International trade could not exist without ocean freight services. From clothing to foodstuffs and other goods, no less than 90% of the world's traded goods cross our oceans.
However, despite the logistics sector’s efforts, this mode of transport still causes pollution, in terms of atmospheric and water contamination. There are somewhat fewer initiatives to reduce CO2 emissions and limit ocean freight’s climate impact, such as the ECA zone initiatives, compared to other modes of transport, such as road haulage, where green fuels and route optimization have already been adopted by a number of carriers: ocean freight’s energy transition is notably taking longer due to the longer average lifespan of a cargo ship. There are new initiatives from the shipping industry to introduce green methanol or other fuels, as well as slow steaming efforts, the transformation is however very low and impact not yet significant.
GHG emissions from the shipping industry will continue to increase if shippers, logistics providers and carriers do not participate in further initiatives and show the willingness to pay for it.
Against this backdrop, how can we ensure that the carbon transition for ocean freight services accelerates and reaches the ideal level of net-zero emissions? Should there be new, stricter regulations? What actions can logistics specialists and customers take?
Why is there such a delay in decarbonizing ocean freight?
Ocean freight is an essential cog in the wheel of international trade.
However, while a number of private companies have begun to move towards more virtuous practices, many are still struggling to limit greenhouse gas emissions throughout their supply chain.
Continuous improvement priorities are still mainly focused on transport time, lead time reduction, safety, cost optimization, etc. Although these are all very important supply chain factors, they don't always consider process sustainability. As a result, the environmental impact of shipping is still very high and continues to increase!
Like all modes of transport, powered by fossil fuels, ocean freight emits carbon dioxide. Today, it is estimated that if the shipping industry were a country, it would rank among the world's top ten carbon emitters. And while it accounts for just 16% of total freight transport emissions, this figure should be viewed with caution, as the quantities of products transported are smaller. Looking instead at the number of tons per kilometer, ships account for no less than 70% of global emissions coming from the transport of all kinds of goods.
The problem is twofold. Not only are the import and export products transported by sea not always recyclable, only a handful of international players have really begun to limit their environmental footprint in this sector.
How a lack of data affects the environmental performance of ships?
For customers of shipping lines, and both importers and exporters of products and goods, transport-related CO2 emissions fall under scope 3 in calculating their carbon footprints. This is the broadest scope: emissions resulting from non-owned assets controlled by a third-party organization.
One of the difficulties stems not from the lack of reliable data, which thanks to new technologies, could be used to calculate the environmental footprint throughout the supply chain. Rather, most businesses find it difficult to assess this data, and to find accurate calculation methods. As a result, most have no real understanding of their scope 3 CO2 footprint.
Although there is a trend towards greater sustainability in the procurement process, this lack of visibility and regulations, or sometimes simply due to poor enforcement of those already in place, are ultimately holding businesses back in their net-zero emission actions or ambitions.
Overcoming bottlenecks to accelerate the decarbonization of industry
To speed up the process of decarbonizing the shipping industry and improving energy efficiency, public and private players need to act on several fronts, starting with legislation. For the time being, most governments and institutions have not legislated or ruled on the ocean freight issue. While there are SMF objectives and EU regulations in place, these are not enough. These haven't been instituted in a clear, easy-to-apply way, as it has been the case in other transport areas, such as the electric vehicle market.
There are no obligations or limited subsidies, and there is limited visibility on potential low-carbon alternatives for these infrastructures. It's hard to understand how future solutions will be adopted, and within what timeframes they will be available. Obviously, this is slowing down the sector's transformation, and the most recent decisions by the International World Organization proposing a carbon-neutral ambition for 2050, meaning in 27 years!! This is far from sufficient to wait for this to happen, considering some contributions do already exist.
Private companies find it hard to see the benefits of using more environmentally-friendly ships or alternative, greener energies. However, they could showcase their efforts in this area to stand out from the competition, for example by subscribing to labels and certifications attesting to their efforts. For customers, this can be a real marketing advantage: rather than greenwashing taking place (i.e. claiming to be good for the environment when efforts are actually very limited, or even counter-productive), they know the approach is real and results in concrete effects.
In invitations to tender, efforts to protect the environment are gradually becoming a distinctive criteria. Price is no longer the only factor when choosing between several carriers: at GEODIS, we’re amongst the logistics providers who have added this element to our service selection criteria.
Generally speaking, logistics companies have a role to play in taking environmental issues into account throughout the supply chain. They can raise their customers' awareness of the importance of responsible shipping, CO2 emissions, duty of care regarding working conditions, anti-corruption measures, etc., encouraging them to extend their eco-responsible approach to scope 3, and suggest ways of improving in this direction.
Businesses that decide to invest in the environment are ultimately rewarded in a number of ways. Naturally, this enables them to improve their CSR and meet ESG (environmental, social and governance) criteria, which are used to assess the extent to which certain issues are taken into account in corporate strategy. Reducing their carbon footprint, which is a success in itself, can also help them to receive financial aid, as well as increase their customer base, which is increasingly sensitive to environmental values. Lastly, it's a way of attracting talent by being more in tune with their values, in a market where the shortage of talents affects all sectors and all types of businesses.
Decarbonization: a process already under way in the logistics and transport world
As mentioned earlier, some private stakeholders have not waited to take steps in favor of more environmentally-friendly ocean freight. At GEODIS, for example, we’re actively working to provide, for the same route, a comparative offering of shipments based on CO2 consumption. This involves, amongst other things, systems to save fuel and reduce consumption, as well as offering a biofuel insetting option, which has already been available for three years, assisting a company's efforts towards carbon neutrality and contributes to transform the industry. The combination of these two areas of improvement is the best way to limit CO2 emissions starting now.
GEODIS continues to put into place both container loading optimization and multi-modal transportation at both shipments’ departure and arrival in ports, which offers up to a 30% reduction in emissions. When considering that cargo ships typically sail at an average of only 75% of load capacity coupled with insufficiently optimized containers on the same vessels, quick ways to optimize cargo is welcome and possible.
Over the last few years, we've noticed that customers are becoming increasingly proactive and are asking us to help them reduce the carbon footprint of their supply chain: together, we find the right solutions to meet their needs and the environmental challenge.
What are the challenges you face in reducing CO2 in your shipping activities?