ikea warehouse Logistics concept
IKEA Transport and Logistics Services is investing in fuelling a container ship with biofuel manufactured from waste cooking oil and forest residues.

The Victorian government is developing a circular economy policy and action plan for the state that will be released later, this year.

But critics say the strategy is missing a key component – logistics – and it’s one that is often missing when people think about a circular economy.

RMIT Professor Scott Valentine tells The Fifth Estate that circular economy approaches will mean a gradual shift from the current dependence on long-haul freight and shipping, to shorter trips.

This gives us an opportunity to rethink the whole logistics picture so we can shrink the sector’s emissions, create jobs, stimulate local economies and advance innovation.

Valentine says there has not been enough attention paid to logistics in the Victorian strategy. He and other researchers from RMIT’s CE Hub are urging Victoria to look at the strategy as more than just recycling re-branded.

It is a once-in-a-generation opportunity to align resource efficiency, eco-innovation, behaviour change and waste management in the state.

There are three things we need to have in place and plan for, says Valentine.

Firstly, a materials tracking strategy. We need to understand where the materials are coming from and going to.

Secondly, we need a digital platform to trade materials more efficiently.

Finally, we need a solution for the delivery of materials from vendor to buyer, which is where transport comes in.

A quick freight primer

There are three main freight modes in Australia: sea, rail and road.

Shipping is generally considered the lowest carbon mode, because the massive cargo weights mean the emissions per tonne of freight are small.

However, the main fuel used – bunker oil, a by-product of crude oil distillation – is highly polluting . There are CO2 emissions from its combustion and the fuels used by most ships have high sulphur oxide emissions, contributing to hundreds of thousands of cases of respiratory disease in portside communities around the world. Sulphur emissions also cause acid rain and degrade coral reefs.

The International Maritime Organisation has passed a resolution that will see all ships required to reduce sulphur emissions from 1 January, 2020 either by switching to low-sulphur bunker oil, and installing “scrubbers” to capture the pollution, or by not using bunker oil at all. Some ships already use liquefied natural gas and others are shifting to heavy biodiesels, which does not require extensive changes to a ship’s engine.

IKEA Transport and Logistics Services is one company that has made a move in this area, announcing in March it was investing in fuelling a container ship with biofuel oil manufactured from waste cooking oil and forest residues. The biofuel is made by Netherlands’ based company GoodFuels.

IKEA says using the new fuel is a step towards realising its plan to reduce emissions per transport shipment by 70 per cent by 2030.

“This is a huge ambition since shipping over the ocean makes up almost 50 per cent of our carbon footprint regarding transports,” said Elisabeth Munck af Rosenschöld, head of sustainability at IKEA Global Transport and Logistics Services.

In the freight world, rail has the second-lowest carbon footprint. Australian freight trains use  diesel locomotives but the volume of goods a freight train can carry makes the footprint per tonne smaller than an equivalent tonne of goods carried by the diesel-powered B-Double trucks that dominate the nation’s highways.

Air freight is the worst performer.

How circular thinking can transform freight

If we want to change the freight emissions picture we need shorter, localised and possibly more frequent trips.

Valentine says electric vans and trucks could be used to transport material and goods over short distances.

“It is a move from a global to a geographically close focus and, for short hauls, electric vehicles could provide effective service,” he says.

For example, Japan’s Yamato Black Cat logistics service uses small vans and trucks in a digitally-enabled, “seamless web”, integrating multiple distribution and handling facilities to provide a same-day, rapid freight service that suits the “just-in-time” mentality of Japanese companies.

Despite Australian distances being much greater than those in Japan, a similar approach is possible.

Valentine says technologies such as Radio Frequency Identification [RFID] tagging, smart pallets, digital real-time shipment tracking and warehouse management, electric trucks and vans can all play a role in disrupting the industry and sparking change.

Add in the circular economy factor, where materials are constantly being moved from one site to another, and there’s an opportunity to stimulate the development of distribution, warehousing and logistics nodes in regional communities. If this doesn’t happen, a shift to a circular economy could increase pollution and transportation congestion.

There are plenty of job opportunities, such as managing and operating the digital side of operations, and cleaner, safer jobs managing warehouse functions.

Smarter solutions can also reduce packaging. Specially-designed electric vehicles for carrying materials, including raw materials and liquids, need to be on the drawing board, Valentine says.

“In a circular economy, we can start to minimize packaging materials because we are delivering more inputs than finished products.”

New business opportunities

However, new handling techniques would need to be developed, and new business models and practices may emerge. It is not unusual for transport companies to provide warehousing. In the near future, as the circular economy grows, they could be competing with existing waste management companies, who begin to provide transport.

A move into materials tracking, recovery and distribution would be a good add-on for a logistics business. Or perhaps waste management firms will be the ones to add the extra services that make them closed-loop resource movers.

As local webs around materials start to evolve, we will need less long-haul freight traffic, and that means less pollution and traffic on our roads, says Valentine.

“When we start along the path [to a circular economy], we start to ask interesting questions, such as can we co-locate with other players in our supply chain” he says.

“If we try designing a circular economy strategy with a recycling frame of mind, as is currently the case [in Victoria], essential elements will become neglected and corporate uptake jeopardised,” says Valentine.

“If implemented correctly, a circular economy strategy will enhance corporate profitability, reduce resource costs, make Australian industry more competitive and create new business and new jobs.” 

He says the researchers, rather than criticising the Victorian government’s initiative, are suggesting that it needs to be considered as a “complex, adaptive system”.

That means all industries, researchers and other experts need to be involved.

“If we have that, we can start to identify some really positive industry initiatives.”

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