Classification of sustainable logistics solutions

At present, the concept of environmental (green) logistics as a factor of sustainable development in the economic, social, and environmental spheres of society is increasingly being discussed in scientific circles. Within the framework of this article, we analyzed the main logistics trends in the concept of sustainable development, which reduces the company’s negative impact on the ecosystem, reduces the burden on the environment, and reduces costs throughout the supply chain.

Historical background

The concept of “sustainable development” became widespread in the 1980s. 20th century, after the release of the UN report “Our Common Future”, in which the United Nations drew attention to the need to meet the real needs of today without undermining the ability to meet the own needs of future generations. In 2001, the European Union recognized sustainable development as a fundamental and overarching goal. The missions of all leading global companies (Unilever, IBM, IKEA, and many others) include sustainable development goals.

The following conditions can be identified in the development of the concept of sustainable development:

• numerous environmental disasters associated with the activities of industrial and transport enterprises (Bhopal (1984), Basel (1986), Chornobyl (1986), Gulf of Mexico (2010), Fukushima (2011), and many others)
• limited natural resources, depletion of oil, natural gas, coal, fresh water, wood, and non-ferrous metals
• global warming and the “greenhouse effect”
• reduction of biological diversity, air, and water pollution
• social inequality, rising unemployment
• the gap in socio-economic development between groups of “rich” and “poor” countries
• demographic problem (population explosion in developing countries, demographic crisis in developed countries)
• the problem of “global” diseases (oncology, AIDS)

Definition of sustainable development

Historically, the term sustainable development has three most important interrelated aspects:

1. Economic: the preservation or increase of distinct types of capital (production, natural, human, social) that ensure economic production
2. Environmental: conservation of ecosystems and natural resources for sustainable economic production and intergenerational equity
3. Social: ensuring social equality, meeting basic needs for health and education

Thus, initially, the concept of sustainable development was considered in a global sense in the context of the intersection of the subject areas of economics, ecology, and sociology. Then, in connection with the problem of limited resources, sustainability began to be considered in the context of individual structural elements — enterprises and their subsystems, among which are the logistics processes that connect the company with the environment, other firms, suppliers, customers, regions, and society acquire a special role.

When managing the logistics activities of an enterprise, the role of environmental factors is growing, which caused the appearance in the scientific and practical use of such terms as green supply chains, green logistics, and environmental logistics. The term sustainable logistics is also widely used, but at the moment it is not a full-fledged scientific concept. The author gives the following definition of the term sustainable logistics: it is the process of planning, implementing, and coordinating the movement of various types of flows and resources at all stages of the supply chain, the main goal of which is to satisfy the needs of the producer and consumer while minimizing the negative impact on the environment and society while achieving a stable balance between the environmental, economic and social objectives of the logistics system.

Sustainability in logistics

We can distinguish the following logistics trends in the concept of sustainable development, the most relevant today:

1. reducing the distance when transporting goods at all stages of the supply chain, increasing the use of local resources, and reorienting to local suppliers
2. the choice of more environmentally friendly modes of transport (pipeline, inland waterway, sea, and rail), the development of multimodal transportation
3. customization of goods according to given patterns, which makes it possible to reduce stocks of finished products in the warehouse
4. development of the shop-warehouse format, which allows increasing turnover, while reducing sales and logistics costs by reducing the need for presentation space and logistics personnel and reducing many types of logistics risks
5. the emergence of automated (unmanned) logistics systems, reduces the labor intensity of the delivery process, and integrates efficient delivery algorithms (based on neural networks), thus increasing the environmental friendliness and energy efficiency of the delivery process and developing an integrated logistics environment
6. development of e-commerce and digitalization of logistics, which allows you to manage the consumption of resources and achieve the most efficient use of them, working through the issues of reliability of logistics processes and sustainability of product quality, compliance with environmental labeling requirements, and eliminating the negative impacts of logistics on the environment and society

It is necessary to classify sustainable logistics solutions according to several parameters:

#1 As the first classification criterion, we can consider the above three aspects of sustainable development (environmental, economic, social): The environmental aspect of sustainable logistics involves the elimination of negative environmental impacts arising in the process of transporting raw materials, materials, semi-finished products, and finished products. The main solutions in the field of elimination of the mentioned negative consequences lie in the field of using the methods and technologies of reverse logistics.

The economic aspect of sustainable logistics involves minimizing logistics costs throughout the supply chain, as well as increasing the added value of products for consumers through the use of sustainable logistics technologies.

The social aspect of sustainable logistics studies the impact on society, people, regions, and culture through the company’s logistics processes and its interaction with the environment, as well as the application of the principles of corporate social responsibility in the organization’s logistics activities.

#2 As a second classification criterion, one can consider the level of logistical tasks to be solved, among which strategic and operational ones are distinguished.

The strategic objectives of sustainable logistics include the following:

• integration and optimization of primary and secondary supply chains
• influencing all contractors (suppliers, customers, etc.) to achieve the greatest effect in logistics processes and the creation of sustainable supply chains
• reducing logistics costs while increasing the added value of products in the process of integrating sustainable logistics solutions
• increased flexibility in changing delivery times, as well as volumes and properties of products
• introduction of innovative technologies in order to reduce the environmental impact of the environment
• development of supply chains with feedback

Examples of sustainable logistics operational objectives include:

1. reduction in the number of vehicles available at the enterprise and not used for their intended purpose
2. reduction of waiting time for delivery by the customer
3. implementation of nature-, energy- and material-saving technologies at all stages of the supply chain
4. maximum use of production waste, recycling of packaging, or its safe sale

#3 As a third classification criterion, we can consider the use of sustainable solutions in various logistics subsystems:

• production logistics (zero defects policy, inventory reduction, use of renewable energy sources)
• transport logistics (multimodal transportation, 3rd party logistics, reducing the share of road transport (as the least environmentally friendly) in favor of rail transport (as having the least environmental impact), consolidating cargo lots in logistics channels, reducing the distance when transporting goods by increasing the use of local resources)
• warehouse logistics (use of returnable packaging, environmental projects for the construction of warehouses using energy-saving technologies and environmentally friendly building materials, reducing stocks to reduce the need for storage space)
• reverse logistics (waste management, reducing the impact of packaging materials on the environment)

#4 As the fourth classification criterion, we propose considering various logistics solutions according to the directions of environmental impact: fuel economy, water-saving, non-renewable natural resources saving, and reduction of air, water, and soil pollution.

#5 Of course, logistics transportation technologies differ in the degree of sustainability in various sectors of the economy. For example, when transporting products of the chemical industry (petroleum products, acids, fertilizers, polymers), one should choose such more environmentally friendly modes of transport as pipelines, inland waterways, sea, and rail.

Difficulties toward a sustainable future

In general, even though the positive effect of the transition to the concept of sustainable logistics is obvious and extremely necessary, this transition causes certain difficulties in the practical activities of enterprises.

Firstly, this is due to the fact that the tools of sustainable logistics that exist today are fragmented, which is why the relevant activities are not implemented systematically enough, and often have a contradictory character, due to differences in their vector, the cumulative effect of reducing the harmful effects of logistics on the environment is low.

Secondly, the company’s management does not see a direct economic benefit from the implementation of sustainable logistics activities, but the costs for them are noticeably clear and extensive.

One of the ways to solve this problem, we see in the development of a detailed system of indicators of the sustainability of the logistics subsystem of the enterprise in terms of such components as energy consumption, water consumption, material consumption of products, the degree of environmental friendliness of products, the level of waste processing, as well as the economic effect of introducing the concept of sustainable logistics at the enterprise, which will allow forming more balanced programs for improving the environmental friendliness and efficiency of the logistics systems. However, all the mentioned activities could be not enough for the environment.

That is exactly the moment when tech companies are coming onto the market with various viable solutions starting from greenhouse gas reporting and calculation and finishing with offsets. Of course, any logistics company can do the same things by themselves. However, it required additional funding and time, while there are already existing sustainable solutions on the market. For example, SQUAKE offers an API technological solution to customers in the travel and logistics sector. Such tech solution allows not only CO2 calculations using almost all existing protocols and methodologies but also by means of high-quality carbon offset certificates to compensate for CO2 emissions.

I would like to thank Dan Kreibich and the rest of the SQUAKE team for the help.