The transport and logistics sector is among the world’s biggest emitters, and as a hard-to-abate sector, there are numerous challenges when it comes to its decarbonisation.
However, climate change will only continue to impact the sector, meaning its pivot toward decarbonisation is vital, not only for our planet’s health but also for maintaining operations and safeguarding global supply chains.
As COP28 wrapped up, ESG Mena sat down with Piotr Konopka, Group VP, Global Decarbonisation & Energy Programmes, DP World, to hear how the multinational logistics company is approaching decarbonisation and navigating industry challenges as the climate crisis intensifies.
Tell me about the role of tech and AI in decarbonisation. How are they facilitating movement towards net zero within logistics?
In the DP World context, when we talk about logistics, we’re talking about ports and terminals, landside logistics, like trucking and warehousing and shipping. AI and technology have quite fundamentally different roles in each of them, but our decarbonisation strategy sits on five pillars, applicable to all of them: electrification, efficiency, renewable energy, low-carbon fuels, and carbon compensation.
When it comes to tech and AI, the majority of it sits in efficiency, it really helps us make things move quicker. For example, in the ports industry, we’re doing a lot of work around automation, where decarbonisation is almost an externality of automation because that’s the most efficient way of doing things – and that’s where technology really plays a huge role.
Another one you might have heard about is BoxBay, our high bay storage patented system. It’s absolutely full of technology to make sure cargo finds its way to where it’s supposed to be within the stack to entry and exit points.
In shipping, technology plays a huge role in efficient routing. So, we’ve been working with a startup called Zero North based out of Denmark. They help us with our weather routing.
It’s where you put in a control system with a monitor inside a vessel and it informs the captain how to navigate around, for example, rough sea conditions, or sometimes you may have to go a slightly longer distance, but the fuel use and the associated carbon emissions are significantly lower.
It’s a similar thing with trucking. Here, weather routing doesn’t necessarily apply, but it can help you with logistics; it will find the most optimal way, avoiding traffic and making sure you pick up and drop off cargo in the right locations to reduce your fuel use.
On the climate finance side of things, can you tell me about your recent $1.5 billion green sukuk issuance? How does this play into DP World’s decarbonisation strategy and how do you see it evolving?
That was a very exciting project for us as the decarbonisation team.
We started earlier this year as a multi-departmental effort between decarbonisation, engineering, finance and sustainability by developing the sustainable financing framework.
We identified all of the assets that would be applicable for the financing, which includes electrical equipment, like electric cranes, renewable energy assets, and anything capex-related on technology, for example, Zero North, as I mentioned, green buildings, and green vessels.
It started with identifying what assets we have purchased over the last few years and what we’re planning up until 2030. This allowed us to calculate the amount that will be spent and is required.
That’s really how the 1.5 billion came up because our KPI for that green bond or green sukuk is what you call use of proceeds. So we need to allocate that 1.5 billion to these projects that have been set in the sustainable financing framework.
It’s been a huge help to us as the decarbonisation team, because this has really strengthened the internal commitment of the organisation towards making these projects happen.
And can you tell me more about the ports piece, electrification efforts, timelines and challenges here?
It really depends on the type of equipment. There are types of equipment in the port environment that are inherently electrical, for example, the ship-to-shore crane; the ones that are static.
When it comes to types of equipment, there are easier ones and there are more difficult ones. The rubber-tired gantries are relatively easy, because they don’t require a battery, and we can attach a cable reel and attach that to a substation, and then you have an electrified piece of equipment.
It gets a little more difficult when you need to include the battery because then you’ll run into similar problems you have with electric cars, for example, how often you charge it, the range anxiety, the operational characteristics and the electrical infrastructure within the port.
So, one that we have worked a lot on over the past few years is electric terminal tractors. These are the tractors that never leave the terminal, but move the containers within.
We’ve done a couple of proofs of concepts here in Jebel Ali with Terberg and Gaussin with very good results, which resulted in internal guidance that all of the newly purchased terminal tractors should be electric, with, ideally, the suppliers that we have trialled.
We’re going to trial new ones from other countries and other manufacturers to see how they operate.
We have also started the process of retrofitting the existing assets, which is an amazing project.
Our very talented team of engineers in Terminal One here in Jebel Ali took diesel terminal tractors that were basically end-of-life and would have otherwise had to have been scrapped and removed all of the internal combustion engine elements. They got the rest of the equipment, like the electric motors, the control systems and the batteries, and they put them into the frame of the terminal track, effectively giving them another ten years of useful life.
So it’s not just decarbonisation, it’s also about the circular economy, SDGs and sustainability aspects. Comparing them to the new ones, they have the exact same operational characteristics.
We’re planning to do up to 40 per cent of a thousand terminal tractors that we have in Jebel Ali already by 2030 by retrofitting in that way, the rest we will probably get new.
We’re looking at full electrification of terminal tractors in Jebel Ali by 2030, hoping to achieve 100 per cent of terminal tractors globally soon after 2030.
You spoke of targets there, and before COP28, Spendwell released an analysis about the sponsors of COP and their commitments to SBTs and renewable energy. DP World was highlighted as one of the companies that hasn’t yet created those targets in line with those included in its climate commitment ranking. Why hasn’t that happened yet? What are the plans for implementation and aligning with those in the climate ranking?
It has, and it’s still in the works.
So, first of all, we are absolutely committed to Net Zero by 2050. So that aligns us; it’s been announced in our ESG reports and everywhere basically, and we’re looking at Scope 1, Scope 2 and Scope 3, and net-zero is net-zero.
We also have a target of carbon neutrality by 2040, recognising that there is only so much we’ll be able to deeply decarbonise by 2040, and then we want to utilise high-quality offset credits.
We suspect that we will probably be close to full decarbonisation of Scope 1 and 2 by 2040, but we cannot guarantee that Scope 3, meaning our supply chain, will also be net-zero ready; that’s why we set that target as carbon neutrality.
We want to be ready with our carbon compensation strategy for 2030, so the short-term target.
When we launched our strategy back in 2020, we set that 28 per cent reduction target, which still stands and that used to be a target that the Science-Based Targets Initiative (SBTI) back then allowed, because that keeps us under well below the two-degree scenario to 2030 and then we accelerate towards 2050.
Now, we’ve also made the commitment to SBTI. We are an SBTI-committed company as of two years ago; however, last year, the guidance changed a little bit, which would require us to stay on the Net Zero pathway towards 2030. And, the maritime guidance only came out a few months ago.
So, we are in the process of finalising it; we remain committed, and verification is pending.
And what about RE100 and EP100 for energy efficiency, which you haven’t yet committed to? Can you give me some insight into that and what the plan is there?
So, I can comment on renewable energy because that’s the one we have analysed.
For renewable energy, specifically, today, we are at 60 per cent of renewable electricity supply as a proportion of the total electricity consumption.
We want to be around 70 per cent by 2030, we’ll probably over-achieve that, and we’re planning for 100 per cent renewable energy by 2040.
What would you say are some of the biggest barriers and challenges that the industry is facing right now?
So, in terms of hurdles, the first thing that comes to my mind is that decarbonisation is not something that one company can solve by itself.
You need partnerships; you need coalitions.
For the shipping business, for example, you need a technology provider to build the vessel and have it available in time, and then you need fuel, which also means you need green corridors. Otherwise, you end up with a methanol vessel that starts in Rotterdam, only to find out that there is only ammonia in Singapore when it gets there.
So, green corridors are absolutely crucial and green corridors are again a collaboration between energy providers who can provide the fuel, port authorities who can bunker the fuel and regulators to allow, certify and standardise these different types of fuel and also enable production capacities in the country.
Then, finally, it’s also willing customers. We want to work with our customers on that transition.
I would say these are the main hurdles in terms of that interconnectivity.
Of course, on top of that, there is technology availability, and supply chain availability.
When we talk about electrical terminal tractors, and we do foresee that, especially towards 2030, there may be supply chain shortages to give us and other port operators a sufficient amount of terminal tractors.
That’s also why we started that retrofit programme: we wanted to future-proof the business against the risk that new equipment may not be available.
The second thing we did for that is launch a coalition called the Zero Emission Port Alliance with APMT.
That alliance is meant to do exactly that: bring together the port operators, port authorities, OEM associations, knowledge partners and other players within the industry to discuss what the total demand is, or what should be, at least, the voluntary design standards.
So you’re working towards the same goal rather than everybody doing their own thing.
And how is DP World bolstering resilience within its operations?
On the resilience part of things, I think it’s a really good question because today, we are already seeing the impacts of climate change.
They’re not large enough to make an impact on the bottom line, the total revenues of the company, but when you look at specific operating entities, there’s definitely an impact.
For example, in Canada last year, we lost multiple shifts because of extreme cold or flooding, and that is a problem.
These acute events triggered us to do a full-scale resilience study.
So we’ve hired a company called Jupiter Intelligence and Guidehouse to provide us with the data for what different climate change RCP scenarios from 2.6 to 8.5 will look like for all of our port locations.
For example, under each climate change scenario, what is the projected wind speed in 2030, 2050, and all the way up to 2100.
Then, we try to overlay this on top of the operational characteristics of our equipment.
So, say we have a crane and a port that can only operate up to an X wind speed, we know that from the design specification of that crane that we have in operation today, and the data from Jupiter, lets us predict how many times in a year under different climate change scenarios you expect that wind speed will occur, which means that the crane would have to stop its operation.
Having done this for most of our operations, or at least operations at risk, we were able to translate that into potential revenue loss by 2050 and 2100.
That was a super insightful study. I think the next step in that study will be moving away from us as a port internally, because, as a matter of fact, even if our equipment operates properly, but the roads are closed or flooded, and trucks can’t come, or trains can’t come, we’re still in trouble.
So, in the future, we will want to go beyond our own operations and actually analyse the full supply chain resilience.
Finally, what are your hopes in terms of the COP28 outcome, and do you have any further collaboration & partnership plans?
Personally, I do hope that it will be a tipping point. Carbon emissions have only been going up and up. And unfortunately, 2023 looks to be the warmest year on record.
So I do have very high hopes for the Global Stock Take, and we will take a pause and analyse all the pledges and the progress and take it from there.
I do believe that the COP28 Presidency has the capability to push things forward.
When it comes to DP World, for us, that’s what COP is about: it’s bringing together all of these partners and using the opportunity that all of these partners are here to announce our collaborations because it’s been in the works for months now.
So, for example, I’ve mentioned the alliance with APMT, which I have very high hopes for because this is a first-of-a-kind industry initiative around the electrification of port equipment.
I do believe it’s going to be impactful on the future of electrifying equipment and bringing more to the market, standardising it.
We have also signed an MoU with PIL, a Singaporean shipping line, to establish a green corridor between Singapore and Jebel Ali.
What’s exciting about this is that the traditional definition of the green corridor very much focuses on Scope 1, so the fuel part of the equation, what we have added with PIL, is also the Scope 3 consideration for a shipping line.
So it’s not just PIL operating a vessel on a carbon neutral or close to zero carbon fuel; it’s also considering us handling their cargo in the port in Jebel Ali with electric equipment supplied by renewable energy, which means that their Scope 3 would also be minimised.
So, we are looking to do some first trials of that in the first quarter of next year and take it from there.