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18 Nov Green Logistics’ Development, Progress, and Future Trends in China
Green packaging has been a growing focus for green logistics development
According to data published by Greenpeace, a global environmental NGO, driven by the booming e-commerce industry, China’s consumption of packaging materials increased from 20,600 tons in 2000 to 9.42m tons in 2018, creating huge amounts of waste and emissions. Although some Chinese delivery companies expressed that they would be willing to contribute to green logistics, thereby reducing air pollution and carbon emissions, many of them have not put any effort into practice because of a lack of resources and expertise. In comparison, China’s leading logistics firms, such as SF Holding [002352:CH], Alibaba-backed [BABA:US] Cainiao Network, and Suning.com [002024:CH], have been working on environmental logistics for several years, which may provide some clues to the industry’s direction and development in this field. Specifically, these companies have mainly focused on green packaging in the past years.
For example, SF Holding, in 2017, established a research center for sustainable packaging solutions. In 2018, it launched its first recyclable packaging box, which can replace the traditional carton box or plastic bag and be reused hundreds of times. The recyclable box uses zippers instead of sealing tape, and is easy to open, foldable, and anti-theft. According to SF Holding’s expectation, 10m of such boxes will save 500m carton boxes and 1.4bn meters of packaging tape. In 2018, SF Holding began promoting 50,000 of such recyclable packaging boxes in Shenzhen, Guangdong province, using it to perform intra-city express delivery service. To date, however, the boxes have yet to gain mainstream use, as at the time this post was published, it has not become a common site in 1st tier cities such as Shanghai or Beijing.
As for Alibaba’s Cainiao Network, it takes a different approach from SF Holding’s strategy in research and development of sustainable packaging. It instead prioritizes recycling packaging materials. Leveraging its extensive deployment of brick-and-mortar delivery shops, named Cainiao Yizhan, around the country, it encourages users to open their parcels on the spot, thus recycling the boxes and achieving resource reuse. Other sustainable efforts include box recycling. In August 2019, Cainiao Network reached partnerships with five domestic logistics giants including ZTO Express [ZTO:US], YTO Express [600233:CH], STO Express [002468:CH], Yunda Holding [002120:CH], and Best [BEST:US] to ramp up box recycling by piloting 1,000 recycling bins in Shanghai, a city where trash sorting has also been strictly implemented for environmental protection.
Compared with SF Holding and Cainiao Network, Suning.com has a wider range of innovations for its green logistics. The company started working on green packaging in 2014 and has developed solutions including package recycling, electronic bills, thinner packaging tapes, etc. Moreover, it has launched green logistics programs in three cities, including Haikou, Wuxi, and Beijing, involving smart warehousing, green transportation, recyclable packaging and box recycling. In addition, Suning.com once launched sharing packaging boxes co-branded with Chinese news outlets such as The Paper, Beijing News Today, and more, in an effort to leverage brands with strong social influence to encourage green and low-carbon behaviors such as recycling.
Tech-Driven Green Logistics as a Future Trend
For now, a technology-powered green logistics system has become the next battleground for logistics companies. The application of modern technology such as the internet of things, cloud computing, big data, digitalization and AI is increasingly becoming the biggest boost for green logistics. Such technologies will enable logistics enterprises to implement green initiatives in more scenarios including warehousing and distribution, and further reduction of carbon emissions while improving operating efficiency.
For example, SF DHL Supply Chain, in May 2019, launched an auto-warehouse in Shanghai, in collaboration with Hai Robotics, a Chinese firm that optimizes warehousing operations with robotics and AI algorithms for corporate customers. The robotics system, which uses robots to put products into storage, to sort, and to check out, reduces labor intensity and costs, and makes the warehouse more efficient. Comparatively, Cainiao Network has been trying to reduce carbon emissions by utilizing clean energy sources for its logistics parks. Since 2017, the firm started building rooftop solar photovoltaic power stations. In 2019, the use of solar energy enabled Cainiao to save 6,500 tons of coal. As for Suning.com, the company has tried to explore more green opportunities in aspects such as adopting energy-saving equipment in warehouses, and constructing facilities by using renewable materials.
A market-oriented approach is important for wider application of green logistics
It is essential to establish a market transmission mechanism for industry-wide operation of green logistics. If the majority of logistics companies put green logistics into practice, it will drive the demand for related green equipment. On the premise of strong demand, manufacturing enterprises will be motivated to allocate more resources to produce the equipment. At the same time, such manufacturers will also ask their upstream companies, like raw material suppliers, to provide them with green materials.
At present, one of the main challenges is that delivery firms have not achieved mass implementation of their green logistics measures, making the costs higher as compared to the price they could achieve at scale. In addition, for sustainable packaging, even if logistics firms can cut packaging costs by using more sustainable materials, an expensive recycling process will still make it hard for green packaging gain mainstream use. In the cost-benefit analysis of green logistics plans, a lack of extensive practice makes it difficult for companies to accurately analyze the prospects of sustainable logistics. This in turn further slows investment and development into more environmentally-friendly logistics solutions.