Long Term Economy interviews SOS LOG President, Daniele Testi

Sure. First of all let me make clear two things: 1) we, as SOS-Log, promote a 360-degree view of sustainability. Our view encompasses environmental, social and economic aspects. 2) Many people see sustainability as an ethical duty. That is not true! Sustainability is a tool, an opportunity for companies which can update their logistics processes and improve their competitiveness.

Substantially through two mechanisms:

1. Cost savings: manufacturing and logistics companies which follow sustainable logistics principles reduce energy and cost waste drastically; companies become more competitive.

2. Market differentiation: markets (consumers) are increasingly appreciating Sustainable companies/products. It is true, sustainability still does not translate into a premium price for companies. However, those which are recognized as sustainable companies can target emerging market segments, those made by conscious customers (also more inclined to a long-term relationship).

Sustainable logistics does not just concern the use of less-impactful fuel in transport. It concerns different activities: a) the way we use resources; b) the organizational model of the supply chain; c) the delivery model; d) the promotion of the brand.

 

This is a very interesting question, as it brings to the surface a critical aspects: you can’t achieve sustainable logistics by working alone.  Logistics is a process, a set of activities (transportation, storage etc…) thanks to which raw materials become end-products, and end-products come to consumers’ hands. The whole supply chain (suppliers, manufacturers, logistics providers, even consumers) is involved in the process. When designing a products to minimize logistics emissions, the company must take into consideration all logistics activities (and all actors) involved in the production process, transport, consumption and possibly disposal and recycling. Now it is clear! The main factors of success for sustainable logistics are networking, dialogue and cooperation within an ecosystem of companies.

 

The first challenge we have to face is “the cultural change.” As I said, sustainability should not be considered a duty, something we are forced to do. It must be a creed, a value, something that shapes the entire organization! All the staff (including senior managers) should feel part of the project, confident that it will bring nothing but benefits to them. SOS-Log is working a lot on this aspect: we are organizing training courses addressed to personnel of logistics and manufacturing companies. We are also making conferences and workshops in cooperation with other associations, such as Assologistica.

Specific challenges concern Italy’s logistics system. In particular:

1. Train and road transport should collaborate more. Freight in Italy is dominated by road transport, a mode also used on non-cost-effective routes. A greater use of trains could bring substantial benefits. It is a very reliable mode of transport (hardly behind schedule), efficient (with lower energy costs per ton on medium-long distances) and with high industrial capacity (the number of exogenous variables to take into account on the scheduling process is lower compared to road transport). Recently, Italy’s Ministry of Infrastructure and Transport has planned major investments in the whole national railway infrastructure. However, the great potential of trains will be evident only when they are seen as complementary (rather than competing) modes of transport.
2. Then It is necessary to increase the efficiency of road transport. An important step in this direction is the use of LNG (Liquefied Natural Gas). It is less expensive as well as less polluting (in terms of CO₂, NOx and especially thin powder) compared to diesel. Compared to diesel, the use LNG improves the well-being of people. It improves the quality of things as well: several studies show that CO₂ and particulates are a lethal mixture not only for our lungs but also for the cement of our homes and other buildings. Now, I’m pleased to say that Italy’s government has finally decided to encourage the use of LNG-powered trucks: more LNG distributors (without which an actual development of LNG is unthinkable) will be built. Currently there are 6 LNG distributors, and this number is set to double by next year. Huge improvements in the logistics process can be also achieved with the support of new digital technologies. Today the expressions Physical Internet and Artificial Intelligence are gaining momentum: these are those innovations which allow goods to be transported more intelligently; they  optimize the use of fleet, routes and thus drastically reduce empty trips that, still today, are estimated to account for more than 25% of the total.
3. Urban logistics. Today, there are significant steps towards electric-powered vehicles and the “sharing economy”,  as well as proximity distribution which have a lower environmental impact.

 

Before speaking of challenges, let me point out the following important figure: today, seaborne transportation makes up most of the international trade; it accounts for about 80% (by volume) of the goods transported globally, to be precise. Moreover, among the modes of transport, it is the less polluting one, in terms of  CO₂ emissions per tonne transported. Sustainability (conceived in terms of efficiency of ships and ports scaled) is a stable element in the long-term strategies of maritime operators. However, in the short term economics factors dominate companies’ strategy. Today shipping companies are faced with a reduction in turnover due to overcapacity and a sluggish demand. This sector, with strong capitalization, today is making great efforts in cutting-cost and rationalization of services. In the world of containers in particular, we are witnessing processes of mergers, with the aim to rebalance the supply and demand of services.

 

Well. I should not use the term “distinctive”. The word “sensitiveness” is more suitable in this case. In my opinion there are countries which are more “sensitive” towards this issue than others. The Scandinavian countries, the Netherlands and Switzerland, for examples, are definitely among them; in fact, these are countries where the culture of sustainability and efficiency pervade every aspect of life. Then some countries are more sensitive to “specific” aspects of sustainable logistics than others. Spain, for example, has an advanced LNG-based transportation system. Italy is called to protect an environmental heritage that is unique in the world; this is a big challenge for the Country: schools, universities, and all those institutions involved in the education/training of the future ruling class have a key role in this challenge.

 

One of the main activities of SOS-Log is to give visibility to all those companies which are improving their logistics process. We have many examples. But I will just mention the most recent one. It concerns LNG vehicles. The LC3 group of Gubbio and Maganetti Group in the province of Sondrio (Lombardia – Italy), in partnership with Iveco Group are investing heavily in LNG technology. Recently, these three companies inaugurated the 6^th LNG refueling point in Italy (it is open 24 hours a day). This case study is at the same time very enlightening and explicative. Why? It has been carried out in “Valtellina,” an area which is very sensitive to the environmental issue. Building something here is not very ease! However, they have done it! The factor behind the success of the project? The ability of LC3 group to gain the trust of all the institutions and members of the civil society involved in the project. This new LNG refueling point can supply a truck with a capacity of more than 1000 km in just 4 minutes. All the stakeholders were excited of the project. It is economically successful and contribute to the reduction of CO₂ emissions.

 

SOS-Log was established in 2005 with the mission to gather all those actors (people, organizations, institutions) who consider sustainable logistics an opportunity to innovate and improve their business. In the last two years SOS-Log’s membership has doubled; we  have strengthened our relationships with other associations, first of all with Assologistica. We have planned some very interesting initiatives for 2017. Among these I would like to highlight the following ones:

1. Training courses: these courses are aimed at both the top management and the workers of logistics and manufacturing companies. All companies which are interested in the initiative can participate. Very high discounts are provided for SOS-Log members. All information in this regard is available on the web-sites of SOS-Log and Assologistica.

2. Sustainability Protocol: it is a methodological-tool (we are developing in collaboration with the LLoyd Register) which is to support companies in their journey towards sustainability. To be true, “it is not a certificate.” It is a tool (based on a questionnaire), validated by a third party, which proposes for each individual companies specific actions for improvement in their logistics process. In fact, there are no magic formulas or recipes for sustainability. Instead, each company has its own path appropriate to their specific market needs and requirements. The tool measures the gap to certain objectives, and focuses on the opportunities they can still grasp. It is a flexible tool, which can be applied to various contexts, various parts of the supply chain, different products and processes. We have planned to market it since the early months of 2017.

 

Yes, absolutely yes! Our protocol main function is to give support to companies which are engaged in an ongoing process of sustainability. However, by adopting a “validated” protocol, companies give a clear message to the market: they are improving their sustainability with the help of a third, specialized, independent part. In other words, the Protocol also allows companies to extract value and build reputation from their investments in sustainability. Finally, another very important point. Now more and more leading companies are shaping their business with sustainability. To this end they also require their suppliers to adopt certain sustainability parameters. Of course, following a validated protocol, can be a useful support and a good card for such companies to be accepted as suppliers of big sustainable companies.

 

Where’s the government? (Note: we recorded the interview just the day after Italy’s Constitutional referendum – 4^th December 2016). I’m joking… Of course, and seriously talking, we must recognize that Mr. Graziano Del Rio (Italy’s Minister of infrastructure and Transport) is showing a big and growing commitment to the improvement of the state of infrastructure in Italy. Many incentives have been put in place for the development of intermodal-transport and the use of alternative low-emission fuels. What now operators are asking for is a clear policy that translates commitments to sustainability (taken with the Paris-COP21 and Marrakesh-COP22 agreements) into concrete actions. We need an industrial plan which leads us into the new economic paradigm, the one that calls for greater environmental, economic and social sustainability and where logistics can play a key role. Personally, I don’t support “de-growth” policies. I strongly believe in sustainable growth instead, based on the development of green and circular economy, as well as on the huge potential (perhaps disruptive) of digital technologies. I know that this is something complex to be realized. But institutions, at all levels, should gather all these factors into a big strategic plan for a more sustainable future.