, Rhenus, SAT Albatros, Savino Del Bene, Scan Global Logistics, Scanlog, Senator International, WHTS, Woodland Group, Würth Logistics, and XPO Logistics.

Services or products offered include The EcoTransIT World API, a solution for automatic calculation of customer-specific transport chains, across all modes of transport, including calculations of energy consumption, carbon emissions, air pollutants, and external costs.

Other freight-focused competitors include Searoutes, Tracks and Big Mile, with another solution from startup Pledge also offering detailed calculations and offsets for at individual shipment level. Generalist competitors also offering sustainability services to the freight sector include: Patch, Squake, Cloverly, Normative and Watershed.

Forwarding network development

Freight forwarding network WCAworld has been exploring and seeking to develop sustainability-related solutions to offer its member agencies, as it has with other freight capabilities. Dan March, CEO of WCAworld – whose member companies collectively boast more than 10,000 offices in 193 countries around the world – says demand and capabilities among small or medium forwarders to offer customers visibility on their freight transport carbon emissions, reduction options, or offsetting capabilities, varies by region and is basically being driven by their customers.

“That demand from European customers for detailed information has really pushed forward in the last year, to have granular emissions data,” he highlights.

‘White label’ product for members

As a result, WCA is currently evaluating two different companies that calculate emissions data with a view to offer this as a ‘white label’ product to WCA members – to offer their customers full emissions information, and offsetting opportunities for their customers.

One of the companies is a member that has a separate IT division that has developed this initially for their own purposes but that “also looks pretty good for other members”. The other is a third-party specialist based in France.

“Our freight forwarders want to have the tools to offer that to these customers,” March says. And they want this at a detailed level, not just broad-brush emissions estimates for a shipment from China to Europe by ocean.

“The emissions from a B747 are very different from those from an A350 aircraft. And the emissions in ocean freight can vary from vessel vessel,” March notes. “We want to get a tool that is at a high level, that is recognised and certified as reliable, to offer to customers. The customers can then choose whether they want to pay for offsetting options. Shippers seem to want a level of granularity”.

IT capabilities important

March believes most WCAworld member companies have, or will soon have, an appropriate level of technology in their businesses to be able to interface relatively easily with the planned white-label emissions and sustainability calculation tools the network is aiming to offer. WCA members have a range of different transport management systems (TMS), varying from CargoWise or similar systems to in-house developed systems.

“It will depend on the system they use whether they can integrate it. Some certainly can; for others, it may have to stand as a standalone tool that they use for specific customers that require it,” March notes.

But the way things are going and the way technology is changing, he believes the majority of companies probably have the capability now to integrate these kinds of plug-in systems – right down to fairly small companies with around 25 employees, although that varies geographically.

“In some of the lower-cost labour countries like India or Bangladesh, some companies still don’t have proper TMSs. There is still a few who use Excel, but a very small number now. But I would say 95% plus of our members will have a proper TMS.”

He continues: “If you’re going up past four or five offices, past 80 to 100 people, then you’ll probably have a very sophisticated TMS, probably CargoWise or equivalent.” And in most developed markets, even those with under 25 staff would now have some kind of TMS.


CONCLUSIONS

Sense of urgency

In summary, research by FORWARDER magazine suggests that the sense of urgency to act now varies according to the size and sophistication of the logistics company and its clients. Many mid-sized to large Europe-based freight forwarding companies are proactively developing emissions assessments and reduction policies and capabilities in response to contract tenders but also ahead of some customer demand, in anticipation of this being a key requirement – and potential mandatory requirements.

And the sense of urgency continues among forwarders in Europe, despite the concerns and challenges presented by Russia’s invasion of Ukraine and the many consequences of that. As Günther Jocher, managing director of Munich-headquartered freight and logistics firm GROUP7, observes: “Yes, absolutely, we are still invested in sustainability topics and are going to continue our drive towards an improved footprint. As unfortunate and sad as the situation in Ukraine is, the sustainability topic is one to be taken care of on a larger scale and will not ‘go away’ anytime soon. Our customers are seeing this the same way.”

But for smaller or less future-facing companies, it may be more like a five-year journey – for example to respond to national mandates, freight sources say.

Little is mandatory yet

Indeed, little is mandatory yet on a global level, but individual countries are expected to be mandating requirements soon on the basis of their national commitments, and some companies are acting now in anticipation of this.

In the meantime, future-facing 3PLs seem to be responding sufficiently quickly to remain competitive in their fields, although the sector as a whole has been slow to respond until the last 12-24 months, except a handful of high-profile majors. For the biggest forwarders, there now seems to be competition to be seen as the most proactive and green.

One key driver, in addition to the perception among their customers, seems to be retention and recruitment of staff, which has become very competitive in logistics, especially in the last two years. Creating a forward-looking culture is now seen as increasingly important, especially to recruit and retain younger staff, with sustainability a key pillar of this.

Technology is key

In terms of the technological capability to measure carbon emissions and offer customers alternative, lower-carbon shipment options, freight sources say that any company using a cargo transport management platform such as CargoWise – used by most Top 50 global freight forwarding and logistics companies – will be potentially able to achieve visibility at shipment level, for example via specialist third-party plug-in tools able to assess and input carbon emissions and performance data and analysis. This data may not yet be available accurately in most cases, currently, but the ability to integrate this capability is there among most major global logistics companies via their existing tech platform provider.

Continuing pain points

According to various freight forwarding sources, continuing pain points for forwarders around sustainability include the perceived costs of investing time and resources, with a relatively uncertain ROI; not knowing enough about the topic and what to prioritise; lack of clear single standards for emissions measurement and comparision; shortage or lack of available fuel alternatives for lowering emissions; congested and inefficient logistics chains currently; not having sufficient and accurate data on emissions of shipment journeys – eg vehicle or vessel emissions; fragmented logistics chains that often involve multiple subcontractors, adding to data and connectivity challenges; lack of digitalisation among some participants in the logistics chain; reluctance to share data (eg due to trust issues in a fragmented chain); lack of integration of digital systems of the different participants in the logistics chain; and continuing instability and volatility related to the pandemic.

The costs of doing nothing rising

However, the costs for freight forwarding and logistics companies of doing nothing to address sustainability issues seem to be rising, and set to rise further in the next 12-24 months. Those costs for companies include: Loss of competitiveness now or in the next 12-24 months; lowered attractive for investors; recruitment or retention issues; lower morale among staff; failure to gain potential competitive advantage; loss of opportunity to communicate positive messages with customers, potential customers, staff, suppliers, and investors; and worsening climate change!

Most European freight forwarding companies, and in many other regions around the world, are now aware of the needs to improve and refine their sustainability credentials, to satisfy their customers, shareholders, staff and maintain their ability to remain competitive in the medium term – although the solutions offered remain somewhat inconsistent and lacking in a single standard, which some firms regard as unsatisfactory. Forwarders in other regions are under less pressure to provide solutions, although many leading companies in the US and some other developed markets are also offering sustainability-related services and options.

For the time being, some freight forwarding and logistics companies may focus their sustainability efforts mainly in managing the environmental impact of their own business activities, rather than the shipments and supply chains of their customers. But as new tools become available and affordable for companies of any size to measure and offset emissions, including at an individual shipment level, most firms with at least a basic TMS will be able to offer these capabilities as options to their customers. Some firms may delay bringing their offering to a high level until mandated, probably from the second half of this decade, while more proactive firms will use these capabilities as a competitive advantage.

Forwarder sustainability profile: Hellmann Worldwide Logistics

Company Profile: 489 offices in 173 countries. Turnover: €2.5 billion (2020)

Reiner Heiken, Chief Executive Officer:

“Sustainability is one of the central topics of our time and therefore no longer a ‘nice to have’ for the logistics industry. Various stakeholders, including our customers, clients, but also employees have very clear expectations with regard to a sustainable corporate strategy. That is why we have increased the strategic focus on the topic and established a Council which will define a long-term sustainability strategy in order to position Hellmann for the future.

“We are currently defining which sustainability criteria are most relevant to us and on which issues we need to put our focus. On this basis, we will then develop our strategy to continuously improve our sustainability performance.

“One key issue is, of course, reducing our CO2 emissions. On the one hand, this involves optimising transport routes as well as capacity management for trucks and containers. On the other hand, we also have to develop innovative new technologies. For example, we are planning to offer intra-European drone flights for our customers together with Dronamics from May this year.

“Particularly in times of acute shortages of skilled workers, no company today can afford not to act sustainably. In particular for younger employees, this is an important criterion when choosing an employer.”

“Sustainability must be firmly anchored in the corporate strategy. Still, it is not a management issue, but must be lived by all organizational levels within the company. The concept of sustainability must be taken into account in all strategic decisions – whether large or small.”

Forwarder sustainability profile: Flexport

Are sustainability and carbon emissions reduction a priority for the company? How does it fit into your overall business strategy?

Yes, sustainability and carbon emissions are a key priority for Flexport. The industry we operate in is responsible for a significant amount of the environmental impact caused by global trade and as we seek to make global trade easier for everyone, this includes making doing so sustainably easier as well.

This is a core principle behind Flexport.org, Flexport’s impact arm and the conduit through which we work to drive real results in sustainability of logistics. From emission offsets offered to our clients to free resources like our carbon calculator, we want to make optimizing the sustainability of supply chains something businesses of all scales have access to.

Flexport also recently joined over 2,000 global companies, including Dell, Amazon, and Facebook, in setting SBTs, which are the leading framework for setting greenhouse gas reduction goals. As part of the United Nation’s Business Ambition for 1.5ºC campaign, the SBT initiative signifies a pledge for action, and Flexport’s participation highlights its commitment to making substantive change as part of an industry with a historically high level of responsibility for human CO2 emissions.

Who do you rely on for sustainability information and guidance?

We are in the fortunate position to be that resource for many of our clients. We use both proprietary data and customer data to help them calculate their impact and work to optimize how their supply chain efforts interact with the environment.

Our carbon calculator is also accredited by the Smart Freight Centre in conformance with the Global Logistics Emissions Council (GLEC) Framework. This allows for us to be guided by an overarching methodology, which is key for consistency and measuring progress.

Do you already offer, or plan to offer, customers visibility on transport carbon emissions or offsetting capabilities?

Flexport.org’s free carbon calculator helps those participating in global trade to better set themselves up for improved sustainability. The tool, which is available in-app for free to all those who use Flexport’s platform, features its own API and CSV uploader and it is accredited by the Smart Freight Centre in conformance with the Global Logistics Emissions Council (GLEC) Framework. It is also automatically available in shipments, reports, analytics and other places in the platform so users at every scale can manage their emissions.

We also offer to help customers offset up to 100% of their shipping-related emissions for a small fee per shipment, regardless of whether those shipments are moved by Flexport. Our full suite of products allows users to measure their emissions, track this data and organize it and more easily create necessary offsets. These offsets are invested in Carbonfund.org’s third-party verified projects like renewable energy or deforestation prevention,

Does management believe new and digital technologies can play a major role in helping customers reduce their transport carbon emissions?

We do, and moreover we believe that data and visibility are requirements for impactful reduction of emissions. Making a decision like switching from air freight to ocean, or changing cargo destinations for sustainability purposes requires better visibility and planning. We also help to track key factors like container utilisation, which can help businesses find opportunities to save costs and reduce their emissions by more efficiently using space.

Another example is driving the use of sustainable marine biofuels, for which we’ve recently entered into a partnership with AirFrance, KLM Royal Dutch Airlines and Goodshipping to increase adoption.

Company size: More than 2,800 employees.