Author: Jan Kilström, President and CEO, Green Cargo
5 Jan 2018
There’s no doubt logistics plays a vital role in the management of any successful business. Without effective logistics, goods and services would not make it from their point of origin to their point of consumption, while complex supply chains would quickly become bogged down with inefficiencies. Yet, logistics is not always given the level of importance it deserves.
Even when logistics is given appropriate consideration, it’s usually the case that short-term financial aspects are prioritised over longer-term issues of sustainability. At Green Cargo, however, this is not the case: our services are always delivered with minimal climate impact, sound working conditions and a strict emphasis on safety and long-term economic sustainability.
Both the Swedish Government and the EU have set robust targets for reducing environmental damage. And, with the transportation sector accounting for approximately 25 percent of Europe’s CO2 emissions, the responsibility falls on rail companies, road freight carriers and logistics firms to invest in green practices.
At Green Cargo, we define sustainable development as the long-term outcome of six target areas: finance, quality, security, employees, the environment and society. This notion is reflected in our long tradition of producing comprehensive sustainability reports, which are included in our annual accounts.
Since 2006, external auditors have reviewed all of our sustainability reports, applying the same scrutiny to our environmental findings as they do to our financial data. From a product perspective, we work in close dialogue with our customers to improve our services and provide sustainable solutions that meet their changing demands and expectations.
Electric trains currently account for more than 90 percent of our rail freight operations, with as little as five percent conducted by diesel trains, and an even smaller percentage carried out by trucks. As such, Green Cargo is the sole provider of nationwide freight solutions that qualifies for the Good Environmental Choice ecolabel. For us, environmental wellbeing is just as important as economic success.
For Green Cargo, environmental wellbeing is just as important as
Although we value sustainability in the logistics industry very highly, it still comes with its own associated challenges. One such customer-centric challenge is that logistic and transport solutions are sensitive to deviations, but customers are often resistant to change.
Unfortunately, this means the necessary revisions that come with revamping supply chains can represent a significant risk. More often than not, we see customers focus on the transport price instead of the total cost of the solution. This will be an important consideration in the future if change is going to be economically justifiable.
Our market is characterised by significant price pressure that is driven by very low transport prices – this is true for both national and international traffic. While this may be positive for transport purchasers in the short term, in the long term these price levels will become unsustainable, preventing future development and investment in the transport sector.
We are noticing that various industries within Sweden want to transport more freight by rail, but are prevented from doing so by the dwindling competitiveness of the railways, which has weakened since 2009. One reason for this is track fees, which have more than doubled in the last few years. Consequently, statistics from the domestic market indicate there has been a clear shift from rail to truck in the freight industry over the last few years.
Even amid significant financial pressure, we are seeing sustainability issues take greater precedence, both politically and within wider society. Companies are starting to view increased rail transport as part of the solution for achieving their sustainability targets, representing a major opportunity for Green Cargo. If we take one tonne of freight with a maximum of 1kg in CO2 emissions, a truck can only go about 20km, and a ship can go 200km.
Our electric trains, meanwhile, can travel 9,000km. If businesses and governments are truly committed to reducing the impact of climate change, then I am positive the demand for rail transport will increase.
As part of Green Cargo’s commitment to sustainable logistics, we have a responsibility to share our experiences of smart logistic solutions and eco-friendly transportation. Through our blog, we share opinions relating to fair conditions and functioning infrastructure within the rail transportation sector. We highlight climate-smart logistics solutions, technological developments, corporate social responsibility issues and the importance of safe transportation.
Since 2004, we have also been organising seminars centred on sustainable logistics. Guest speakers – ranging from ministers to CEOs – are invited to talk about transportation, the environment and other topics relating to sustainability. We also bestow the Climate Comet of the Year award to companies that have made significant changes to their logistical set-up.
Companies are starting to view increased rail transport as part of the solution for achieving sustainability targets
Our partnerships are a vital part of our green credentials; sustainable partners allow us to deliver a more credible, comprehensive and qualitative transport offering. Xrail Alliance, for example, consists of six partners with rail networks covering 11 countries. The partners, which include CFL Cargo, DB Cargo, Rail Cargo Group, SBB Cargo and Linneas, target better transport reliability through common cross-border production standards, IT tools and enhanced information.
We are now working towards developing a common booking system. All this helps to provide sustainable and reliable transport throughout Europe.
Roadmap for sustainability
Since Green Cargo was founded in 2001, we have witnessed a number of significant changes within the Scandinavian logistics industry. One of the biggest changes to have occurred within the sector has been the growth of various innovative solutions. Alternative fuels like hydrotreated vegetable oil biodiesel are on the rise, and we are also seeing further tests and developments in electrical road systems, platooning and autonomous vehicles.
That being said, we also encourage the improvement of more established technologies in the freight industry. One such example is the continuous upgrading of our locomotive engines. Although there is considerable additional cost attached to this, there are also many advantages, such as reduced noise and vibrations, as well as reduced emissions of hazardous substances and carbon dioxide.
Another example is the installation of the automatic start/stop function in our diesel locomotives, which helps to avoid engine idling. This function also contributes to noise and emission reduction, while providing some cost benefits.
I am pleased to say that we have met each change positively, overturning several years of loss to improve our operating profit by SEK 200m (€20.5m) between 2013 and 2016. This was in no small part down to the restructuring programme we adopted three years ago. As part of this programme, we have developed a more effective production model, increasing our train fill rate by 15 percent.
Further, we centralised our administration processes, revised our locomotive fleet and reviewed our working methods to make them more efficient. As a result, we are now in a position to focus on growing our business. This is reflected in our Q3 2017 report, which shows our net sales and operating profits continue to improve despite facing a tough marketplace with sustained price pressure.
Looking long term, we are helping companies reach their environmental targets with respect to CO2 emissions. We transport freight corresponding to 10,000 truckloads on a daily basis, which is equivalent to a 165km-long convoy of trucks.
Our plans for the future are simple: we will continue to develop and deliver effective, sustainable rail logistics within our home market of Scandinavia, while always considering the environmental health of our entire planet.