Challenge of CO2 emissions - a more holistic approach

Due to the public debate over the last couple of years, carbon reduction has become a top priority for public policy-makers and companies alike. On this issue, it is not possible to ignore the fact that the transport sector is a large contributor of CO2 emissions. Together with the energy sector, transport accounts for two thirds of total CO2 emissions in Europe and transport is the only sector where CO2 emissions are increasing. The increase in transport is not only damaging from an environmental perspective. For example, studies in the UK indicate that if there is no action taken to the current transport situation, the cost of road congestion on the UK market alone will increase by a staggering € 5.2 billion between 2003 and 2010.

Traditionally, transport has been seen as a tactical and/or operational issue and there are numerous examples of how companies have made changes of a tactical / operational nature that not only reduce the carbon footprint, but also improve the bottom line. Examples of such measures include the use of in-vehicle communications systems in order to avoid traffic congestion, educate drivers in ECO-driving, and improvements in the coordination and planning of shipments between facilities in order to improve the fill-rate of vehicles.

A common denominator among these measures is that they all relate to changes that decrease the amount of CO2/tonne kilometre due to a decrease in overall fuel consumption. At the same time as companies have employed these types of changes, they have also been making strategic changes to their logistics systems that in many cases counteract the benefit of these measures. A typical strategic logistics decision is that of deciding how the logistics system should be configured in terms of number and location of production sites and warehouses. Decisions of this type determine the amount of tonne kilometres a logistics system generates.

Over the last few decades, customers have been demanding shorter lead-times, smaller order quantities, more frequent deliveries, and narrower delivery windows. Simultaneously, companies have sought to find economies of scale in their production and as a consequence, production plants and warehouses have become more dispersed. This development has led to an overall increase in the amount of tonne kilometres generated by companies’ logistics systems. This illustrates how companies need to approach the issue of transport and the environment in a more holistic manner if they are to curb the problem of increasing CO2 emissions. There is a need to recognise that the carbon footprint of a logistics system is determined by decisions taken at all of these three levels.

Companies need to understand how to connect changes that affect the amount of tonne kilometres with changes that affect CO2/tonne kilometre. There is also a need to be aware of, for example, how revised inventory levels or lead-time constraints affect a company’s opportunity to employ less polluting transport solution. In other words, there is a need for an understanding of the trade-offs that exist between transport and other supply chain issues. A first step towards achieving this is to start measuring the carbon footprint of the supply chain. If you do not measure your performance, you will not be able to improve it! This is true, whether we approach the issue of carbon reduction or more traditional supply chain efficiency.


Christofer Kohn
Consultant, Establish