How Will Changing Environmental Policies Impact Shipping and Logistics?

How Will Changing Environmental Policies Impact Shipping and Logistics?

The reality? The logistics industry is notorious for stirring up less-than-positive environmental press. And considering a single Capesize Bulk Carrier uses 40-plus metric tons per day—and releases about 33,000 tons of CO2 in a single year—that shouldn’t come as a surprise.  

The global shipping industry generates about 4%-5% of the total carbon dioxide emissions created by human activity. It’s also a massive contributor to sulfur oxide (SOx) and nitrogen oxide (NOx) emissions. Then there’s airborne pollution, especially around coastal areas and highly-trafficked ports.  

While it seems black-and-white, moving to green logistics is more complex. Because while shipping and logistics are being pushed to “clean up,” it’s simultaneously hurtling towards another breakpoint as consumer demands skyrocket—especially when it comes to the retail supply chain. Pandemic time demands pushed the global supply chain to its limit and introduced consumers to the simplicity and efficiency of on-demand eCommerce. And there’s no going back.  

That’s the critical balance: accelerating shipping and deliveries to satisfy consumer demand while considering the increasing environmental pressures of this growing industry. 

Now, though, there’s a third consideration gaining momentum worldwide: cast-in-stone environmental policies set to transform shipping and logistics. From regulatory mandates to emerging tech best practices, the industry’s future and how cargo moves are under the microscope.  

Your role, then? Understand the modern landscape with an eye on the complexities, controlling factors, and evolving environmental policies driving what comes next—specifically, the government, consumer, and industry-specific forces looking to define the way shipping happens.  

1. Government Sustainability Targets

Underscoring much of the conversation are government regulations and emerging sustainability initiatives. Chief among them is the 2015 Paris Climate Agreement. Legally binding—and agreed to by 196 countries—this international treaty strives to keep this century’s global temperature rise to 1.5℃-2℃.  

Since freight transportation is responsible for about 11% of all global greenhouse gas emissions and 20% of black carbon, all eyes are on international shipping.  

Considering carbon budgets, getting to a zero-emission state—which syncs with the Paris Climate Agreement’s global warming goals—is possible. But it requires an immediate shift to scaling new technologies, efficiencies, and alternative fuels. And that means allocating the resources, budget, and people power right now. Possible? Potentially—for some organizations. Others may need more time, support, and hands-on guidance to promote these transformation shifts.  

Regulatory pressure is also coming from the inside. The International Maritime Organization (IMO) has been laser-focused on mitigating shipping emissions and reducing sulfur content in fuel oil. Per IMO requirements introduced in 2020, ships’ fuel must contain no more than 0.5% sulfur. Their experts argue that this will provide ongoing environmental impacts and public health benefits, including reductions in childhood asthma and lung cancer deaths.  

2. Consumer Pressure for Reduced Carbon Footprints – and Greater Performance

Like government pressures, consumers are another key driving force behind changing environmental demands. Eighty-five percent of global consumers admit to evolving their purchasing behaviors, favoring more sustainable companies. They seek out businesses with clear-cut environmental, social, and governance (ESG) strategies and public roadmaps tracking their green goals—even from shipping and logistics providers

  • 91% of e-commerce customers want eco-friendly shipping options at checkout 
  • More than half would pay an additional 10% for these green services 
  • 73% who indicated green behaviors aren’t important to them would still like to see sustainable shipping options   

3. Industry Insiders and Employees

The push towards more sustainable practices is coming from the inside—and in today’s competitive, candidate-first environment, this commitment can be a competitive advantage. Sixty-eight percent say they’re more likely to accept a job at an environmentally-friendly organization.  

Respond To Mounting Internal and External Pressures

While these regulations and demands from consumers and employees inspire countless global conversations, there’s no one switch to flip. Transforming shipping workflows and best practices to improve sustainability must also consider methods for maintaining or improving service—and infrastructure durability.  

We can’t compromise construction, deliverability, and design speed for short-term emission reductions. In the U.S. alone, shipments are expected to increase by nearly 24% by 2025 and 45% by 2040.  

However, some organizations, ports, and governments are diving in head first, committing to significant investments in initiatives like “ports of the future” in France. Here, maritime, waterway, aeronautic, and land-based transportation come together to preserve space and environmental impact.  

These ports are in-step with the French government’s own Stratégie national bas Carbone (National Low-Carbon Strategy), which seeks to curb industrial sector emissions by 35% over the next eight years, and 81% by 2050. Doing this means complete decarbonization in maritime transport—and, already, it’s posing a significant technological challenge, especially with maritime transport expected to increase by up to 40% during the same period. Total adherence to these environmental standards could leave the industry and key French players vulnerable.   

Others are choosing to get ahead of any potential roadblocks. With the introduction of the La Rochelle Zero Carbon Territory project—a push for the greater La Rochelle area to be carbon neutral by 2040—the local port has already begun implementing initiatives to curb its energy-related emissions.  

Next Steps: What Should You Do Today – and Tomorrow?

By understanding the environmental pressures impacting shipping and logistics, your organization can better prepare for what comes next and how you can and should respond. Economic, political, and financial considerations will undoubtedly contribute to individual businesses’ moves to green logistics. But regardless of where a company falls, the next 12-24 months will mark a seismic shift in the industry as a whole—and that means all organizations and stakeholders must commit to rethinking processes, workflows, and operating models, with sustainability considerations in mind.  

No matter your exact path forward, there are negatives and positives—and more than just environmental and public health considerations to account for. Done right, though, companies can strike a balance, making positive strides to better the global community—and their bottom lines.  

Need help mapping out your next steps? OL USA can help. With both a big-picture global understanding of the current and emerging policies, regulations, and initiatives driving the future of shipping and logistics—and teams on the ground in key local markets—we can help navigate today and tomorrow. Let’s talk

Top 5 Freight Forwarding Best Practices

Top 5 Freight Forwarding Best Practices

Whether you are a seasoned veteran or planning your first international shipment, the freight forwarding process can be challenging to navigate. Even the slightest hiccup along the way can cause significant delays, damaged goods, and higher costs.

Given these high stakes, it is vital to minimize your chances of encountering problems. By following industry best practices, you can avoid many headaches and be better prepared to handle the unexpected. Here are five ways to help ensure your next shipment arrives on time and within budget.

Estimate, Do Not Guesstimate

We all know how sensitive costs are when doing business. Many factors determine your freight forwarding costs, including:

  • Mode of transport: The method you use to transport your goods ultimately depends on the cargo you are shipping, the distance for transport, your budget, and other requirements. Each form of transportation features different rates, ranging from air freight at the high end to ocean freight as the most cost-effective.
  • Shipping distance: Shipping distance is another critical factor in your freight forwarding costs. Storage costs, fuel charges, and port tariffs increase costs for transporting goods across borders. Also, note that more popular shipping routes are typically more affordable than less utilized shipping routes.
  • Type of cargo and weight: Other critical factors include the type of cargo and its weight. If your cargo is perishable, oversized, requires special handling, or is hazardous, your costs will be higher. Your chargeable weight will be determined by the greater of your actual weight or the dimensional weight of your goods.

What You Can Do

Calculating your costs is not always easy, as many variables affect this calculation. This is why it’s critical to ensure you are working with current information. Before determining your rates, make sure you have the most current data available. Otherwise, you risk facing higher charges and smaller margins.

While air transport is generally quite reliable regarding departure and arrival times, delays can happen. Inclement weather, congestion, and political events can cause bottlenecks, which can have severe consequences if you are unprepared. Be sure to factor your timeline into shipping decisions to ensure you have room to handle the unexpected.

Confirm the export and import tariffs on your goods with each relevant country involved in your shipping process. These extra charges change and can negatively impact your bottom line. Although double-checking this information can take time, errors represent avoidable headaches.

Watch Your Regulations and Licensing

When freight forwarding crosses borders, your cargo must meet all applicable regulations of the destination country. Determining which rules apply to your shipment can be a complex process. While many standards must be met regardless of what you ship, other regulations apply to only specific goods.

For example, exports from the U.S. are subject to many regulations and export control laws. Dual-use commodities and technology subject to the Export Administration Regulations (EAR) could require you to secure a license for export. Goods related to national defense demand a license under the International Traffic in Arms Regulations (ITAR).

Penalties for failing to comply with regulations and licensing requirements can be steep. In addition to the business-related problems caused by such oversights, your goods may be confiscated, and you may even face fines and jail time.

What You Can Do

Confirm with the destination country any regulations, standards, and licensing requirements you need for shipping your goods before beginning the freight forwarding process. Check into whether any imminent changes are likely to affect your shipment to help mitigate any potential issues.

Most industries are controlled to some extent, and the degree of monitoring varies according to the item. Double-check to be sure that you have the proper licensing required for importing or exporting products. Also, ensure your goods are packed properly to meet all shipping requirements.

Consider how international events and international relations could affect the shipping of your goods, and factor this uncertainty into any freight forwarding decision.

Document, Document, Document

Specific documents are required in global shipping for various reasons. First, documents make up the contract of carriage, including all particular clauses related to the transportation of goods. This paperwork also serves as proof that goods have been delivered. Not only that, but it also verifies that, even after sometimes weeks of transport, the goods have been delivered in acceptable condition. Perhaps most importantly, your documents serve as proof of ownership for the cargo being transported.

Here is a look at some of the most important documents used in freight forwarding:

  • Import/export declaration: An import or export customs declaration states the essential details of the goods being transported. It is crucial for customs clearance and in calculating any duties that apply to a shipment.
  • Commercial invoice: A commercial invoice is one of the most important documents in shipping goods internationally by sea. It provides proof of sale from the exporter (seller) to the importer (buyer). This document is needed for customs clearance.
  • Bill of lading: A bill of lading is a transportation contract. It states that the cargo carrier received goods from the shipper in usable condition and gives the document holder rights to control and manage the goods.
  • Certificate of origin: This document states which country the goods were manufactured in. It includes product information, destination, and country of export, and it helps determine whether a shipment is eligible for import and any duties that may apply.

What You Can Do

Knowing what forms you need is not always an easy task. Ensure that your customs documentation is accurate, up to date, and complete.

Collecting your documentation is one of the simplest ways to save yourself a lot of time, money, and headaches later on. It is much more cost-effective to get it right the first time than to collect the required paperwork as your cargo sits in a warehouse, incurring storage costs. After all, a pinch of prevention is better than a pound of cure.

The First Mile is as Important as the Last Mile

Freight forwarding involves many moving parts that often include the combination of rail, road, air, and sea freight. The delivery process is complex and requires the successful delivery of goods at every step to ensure each shipment reaches its final destination safely.

Businesses have realized the importance of last-mile delivery in providing a positive customer experience. However, the first mile is often overlooked as it does not involve the same intimate contact with customers.

Common Oversights of First-Mile Logistics

Given the importance of the first mile to the cost of goods sold (COGS) and its impact on every subsequent step in the freight forwarding process, its lack of prioritization in many companies represents an incredible opportunity to improve business practices.

Here are some of the areas that often get overlooked in first-mile logistics.

  • Proper packaging: It is crucial to properly package goods to prevent damage or loss during transit or the loading process.
  • Correct labeling: Accurate labeling is essential to guarantee suitable shipping and handling of goods.
  • Planning for congestion: Careful scheduling is vital to ensure the smooth flow of shipments.
  • Preparing documentation: As mentioned earlier, documentation is a critical area in freight forwarding. Not preparing everything that’s required can cause delays, fines, and other penalties.

What You Can Do

Do not make the mistake of overlooking any step of your freight forwarding process — from start to finish. Your costs depend on each step and not just the final mile. So spend your time and money looking for ways to optimize each node of the transportation process.

Work With the Right Partners

Every shipment differs in terms of services required for successful transport. It takes a great deal of finesse to navigate the logistics landscape to determine the optimal solution for your needs.

With so many stakeholders involved and steps along the path, it is vital to work with the right people. Tapping into experienced partners and established networks makes freight forwarding much more efficient and problems easier to avert.

But choosing partners can sometimes feel like traversing a field full of land mines. How can you choose the right partners for your needs? Many areas need attention to make sure you choose what is best for your business:

  • Check reviews: You should not base your judgment of a potential partner solely on its website. Collecting feedback from former clients is often a much more reliable source of information.
  • Do not overemphasize fees: Of course, your costs are essential. But low cost should not be your only criterion in choosing partners. Be sure to factor in experience, delivery time, insurance, and services offered.
  • Examine expertise: You need to consider what exactly you need. There is no need to work with the best air freight logistics provider if transport cost is critical to your business. Seek out experts in your areas of need.

What You Can Do

It often makes sense to partner with logistics experts to realize cost savings and added convenience. Choosing partners with extensive logistics networks can make your life much easier. Spend the time up front to select partners that best serve your needs.

We Are Here For You

We know how complex freight forwarding can be. But OL USA can help. Sign up for our newsletter or contact us today to see how we can help your brand. We’ll work with you to determine your transportation and freight forwarding needs so we can tailor our services to suit you best.

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