CC BY
206Russian Journal of Logistics and Transport Management, Vol.1, No.2, 2014
©Vladimir Gromov Saimaa University of Applied Sciences
GREEN LOGISTICS IN RUSSIA (Review article)
Abstract
The approach of making business with a complete ignorance of sustainable logistics is no longer works in the international market. Meanwhile, the national enterprises are interested in green technologies for cost reductions purposes rather then setting major priority. With the reference to the existing situation on Russian transport market, the article analyses the green logistics activities. The focus is made on the technologies that are not mandatory for regulations but bring benefits to the environment and companies, which geared towards transcontinental corporations, guided by the principles of green logistics.
Keywords: green logistics, freight traffic, roads, railways, environment. 1 Introduction
As a result of big number of initiatives related to improvement of ecological situation in the world during recent years green logistics becomes more and more prevalent in Europe. The essence of a term "green logistics" is that the logistics activities should be based on green technologies, i.e. technologies which do not cause or cause minimal harm to the environment.
According to greenlogistics.org (2014), 'logistics is the integrated management of all the activities required to move products through the supply chain'. For a typical product this supply chain extends from a raw material source through the production and distribution system to the point of consumption and the associated reverse logistics (Greenlogistics. org, 2014).
The logistical activities comprise from freight transport, storage, inventory management, materials handling and all the related information processing.
The main objective of logistics is to coordinate these activities in a way that meets customer requirements at minimum cost. Tn the past, this value was measured mainly in monetary equivalent. As a reaction for the environment challenges, companies must take more account of the external or extra costs of logistics associated mainly with climate change, air pollution, noise, vibration, and accidents.
The main factors cause adverse impacts on state of the environment are: Pollution by industrial and other emissions; Pollution of shallow and ground water;
Soil pollution by industrial emissions and household waste;
Acoustic pollution (noise) from industrial enterprises and transportation;
Loss of biodiversity. One possibility to decrease emissions originating from transportation is to utilize more rails instead of relying simply on road transportation (Lattila, 2013). Meanwhile, in Russia, where the major logistical problems have not been resolved yet, the infrastructure constrains prevent the shift from roads to railways (Padilha and Hilmola, 2010). Additionally, there is a belief in the Russian logistics environment that green logistics leads only to more expensive logistics cost (Kanaeva, 2013). However, for many companies, particularly those that are trying to enter or improve position in the international market, such approach with complete ignoring of green logistics no longer works (Kizim and Kabertay, 2013).
In the near future in the international market usage of green technologies will be the same necessary for participation in a tender like the ISO certification (Kanaeva, 2013).
2 Logistics as a tool to reduce impact on the environment
The main ways to reduce an environmental burden from logistics perspective are the following (Elyashevich and Elyashevich, 2011):
- Selection of suppliers of raw materials by the maximum reduce waste production, as well as the elimination of losses from spoilage ( a policy of " zero defects ");
- Decrease in inventories due improving the system of planning and regulation flow implies a corresponding reduction in the need for storage areas and, as a consequence of reducing the number of produced waste over the same period;
- Transportation optimal routes, suggests reducing empty mileage vehicles, which in turn reduces the amount of emissions in the exhaust gases to the atmosphere;
- Consolidation of shipments in logistics channels gives the ability to use more "environmentally friendly" types of transport, such as railway, sea, inland waterways;
- Exclusion of intermediate storage and trans-shipment of goods involves reducing the losses of material resources at their delivery from suppliers, which also decreases the anthropogenic load, for example, on the soil.
The activities mentioned above can considerably contribute to the sustainable logistics (Figure 1).
Productivity Employment Competitiveness Choice
Society
Invironment
Safety Health Equity Access
Climate change
Biodiversity Recycle
Air quality
Noise Land use
Fig. 1. Sustainable logistics Source: Grennlogistics.org (2014)
Such requirements impose a lot of fundamental changes in the whole processes in logistics. In realities of global reforms in logistics in Russia where many old Soviet infrastructures are in use many of those looking horrifying for management. However, there also rather simple green technologies, which not only ruin the logisticians who dared to use them, but also help to save money. Therefore, if the company was faced with the necessity of deploying themselves to the enterprise, guided by principles of green logistics, it can use the following methods, which are not mandatory for regulations but bring some benefits (Kanaeva, 2013):
- Returnable packaging. In many cases, it allows to save costs associated with packaging, especially when the packaging is sufficiently large volume. A classic example could be the beer in kegs, not bottles.
- Insulation of warehouses. By investing time in insulation, it will be used less energy for heating, which is undoubtedly a very environmentally friendly, and, therefore, less costly.
- Rejection of paper documents flow, where possible. From an environmental component it is clear - there will be a place for beavers to live. Concerning the possibility to save money, there are reductions of costs on the paper, cartridges, electricity, printers, and document archiving.
- Decrease of C02 emissions into the atmosphere, planning optimal routes, attempt to transport off-peak hours to reduce sitting in traffic jams and burning gasoline, cargo consolidation and usage of railways, Thus, all the techniques to optimize transport costs creates favorable preconditions for the company, meaning its care about the aspects of green logistics.
3 Real situation
Automotive Logistics magazine made a survey about development planning in logistics (Ludwig, 2014a). One of the questions was: "How much of a priority is green logistics and climate change for your operations?". The result demonstrated in the following picture (Figure 2).
How much of a priority are green logistics and climate change?
Major priority Important, but not in today's economy Only for 'win-win' (i.e. cost reduction) Only to meet regulatory demands Not a priority
48
™ 15
™ 6 ™ 6
10
20
30
40
50
60
Fig. 2. Result of green logistics survey major.
Sometimes these surveys bring out the truth in ways interviewers would not say on stage. Green logistics is critical, it would seem, but mainly where it also means saving money. Investments in being greener just for the sake of the planet may be rarer. However, there companies that indeed wanted to showcase its green ambitions. One of those is Volkswagen, which is aiming to cut emissions by 25% by 2018, and could eventually tie the targets to its logistics purchasing (Ludwig, 2014a).
The other interesting results indicated question about further expectations on investments in logistics in the perspective of 1-5 years. Currently, Russia is one of the outsiders among potential directions of investments in logistics (Figure 3).
Where do you expect to invest most in the next 1-5 years?
Western Europe Central and Eastern Europe Russia and Central Russia North Africa and Middle East Asia
North America South America Africa
10
15
18
20
24
39
25
30
35
40
45
Fig. 3. Result of green logistics survey.
Based on this figures, it might be said that the investment climate does not look well for many domestic logistics companies.
During recent years, usage of environmental friendly technologies got some support from government.
Decree of the Russian President Mr. Vladimir Putin in 2013 declared the Year of Environment. Regarding to this, the dynamic development of environmental programs and the introduction of resource-saving technologies in railway and other types of transport - is not only a question of image to market players, and an obvious need. The scale of the negative impact on the environment by railway transportation is the least danger.
The less environmental impact of rail in comparison to the most damaging road transport is provided by logistics companies, such as Rail Freight Group, DB Schenker, Freightliner (Panova, 2010). Additionally, speak for themselves the figures, which were given in the statement of Dmitry Frank-Kamenetsky, head of state regulation in the field of environmental protection Committee on Environment and Ecological Safety of St. Petersburg: "From the point of view of Russian legislation pollutant is not itself C02 but the total amount of emissions of harmful substances such as nitric oxide, carbon dioxide. For the city figures are: 68.9 tons gives industry, 419 tons - vehicles, 13 tons -watercraft, 4 tons - the railway" (Transport.ru, 2013).
Today, however, the main trend is that more and more shippers prefer the delivery of goods by automotive transport. Thus, according to the head of transport and logistics group of Heineken Russia, Ilya Semenov, for a distance of less than 2.5 thousand km it is advantageous to carry cargo in the automobile (Transport.ru, 2013).
Nevertheless, the situation on the Russian highways - the total load of the key routes, congestion at border crossings - requires transfer of the traffic to the railways. To solve the problem of increasing the competitiveness of rail transport industry representatives develop new transportation and logistics products to meet the challenges of the European market, actively implementing green technologies in their business processes. To attract customers to railway transportation helps promotion of the organization of freight trains on a fixed schedule. This practice is supported by the leading railway operators, ensures timely delivery of goods, eliminates potential downtime and minimizes harm to the environment.
Such projects are actively implemented. The roundtable head of transport planning JSC "Eurosib - transport systems" Yevgeny Ershov shared experience organizing regular services of cargo delivery schedule of the North-West of Russia in Finland that the speed, quality and sustainability allow to compete with automotive transport (Transport.ru, 2013).
The October Railway (an affiliate of RZD) offered cargo owners to develop "green" supply chains, i.e. to switch from automobile transport to railways.
Christina Maleryan, Deputy Head of the October Railway for quality control and marketing, has said that the growth of the share of railway transportation by 1 % will allow improving the road situation, and it will have a positive impact on the environment. "This will lead to the optimization of fuel consumption in the volume of 15,418 tons per annum (currently, its consumption per 1 million tonne-kilometers amounts to 7114 kg for road vehicles and 2,311 kg for trains), and will allow reducing C02 emission by 13,925 tons per annum and will decrease the number of heavy trucks on motorways to 47,764 units per annum," said K. Maleryan (Alexandrova, 2013a).
Thus, the October Railway is actively developing transportation of piece-goods or high-yielding cargo, for transportation of which consignees prefer automobile transport. It was planned that, in 2014, they start selling wagon-places in cargo shuttles, which will link St Petersburg and the Far East without additional stops at railway yards.
"Implementation of this technology will allow competing with road transport in the sector of less-than-carload consignments," noted K.Maleryan. In her words, the travel time to Irkutsk, which is now nine days and six hours, will reduce to five days and 20 hours. Thus, the new service must attract new consignors to the railway (Alexandrova, 2013a).
The October Railway is currently holding negotiations with potential clients, and it has already noted the market's interest in the "green logistics".
Speaking about the organization of the supply chain, every company inevitably faces a choice. On the one hand, customers are more interested in "door to door" delivery, which is only possible through the use of automotive vehicles. On the other - the market is seeing an example of the West countries that understand that, except for the speed of the work, it is necessary to take into account such factors as environmental dispatch.
Nowadays, in Russia, C02 emissions by one million ton-kilometres in automotive transport stays for 81.8 million tons, railway for 29.4 million tons (Alexandrova, 2013b).
According to the White Paper, adopted by the European Commission in 2011, all passenger and freight transport in a range of over 300 km should be carried by rail. It should be noted that the use of railways rather than roads can be addressed in different areas. One of the latest techniques within the sphere of logistics and transport relations is attributed to the concept of dry port (Roso, 2009). For example, Lattila et al. (2013) considers that the application of dry port concept, where an inland intermodal terminal is connected to a sea port using railways, the positive benefits can be gained for Finland. While the study of Panova (2011) analyses the ecological impact of dry ports utilising feeder trains in the Russian context.
Meanwhile, according to sales manager of the company InterRail, Ljubov Shepelyova, nowadays, the factor of green logistics goes to the background. "At the moment, when the state of the environment inspires more fears, corporations
should pay more attention to externalities, that is, those external effects of activities that are presented in some types of transportation, namely, air pollution and noise level" (Alexandrova, 2013 c).
In Shepelyova's opinion, the transfer volumes of traffic from roads to railways will be a significant step towards minimizing harm. At the same time, Padilha and Hilmola (2010) underscore in their study that the shift of cargo from roads to railways is hindered by the inadequate infrastructure and equipment.
In addition, the use of more environmentally friendly fuel, reducing the amount of packaging used in polymers and plastics, and the introduction of new technologies will benefit the situation. However, it is important to mark that fuel issues, are compounded by the lack of complexity in solving the problem, outdated regulatory framework in the production and operation of road transport, inefficient administrative and economic measures. Current standards and regulations for fuel, which are in use, are almost much out-dated comparing to developed countries. Prohibition of usage of old rules of gasoline were postponed few times, for instance, usage of "Euro-4" fuel is extended until 2016.
4 Conclusions
The main objectives of environmental logistics nowadays are usage of sorting of separate collection of waste, as well as reusable packaging waste with a further purpose; development of small companies with ability to solve problems related to separate collection, processing and recycling of household waste; introduction of new technologies that make use of secondary raw material resources suitable for production activities of enterprises; usage of natural energy production to minimize pollution on the example of developed countries (energy wind, water, sun, clever use of climate characteristics of the region , etc.); improvement of existing environmental legislation in Russia envisages not only a punishment for violation of separate waste collection and uneconomical usage of natural resources but a tax or subsidized production and promotion of enterprises that use environmentally friendly and innovative technologies; usage environmentally friendly packing materials in the production, especially when recycling is impossible or difficult (Elyashevich and Elyashevich, 2011).
According to Automotive Logistics magazine (Ludwig, 2014b), troubles in the Russian market and the crisis with Ukraine could be discouraging some investment by the automotive and logistics industries. During an interactive voting survey conducted in Automotive Logistics Europe, delegates were asked in which region they would invest most during the next five years. While Asia was the top answer at 39%, followed by Western Europe at 24%, there was not a single response in favour for Russia. Central and Eastern Europe, meanwhile, received just 3%. The survey was made up of around 200 executives from OEM, tier one and logistics providers at the event and another 100 who participated via
live streaming. The Russian light vehicle market declined 5% in 2013 to 2.73m units and has so far dropped 4% in the first two months of the year compared to the same period last year. Martin Gartside, senior manager of the Autofacts strategy group at PwC, said that the recent issue with Ukraine, which could lead to economic sanctions on Russia from the US and the EU, could push the market even lower. However, beyond the crisis, he suggested that investment in Russia may have already exceeded demand (Ludwig, 2014b).
In such conditions development of green logistics becomes a minor direction of renovation of logistics processes, but survey also indicates that main international players on the market such as General Motors, Volkswagen, DHL and others will continue developing their international standards of green technologies.
During the upcoming years, most consumers will prefer a company that uses "green" transport and logistics solutions than cheaper solutions. As a consequence, according to the survey "Green trends" (The Green Trends Survey) in study «Towards Sustainable Logistics» (Appel, 2010), 59% of businesses have calculated that "green" transportation of their products will be the deciding factor in winning customers in the future . Thus, "green" logistics is one of the most important aspects of the world of business entities that affect the environment. Domestic Russian companies will be pushed by transcontinental corporations to develop green technologies and to use green logistics.
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