How technological innovation is paving the way for a carbon-free future in logistics and supply chains

Supply chains are responsible for around 60% of carbon emissions globally, making them a top priority for delivery on net zero. Effectively reducing emissions of that scale requires delivering decarbonization at each part of the supply chain—from material extraction to manufacturing and distribution.

The good news is that there is awareness of this challenge. Businesses are facing pressure from consumers, investors, and regulators to address emissions that are generated indirectly from transportation, distribution, and suppliers. Pressure on suppliers to reduce emissions has increased by over 50% between 2011 and 2020, while in the past five years, pressure from investors to improve supply chain sustainability has grown by 25%.

Regardless of where corporates are feeling the strain to focus their decarbonizing efforts, the need for immediate action to reduce supply chain emissions is clear. Technology innovations in recent years—from detection to mitigation—mean that corporates are better positioned than ever before to address emissions at all stages of the supply chain.

Technology can increase the accuracy of emissions reporting

One of the foundational hurdles to decarbonizing supply chains is the lack of visibility of where emissions are most intense. With corporates finding it difficult to engage suppliers and stakeholders for accurate data sharing, they are often unaware of their specific emissions footprint and are therefore unable to take targeted action to abate it. Indeed, 44% of respondents to a Normative survey cite complexity tracking emissions across multiple locations, whilst 30% believe that this might contribute to missing overall sustainability targets.

In this space, adopting sensor technologies, which collect and analyze data on emissions, are crucial first steps. One interesting company in this field is SensorUp, which has developed a real-time data integration platform enabling operators to track emissions. By fusing operations data from assets and fleets, this type of software is helping industrial operators to improve efficiency and productivity, while also monitoring emissions over time to make year-on-year comparisons easier. A notable use of this technology is in SensorUp's partnership with Cando Rail Services, where it tracks sensor data throughout the product transport process to inform operational decisions.

The company’s “Powered by SensorUp” program, which enables other data and service providers to integrate with the SensorUp platform, is also helping give companies a more holistic understanding of where emissions occur, providing a fast track to taking action on supply chain decarbonization.

Optimizing the value chain

Having gathered emissions data and identified where value chain emissions are greatest, corporates are positioned to take targeted mitigation action. Companies utilizing automated digital tools for measurement are 2.5 times more likely to measure emissions comprehensively.  From raw material sourcing and manufacturing to logistics and transport, accurate reporting allows corporates to implement reduction levers through emissions-limiting technologies at each level of the supply chain.

Manufacturers are turning at ever-greater speed toward AI-driven solutions, such as predictive maintenance (PdM) and energy optimization. As well as reducing maintenance costs by up to 40%, PdM limits the need for replacement parts by “fixing before failure,” thereby lowering carbon emissions.

One application of AI is the analysis of data from Internet of Things (IoT) devices to determine equipment and processes that consume too much energy. Fero Labs, a machine-learning software company in this space, is leveraging this to optimize energy usage. From reducing scrap rates at auto suppliers to optimizing concrete spalling in refineries, the combination of IoT and machine learning to improve sustainability is impactful, especially in high-emitting sectors. A World Economic Forum report, for example, estimates that quickly adopting these types of digital technologies can reduce emissions between 4% and 10% across energy, materials, and mobility. Working with companies such as Henkel, a leader in the production of laundry detergents and fabric softeners, Fero Labs has introduced its technologies at selected sites to simplify forecasting and maintenance for plant engineers.

Following the manufacturing process, decarbonizing the distribution component of the value chain requires the deployment of multiple solutions owing to the diverse forms of transport that power modern logistics. Here, AI has applications across transport types, but in trucking specifically, which accounts for 9% of global CO2 emissions, it can allow for shorter journey times and the optimization of storage capacity to limit fuel waste.

Digital freight brokerage platforms are a notable development in the field and illustrate the real difference that AI can exert. OnTruck, a company that uses AI tools on road freight transport, has reduced the percentage of "empty kilometers" driven by trucks—when vehicles travel without a load—from 44% to 19%. This innovation has played a central role in reducing unnecessary fuel consumption, lowering costs and curbing emissions on the road. Given that empty vehicles accounted for one-fifth of the distances traveled by road freight vehicles in the EU in 2023, these technologies are critical.

Technology innovation is also driving the transition to carbon-neutral fuels and propulsion methods. Whilst some corporates utilize alternative fuels and electric batteries to reduce their supply-chain emissions, others are adopting freighters with wind-powered propulsion sails. Finland-based Norsepower, for example, manufactures sails that can deliver up to 28% in CO2 emissions savings when combined with voyage optimisation technology. With the introduction of the International Maritime Organization's Carbon Intensity Indicator (IMO CII), this technology has become an operational imperative. By providing deployment opportunities for these technologies, investors and corporates are playing a critical role in activating maritime decarbonization. A notable initiative in the space is the OGCI-backed Project Remarccable, announced in collaboration with the IMO in October, which is the world’s first end-to-end shipboard carbon capture pilot.

Circular value chains are the future

Circular value chains represent the next frontier in decarbonizing supply chains, offering a sustainable, long-term solution to resource management. This innovative approach enables materials to be returned and reused, reducing waste. In the agricultural sector, food preservation technologies extend the shelf life of perishable goods, while in industry, excess CO2 is being repurposed into everyday items. For example, British company Econic is able to convert waste CO2 into polymers, a material found in sofas and shoe soles. Given that synthetic polymers currently use petrochemicals, which account for 12% of global oil use, the provision of sustainable alternatives has been a step in the right direction.

With nearly half of global CEOs looking to integrate circularity into their operations, recycling of rare earth elements (REEs) will also be key.  Not only are REEs such as lithium and graphite used in EV batteries a pillar of the transition to net-zero, but demand for rare earth elements is expected to grow between 400% and 600% over the next few decades. Cyclic Materials, an advanced recycling company in the space, is pioneering the recovery of rare earth elements from used magnets, reducing the need to open new mines. Recycling REEs can result in a carbon footprint that is 75% smaller than that of traditional extraction processes.

Whilst the full spectrum of technologies for decarbonizing supply chains is available, it is up to adopters to step up and recognize the opportunity they offer. At Climate Investment, we’re supporting the deployment of technology innovations across this spectrum by connecting corporates to the solutions they need most. Ultimately, it’s only through collaboration that we’ll achieve the full-scale commercialization of supply chain technologies that are needed to make tangible progress on decarbonizing supply chains.

About the author

Marc van den Berg is Global Managing Director for Investments at Climate Investment (CI). He joined Climate Investment in 2022 and is a noard member for CI portfolio companies, 75F, Achates, Andium, Qnovo, Svante and a Board Director at Aeroseal. Over his extensive venture career, Marc has held investment roles at 40 North Ventures, DBL Partners and VantagePoint Venture Partners. In those roles, Marc has focused on energy, energy efficiency and industrial investing in support of sustainability initiatives. Prior to his venture capital career Marc spent 25 years in both venture-backed startups and multi-national public companies in Silicon Valley and abroad.

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