China’s leading logistics firm SF Holding [002352:CH] released its first carbon target white paper on June 5, which was also the first white paper in the Chinese logistics industry. In the report, SF Holding committed to improving its carbon efficiency by 55% and reducing the carbon footprint of each express parcel by 70% in 2030 compared with 2021.
SF Holding listed four ways to achieve the carbon reduction target from 2021 to 2030. First, the company would adjust its energy consumption structure for completing 68% of the target, including adopting renewable energy and building photovoltaic equipment in its industrial park. Second, it committed to gradually building a carbon emission management platform by leveraging artificial intelligence, big data and Internet of Things (IoT) to realize low-carbon operation, making up 12% of the target. Third, 11% of its target would be achieved by upgrading the transportation and business modes. SF Holding would promote multimodal transport, use cargo aviation hubs to improve delivery routes, adopt green low-carbon packaging and intelligent enterprise management, and provide green supply chain solutions to customers. Lastly, for those unavoidable carbon emissions, the company promised to offset them by planting forests and purchasing carbon compensations.
Chinese logistics industry giants join in carbon neutrality and carbon reduction actions.
In addition to SF Holding, two other logistics giants JD Logistics [2618:HK] and Alibaba-backed [BABA:US] Cainiao Network also took part in the implementation of the country’s carbon neutrality goal.
In October 2019, JD Logistics announced that it officially signed onto the Science Based Targets initiative (SBTi), a global campaign aiming at driving corporate actions on climate change, becoming the first company joining the SBTi in the Chinese logistics industry. Following that, in November 2020, JD Logistics announced that it would reduce 50% carbon emissions by 2030, starting from 2019. To achieve this goal, the firm committed to taking measures in green packaging, green storage, green transportation, and other relevant fields. For example, in the storage scenario, JD Logistics introduced distributed photovoltaic power generation mode. Since June 2017, it has also allocated recyclable delivery boxes in nearly 30 cities in China, which were used over 16 million times by the end of 2020.
Cainiao Network introduced digitization into the logistics industry to achieve a more environmentally friendly and sustainable operation. It developed an open platform that provides a full suite of technology-enabled logistics services for global companies. In 2017, Cainiao launched a recycling program to carry out the reuse of packaging materials in China. In 2020, during a sales promotion campaign hosted by Alibaba in November, more than 100 million parcel packages were collected within 14 days for reuse or recycling. Cainiao also used smart packaging algorithms to sort products into proper sizes of boxes to minimize waste from overpacking. In addition, the firm initiated the National Cardboard Box Recycling Day campaign to promote recycling across communities, which attracted Swiss good and beverage giant Nestlé [NESN:SW] to join.
What impact will carbon neutrality have on the logistics industry?
Multimodal Transport. China continues to optimize the foundation for multimodal transport by improving its infrastructures and upgrading transfer equipment. According to the China Federation of Logistics & Purchasing (CFLP), in 2019, the enterprises that focused on highway freight transport consumed 1.7 kilograms of standard coal per 100 tons per kilometer, while coal consumption of ocean and coastal freight transport companies and railway transport firms were 0.26kg and 0.39kg respectively. This means the energy consumption of railway and water transportation is much lower than highway transportation. For logistics firms, it is an inevitable requirement to develop multimodal transport and increase the proportion of railway and water transport in the whole transport structure.
Green Logistics. First, select greener suppliers since extracting and processing raw material could have massively different carbon footprint. Logistics firms shall adopt eco-friendly and sustainable packaging, such as biodegradable and recyclable packaging materials. Second, choose renewable energy fueled vehicles in the field of freight transportation, especially in urban distribution. Finally, optimize energy consumption and waste production. Logistics firms could consume energy more efficiently, minimize paperwork, and recycle packages.
Smart Logistics. In recent years, the innovative concept of smart logistics has been gradually applied to all aspects of the logistics industry. Shanghai and Qingdao have opened unmanned ports, including autonomous warehouses, self-driving vehicles, unmanned aerial vehicles, logistics robots, cloud warehouses, and other emerging technologies. Smart logistics systems not only improve the logistics efficiency but also reduce the invalid and inefficient auto driving and equipment operating with less emissions.
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