Sustainability in Global Trade and Logistics

JUNE 2021

Sustainability in Global Trade and Logistics:

What Organisations Can Do Now to Make a Difference White Paper

SUSTAINABILITY IN GLOBAL TRADE AND LOGISTICS: WHAT ORGANISATIONS CAN DO NOW TO MAKE A DIFFERENCE

JUNE 2021

Introduction Increasingly, leadership in today’s global trade and logistics industry is measured less by size and reach and more by economic, social, and environmental impact. In a word: sustainability.

How sustainable is your organisation? Are you positively contributing to the economies in which you operate? Are you reducing energy use and emissions? Are you conserving and protecting natural resources and biodiversity? Are you integrating sustainability into your supply chains?

And finally, are you enhancing community responsibility?

Executive Summary It is not possible to imagine the global trade and logistics industry moving in any direction other than toward swifter, fuller, and more robust economic, social, and environmental responsibility.

When one stops to consider the advancements made in any number of measurable areas of sustainable development – from employee training and community giving to climate change mitigation, energy efficiency, and water optimisation – the industry has come a long way, even in the last five years to 2020.

However, further change is coming. For example, the European Union (EU) has set new standards for sustainability, publishing its Green strategy in July 2021 to become net-zero by 2050. To protect access to capital, low capital costs, and ensure long-term investors, companies will need to focus on having a proactive and demonstrable program for reducing their carbon impact and energy intensity. Furthermore, with the rapid shift in regulation, companies need to be ahead of the expected tightening of Environmental, Social and Governance (ESG) directives post-COP26. Any ESG strategy needs to have the correct frameworks (SASBI, TCFD), as well as a proactive commitment to and investment in reducing carbon intensity (water, electricity, and energy efficiency).

Organisations will need to evaluate what other actions they can take to put the business ahead within the sector for the next 20 - 30 years. There are already EU proposals to introduce carbon pricing to the maritime sector. This will foster the use of sustainable fuels for all ships departing or arriving at an EU port. In addition, vessels not meeting those limits would pay a deterrent financial penalty. There will also be targets for important ports to serve vessels with onshore power, reducing polluting fuels that also harm local air quality.

The next decade’s industry leaders have been hard at work for some time, tracking and monitoring their behaviors, modifying them on occasion and changing them entirely where required, to ensure that sustainable thinking becomes ingrained in the overall thought process of the organisations which they lead. Creating “lasting legacies for communities” is the most apt way we heard experts describe how responsible organisations should think about how they intend to deliver environmental, economic, and social value through their operations.

We found that the most sustainable organisations are actively changing the way they operate.

They are: - Contributing in a positive, measurable way to the economies in which they operate - Reducing energy use and emissions - Conserving and protecting natural resources and biodiversity - Integrating sustainability into their supply chains - Enhancing community responsibility

About Our Research During Q2 2021, we conducted telephone and video call interviews with those who deal closely with sustainability issues in the global trade and logistics industry.

Our research questions focused on strategic objectives employed to increase organisational change seen necessary to ensure economic, social, and environmental sustainability.

We wanted to learn what sustainability professionals believed were evolving bestpractices that could be put into place and effect measurable and beneficial change.

2

SUSTAINABILITY IN GLOBAL TRADE AND LOGISTICS: WHAT ORGANISATIONS CAN DO NOW TO MAKE A DIFFERENCE

JUNE 2021

CONTRIBUTING TO THE ECONOMIES IN WHICH THEY OPERATE: Invest in Key Markets Open the annual report of any multinational organisation, and you will read of an enterprise committed to contributing to the economies in which it operates. The reason is manifest: a company invested in an economy is a company with a future in that market.

We were reminded by respondents that, unlike most other organisations, ports and industrial zones are vital elements in a country’s infrastructure, connecting it to global trade routes and, thus, increasing its possibilities for economic growth.

Indeed, global trade and logistics organisations contribute tremendously to the economies in which they operate.

Measured by any reasonable metric – jobs supported, payments to the government, employee wages and benefits, or community investment – the economic impact of our industry on the key markets in which we choose to invest remains outsized and overwhelmingly beneficial to all parties involved.

3

SUSTAINABILITY IN GLOBAL TRADE AND LOGISTICS: WHAT ORGANISATIONS CAN DO NOW TO MAKE A DIFFERENCE

JUNE 2021

REDUCING ENERGY USE AND EMISSIONS: Embrace Change Early There is still so much every organisation in the industry can do to optimise environmental stewardship by reducing energy consumption and emissions output. Technology will drive much of this change, but a shift in mindset is what is paramount – companies must want to change, we heard from respondents, as opposed to being forced to adopt change.

We also heard that the leading global trade and logistics players are all-embracing change early and enthusiastically, seeking to lead low carbon transformation.

Through strategic planning and careful advanced consideration, these international organisations are taking the time provided to them to best effect change to their competitive advantage. In short, they are all working now to find ways to introduce clean energy sources into their total existing energy mix, thus reducing their overall carbon footprint, if not the size of their energy footprint.

We know from the World Watch Institute that buildings are responsible for the annual consumption of 40 percent of the world’s energy.

The introduction of building management systems (BMS) to control, monitor, and operate all heating/air conditioning, ventilation, lighting, water, and power will significantly enhance energy savings, improve operational e ciencies, and promote a safe and comfortable environment for all who live and work inside them.

Another emission-reducing measure increasingly under consideration in the industry is Cold Ironing, or Alternate Maritime Power, an e cient pollution control measure in which the diesel engines of large vessels are turned off, and the vessels’ electricity is supplied using shore electric power as a

substitute. The environmental benefits are many, not least the ships switching off their auxiliary power units, which further reduces noise and air pollution.

Industrial zones form an intrinsically vital dimension in today’s global trade and logistics arena, particularly where energy-intensive metals manufacturing is concerned. We were told that, for too many years, metals often were unnecessarily cast and recast before ever reaching their intended customers and at great expense to both manufacturers and the environment. Thus, the creation of a Modular Path or ‘Hot Metal Road’ that enables transport and delivery of metals in molten form is seen as an energy emissionsreducing gamechanger.

In the case of Emirates Global Aluminium (EGA), located at Khalifa Industrial Zone Abu Dhabi (KIZAD), we learned that molten aluminium is transferred to preheated 14.5 tonne trailermounted crucibles via overhead cranes. The crucibles are designed to keep the metal in a liquid state for up to 18 hours at temperatures of 780°C. The trailer-mounted crucibles are then driven to customers who utilise the molten metal to manufacture a variety of products.

In a business-as-usual scenario, aluminium would have been cast into ingots, which would then be molten and used by aluminium product manufacturers; however, the energy used for melting the ingots is avoided through the Hot Metal Road. By avoiding the use of fossil fuels, the Hot Metal Road significantly reduces emissions in addition to the energy and cost of remelting the ingots for use.

4

SUSTAINABILITY IN GLOBAL TRADE AND LOGISTICS: WHAT ORGANISATIONS CAN DO NOW TO MAKE A DIFFERENCE

JUNE 2021

CONSERVING AND PROTECTING NATURAL RESOURCES AND BIODIVERSITY: Measurement is Key

No sustainability efforts – anywhere in the world – can be advanced if existing natural resources are not protected vigorously.

In the global trade and logistics industry, there is heightened sensitivity around natural resources and biodiversity, as so much of its volume is shipped by air and sea, two environmental areas known to be suffering the impacts of unregulated carbon emission and waste management.

We learned that industry leaders are mobilising efforts, resources, and funding to clean the marine environment – first in their own areas of jurisdiction, and then in others; raising awareness about the criticality of reducing plastic consumption and, more urgently, its disposal at sea. Overall, we found there is an impetus to reduce to zero where possible the consumption of ‘single-use’ plastics that could find their way into the world’s waterways.

But marine pollution prevention is not the only concern of global trade and logistics leaders; they are also vigilant monitors of air and seawater quality.

The introduction of highly advanced air quality management programmes, for example, is now being proposed for KIZAD, the largest industrial zone in the Middle East. And many of the world’s most ultra-modern ports operate well-established water quality and ecological monitoring programmes, with particular concern shown to

critical habitats with high biodiversity value, such as those with threatened coral or seagrass populations. Global industry leadership of the highest order is demonstrated, we found out, when organisations undertake enormous time and a great investment to translocate coral, thus enabling the expansion of their operations without damaging the environment.

Finally, global trade and logistics leaders who are committed to sustainability and protecting natural resources and biodiversity have given due consideration to waste management and will have a documented plan to address the disposal of all waste.

Beyond the obvious tenets of “reduce, reuse, recycle” a robust waste management plan calls for all port operations and industrial zones to commit to the deployment of regulatory criteria, implementation protocols, and monitoring methodologies for all mentioned causes of pollution. All waste should be tracked and measured and benchmarked from generation to storage to disposal.

As one proud respondent told us: “Sustainable waste management is incredibly important to us, and we are committed to the principles of a circular economy. Year after year, we are shaping the future for waste management in ports and industrial zones.”

5

SUSTAINABILITY IN GLOBAL TRADE AND LOGISTICS: WHAT ORGANISATIONS CAN DO NOW TO MAKE A DIFFERENCE

JUNE 2021

INTEGRATING SUSTAINABILITY INTO THEIR SUPPLY CHAINS: Values and Principles Matter Sustainability is only a worthy goal for an organisation if its values and principles can be seen clearly how it conducts its business across its supply chains.

Our respondents challenged us to think about the tremendous importance of organisational consideration for human rights, labour, the environment, and anti-corruption, among other responsibilities, when contemplating their sustainability in the global trade and logistics industry. By incorporating The UN Global Compact’s principles of responsible business, which include meeting these fundamental responsibilities, into strategies, policies, and procedures, organisations can set themselves on a path toward long-term supply chain sustainability.

Stakeholder inclusiveness is central to any global trade and logistics organisation’s sustainability

effort, thus engaging regularly and openly with stakeholders is critical to the success of the supply chain.

As one contributor shared with us: “Our stakeholders are the source of our inspiration and aspirations; without their support, it would not have been possible for us to become the industry leader we are today.”

Finally, measurement is fundamental to the successful integration of sustainability in any organisation’s supply chain. We were told that events, activities, surveys, and meetings proved to be the best way for global players to stay in close contact with their respective supply chain stakeholders, educating them about new developments gauging their feedback regarding the same.

6

SUSTAINABILITY IN GLOBAL TRADE AND LOGISTICS: WHAT ORGANISATIONS CAN DO NOW TO MAKE A DIFFERENCE

JUNE 2021

ENHANCING COMMUNITY RESPONSIBILITY: Meaningful Engagement is Paramount

Creating “lasting legacies of community involvement” best sums up how leading global trade and logistics respondents aim to meet their community responsibilities.

It is true that all organisations will measure social value differently, but the notion that meaningful engagement is paramount has been an increasingly evident trend in corporate social responsibility over the past five years.

Organisations are effecting positive local change because they want to do so, not because they feel obliged to do so.

Increasingly, global supply chain companies are pursuing a more proactive and more collaborative approach to sustainability.

We discovered that leading global trade and logistics players are overwhelmingly socially responsible. They demonstrate this trait most notably in their human capital management, health and safety, and governance practices.

Leading organisations, first and foremost, take care of their people. They promote diversity, gender equality, and employee well-being within and outside their work culture. They also prioritise health and safety to drive solid growth; and finally, the organisation’s strategic direction, often with the aid of a ‘sustainability committee’ composed of senior executives representing various departmental functions; from strategy and procurement to finance and communications.

Organisations should leverage their significant investments in ports and industrial infrastructure to create strong, positive, and lasting goodwill that will unlock future economic and social value for all parties involved. In addition, they should look for ways to contribute to the social needs of the wider community.

By constantly asking themselves how they can add social value – through both conventional and nonconventional means – to the communities in which they operate, global players can further their shared sustainability goals.

One respondent spoke of a new initiative to deliver aid to Guinea in West Africa through marine vessels that travel regularly and continuously every six months to a container terminal in the port city of Kamsar. In-kind donations are made on every return voyage and include computers, clothes, toys, stationery, and non-perishable goods.

Another respondent spoke of a more creative community-giving in the form of industrial zone relief to businesses facing operational challenges during the COVID-19 pandemic. The relief package included several measures for existing customers, including a three-month rent deferment for Q2 2020, a freeze on late payment penalties, and an exemption from standard tenancy contract fees.

7

SUSTAINABILITY IN GLOBAL TRADE AND LOGISTICS: WHAT ORGANISATIONS CAN DO NOW TO MAKE A DIFFERENCE

JUNE 2021

CONCLUSION The global trade and logistics industry is currently committed to sustainability in all its forms, with an unprecedented level of passion and enthusiasm.

climate change and building an equitable society – while remaining both competitive and profitable are not mutually exclusive.

We found that the most sustainable organisations are actively changing their operational models

As the Abu Dhabi Ports Group CEO has said: “Sustainability is a core principle of our business strategy, and it has provided our organisation with an opportunity to demonstrate leadership in championing best practice.”

by contributing in a positive, measurable way to the economies in which they operate. They are reducing energy use and emissions; conserving and protecting natural resources and biodiversity; integrating sustainability into their supply chains; and enhancing community responsibility.

In the corporate world, an increasing number of businesses recognise that adhering to the highest standards of sustainability – whether it be tackling

His sentiment is reflective of an increasing number of global trade and logistics industry executives who believe sustainability is not just the right thing to do, but it is essential to the long-term success of any organisation.

8