The political landscape as well as regulators, the public, customers and investors increasingly demand the integration of sustainability into the core of companies. Thereof, logistics – as the industry itself and a major component of supply chains – undergoes a big change to become greener: to transform into green logistics. In doing so, digitalisation becomes the biggest enabler of this transformation which not only delivers advantages to those companies employing it, but also to startups and ventures that actively seek new business opportunities through technology innovations. But how important is green logistics long-term and what does the current landscape look like? Is it a mere trend in public discussions or a new business turn to follow to increase competitiveness and exploit new business opportunities in the LogTech sector?
Why should green logistics come before logistics?
While traditional logistics goals look at cost and efficiency considerations around high inventory levels, readiness to deliver as well as delivery quality, the exponential progress of climate change shifts a new aspect into the picture: sustainability. The vision of environmental protection and current environmental policies is an emission-reduced, and in the long-term, an emission-free future. Aiming at exactly that, the European Green Deal of the EU Commission proposed a concept to evoke ecological protective measurements in face of climate change by becoming emission-free and climate neutral by the end of 2050. The pressure to reduce environmental impact in the logistics industry is growing, as this sector is responsible for roughly 14% of all greenhouse gas emissions – not only for the logistics sector but all logistics activities considered in supply chains. On the one hand, there is a need for established companies to transform their business and supply chains towards an ecologically sustainable paradigm – so-called green logistics. On the other hand, it also creates new business opportunities that can be exploited by new, dynamic startups that sweep in to solve newly arising demands. Especially in times when digitalisation empowers new customer expectations for fast order processing and delivery, new concepts cannot be thought without sustainability.
Why green logistics and digitalisation go hand in hand
Green logistics considers the bundle of sustainable strategies and measures targeted at reducing – or in the long run neutralizing – the environmental impacts caused by activities in logistics. More specifically, it looks at the processes, structures, systems, transportation and storage along the whole supply chain of a company. Its goal is to ensure that the supply chain and accompanying logistics services are efficient but also preserve natural resources. Hence, the aim of green logistics is not simply to reduce the ecological footprint of a company, but rather combine ecological and economic ambitions.
On a high level, three prominent ecological measures can be observed:
- Reduction of energy consumption and carbon footprint
- Analysis and reduction of air- , soil- and water pollution
- Efficiency improvements within business processes and vertical value chain integration
Ecological measures as taken by the logistics sector (Source: XPRESS Ventures).
Digitalisation and the resulting surge in technologies enable green logistics and the aforementioned measures due to interconnection and efficiency enhancement of supply chain steps. Besides hardware-based trends like robotics, it is essentially software-based technology that leverages a substantial change in processes, operations, functions and even entire business models towards sustainability.
Therefore, green supply chains can translate into feasible financial and commercial advantages – especially long-term. Some advantages of the application of new technologies to achieve green logistics include but are not limited to:
- Targeted saving measures through the use of new technologies assist in reducing energy, material and loan cost (and can be forwarded to customers)
- Digital and sustainable processes free budget and logistics capacities that can be reinvested in other business areas
- The media reporting positively about companies that committed to sustainability leverages a stronger brand positioning
Many big players in the logistics industry have placed their bet on new technologies and their integration into activities to foster green logistics and the aforementioned advantages as early as possible. Logistics pioneer DHL, for instance, sets a focus on new hydrogen technologies in road freight to lower emissions as well as data integration and tracking to combine multi-channel transport solutions in the supply chain.
Green logistics: the new green deal for VC & LogTech Startups?
To put simply, digitalisation is making green logistics achievable while maintaining ambitions to grow. But for whom – established logistics pioneers like DHL, FedEx etc. alone?
No, green logistics is more than the mere digital transformation of processes within a business operation. Big players in logistics can count on their financial resources, established infrastructure and existing customer bases to implement ecological measures. New businesses usually cannot count on these resources to transform.
On the flipside, the fragmented LogTech landscape leaves room for new business models and ventures to fill the gap that logistics providers are not able to cover before. The advantage of founders and startups is the agility and speed of innovation, which established players struggle to implement. According to the Green Startup Monitor of 2018, around 39% of logistics startups are named to be green logistics startups. What’s interesting to see is that in 2018 LogTech does not appear among the most prominent technology sectors of where green startups seem to grow – just yet.
By now, the adoption and exploitation of green logistics becomes increasingly interesting among venture building and thereby proposes a high potential startup landscape for the future – also due to the strong interconnection between new technologies. For instance, In February 2020 it was announced that the Silicon Valley corporate accelerator pioneer Plug and Play is investing in green logistics. Recipient was Mixmove, a provider of software solutions for logistics operations, which uses real-time data to consolidate shipments to optimise fill rates and fleet vehicle management.
The following venture-funded examples of startups have exploited green logistics through new technologies from their early inception. The most prominent technologies used for economic and ecological equilibrium constitute real-time tracking and data interconnectivity, artificial intelligence as well as drone robotics.
Budbee is a Swedish logtech startup offering a solely sustainably-focused last-mile delivery service specialized on e-commerce. It combines fossil-free line-hauls, bike cargos as delivery methods with real-time data tracking for flexible delivery to customers. Recently, it announced that it has raised roughly €52 million of new investment. It currently operates in Sweden, Denmark, Finland and the Netherlands.
The Swiss startup RigiTech develops drones with large formats and capacities for efficient cargo delivery. By drone delivery, pollution caused by delivery traffic is to be reduced. With a single battery charge, their products range up to 80km in a round-trip. Moreover, it was built via 3D-printing biodegradable thermoplastic and runs on a battery with zero carbon dioxide.
The Berlin-based start-up shares the mission of higher efficiency and strong emission management in road freight transport. Based on real-time data and the use of artificial intelligence, Tracks does not only question the status quo but can deliberately offer recommendations to logistics to track and reduce CO2-emissions in line-haul truck fleets.
Pamyra tackles unnecessary empty runs and resulting air pollution and cost inefficiencies by offering a transparent freight route system and transport mediation for private and business clients. Like a search engine, Pamyra calculates possible time and cost of transportation of goods and leaves an offer to the user.
The German startup Smartlane created a platform for demand-oriented tour- and order management. By connecting various transport management systems and real-time traffic data, it increases efficiency of order management and optimisation of tours.
It is certain that green logistics is one of the main aspects in logistics activities due to two reasons: pressure from regulators, investors, customers and the public pushing for sustainability measures and simultaneously, significant benefits arising from integration of new technology to achieve those sustainability measures in the supply chain. Based upon the Internet of Things, logistics technology such as artificial intelligence, cloud-connected sensors and smart tracking systems make green logistics achievable. One thing is clear, the shift towards green logistics is more than just a mere trend: it poses a competitive advantage for companies that will compete in a future that inevitably has to be sustainable. Due to the strong interconnection of innovative technologies, green logistics especially poses a groundbreaking potential for LogTech startups and new business models over big players yet alone.