Logistics firms risk falling behind on ESG targets if they don’t accelerate the transition to electric fleets, though inflationary pressures could stall progress as companies neglect ESG targets to make savings.
Deepti Yenireddy, senior director of product management at technology firm Samsara, told Supply Management interest in electrifying HGVs had “exponentially increased” as the war in Ukraine highlights oil dependency.
“Now, more than ever, we're seeing the constraints of supply chain layouts, and customers and the market in general are investing a lot more into electrification,” she said.
“The market is facing rising fuel costs and the impact of all of the geopolitical political climate that is happening right now. As a result, we have seen companies move more and more towards a conservative outlook, as they think about how they build their business for long term profitability and sustainability.”
She said the industry is growing at a compounded annual growth rate each year in the US at 27%, while in Europe this figure stands around 25%. “It's exponential,” she said. “So whatever we see is only going to multiply by double or triple within the next couple of years, and continue on that hockey stick growth curve. So my opinion is rarely do we see anything as inevitable as this.”
Yenireddy’s comments come despite warnings from hauliers that targets to phase out petrol and diesel HGVs starting from 2030 is ”impossibly fast”.
She warned the inflationary environment triggered by the war meant shrinking margins could see moves to electrify fleets decelerate as ESG targets get depriotised.
“We are in an inflationary environment where we might see a little bit of a slowdown, but at the same time, it's so critical. People need to eat, people need to buy. This is critical infrastructure that we need to invest in.”
Despite the rise in interest in electric vehicles, she admitted the industry is being stalled by the global semiconductor shortages, which have cause automotive factories to halt operations and cost the US economy $240bn last year alone.
Yenireddy said: “I think the best thing I can say is there is a shortage. We'll have to evolve and innovate to see how we can use different materials at all points. We have dealt with it as well and we have been innovative and creative in figuring out alternatives for providing the same use case to the customer. I think it's only the natural course of the world and industry that we would see the impact of these shortages.”
She predicted the development of autonomous vehicles will continue but said progress is “complex” and limited by regulations. “Becoming prevalent in commercial trucking will take a lot of time,” she said.
Supply chains, procurement and logistics are ultimately at the forefront of driving the ESG agenda, she said.
“We also need to give customers confidence that they can manoeuvre all these supply chain challenges and electrify, because that's the right thing to do for the environment. That's the only way to go.”
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