With nearly 40 per cent of Australia's businesses struggling with significant supply chain disruption and consumers feeling that reflected in prices fuelling inflation, it is fair to say we are all suffering from the mind-bogglingly complex world of freight and logistics.
There is a well-recognised global shortage of truck drivers unable to bring the food, medicine and fuel that we rely upon, reminding us how reliant we are on deliveries to live and thrive. To top it all, we must accelerate efforts to reduce emissions to prevent the climate crisis escalating further. With all these pressures, it would make sense to be as efficient as we possibly could be.
However, when it comes to freight and greenhouse gas reduction, most world governments are trying to solve the wrong problem, and not looking at efficiency opportunities.
About 30 per cent of our transport emissions comes from trucking, and in Australia our emissions are growing faster than our economy. So, everyone is focussed on tailpipe emissions. This is not bad for the future. It is a wonderful and important thing that deserves our attention. Within three decades, we will see significant reductions across the sector. But do we have three decades? And what is the real problem?
Freight movement is expanding, even as our goods are shrinking. Even though industry has spent the best part of 350 years since the first wagonway consolidating loads to minimise trips required to carry the maximum goods, the internet and electronic payments have exploded the world into micro packages.
For efficiency, minimum package sizes for high volume exporters have created a sector where an item worth only a few dollars is air freighted thousands of miles, in a box containing a very small item and a great deal of bubble wrap. Or if you are lucky, some recycled screwed up cardboard. But still, it's mostly air. And that's the problem. Is the short delivery window a convenience the planet cannot afford?
The trouble with air
Carrying air by air is probably the worst performing cargo from a climate change perspective. With a global shortage of containers, labour and hauliers, and a global excess of emissions, failure to consolidate loads and minimise packaging is both economic and environmental madness.
Many high value items in people's everyday lives have become more compact and robust – for example, computing with the shift from desktops to laptops and increasingly phone/tablet crossovers. While the amount of packaging is reducing (to the credit of some of the big global players), the most shipped good, by volume, is still air.
As the risk of overstocking bricks-and-mortar stores reduces, the retail sector and its role in the middle is becoming increasingly irrelevant. But if we think it's wasteful for people to travel to a store to buy a few things that were delivered from a warehouse, we should also consider the impact of bringing one item (with mostly air) directly from a factory halfway around the world to a doorstep so one person can avoid a shopping trip.
On the flipside, consolidation of loads is green. The freight industry, thought by many to be a dinosaur, is one of the most technologically enabled and green industries because its economics dictate it. But the industry responds to customer demands rather than setting them. It is agile and always services the customer's need, because failure to do so would mean extinction.
When Amazon couldn't get the product it needed delivered at the price it wanted, it simply built its own delivery system from top to bottom. That in itself is inefficient for the planet, but great for the company. Now, it has the volume to drive consolidation and maximise deliveries per vehicle, particularly in markets where it dominates. But given the consumer demand for instant gratification, deliveries are increasingly being made by air in addition to road. While organisations are making efforts to provide 'climate-neutral' shipping options – for example Amazon's Shipment Zero mission – more can be done.
A green freight tax
While over the next three decades technical solutions will increasingly be found to decarbonise and remove particulate matter from tail pipes, and move material more efficiently, we are a long way from the final destination.
Could the tobacco industry hold an answer? Decades ago, a controversial sales tax was added to reduce the cost of smoking-related diseases being borne by the taxpayer. If individuals refused to avoid harm, they could pay more towards their own costs.
In the logistics industry, there is a human and environmental cost to ever-tightening windows of delivery, payment based on time delivery, and the amount of carbon and particulates spewed onto populations as everything tries to arrive in 1-2 hours (per Amazon Prime deliveries), a half day, one-day, three-day and seven-day windows from anywhere on the planet.
What if short delivery windows were heavily taxed in proportion to environmental impact (with the exception of fairness exemptions in place for items such as medicine and fresh food)? The revenue uplift could even be allocated to accelerating fleet change to zero emissions. This is likely to generate more compliance than voluntary trading schemes such as the Australia's Emissions Reduction Fund for aviation.
Or what if consumer packages were assigned a carbon certificate so the impact is transparent? The consumer sees the impact and pays the removal or repair cost at point of purchase.
Behaviour changes according to price, that is the fundamental premise of market and behavioural economics. Governments are charged with acting in our best interests collectively when we or the industry fails.
Large logistics firms like DHL, Maersk and Aramex have committed to adopt more sustainable practices through using green fuels, larger vessels, and adding electric vehicles to fleet, among other initiatives. Daimler Benz, Volvo, Ford, Hino and a host of new entrants are flooding the market with electric city delivery trucks arriving from this year.
This, of course, comes with a price that will be shouldered by consumers to some extent. Needing more vehicles because of the decreased load density from micro-shipping incurs societal costs. Increasing the price of unreasonably short delivery windows would reduce waste in the delivery chain substantially and help create capacity for important goods to move more efficiently. It could achieve effectiveness at a local level or be truly transformational on a global scale.
A necessary efficiency
Of course, air freighting products is still essential. Medical supplies and equipment move by air to avoid critical delays. Even organs for donation travel globally by air every day. But does your new sweater need to fly to you?
Yet there is no urban life without freight and logistics. No food, no medicine, no goods, no computers or phones, nothing is maintained. As the UK learned very quickly with shortages of food, medicines and fuel when they broke the logistics system due to Brexit, this is a life-critical sector.
Playing with its settings without thinking through the end-to-end consequences can wreak havoc. But if the world can collectively agree to spend 30 years removing carbon, it is capable of removing market inefficiencies that save carbon far more rapidly. It just needs a brave first mover…
This blog was authored by: Terry Lee-Williams
