ESG Facilitates Low-Carbon Development for Logistics Companies

Industrials Author: Di Chen Sep 12, 2023 11:02 PM (GMT+8)

Recently, "low carbon" has become a trendy element. "Citywalk," which gained popularity not long ago, has become a fashionable check-in activity on social media, and camping and cycling have become top outdoor sports. "Leftover food mystery boxes" have also become a new favorite way for young people to save money in recent years. They not only participate in various second-hand markets for barter but also use recycled cardboard boxes or old clothing to earn points and exchang

ESG

"Low carbon" is becoming a trendy lifestyle and an enduring attitude towards slow living, especially in the online world. In recent years, China's logistics industry has seen rapid development due to the expansion of the e-commerce market, which has intensified the demand for product distribution services. According to data from the China Federation of Logistics and Purchasing(CFLP), the total social logistics value in the first half of 2023 reached CNY 12.99 trillion, an increase of 4.5% year-on-year. The logistics market continues to grow rapidly, with transformation and upgrading being key factors for development.

Since April 2023, 10 listed logistics companies, including SF, JDL, and YTO, have successively disclosed their 2022 ESG reports, which include CSR reports and sustainable development reports. More and more logistics companies are using ESG information disclosure to showcase their sustainable development capabilities and social responsibility from three aspects: environmental, social, and governance.

The total carbon emissions in the express delivery industry have been steadily rising year by year. According to data from the carbon emissions of China's express delivery industry, from 2017 to 2022, the carbon emissions of China's express delivery industry increased from 18.37 million tons to 55.65 million tons, representing a growth of over 200% in five years with a compound annual growth rate of nearly 25%. Among these, carbon emissions in the express delivery industry come from its entire operational process, primarily including warehousing, packaging materials, and transportation. In 2022, carbon emissions from the transportation segment reached 34.91 million tons, making it a key area that the express delivery industry needs to focus on for green development.

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The transportation stage is currently the key area where major express and logistics companies need to focus on carbon reduction efforts. The green upgrades in transportation and delivery scenarios primarily involve three aspects: "Optimizing Capacity Structure," "Intelligent Route Planning," and "Smart Energy Management." Currently, four logistics companies are working on these initiatives, with JDLand SF disclosing more comprehensive information in the field of green transportation.

In the transportation stage, SF has primarily focused on adjusting its capacity structure. In 2022, they added over 4,900 new energy vehicles to their operations, covering scenarios such as regular and large-item collection and delivery within cities, short-distance trunk lines, and transfer transport. As of April 2023, SF has deployed over 26,000 new energy vehicles, spanning 232 cities. Regarding air transportation, SF introduced large cargo aircraft like the 747, 757, and 767, which offer higher carbon emission efficiency compared to traditional 737 cargo planes.

As for JDL, by the end of 2022, they had deployed 5,418 self-owned new energy vehicles nationwide, with plans to achieve 100% new energy logistics transportation vehicles by 2030. In October 2022, JDL put its first batch of hydrogen-powered logistics trucks into operation, which can reduce carbon emissions by approximately 7.53 tons per month compared to traditional gasoline vehicles.

Warehousing and packaging are currently the key areas in which the logistics and express delivery industry is focusing on reducing carbon emissions. The green upgrade of warehouse parks primarily focuses on two aspects: "green energy supply" and "efficient energy utilization." Green energy supply mainly refers to the installation and coverage of photovoltaic power generation in warehouse parks. Currently, the development of logistics enterprises in this regard is relatively slow, but based on the disclosed ESG data, SF and JDL have the largest scale and the most progress.

Efficient energy utilization involves the need for a management platform that supports energy consumption monitoring and carbon emissions monitoring within warehouse parks. Currently, CaiNiao, SF, and JDL are all involved in this aspect.

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The green upgrade in the packaging process is reflected in two main aspects: "intelligence" and "circularity." Intelligence primarily includes the application of electronic waybills, smart packing algorithms, and RFID technology for precise and contactless identification. Currently, companies like YTO, ZTO, and Yunda have all made investments in this area.

Circularity is a highlight in the packaging process, where multiple logistics organizations are focusing on producing sustainable and biodegradable materials to achieve eco-friendly packaging. Based on the disclosed ESG data, SF and JDL remain industry leaders in this regard.

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Technological innovation is also crucial for the green development of the logistics industry. The integration of digital and intelligent technologies such as big data, cloud computing, and artificial intelligence across the entire logistics and express delivery chain is driving the digitization and stratification of operational management. Logistics companies have also established their respective carbon asset management platforms, optimizing their carbon management practices while empowering the entire industry chain.

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Combining business value with social value, the logistics and express delivery industry highlights its responsibilities in the "S" (social) aspect.

SF was the first domestic express logistics company to deliver fresh agricultural products directly from farmers to urban consumers via express delivery. In 2022, SF established a special fund subsidy mechanism for regional brand packaging materials, investing 3 million yuan to support the co-creation of 16 regional agricultural product brands, generating over 500 million yuan in income for local farmers.

YTO initiated the "Dream Fulfillment Action" program, primarily providing 20,000 employment and entrepreneurship opportunities for disabled individuals and their families. As of December 2022, the "Dream Fulfillment Action" has made significant progress, with the company employing over 9,000 disabled individuals across its network. They have signed strategic cooperation agreements for the "Dream Fulfillment Action" with 23 provinces, established nearly 5,000 "Dream Fulfillment Homes" stores, and set up two shared customer service centers for disabled individuals in Beijing and Hangzhou.

ANE has continually expanded its service network into rural areas across the country. In 2022, ANE covered 96% of county towns and townships nationwide, persistently committed to serving agricultural product distribution.

ESG is not just about green marketing; in the future, there is a need to refine ESG standards in the logistics industry.

While ESG development in the Chinese logistics industry has been gaining momentum since 2020, there are still some common issues regarding the number and ratings of disclosed ESG reports by Chinese logistics companies. These issues include qualitative content dominating ESG reports, lack of data support for key indicators, and ESG practices often remaining at the level of slogans and commitments. There are also concerns about "greenwashing." The development of ESG is not a one-time achievement; logistics companies need to genuinely integrate ESG principles into their strategic management and corporate culture.