Every industry is working toward reducing its carbon footprint to comply with various global regulations and policies. The logistics industry is responsible for 8% of greenhouse gas (GHG) emissions and, left unchecked, is set to become the sector with the biggest carbon footprint by 2050.
The world’s leading freight and logistics companies are working to decarbonize their operations to meet the objectives set out in global resolutions like the Paris Agreement and the United Nations Sustainability Development Goals.
Demand for shipping is only likely to increase with the rise of global South countries as economic powers, so air, maritime, and land freight companies will need to make a concerted effort to reach net-zero emissions by 2050.
Here’s how logistics companies can work on decarbonizing emissions:
Getting started: How to begin the decarbonization journey
The logistics industry is carbon-heavy. From air cargo and maritime shipping to on-land last-mile delivery and freight trains, the transportation of goods is synonymous with carbon emissions.
Detractors often highlight the need for technology to meet ambitious sustainability targets for businesses to truly transition. McKinsey, however, believes differently, stating that all the technology required is already available today.
There are five key actions firms can take right now to begin their logistics decarbonization journeys:
1.Baseline logistics emissions and set targets
Peter Drucker famously coined the phrase, “You can’t manage what you can’t measure.” This principle speaks to the industry’s core: baselining emissions to set realistic targets. Emissions baselining, like carbon accounting, follows an international standard to ensure consistent global reporting.
The GHG Protocol provides the guidelines for baseline emissions and advocates for, where possible, a sensor-based emissions measurement tool. Data accuracy is essential as the world heads toward a net-zero future and carbon regulations are more deeply enforced.
Another resource available for companies on their decarbonization journey is the Science-Based Targets Initiative. This tool helps set science-driven standards and targets, and a specific trucking and ocean shipping guide is available.
2. Improved corporate emissions governance
Without a robust corporate governance framework to manage emissions, decision-making across various departments will not support goal-setting initiatives. Many companies create a decarbonization office or appoint a corporate environmental officer to manage, track, and align business activities with carbon reduction targets.
Typically, these offices are responsible for communicating their goals both internally and externally, managing educational initiatives, and the change management process when implementing new systems. With a stringent governance structure, companies can set overall targets and effectively implement granular metrics and KPIs for the different departments.
Studies have shown a clear, positive relationship between a robust corporate governance structure and carbon emissions reduction. This allows everyone to buy into a single vision regarding a business’ sustainability goals.
3. Early-stage efforts, a foundation for decarbonization
With an understanding of your baseline emissions, realistic targets set, and corporate governance in place, the next step in the decarbonization journey is creating a portfolio of initiatives. These initiatives should act as the foundation for a decarbonization plan.
These early actions should include a mix of short—and medium-term activities that, ideally, prioritize cost-efficiency and help build momentum for the road ahead. Logistics companies should consider “low-hanging fruit” at this stage when they’re likely to see a decent return on investment and tangible impact. Best practice at this stage suggests that companies prioritize initiatives that are actionable and link back to the governance structure (KPIs, milestones, and metrics).
4. Capital Investments to Move the Needle
Once you’ve got momentum and are looking at the longer-term strategy, a deeper investment in decarbonization is required. This fourth stage looks to technology and innovation to really move the needle in reducing emissions and requires a careful evaluation of so-called “new-but-proven” technology.
In this regard, electric vehicles (EVs) have emerged as the most viable option for carbon reduction for vehicles. The transition to EVs has greatly impacted decarbonization efforts in the industry, but the big phrase in this area is total cost of ownership (TCO) parity. This looks at how logistics companies can effectively reduce carbon emissions by switching to EVs while still looking after the bottom line by paying the same or less in operational costs.
The industry is set to reach TCO parity for medium—to heavy-duty trucks by 2030, which aligns with the target year for many global emissions policies. Other technologies that fall under the new-but-proven banner include alternative fuels like hydrogen. The problem is that in their infancy, these solutions are cost-intensive.
Logistics companies are encouraged to capitalize on incentives from government policy and regulation. This leads us to our last point about being first-movers in the industry and the competitive advantage it provides business.
5. Building a green business and gaining a first-mover advantage
McKinsey’s annual Green Business Building Summit is an opportunity for leaders in ESG and decarbonization to share insights on emissions reduction. Here are some of the principles for success that have been unpacked in the conference:
Set ambitious targets: Define clear goals to inspire an organization-wide vision.
Secure cost advantages and financing: Identify the scale at which new technologies become cost-competitive. Use strategies like project finance, purchase agreements, blended finance models, or multistakeholder-funded RD&D programs.
Gain committed demand before scaling: Ensure demand, as Swedish battery manufacturer Northvolt did by securing partnerships with BMW, Scania, Volvo, and Volkswagen before a $5 billion gigafactory expansion.
Form ecosystems and alliances: Collaborate across the value chain to unlock full potential. For example, Maersk partnered with six companies to source 700,000 metric tonnes of green methanol annually by 2025.
Faced with growing regulations and heightened expectations from stakeholders, logistics companies need to swiftly translate net-zero ambitions into tangible results. Achieving this demands the use of established and reliable technologies, comprehensive emissions monitoring, and a more holistic strategy for decarbonization. Companies taking the lead are already securing a competitive advantage by tackling the intricate challenges of when and how to decarbonize, establishing themselves as pioneers in sustainability and innovation.
A Few Success Stories
Maersk
Shipping and logistics giant Maersk are first-movers in decarbonization. Their broad goals focus on four SDGs: goal 7 – affordable and clean energy, goal 13 – climate action, goal 15 – life on land, and goal 17 – partnership for the goals. By 2023, they launched their ECO Delivery Inland product, aimed at reducing GHG emissions through electric vehicles. Maersk was also able to expand its eclectic truck fleet, introduce smart meters to its warehouses, and launch the aviation wing of ECO Delivery, revolutionizing air freight as well.
CMA CGM
Global maritime shipping company CMA CGM declared their support for global sustainability efforts at COP28. Aiming to hit net-zero by 2050, they have an ambitious plan to decarbonize their cargo fleet and warehouse operations. CMA CGM has pledged to invest $15 billion in decarbonization efforts, which would allow them to power 120 vessels with alternative fuels. Outside of their company, they’re invested in the industry as a whole, with $1.5 billion set aside to help the logistics sector become more sustainable.
Concluding Thoughts
The logistics industry is critical in reducing global emissions, with freight and warehousing accounting for at least 7% of greenhouse gas emissions. Companies aiming for net-zero targets must address “Scope 3” emissions—indirect emissions embedded in supply chains. However, a recent McKinsey survey reveals that few organizations have actionable plans to tackle this challenge.
Industry leaders are taking steps to decarbonize through innovative technologies and partnerships. For example, Maersk and CMA CGM are transitioning fleets to green fuels like methanol and hydrogen while supporting overall industry sustainability goals through investments and resources.
Early adopters of green solutions not only meet regulatory requirements but also capture emerging market opportunities and avoid penalties.
To begin the decarbonization journey, companies should baseline emissions, establish robust governance structures, and implement short- and medium-term initiatives like network optimization and warehouse efficiency. Monitoring and investing in proven technologies, such as electric vehicles and sustainable aviation fuels, is crucial for long-term success.
Collaborative efforts, such as building green ecosystems and securing early demand for new technologies, enhance scalability and cost efficiency. As stakeholder pressure and regulations intensify, companies that act now can gain a competitive edge, aligning environmental goals with business strategy.
