TSL firms that ‘sleep’ through green revolution could see profits drop 20%
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According to a recent report by PricewaterhouseCoopers Germany (PwC Germany), the emission targets in the transport and logistics sector can only be achieved by a fundamental change. At the same time, experts warn that the transition to a climate-neutral economy could cause profits (EBITDA) to fall by up to 20% as early as 2025 for companies in the transport sector that do not take this issue seriously enough.
Climate change is having an increasing impact on the transport and logistics industry. Businesses have had to change their business models and develop long-term climate strategies. This also includes assessing the financial impact of climate change on business. Emissions of greenhouse gases related to transport in the EU have steadily increased in recent years. According to the report by PwC Germany, the main cause is freight and passenger road transport.
The transport and logistics industry is the only sector in Europe where emissions are rising and the existing potential is not being exploited,” stresses Ingo Bauer, head of transport and logistics at PwC Germany.
Radical trend reversal is the only way
For Germany to become climate-neutral by 2050 as planned, the transport sector would have to reduce greenhouse gas emissions by 25% by 2025 and by 42% by 2030, compared to 1990 levels.
To achieve this, a radical change is needed. This cannot be tackled by a pure increase in productivity without a modal shift (of road transport to another mode of transport – editorial note) and a switch to alternative propulsion systems and fuels,” stresses Dr Nicole Röttmer, Sustainable Development Partner at PwC Germany.
The expert argues that companies in the transport and logistics sector must quickly define a climate strategy that should take two perspectives into account.
On the one hand, transport and logistics companies face the task of measuring their impact on climate change and reducing greenhouse gas emissions. On the other hand, they need to understand the financial impact that climate change may have on industry and their own activities, and to know and assess the basic measures of their future success,” adds Röttmer.
Early response is required
That is why experts are calling on companies to use the coronavirus crisis as a chance and an opportunity to rethink their logistics processes.
The current crisis situation offers us opportunity to rethink our own business model and make it sustainable and thus future-proof,” says Bauer.
In addition, regulatory changes are being introduced that force TSL companies to deal more effectively with climate change, which may lead to a climate strategy.
Many logisticians try to determine the impact of their own company on climate change, for example by calculating the carbon footprint. “However, the next step, which is to examine the physical effects of global warming and the impact of the global community’s efforts to limit climate change on their own business, is taken only by a few,” adds Bauer.
Experts are therefore warning companies not to underestimate the issue of climate change, otherwise, the transition to a climate-neutral economy could lead to a significant drop in profits in just five years’ time.
Our analysis with the PwC Climate Excellence Tool shows that the profits (EBITDA) of logistics companies listed in the MSCI index (MSCI includes large and medium-sized companies from 24 countries; it is the most important index in the world providing a benchmark for investors placing assets in shares from emerging markets – editorial note) will increase by 16% by 2025 if they effectively limit global warming in line with the objectives of the Paris Climate Agreement. Assuming an early response to regulatory changes, new technologies and changing markets. For those companies in the industry that do not prepare for the upcoming changes in time, they will lose even 20% of their profits in the same period,” warns Röttmer.
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