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GUEST EDITORIAL

The sustainable agenda and energy efciency

Logistics solutions and supply chains in times of climate change
Arni Halldorsson
School of Management, University of Southampton, Southampton, UK, and

Logistics and SCM in times of climate change 5

Gyongyi Kovacs
Hanken School of Economics, Helsinki, Finland
Abstract
Purpose This double special issue called for logistics solutions and supply chains in times of climate change. The purpose of this editorial is to investigate the current and future implications of climate change, and in particular, energy efciency for logistics and supply chain management (SCM). Design/methodology/approach Against the backdrop of climate change, a conceptual framework is constructed that reects on the immediate and tangible effects of a sustainable agenda on logistics and SCM. Findings Energy efciency has been largely neglected in logistics and SCM. At the same time, considering energy efciency requires considerable rethinking on the operational level (from transportation emissions to the cold chain) as well as even the conceptual level. The energy agenda needs a further development of logistics theory and practice. Originality/value The editorial highlights the challenges of sustainability and energy in the context of logistics and SCM pertaining to their novelty, importance and interdependence. SCM needs to develop new performance measures that include measures of energy efciency, in order to adapt to an environment where the old assumption of low fuel costs does not hold stand. Keywords Supply chain management, Energy management, Sustainable development, Distribution management Paper type Research paper

Energy-climate era: important and inter-dependent implications The aim of this editorial is to stimulate further the academic debate on the two contemporary concepts presented in the papers in this special issue in the context of logistics and supply chain management (SCM). First, the sustainable agenda, which in the present context refers to the inter-relationship between industrial activities in supply chains and climate change. Second, energy efciency has not received much attention in business and management although it might be an old hat within some branches of engineering sciences including transportation research. The concept of
The special issue Editors would like to thank the Editors-in-Chief, Mike Crum and Dick Poist, and Lucy Sootheran, Publisher at Emerald Group Publishing, for their support. Not the least, the Guest Editors owe grateful thanks to the group of anonymous reviewers around the world for their critical but constructive feedback to the papers during the review process.
International Journal of Physical Distribution & Logistics Management Vol. 40 No. 1/2, 2010 pp. 5-13 q Emerald Group Publishing Limited 0960-0035 DOI 10.1108/09600031011018019

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energy, broadly dened as any usable source power (e.g. fossil fuels, electricity, wind and solar power), has already gained considerable attention in transportation (Browne, 2005). Transportation is certainly an important factor for energy efciency in the supply chain, but a review of supply chain management (SCM) oriented journals reveals that energy efciency is yet to be conceptualised into a more comprehensive framework (managerial or theoretical) in the context of business logistics and SCM. Still, scarcity, prices and security of energy sources are among the most immediate challenges society is facing (Giddens, 2009), not to forget the fundamental role the generation and distribution of energy has played for innovation in the industrial revolutions (Castells, 2000). The argument developed here is that scholars and professionals in logistics and SCM should take direct interest as regards climate change and energy efciency; not only as separate issues, but also more importantly as convergent agendas. Tangible and immediate reasons to take a closer look It is not merely logical reasoning but rather a fact that the energy-climate era (Friedman, 2008) is challenging the nature of business and management activities. Since the launch of the call for papers for this special issue The sustainable agenda and energy efciency, logistics solutions and supply chains in times of climate change sustainability (and climate change) and energy (including use of natural resources) have received increasing attention amongst various groups of stakeholders; managers, researchers, policy makers and consumers. The need to revisit logistics performance is not only stimulated by the importance of environmental concerns or rising oil prices. Supply chains and energy security are the two out of four emerging issues that World Economic Forum (2008, p. 6) has identied as areas that will fundamentally shape our future and that are central to the functioning of the world economy and to the well-being of global society. Furthermore, immense regulatory pressure from governmental bodies (e.g. directives issued by the European Union) as well as the medias social regulation on issues like product recalls and supply chain disruptions require this subject to be dealt with in a more distinct manner than has been the case so far. The consequences of rising energy prices and climate change are more tangible (impact on performance and strategic position) and immediate and (supply chain disruptions) for the individual company than ever. These issues do, moreover, not only stand out in terms of importance, it is evident in our context that they should be approached as being causally inter-dependent; there are energy costs involved in the way materials are moved through the supply chain, which in turn has an impact on carbon emissions. The transition towards a low carbon economy aims to reduce emission of greenhouse gases amongst other things through the use of renewable sources of energy and by reducing the need for energy. Figure 1 shows what we regard as a tension between use of natural resources, such as fossil fuels and the eco-system, and relates this to emerging research agendas within logistics and SCM. Starting at the top from left to right, natural resources (1), such as water and non-renewable fossil fuels, are used for industrial production and movement of goods across various stages of the supply chain. In this context, the pattern of the usage of natural resources is shaped by the key performance objectives of strategies (e.g. time and cost) and structures (e.g. degree of centralisation, nature of

Use of non-renewable sources of energy (fossil fuels). CO2 emission. landfill (1) Use of natural resources (2) Ecosystem (climate change) (3) Natural disasters (e.g. flooding, hurricanes)

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Figure 1. The energy and sustainability agenda in logistics and supply chain management

Flooding can lead to further deforestation

Costs, scarcity, security

(6) Environmental sustainability (7) Energy efficiency

(4) Supply chain disruptions (5) Humanitarian logistics

inter-organisational relationships, geographical location) of the supply chain. The consequence is emission of greenhouse gasses and use of landll space for waste disposal which inuences the balance of the eco-system (2). This imbalance can have further inuence on the scarcity of natural resources; deforestation caused by industrial production can trigger ooding, which in turn can inuence forestry. These tensions, commonly referred to as climate change, are considered as being the root cause of natural disasters (3) such as ooding and hurricanes. Such events in the eco-system have had severe disruptive impact on industrial operations, and the knock-on effects on the wider supply chain are not uncommon. Impact of climate change: natural hazards Two research areas in particular are growing out of imbalances of the eco-system. First, global supply chains are subject to disruptive risks that can be seen as consequence of natural hazards. This inevitably leads to the question of how robust the supply chain design is against disruptions, cf. (4) in Figure 1. Empirical evidence (Macbeth et al., 2009) proves the importance of the subject matter. In June 2008, oods in the USA Midwest closed a grain and ethanol plant, resulting in delayed shipments of corn syrup, soy meal, ethanol and grain. Earlier in the same year, heavy rains and a landslide damaged mining equipment and prevented access to rail lines. This had a severe disruptive impact on the operations of mines in Queensland, Australia that produced nearly half of Australias coal exports. Also, in 2008, two Honda China plants were ooded and as result, an engine factory was unable to supply to other assembly plants. The literature on supply chain risk has developed an understanding of potential causes of risk, but has also proposed a set of mitigation strategies (Chopra and Sodhi, 2004; Craighead et al., 2007). The second area is humanitarian logistics (Kovacs and Spens, 2007) that in this context can be seen as a reaction to the very natural hazards through logistics operations, cf. (5) in Figure 1. The increasing frequency of hurricanes and intensity of oods can often be related to climate change, although also (man-made) deforestation can cause oods and droughts. Humanitarian supply chains respond to such disasters but are also concerned with preparing for them. Preparedness includes helping societies adapt to climate change (IFRC, 2009).

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Natural resources: sustainability and energy The use of natural resources raises two further issues, shown in the lower left part of Figure 1. Emission mitigation strategies and more efcient use of sources of energy do not come without implications for logistics performance and other design criteria that are used to develop appropriate structures and strategies for supply chains. Environmental sustainability (6) has been developed (Srivastava, 2007; Kovacs, 2008; ller, 2008; Carter and Rogers, 2008); logistics and SCM undoubtedly Seuring and Mu have a role to play in the transition towards a low carbon economy. In the context of global sourcing, for example, it is of interest for purchasing managers to be aware of the carbon footprint of their supply chains (Hertwich and Peters, 2009). Energy efciency (7), on the other hand, is at a much earlier stage of development. Recently, companies face the challenge of addressing the sustainability of the natural environment and energy efciency in the logistics ow across the supply chain; not only from sourcing to production and delivery, but also into the stage of consumption where consumers use and later dispose of products. Research agenda and supply chain strategies to address the potential implications of these changes are not well understood, but below we shall take a closer look at this particular topic. Energy: important but supply chain assumptions need re-thinking Acquisition of natural resources and the effects of their use are similarly often treated as costs and quality of materials. Energy is of the utmost importance in logistics and SCM but has not received corresponding attention. Road freight transport is causing some of the problems of energy use (Browne and Allen, 1998). More specically, worldwide transport counts for about 20 per cent of global primary energy consumption (Amann and Sieber, 2005). The fact that supply chains are highly dependent upon energy that is generated by fossil fuels has become a matter of concern. Falling demand and high oil prices are eroding protability in the air cargo industry, and reports suggest that the costs of fuel can make up to 30-35 per cent of total costs of some carriers (Thuermer, 2008). The rising costs of energy have direct impact on operating expenses of transport providers and costs of goods sold (Tanowitz and Rutchik, 2008, p. 34). These numbers refer primarily to the actual movement of physical components, but other operations that also inuence the time and location of products are warehousing and storage at retail level; both require heating of space and water, as well as electricity for, e.g. sorting packages in distribution centres and keeping products cool in the food supply chain until they are consumed, which is the case of vending machines for soft drinks. Longevity of current frameworks of supply chains To put this into context, contemporary logistics solutions and supply chain design have been developed in an industrial context where the sustainability of the natural environment and efciency of the use of energy appear as part of traditional performance measures, for example costs and quality. Fuel price, for example, is internalized in transportation costs. This is in line with Rogers et al. (2007, p. 279), which assert that in the context of the USA, supply chains have been built around the assumption that petroleum-based fuel would be inexpensive and plentiful for a long time. Similarly, Tanowitz and Rutchik (2008, pp. 34-5) acknowledge that rising fuel

costs have an impact on overall supply chain costs, and point out that Companies have compelling reasons to revisit the fundamental assumptions upon which their supply chain strategies are built. The demand for energy in the supply chain cannot be reduced to a derivative of the pattern of demand at the customer market; the physical ow of materials is also mediated by strategies and structures that are implemented to serve the market, or more proactively, to stimulate demand. A further look into design parameters that underlie, e.g. effective or responsive supply chains (Fisher, 1997) or postponement vs speculation as supply chain strategies (Pagh and Cooper, 1998), reveals that besides costs, proximate measures of energy efciency do not appear herein.

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Energy (efciency of) supply chains Further to Rogers et al. (2007), who raise the issues of supply and demand, we believe that the connotation of energy and supply chains has at least two meanings that need further conceptualization and research. The rst notion, demand, implies energy reduction or increased efciency in the use of current sources of energy. The assumption is that demand for energy is created by supply chains. Here, we do not think of direct demand for energy such as the actual transportation activity, but rather of supply chain strategies and structures, for example time-based strategies, global sourcing arrangements and use of third party logistics providers, as generative mechanisms that inuence, and perhaps stimulate, this demand. As performance measures of energy efciency and carbon emission develop, it will be possible to explicate the compromises related to climate-energy that some of the current performance indicators and design criteria suggest. In their analysis of the viability of various types of fuels, Rogers et al. (2007, p. 277) conclude that the burning of gasoline produces more greenhouse gas emissions than alternative fuels such as bio-diesel, bio-ethanol, bio-butanol, hydrogen fuel cells and hybrid electric. Yet, petroleum-based fuels are regarded as viable source of fuel in terms of abundance and accessibility. This equilibrium is not expected to be ever lasting. Therefore, the latter notion, supply, suggests that principles of logistics and SCM can be used to serve or facilitate the supply of alternative and ideally renewable sources of energy for the purpose of making and delivering physical goods to consumers. Based on the assumption that the abundance of alternative sources of energy is a function of their accessibility, the second challenge of further research is to understand facilitators and barriers for the developments of supply chains for alternative energy. Such transition to a low carbon economy relies upon technological as well as behavioral approaches to meet the joint targets set for energy efciency and CO2 emission reductions (Parliamentary Ofce of Science and Technology, 2008). The European Union Emissions Trading System is the worlds largest CO2 trading system, and has been set out to balance supply and demand of emission allowances. The costs or benets of operating with this scheme may redene the way companies justify sourcing decisions such as make-or-buy. An energy efcient company may wish to make whilst the less efcient company may rely upon the energy efciency of the wider supply chain, hence buy. The most efcient companies may, however, be able to sell emission credits or, alternatively, make-for-others.

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Final remarks This research note is not intended to be conclusive, but has rather aimed to stress the importance of sustainability (and climate change) and energy efciency. Sustainability and energy in the context of logistics and SCM are not only a challenge through their novelty (need to integrate these into our understanding of, e.g. performance) and importance (large and immediate implications), but further research and practice must also understand their implications through their inter-dependent nature. Based on this advancement, we can start developing further research agenda that cross with natural resources and eco-system. This raises, however, a number of questions. How radically must we go about this development? Provided that theoretical models and approaches in logistics reect the industrial context in which they are generated, would it not be fair to say that business solutions considering sudden emphasis on sustainability and energy efciency would need a shift in the theoretical mindset? Are current theories and solutions in logistics and SCM suitable to address the current challenge of sustainability and energy efciency? Are the time-based distribution strategies with small-size shipment deliveries at exible dates still environmentally and economically sustainable? And what about global sourcing is the next step local sourcing? Perhaps theoretical approaches and practices need to change? Or more radically, are current theory and practice the root causes of the problem, not (only) a key to the solution? Our proposition is that logistics and SCM denitely have a role to play in the transition to low carbon economy. But it probably needs to undergo transition itself to be able to cope with the emerging agenda. The articles in this special issue Focus and process The papers in this special issue document in a variety of ways that the energy-climate era has implications for academics as well as professionals within logistics and SCM. We received a good number of articles from all over the world, in the end exceeding the number of papers for just a special issue. The nal selection, therefore, needed to distinguish between papers for the special issue and other articles that will come out in subsequent issues of the International Journal of Physical Distribution & Logistics Management. The articles selected for the special issue combine a general overview on lean and green supply chains with more specic examinations of economic and environmental risks for sustainable transport operations, carbon footprinting in the supply chain, and even an outlook on the social aspects of sustainability in the production of biofuel. Contents The rst paper in the special issue, by Diane Mollenkopf, Hannah Stolze, Wendy L. Tate, and Monique Ueltschy, examines the relationships between Green, lean, and global supply chains, revealing drivers, barriers, converging and contradictory points at the intersection of the three strategies. The literature review highlights the need to integrate organisational silos from a network perspective as well as silos in different streams of literature. As the Toyota example indicates, there are possibilities for companies and their supply chains to be lean, and at the same time being green as well as global. A concurrent implementation of these approaches, however, requires the integration of their metrics.

Measuring carbon footprints in the supply chain is at the core of Alan C. McKinnons paper on Product-level carbon auditing in the supply chains: environmental imperative or wasteful distraction? As if answering the call of Mollenkopf et al., the question of system boundaries is assessed through questions of allocating carbon emissions and thus of the accuracy of carbon auditing at the SKU level. Also, supply chain variability leads to uctuations in emissions on the SKU level. The question remains which effects carbon labelling would have on consumer buying behaviour and ultimately, on the supply chain. Fluctuations in demand, delays, as well as delivery constraints and supply chain integration are further investigated in Vasco Sanchez-Rodrigues, Andrew Potter, and Mohamed M. Naims paper on The impact of logistics uncertainty on sustainable transport operations. Uncertainties are further grouped into economic vs environmental risks for the effectiveness of transport operations. The primary environmental risk is product return, closely followed by the criticism of a lack of a logistics vision. The importance of Environmental impacts as buying criteria for third party logistics services is evaluated in the paper by Christina Wolf and Stefan Seuring. This paper considers the environmental impacts of transportation from the perspective of the supply chain, though nd limited evidence for environmental impacts being considered in purchasing third party logistics services. Focusing more specically on environmental risks and carbon footprints, Julia B. Edwards, Alan C. McKinnon, and Sharon L. Cullinanes paper, Comparative analysis of the carbon footprints of conventional and online retailing: a last mile perspective, observes ample differences between conventional and online retailing when it comes to consolidation and product returns, and differences in features when it comes to failed deliveries and upstream emissions due to differences in supply chain conguration. Last-mile emissions, however, depend on a number of factors. Consolidation is emphasised, whether in the routing of many one item home deliveries, or by the consumer in large shopping trips en route from work. Though emissions largely depend on the type of fuel used, Jeremy Hall and Stelvia Matos discussion of biofuels focuses on the social impact of their production. Incorporating impoverished communities in sustainable supply chains thus highlights the problem of considering only the ecological aspect of sustainability, while also providing some insight into the challenges of collaborative community approaches for large-scale production. The special issue closes with a Research Note by Remko van Hoek and Mark Johnson, who discuss the topic of the call for papers of the special issue at an academic roundtable at the Council of Supply Chain Management Professionals education strategy committee. Three questions from the call are discussed in detail. First, are current theory and solutions suitable to address current challenges of sustainability and energy efciency? Notwithstanding, the trade-off between inventory and transportation costs, both are currently on the rise; inventory costs due to the credit crunch, and transportation costs due to increased fuel prices. A resulting transport network optimisation is deemed ecologically favourable. However, the equation is criticised for social costs still not accounted for. Second, is time-based distribution with small-size shipments and deliveries at exible dates still environmentally and economically sustainable? Considering Wal-Marts example, it seems that a focus on environmental sustainability is important as long as consumers see it as an added benet but is at risk to remain a temporary marketing fad once the economic crisis impacts on that perception. Last but not least, is local sourcing the

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next step to global sourcing? Again, global vs local sourcing uctuates with fuel prices but also labour costs in low-cost production environments. The research note closes with a call to study sustainability questions in the long run, eliminating the focus on short-term fads. At the same time, more focus on social costs in logistics and SCM is called for.
References Amann, D. and Sieber, N. (2005), Transport in developing countries: renewable energy versus energy reduction, Transport Reviews, Vol. 25 No. 6, pp. 719-38. Browne, M. (2005), Special issue introduction: transport energy use and sustainability, Transport Reviews, Vol. 25 No. 6, pp. 643-5. Browne, M. and Allen, J. (1998), Strategies to reduce the use of energy by road freight transport in cities, Transport Logistics, Vol. 1 No. 3, pp. 195-209. Carter, C.R. and Rogers, D.S. (2008), A framework of sustainable supply chain management: moving toward new theory, International Journal of Physical Distribution & Logistics Management, Vol. 38 No. 5, pp. 360-87. Castells, M. (2000), The Rise of the Network Society, 2nd ed., Blackwell, New York, NY. Chopra, S. and Sodhi, M.S. (2004), Managing risk to avoid supply-chain breakdown, Sloan Management Review, Vol. 46 No. 1, pp. 53-61. Craighead, C.W., Blackhurst, J., Rungtusanatham, M.J. and Handeld, R.B. (2007), The severity of supply chain disruptions: design characteristics and mitigation capabilities, Decision Sciences, Vol. 38 No. 1, pp. 131-56. Fisher, M. (1997), What is the right supply chain for your product, Harvard Business Review, Vol. 75 No. 2, pp. 105-16. Friedman, T.L. (2008), Hot, Flat and Crowded, Penguin Books, London. Giddens, A. (2009), Politics of Climate Change, Polity Press, Cambridge. Hertwich, E.G. and Peters, G.P. (2009), Carbon footprint of nations, a global, trade-linked analysis, Environmental Science & Technology, Vol. 43 No. 16, pp. 6414-20. IFRC (2009), World Disaster Report 2009: Focus on Early Warning, Early Action, International Federation of Red Cross and Red Crescent Societies, Geneva. Kovacs, G. (2008), Corporate environmental responsibility in the supply chain, Journal of Cleaner Production, Vol. 16, pp. 1571-8. Kovacs, G. and Spens, K. (2007), Humanitarian logistics in disaster relief operations, International Journal of Physical Distribution & Logistics Management, Vol. 37 No. 2, pp. 99-114. Macbeth, D.K., Halldorsson, A., Murphy, M. and Wildgoose, N. (2009), Supply chain disruption risks and event database, The Partner, May, pp. 38-41. Pagh, J.D. and Cooper, M.C. (1998), Supply chain postponement and speculation strategies: how to choose the right strategy, Journal of Business Logistics, Vol. 19 No. 2, pp. 13-33. Parliamentary Ofce of Science and Technology (2008), The transition to a low carbon economy, available at: www.parliament.uk/documents/upload/postpn318.pdf (accessed 23 October 2009). Rogers, Z., Kelly, T.G., Rogers, D.S. and Carter, C.R. (2007), Alternative fuels: are they achievable?, International Journal of Logistics: Research & Application, Vol. 10 No. 3, pp. 269-82, available at: www.ingentaconnect.com/content/tandf/cjol/2007/00000010/ 00000003/art00009-aff_1

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 Seuring, S. and Muller, M. (2008), From a literature review to a conceptual framework for sustainable supply chain management, Journal of Cleaner Production, Vol. 16, pp. 1699-710. Srivastava, S.K. (2007), Green supply-chain management: a state-of-the-art literature review, International Journal of Management Reviews, Vol. 9 No. 1, pp. 53-80. Tanowitz, M. and Rutchik, D. (2008), Squeezing opportunity out of higher fuel costs, Supply Chain Management Review, October, pp. 34-40. Thuermer, K.E. (2008), Air Cargo braces for a slow down, Supply Chain Management Review, December. World Economic Forum (2008), Global Risks 2008, A Global Risk Network Report, Global Risk Network of the World Economic Forum, available at: www.weforum.org/pdf/globalrisk/ report2008.pdf (accessed 12 July 2009). Further reading Peck, H. (2006), Reconciling supply chain vulnerability, risk and supply chain management, International Journal of Logistics: Research and Applications, Vol. 9 No. 2, pp. 127-42. About the Guest Editors Arni Halldorsson is a Senior Lecturer and Academic Director of MBA, School of Management, University of Southampton. He has been engaged in lecturing at Copenhagen Business School, Denmark, Reykjavik University, Iceland and Hanken, Finland. Research topics include logistics outsourcing, inter-organisational relationships, supply chain risk, reverse logistics and the sustainable agenda in supply chains that has been published in leading journals for academics as well as practitioners. Arni Halldorsson is the corresponding author and can be contacted at: arni@soton.ac.uk Gyongyi Kovacs is an Acting Professor in Supply Chain Management and Corporate Geography at the Hanken School of Economics, in Helsinki, Finland, where she also earned her PhD. She is the Director of the Humanitarian Logistics and Supply Chain Research Institute (HUMLOG Institute) and also co-ordinates the HUMLOG Group. Her publications have appeared, e.g. in the International Journal of Physical Distribution & Logistics Management, Journal of Transport Geography and Journal of Business Logistics. She is currently a European Co-Editor of the International Journal of Physical Distribution & Logistics Management. Her current research interests include sustainable supply chain management, supply chain collaboration, the abductive research approach, reverse logistics and humanitarian logistics.

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