David Baur, co-CEO and co-founder, AELER, speaks to Maritime Fairtrade on the need to improve shipping containers for fighting climate change and cost efficiency.
David Baur, co-CEO and co-founder, AELER. Photo credit: AELER
How can a smart container help in mitigating climate change?
We must first comprehend the context in which container transportation contributes to climate change. As trade volumes expand, container shipping’s contribution to the global CO2 emissions is anticipated to rise to roughly three percent. Notably, the industry is one that will continue to grow, which inevitably indicates a potential continuous rise in carbon emissions.
In fact, it is attributed that if the shipping industry were to be a country, it would be the sixth most polluting nation in the world.
However, in lieu of international pledges and regulations, the sector has pledged to reduce emissions by at least 40 percent by 2030 and by 70 percent by 2050 compared to 2008 levels, but in order to meet these goals, considerable investments in new technologies, fuels, and infrastructure, as well as regulatory and market incentives, will be needed.
Realizing the need for cutting edge and sustainable solutions, smart containers are one way to develop a more effective, safe, and environmentally sound shipping supply chain. But what are smart containers and how do they help in mitigating climate change?
In a broader sense, a smart container should be an end-to-end solution bridging the existing gaps within the shipping and logistics industry. The rationale behind the creation of smart containers is what makes it a viable solution for all stakeholders within the ecosystem. With that in mind, these are some key factors taken into consideration in the development of a smart container.
Firstly, the overall design must be manufactured with new materials that are stronger, more aerodynamic and insulated. Properties of these new materials indicate added strength which in turn increases the loading capacity of the container within certain verticals and enables better protection of the cargo. These attributes of a smart container significantly contribute towards eliminating single-use plastic that is heavily utilized in packaging of the goods. As the containers are well insulated, the need for plastic or any similar materials is reduced, contributing positively toward the environment.
Secondly, an IoT system that is not only added on the container but truly embedded within the smart containers. It enables users’ total visibility on both the container and cargo. These sensors have the capacity to gather data in real-time on a variety of topics, including temperature, pressure and humidity within a container and its precise position or location.
The supply chain could be improved significantly with the help of such data collection. Sensor data provides incredibly precise information about a container’s location, enabling optimized fleet management that minimizes repositioning and maximizes fuel efficiency.
Fuel is frequently wasted when empty containers are transported and repositioned. According to research by Boston Consulting Group, the sector could save carbon emissions by six million tons annually, should they refrain from delivering empty containers “for carrier-specific reasons”.
These sensors can also monitor the progress of containers, enabling consumers or port operators to anticipate ship arrival times, disruptive supply-chain bottlenecks that result in unwarranted delays and congestion.
Port congestion is a complex challenge that has persisted for decades, the usage of smart containers can untangle these concerns and allows for companies to be more responsible in their shipping operations by better predicting the waiting time to be off loaded.
Aside from that, these sensors can also analyze and control container conditions, which present significant sustainability benefits such as ensuring temperature-sensitive cargo carrying food or perishable goods doesn’t spoil throughout the travel.
Thirdly and most importantly, the information given by smart containers provides the ability to quantify the CO2 emissions that could possibly be caused by that particular shipment. Why is this of utmost importance?
We cannot tackle what we are unaware about. The data presented from CO2 quantification presents businesses with the intel to assist them in making informed decisions about their shipping operations. There is a laser focus spotlight on the shipping industry to decarbonize, therefore, access to such information allows companies to understand their hotspots and map out ways to reduce CO2 emissions while delivering fast, reliable, and affordable shipping capability.
Another major upside of reliable carbon emissions data holds us accountable to be aligned with industry and international regulations. Collective action is the only way forward which is the ultimate goal of having such regulations in place. Thus, with smart containers in play, it is made possible to abide and fulfil the goals outlined.
What is the business case for investing in better cargo containers amid climate change?
In current time, we are realizing the need for better solutions amid climate change to ensure businesses are able to execute operations efficiently whilst minimizing environmental impacts.
Cohesive Business Model: It is known that shipping requires significant investment from a monetary, time and effort point of view. Companies are consistently on the lookout for reliable and reasonably priced shipping vendors whereas cargo owners have needed to adapt to the containers and their pain points. However, with smart containers and their features, they bridge these glaring gaps and detangles such persistent concerns. Which then, enables all stakeholders to better manage their end of the business operations in a more cohesive manner.
Data Transparency: We all understand that information is key. However, transparent, honest and reliable information is a step further. Information derived from the IoT sensors are real-time data that is transmitted and shared with the assigned party. Compared to the traditional shipping methods, this omits information or communication breakdown and instead facilitates a full loop of data transmission for quicker and efficient processing.
Regulatory Compliance: Many countries are implementing stricter emissions regulations and environmental standards for the transportation industry. Investing in advanced cargo containers ensures compliance with these regulations, avoiding potential fines and penalties.
Risk Management: It is established that this industry is agile and involves multiple layers of risks that could potentially cause significant consequences. A major USP of the data derived from the IoT sensors provides the ability to preempt possible risks and challenges, which then allows the assigned stakeholder to manage those in advance. It creates opportunities for sound decision making, having all possible risk information at hand. Additionally, this aids in mapping out trends or happenings that are inevitable through which companies are able to better plan their operations and all relevant risks associated with it.
Visibility: Smart container technologies are equipped with advanced features such as real-time tracking, temperature monitoring, and security measures. These innovations improve cargo visibility, reduce the risk of theft or damage, and enhance the overall efficiency and visibility of logistics operations.
Cargo Protection: The preservation of goods in shipping is a major concern especially ensuring they arrive in a condition that it was shipped in. More often than not, perishable goods have the biggest risk of getting damaged during shipment. In this case, smart containers provide solid protection (stronger materials and insulated aerodynamically properties) which usually maintains the quality of the shipped goods and decreases the risk of a damaged shipment.
Sustainability Advantages: Businesses that are heavily dependent on shipping and logistics are now on the lookout to better manage their carbon intensive operations. Currently, with many committed to carbon reduction targets, the smart containers certainly act as a catalyst in fulfilling those goals. On the logistics front, it helps businesses minimize their carbon impact significantly and quickly progress forward in an environmentally efficient way.
Why does it matter to develop better containers in line with scientific research and prevailing maritime regulations and undergo third party verification?
It is crucial for several reasons, but a main reason would be that the container hasn’t changed since its creation more than 60 years ago. Smart containers are a much-needed upgrade to address the existing and potential future needs and challenges. This upgrade is deeply rooted in scientific knowledge that has provided the industry with objective and tangible evidence to implement the necessary changes.
Speaking from our experience at AELER, the smart containers are created utilizing proven solutions and materials from other industries and adapted to the logistics landscape. Thus, we worked off proven scientific evidence to ensure the creation of a solid product.
Fundamentally, smart containers designed with scientific research in mind enhance cargo safety and integrity. With the rise in AI, the data generated by those smart containers enables not only transparency and monitoring but also efficiency and better planning across the entire supply chain.
Finally, and most important, is third party verification and testing. This is a critical element in our field which essentially shows the level of acceptance of potential customers. There is no better validation than the market validation and any successful pilot project demonstrating the advantages of the smart container.
Specific to the smart container, how to increase cargo volume, implement temperature and moisture control, reduce risk of cargo damage?
To make a container smart and enabling it to:
- increase cargo volume: one must rethink the design of the container itself. By using composite material for the panels, bulging can be avoided on the side panels allowing more payload in the case of bulk liquid transport (flexitank).
- help temperature and humidity control: help temperature and moisture control, not by controlling it per se (as would a refrigerator) but by protection of the cargo. Due to its composite materials, it therefore has a passive insulation (avoiding big temperature variations or humidity changes) that aids the cargo owner to monitor the state of its cargo periodically. The sensors also provide real-time and specific data on the temperature variation and humidity throughout the entire shipping process.
- reduce risk of cargo damage, there is a two-prong approach. On the structural and material front, the components utilized in manufacturing the container are more robust and better insulated. Which then as highlighted, maintains the state of the goods in its original state for an extended period of time. By having an embedded IoT system with sensors that can detect various happenings, provides cargo owners with sufficient data on to track the container from start to end.
What does an end-to-end sustainable solution look like in the shipping and logistics industry?
In addition to the insights shared above, an end-to-end sustainable solution in the shipping and logistics industry encompasses a comprehensive approach to reduce environmental impact and enhance efficiency at every stage of the supply chain. It involves using eco-friendly materials and technologies in container design, optimizing cargo loading and transportation routes to minimize emissions, and implementing more granular real-time tracking systems for efficient resource management.
More progressively, the inclusion of eco-friendly elements and sustainable principles in the manufacturing of a smart container would promote responsible practices, such as waste reduction, compliance with stringent environmental regulations, and the adoption of clean energy sources.
Another aspect of an end-to-end solution is to be compliant with global standards and regulations. Last year, the International Maritime Organization (IMO) introduced new rules compelling ships to report their carbon intensity through an annual efficiency ratio (AER), a calculation based on a ship’s cargo capacity, fuel consumption, and travel distance over the previous year.
Ships receive grades of A, B, C, D, or E, with A, B, or C considered compliant for the year. To enhance their grades, shipping companies have three options: switching to lower CO2-emitting fuels, altering ship operations to optimize cargo movement per unit of distance, or making technical upgrades. Hence, the need for smart shipping solutions such as ours is a requirement of the hour.
As shared above, carbon emissions quantification is a key step in managing a business’ shipping emissions across the supply chain. Transparent and reliable data of this measurement will help companies paint an accurate picture of the impact from their shipment.
This in turn would help them set quantified targets to decarbonize and measure progress holistically. Mapping emissions reveals hotspots areas and unlock opportunities for reduction. Fundamentally, smart containers create an avenue for improved CO2 quantification, providing data that shapes smart shippers and helping them make sound decisions.
Ultimately, the aim of smart containers is to foster economic growth with environmental stewardship, ensuring a greener, more efficient, and socially responsible shipping and logistics sector.
In your opinion, what are the biggest obstacles to using smart containers?
The adoption of smart containers in the shipping and logistics industry is much needed but presents several significant obstacles that must be addressed.
Interoperability and Standardization: The shipping and logistics industry involves multiple stakeholders, including shipping companies, ports, customs, and transportation providers. Ensuring interoperability and data standardization across these diverse participants is a complex challenge. Without standardized protocols, data sharing and seamless communication between smart containers and various systems become difficult.
Workforce Training and Adaptation: The integration of smart container technology requires the training and adaptation of the workforce. Educating personnel on how to effectively utilize and manage smart containers is essential. Resistance to change within organizations can slow down the adoption process and reduce the technology’s effectiveness.
Environmental Impact: While smart containers offer numerous advantages, they also introduce additional electronic components and power requirements. There are studies to prove an increase in the environmental footprint of containerized transport. Balancing the benefits of smart containers with their environmental impact is a challenge, particularly in an era of offering sustainable shipping solutions.
How do you propose to overcome them?
To overcome the challenges associated with the adoption of smart containers in the shipping and logistics industry, a multi-pronged approach is necessary:
Interoperability and Standardization: Industry stakeholders should collaborate to establish clear standards and protocols for smart container technology. Organizations like the IMO play a role in setting industry-wide standards, ensuring that smart containers from different manufacturers can seamlessly communicate with various systems.
Additionally, there is the International Federation of Freight Forwarders Association (FIATA), which is a reference source of international policies and regulations that govern the freight forwarding and logistics industry. They operate at an international level to represent service providers who operate within this sector. Aside from that, there are ISO standards that must be complied with, for the containers to be operational within the supply chain. These are a concrete premise for the time being, however as we progress on multiple fronts, it must be revamped and adapted to the need of the hour.
Workforce Training and Adaptation: Companies should invest in comprehensive training programs to familiarize their workforce with smart container technology. Emphasizing the benefits, such as increased efficiency and reduced manual labor, can help in overcoming resistance to change. Collaboration with technology providers for training and support can also be beneficial.
Environmental Impact Mitigation: Smart container manufacturers should prioritize energy-efficient components and sustainable practices in the production of these containers. Additionally, research and development efforts should focus on minimizing the environmental footprint of smart container technology. Companies can also consider offsetting their environmental impact through initiatives like tree planting or renewable energy investments.
Overall, addressing these challenges requires a collaborative effort among industry players, regulators, and technology providers. The benefits of smart containers in terms of efficiency, transparency, and sustainability can outweigh the challenges when approached strategically and with a long-term perspective.
Photo credit: iStock/Tryaging