In this episode of the Venari Podcast’s Sustainability Series, our Transport & Logistics lead, Gov Kandola, spoke to Dr. Julia Hartmann about DACHSER’s sustainability initiatives and the state of play in the sector at large. You can read the transcript of their full interview below.
Welcome back to the Venari Podcast. I'm Gov Kandola, and we're joined for what is now Episode Three of the Sustainability Series with Dr. Julia Hartmann. who is an advisor on ESG leadership and strategy at DACHSER, one of the global leaders in the field of system logistics.
Julia, welcome.
Thank you for having me, Gov!
I really appreciate you coming on.
In terms of the conversations we're going to be having with a number of individuals across this series, often they're kind of coming into, I would say, a strategic leadership position within sustainability. But you've been doing this for over a decade within this space. How did you get into it, by the way?
Honestly, it started with personal interest. When I started my academic career, this was the time when the Enron case, this big Enron scandal, happened in the United States. And I started to get into Sarbanes-Oxley and all the regulations that have to do with making sure that firms adhere to certain social and environmental principles.
So, this is what I started with. I was originally trained in supply chain management. I was a procurement manager for quite a while. In that capacity, I started to look into relationships between companies and their suppliers, and that obviously included logistics service partners. We figured out that huge potential to improve environmental conditions actually lies outside of an organisation in its supply chain, where usually 80% of the greenhouse gas emissions occur and which also causes the biggest social problems. So that is what I felt interests me for a career and this is how I started.
Amazing!
A lot of individuals working within other areas often have a passion for this space and I know there are certain universities offering degrees in sustainability now. So, it was very much, you know, progressing and moving forward. But we did mention, obviously: you're currently working with DACHSER and have been for quite a while. Do you mind giving us a little bit of an insight to the current initiatives that you're working on – especially when it comes to sustainability?
Well, sustainability has been a topic that’s interested DACHSER for a very, very, very long time. And just to give you a track record, in 2012, we did a study figuring out what would happen if somebody would tell the logistics industry, ‘You have to work to significantly cut down your carbon emissions.’ So, we started to work with scenarios: what could happen, how could the diesel price change? How would the price for an electric vehicle impact the competitive landscape?
Back then, there was no electric solution and there was also no other type of hydrogen or hybrid solution out in the market. But we worked on scenarios to figure out how DACHSER could prepare. So, the company started to do research in this area quite early and they started to set up role models. They started with smaller cities where they actually learned how to generate a logistics service without incurring any carbon emissions. And at the moment the company is about to roll this out. It is still not large-scale. We still speak about smaller island situation, but the company is about to accumulate all the knowledge that is necessary in terms of building up the infrastructure, making sure that the electricity or the other type of fuel you might need is in place and that they have investment policies, that they have the right incentives for their employees. All of this is something that they continue to work on and it's there’s still a long way to go. They are still not at the end.
I can imagine.
With those points in mind, what are the main challenges the business is facing, especially in the transition to zero carbon?
Oh, there are so many! I think two or three are the most important ones.
One is, it is really a big, big, big change. Big change means you incur a lot of investment. And what many logistics service providers feel very uncertain about is the type of technology that they should go for. Meaning: there are different versions, there are different opportunities, and each comes along with a cost that is way more than a traditional investment into diesel, let's say.
So, one is – if you incur that investment, you want to have some certainty about the payout. But at the moment the landscape is very uncertain as to what it will be, [and what] the technology that will finally impose itself [will be]. Then the next thing is, sustainability is possibly not something that you can gain a competitive advantage with. It is something that the industry has to do. It is also something that they understand they have to do, but customers are not forcibly ready to pay for this. So, you need to be really innovative to make this an economic success as well.
Amazing. It’s definitely going to be a collaborative push forward in terms of obviously making this better.
We saw, at COP-28, the big five leaders coming together to have those types of conversations from a shipping perspective on the European side. Now, you've been an advisor for a number of industry verticals from logistics and transportation all the way to retail. In your experience, how important is it for companies to engage in regulatory advocacy as well?
Regulatory advocacy is a very important step for two reasons, again. So, one is – as I said before – not forcibly something that you can set yourself apart with. Maybe a little bit, but not too much. So, if it's not something that gains you a competitive advantage, it means that if you as a company are moving into the direction of sustainability, but your competitors don’t, you incur a cost – but you cannot charge this additional cost towards your customers. So, by definition you would be at a competitive disadvantage. It’s very important to make sure that political leaders understand this problem and design regulation that makes sure everybody is on the same page, because then everybody will have to incur the same costs. Then, we are all even.
The other reason is this technological uncertainty I mentioned earlier, where you don't really know what is going to be the final solution for the logistics industry, and the investment problems that come along with this. This uncertainty could be reduced if the political leaders would clearly indicate which way to go. So, in that sense, this is really important. But I think that logistics service providers really need to think outside of the box to make this a success. And something that they often don't think about is to make sure that they use artificial intelligence for their support.
I would like to give you one example. If you drive an electric truck, it's a completely different driving experience than a diesel truck. The electric truck will consume different levels of energy depending on what the outside temperature is. If it's cooler, it consumes more energy. It will also consume much more energy if the street is uphill versus downhill. If it goes downhill, it will recuperate some of the electricity that you have needed. So, when you have a very sophisticated artificial intelligence system that allows you to design your route, while integrating all of those additional elements, it will allow you to reduce the costs of electric transportation significantly. And we speak about several percentage points here. So, this can be up to 20% in cost savings.
If you manage this, then a more sustainable solution will start to get cost-competitive with diesel. But this is potential that most of those logistics service providers haven't seen yet.
And that's a huge cost incentive. You know, 20% is an incredibly large figure. And in terms of cost –that's something that's been on a lot of people’s minds, and one of the things that has also been coming up at the forefront of many conversations recently. I think over the next six months, cost is going to be heavily involved in a lot of conversations is Scope 3 emissions, obviously including all indirect emissions that occur in the upstream and downstream activities of an organisation. In your opinion, for Scope 3, what are the consequences of businesses who are not accurately measuring all this?
Well, this is probably the next big thing. In the last ten years, companies started to learn how to calculate, how to measure and how to manage Scope 1 emissions and Scope 2 emissions. Most of them have absolutely no idea of their Scope 3 emissions. Most of them, or those who try to quantify them, make informed guesses, meaning they actually look into where a certain product comes from, what the local energy mix is and what the type of transportation is that I use to bring this to my doorstep. And then they make some crude assumptions about what the greenhouse gas emissions are along the way.
This has led to all sorts of problems. One is, this is not forcibly correct. You might actually have a supplier who is much worse in their greenhouse gas emission performance because they have a different type of energy infrastructure. You could also have a supplier who is much better and, anyway, if you just make an assumption about the performance of the supplier, you can choose the supplier based on accurate measures.
So, this is going to be something where firms – customers of logistics service providers, in this case – will proceed with lots of pressure over the next few years, because this is something that the regulators will now target. CSRD in Europe is one of those instruments where they have to report this accurately and correctly. So, they need to learn.
This is also an opportunity for logistics service providers, because they are part of this value chain and if they are in the situation where they can support their clients in quantifying those carbon emissions correctly, it will help them. Plus, it could also be that if you are able to offer your logistics services at a lower level of emissions, that you will be a preferred choice for them. So, in that situation you might actually increase market shares, and that is going to be something where I believe a lot of opportunity lies. As I said earlier, 80% of the carbon emissions are in the supply chain, and logistics plays a huge part in that. So that is going to be an important instrument.
Yeah, it's going to be huge over the next year in terms of figuring it out, but also to calculate that and, I would say, understand what to do in terms of the next step as well.
As an executive search consultant, I'd be crazy not to ask you this question, especially because you’ve worked across a number of industries. Now, obviously the talent gap within sustainability, as we've seen, is huge at the moment. Have you noticed similar challenges not only within the logistics space but across a number of industries as well?
Oh, many, many! I've been working in logistics and in oil and gas, both of those industries that we call ‘hard to abate’. So, the ones that are particularly tricky and, I would say, in some way are a challenge because they have an infrastructure and a tradition which is not very supportive of sustainability per se. But there is also lots of opportunity to change.
So, for people who like to get things moving, this is an area where they can really make a significant contribution, and that's something that is very attractive. But you need to be persistent; you need to have lots of energy and there is something else that really would set those people apart. You need to be able to form ties. I think we mentioned this. Logistics service providers alone cannot solve the problem. You need to have everybody on board: those who provide the infrastructure, charging infrastructure, fuelling infrastructure, those who produce the trucks, etc., etc. So, you really need to be able to form relationships and make sure that all those partners move into a similar direction. That is something that not everybody can do, and you need to be able to think in a very complex way because sometimes we have lots of interdependencies. When we make one choice in sustainability, it might do something good for one aspect, but something much worse for another. And, if I may, I would like to give you one example.
Of course!
The European Union have defined emission classes for trucks; they define a certain number of different types of greenhouse gas emissions that those trucks can have. And when you look into the exact specifications for Emission Class 6, the admitted carbon emissions are slightly higher than for Emission Class 5. And some logistics service providers thought that it's now worse to have an Emission Class 6 truck. But the devil is in the detail. When you look at nitrous oxide emissions, they are lower for Emission Class 6 than they are for Emission Class 5. And nitrous oxide has a much bigger greenhouse gas and global warming potential. 250 times that of Co2! So, in essence, it is really better to have an Emission Class 6 truck. But you would not know this unless you have the knowledge of that.
Definitely. It's no longer going to be a standalone position within a sustainability team. You’re going to have to have a number of individuals with different skillsets, all reporting into each other, but also into the wider business strategy, commercial, operations, or even the finance side as we're going to see when it comes to those different scope emissions.
Finally, in terms of future initiatives, especially with DACHSER, given that you're working with them at the moment – are there any that we should be on the lookout for or can expect over the coming year?
Well, artificial intelligence is clearly one big thing. The company is also heavily looking into the capacity of hydrogen and to see what can be done there. I would say the technology’s not yet fully elaborate, but what is not ready today could be in the future.
Perfect, something to look out for.
Julia, I really appreciate your time and for being part of this series. Thank you again.
It's been a pleasure. Thank you so much, Gov.
This interview has been lightly edited for conciseness and clarity.