The rising significance of international trade has encouraged shipping companies to integrate environmental concerns into their organizational and operational practices of supply chain management.
Shipping companies need to make environmentally sound choices on how they deal with scarce resources, waste disposal, emission of pollutants, and impacts of human activities on the ecosystem.
Eco-friendly supply chain management is a cost reduction strategy and a competitive factor in the global market. While you aim to save on costs through improved environmental performance, consumers are concerned about how green your production and supply chain is and how your products impact their health.
Check out our Sustainable Supply Chain Financing.
Green supply chain management (GSCM) strives to reduce the environmental impacts of supply chain activities through reducing, reusing, recycling and remanufacturing.
Functional Model of an Organizational Green Supply Chain:
Shippers contribute significantly to various environmental threats and have the biggest role in engaging in environmental actions. Therefore, they should focus on how transportation, warehousing, and distributing products affect the environment and how they can shift to more eco-friendly approaches.
Shippers should focus on their supply networks and how they can make them cleaner to reduce costs and improve efficiency. A green supply chain is more economical, environmentally safe, and sustainable in the long run.
Apart from the green environment's main agenda and consumer interests, the green supply chain also translates to increased profits.
Most shippers have re-evaluated their supply chain to find ways to eliminate waste, save on resources, reduce materials costs, improve productivity and pay less environmental-permitting fees.
Other economic benefits from greening your supply chain include:
Lockstep further rewards you for greening your supply chain. Our sustainable supply chain financing is based on how green your shipping methods are; the more you make the world green, the more you save with us. Check out or Green Score system!
Shippers have taken measures to address environmental issues and avoid harmful practices caused by and affect the shipping industry.
The International Maritime Organization (IMO) controls and prevents ship-source pollution. Such pollutants include oil, chemicals carried in bulk, sewage, garbage, and emissions from ships such as air pollutants and greenhouse gases emitted. During IMO's Marine Environment Protection Committee (MEPC) 72nd meeting session of 2018, all members agreed to adopt strategies to reduce greenhouse gas emissions from ships.
Here are some green changes and eco-friendly policies being adopted by shippers to conduct their businesses better:
Shippers take measures to reduce ship emissions at the ports by ensuring that vessels' waiting times and turnaround times are drastically reduced. This is possible through a vessel traffic management system that conducts surveillance of maritime activities to facilitate effective management.
Cold ironing is the use of shore power for auxiliary engines and not bunker fuel when the ships are at berth. This reduces emissions from ships when they are stationary.
The shore power can be used for lighting, refrigeration, air conditioning, and several other types of equipment on the ship. This heavily reduces dependence on bunker fuel, which translates to lower emissions.
The cost of cold ironing is currently high, limiting implementation to only cruise shipping and ferry businesses, which mostly have idling ships at the ports.
Shippers are eliminating the use of heavy fuel oil (HFO) and adopting liquefied natural gas for their ships. Some shippers are using dual-fuelled vessels, alternating HFO and LNG to help reduce environmental pollutions.
Liquefied natural gas reduces CO2 emission by 25%, sulfur emissions by 99%, particulates by 99%, and nitrogen oxide emissions by 85% compared to heavy fuel oil.
Exporting companies have changed their supply strategies by procuring raw materials from local supplies instead of importing them abroad. This way, they are reducing the distance to transport raw materials hence decreasing negative environmental impacts.
For instance, in Philadelphia, a shoe factory has been sourcing leather from China, which means over 10,000 miles covered and 30-40 days to be delivered. However, the factory can procure leather from Texas and be delivered within 48 hours by rail.
This way, the shoe factory will not only significantly reduce the distance and time taken, but it will also save on costs and threats to the environment.
Shippers have adopted eco-friendly packaging characteristics such as the type of packaging material, sizing, and shaping.
The reusable packaging material of a specific size allows for better arrangement, reducing waste, handling requirements, and increasing space utilization when transporting and warehousing.
For instance, Coca Cola, a global beverage company, has a robust, sustainable packaging policy with returnable, reusable glass bottles. They also have reusable PET bottles, working through a deposit system where consumers get a small amount for returning the bottles. This has gone a long way to ensuring greener environments and effective logistics management.
The best load optimization strategy is to ensure that every container is full before being shipped.
Cargo planning and loading is the most critical aspect in load optimization. Shippers have to ensure proper arrangement of goods to reduce space wastage and damage to goods in the container.
Early planning is necessary to ensure the goods to be shipped optimize all the containers and that ships carry a full load. This reduces the number of ships plying the same route and saves on costs and environmental impacts.
Inland logistics include any means used to move goods from hinterland to port or port to hinterland, including rail, barge, truck, and pipeline.
The same load optimization application can be applied to reduce empty kilometers, ensuring full utilization of inland transport means by bundling cargo from one company or different companies from the same area.
Port regulations such as traffic management systems, taxes, or minimum emissions standards may also be used to reduce the number of vehicles entering the port area, ensuring greener ports.
Shippers are committed to sustainability and are actively committed to corporate social responsibility through responsible shipping activities.
World shipping-related associations such as World Port Sustainability Program (WPSP) and EcoPorts offer shippers a platform where they can share knowledge and strategies to improve environmental management.
Shippers also encourage community based green supply chain management through incubators and smart-labs for businesses starting or scaling up their import or export activities.
Shippers also have a standard checklist to conduct self-assessment on environmental management activities regarding the sector and international standards.
Designing and implementing green supply chain management improves environmental performance and economic benefits.
By making the world green, you reduce waste from your supply chain and, in turn, reduce costs. Consumers are also concerned by how your green supply chain initiative impacts them and their environment, which can be a marketing advantage for you. In the long run, you will be reducing waste and costs while increasing competitiveness and growing your global brand, resulting in increased profits.
Are you sending cargo to your buyer abroad but fear payment terms may inconvenience your business? Lockstep’s supply chain financing will help you get your goods to your customers, and you get paid immediately you close your container!
Payment terms associated with international transactions may not favor exporters, but you need to sustain your business relationship. That is why trade finance is essential with longer payment terms.