Jochen Thewes, chairman and CEO of freight forwarding and logistics giant DB Schenker, is a committed enthusiast for more-sustainable logistics and believes the sector will make significant steps this decade in handling intercontinental supply chains in a far more sustainable way, he tells Roger Hailey
As the implications of climate change and the urgency of tackling it have risen rapidly up political and business agendas in recent years and months, air freight operators and their customers – along with the wider logistics and supply chain sector – are now accelerating their efforts to make their businesses and supply chains more sustainable, despite the many challenges.
For a sector like air freight that is so reliant on aviation fuel, the business is to some extent currently limited in what it can do by the technologies and fuels available. But nevertheless, certain leading shippers and logistics companies are trying to push things forward as fast as possible and persuade their suppliers to do so too.
For example, several airlines are now employing sustainable aviation fuel (SAF) in collaboration with their freight forwarder partners, and DB Schenker is one of those leading freight forwarders offering shippers the chance to be greener.
Jochen Thewes, chief executive of DB Schenker, is a committed enthusiast for more-sustainable logistics across all modes. “Our goal is to become sustainability leader and climate-neutral by 2040,” he stresses.
Reality check
But he is a realist too, aware of the challenges. These include a ten-year ramp-up phase until SAF is widely available at scale to airlines, while the present-day challenge is that shippers often come to the negotiation table with good green intentions but then quail at the cost of implementing them.
So, what are the choices for shippers who want a sustainable supply chain here and now? “The first thing to say is that shippers should use as much ocean freight as you can because it is the most climate-friendly way, at least for intercontinental transport, that we have now to move freight between continents,” Thewes advises. “Try, as much as you are able, to ship by ocean.”
Of course, Thewes knows that ocean freight is not a realistic option for all types of cargo or shippers. And he also agrees that air freight supply chains can still be made greener, when each link is optimised.
“There is not enough SAF available right now and we simply cannot switch everything to this alternative fuel, but there are a lot more available possibilities which can be fed into the system which will help you and help us to make air freight more sustainable,” he highlights.
One of these is the weekly Frankfurt-Shanghai-Frankfurt Boeing 777 freighter service operated by DB Schenker which offers shippers the choice to buy SAF for the flight. Currently there is still has some availability for companies willing to pay a premium for this carbon-neutral air freight capacity.
“Our Frankfurt flight is full, and we’ve decided that we will extend it throughout the entire winter schedule until the end of March,” says Thewes. “The flight is not entirely booked out with customers paying for sustainable fuel. For now, we buy and pay more than our customers demand, making it a truly CO2-neutral flight. But there should be enough cargo to fill a Boeing 777F flying once a week from Central Europe into Shanghai with cargo from customers that are willing to pay the extra for the SAF.”
But freight forwarders and airlines have more opportunities today to offer SAF or carbon offsetting opportunities to shipper customers, many of whom have boardroom pressure to operate greener logistics but put cost before sustainability.
“We are clearly seeing a lot of companies who want to reduce their carbon footprint, but when it comes to sitting down with us and discussing the solutions, we all know that SAF is significantly more expensive than fossil aviation fuel,” notes Thewes.
Talk versus action
One major freight forwarder recently acknowledged that out of 20 face-to-face discussions with customers about greener air freight and SAF, just one of those will take the final decision to pay extra for the privilege. DB Schenker recognises that ratio; but not all is lost.
“Quite a few customers shy away to make the final step in the solution but they will try cooperating with us to see what other flights can be put in place and where we can feed in SAF in order to reduce the carbon footprint,” he explains.
And sustainability has to become a key topic in the conversations that freight forwarders have with their shipper customers, says Thewes, adding: “If we go back a couple of years, the majority of the conversations were normally around price and transit time. Whatever the mode, those were the two main topics discussed.” The advent of the pandemic and severe disruption to air and ocean freight changed the air freight discussions towards “access to capacity, reliability, visibility and getting things moving”.
The discussions, says Thewes, now need to make sustainability an “integral” part of the conversations with customers and logistics partners such as airlines.
“Nokia is an excellent example of that, where we have a business relationship in other transport modes,” he notes. “They came to us and said that they needed to reduce their carbon footprint and asked us to help.
“The first step was about other choices and alternatives. It is only the first stage, but they signed up for that Frankfurt-Shanghai flight with a regular tonnage per week and they still support that flight.
Important change
“Companies are starting to take sustainability seriously and are coming to us for solutions, and while price will always be important, they want to discuss the carbon footprint. I think that is the most important change that we need to see.”
Thewes believes the UN’s recent COP26 climate change conference in Glasgow should make a difference when top executives now discuss sustainability in their supply chains, noting: “I hope that more boardrooms, CEOs and responsible leaders in companies and industries will not wait for political pressure, frameworks, regulation and restrictions in order to make a move towards sustainability.”
Optimising ground movements
He adds that the actual flight in any air freight movement is only the airport-to-airport part and that other elements, such as trucking and last-mile delivery, although relatively small components of the overall carbon footprint, are well worth optimising.
Switching from diesel to an electric-powered truck or on rail is one option, but there are broader gains and efficiencies to be achieved.
“We need to see what the last mile looks like, how the road feeder network is organized, and how goods can be consolidated to using the capacity of larger trucks – and where possible rail – as we go to and from the hubs,” Thewes notes.
He says that the logistics ecosystem, including air freight, needs greater collaboration to provide customers with the most efficient and economically viable transport while also reducing the impact on the environment.
Rethinking supply chains
Globalisation, fuelled by internet-driven connectivity, saw the creation of ever more complex supply chains as component production centres scattered around the world required just-in-time logistics to make sure inventory levels met consumer demand. The pandemic exposed the risk that such extended supply chains face when bellyhold air freight, for example, disappears almost overnight, halving air cargo capacity at the same time as ocean freight was hit by sudden port closures out of position containers.
Thewes says that cost was the main factor in logistics negotiations as intercontinental supply chains were established to meet the demands of globalisation.
“If we look at sustainable supply chains with regards to keeping goods moving, in many instances we see an ‘all the eggs in one basket’ approach, with goods produced entirely in the Far East, moving across the Pacific to the US or the Atlantic into Europe. That is maybe not the most dependable way, and we need to look at alternatives so we can keep goods moving.”
He says that one topic now up for discussion is around alternative sourcing in other regions of the world and near-shoring, but “you cannot always go bigger and further, looking just at the economic scale it brings; you also have to consider the environmental impact”.
Thewes continues: “It is not a sustainable way of living going forward; and I agree it is a big task and a big challenge, but I can only hope that events like Glasgow will raise awareness. We cannot continue flying everything around the world, we cannot just produce something and look at the cheapest option of moving goods, we need to strike the right balance where we combine what is economically possible with what is environmentally viable.“That is the challenge, and it is why we need greater collaboration and cooperation between carriers, shippers, forwarders and regulators to make this happen.”
E-commerce puzzle
In the meantime, the pandemic has also accelerated the growth in e-commerce, as consumers purchased goods online because they could not visit many physical shops. The question arises whether e-commerce logistics is as sustainable as it could be.
Thewes recognises the tension between consumers demanding faster delivery of their goods and the industry challenge to fashion sustainable linehaul and last-mile logistics.
“The expectation today in consumer behaviour is for everything, every time, everywhere, being a next-day delivery, and we are now even looking at same-day deliveries with certain products in certain geographies.
“Certainly, it is not the optimal way of transporting goods and optimising load factors in terms of the carbon footprint per unit transport. Is e-commerce a development that is potentially counter-productive to optimal transport flows?
“Yes, it is, and everything that happens in supply chains starts with the expectations and the willingness of the consumer either to pay a higher price for a more sustainable product or maybe accept that the product ordered online is not coming within 24 hours but maybe in 36 hours. If 36 hours, that allows the possibility to better consolidate the linehaul, or use rail transport.”
Data is key
Thewes believes that supply chain data is key in helping consumers make more sustainable choices in how their goods are delivered.
“Certainly, that is something where better communication and, potentially, education needs to happen. Data is becoming incredibly important because you can calculate accurately the extra carbon emissions down to the single product and give consumers a choice,” he notes.
“Let’s say that whichever e-commerce platform you use, there is a choice between 24-hour delivery – which has a calculated carbon footprint – or you can have 36 hours with a reduced footprint. I think many people would think, do I really need it in 24 hours?”
He adds: “Today, we order by default or because we signed up to whatever kind of subscription programme to get everything within 24 hours. But do we really need it? Having that data in front of you, having the choice, the awareness and information could be a trigger to change consumer behaviour.”
Air freight preferences
If the data becomes available, shippers could also make similar choices when it comes to flying general cargo, in theory. “Yes, and in theory you have the choice to fly with an airline that has modern and more environmentally friendly aircraft,” Thewes notes. “But given the situation now where air freight capacity is a scarce resource, unfortunately shippers do not have that choice because they have to fly on anything that makes it in the air to get their supply chains moving and their products out to customers.”
Nevertheless, Thewes remains optimistic that changes will happen to make air freight and other modes more environmentally friendly, while providing shippers with the tools to operate greener logistics.
“I believe that what we’re seeing right now, the advances in fuel technology for example, gives me hope and confidence,” he says. “Ten years from now, we will not have solved all problems, but we will have made significant steps in handling intercontinental supply chains in a lot more sustainable way then we do today.”
