Analyst Insight: The business of chemical logistics is evolving rapidly. A compound annual growth rate (CAGR) of 5.5%, coupled with new global regulations, is driving the need for sustainability strategies that offer tighter control and greater efficiency in freight operations. These trends present an exciting opportunity for the chemicals industry to adopt forward-thinking practices. Two key strategies — diversifying transportation modes and leveraging emerging technologies — are setting the stage for a more resilient, efficient and sustainable future.

The SEC’s climate disclosure rule from 2024, along with California’s SB 253 and SB 261 regulating Scope 2 and 3 emissions, have increased the regulatory pressure on chemical logistics. That pressure has only been compounded by the growth and ongoing demand for chemical transportation, as well as the already greenhouse gas (GHG)-intensive nature of the chemical and transportation industries. This has created a dual challenge: maintaining supply chain efficiency while addressing sustainability in a highly scrutinized regulatory environment. 

Tackling sustainability will take a multi-pronged approach. But there are at least two, sure-fire ways for chemical companies to hit more ambitious targets. First, diversifying the transportation mix will allow companies to develop greater flexibility in moving their freight, and implement a more sustainable strategy. Second, leveraging new technologies and tools will provide greater visibility into freight at a shipment-to-shipment level, allowing chemical companies to make fine-grained adjustments that result in greater efficiency. 

Diversifying the Transportation Mix

Trucking is traditionally the backbone of chemical transportation in the United States. But it’s also one of the most GHG-intensive. It contributes 23% of the emissions from the transportation sector — the highest polluting sector of the U.S. economy. Diversifying modes used in moving chemicals, such as intermodal or multimodal logistics, strikes a pragmatic balance between sustainability goals and the day-to-day demands of logistics. This approach also helps mitigate risks associated with driver shortages, fluctuating fuel costs and other disruptions, providing added resilience to supply chains. Breaking down longer truck hauls across lower-emission modes of transportation also significantly reduces a company’s carbon footprint. 

Visibility through Technology

New technologies are enabling chemical companies to gain more granular visibility into their freight. While chemical logistics is a data-driven business, the data tends to be coarse, offering insight at the level of general trends rather than individual shipments. 

Still, these tools allow companies to establish baselines regarding the current carbon footprint and the behaviors that shape it, giving a measurable means of understanding why their sustainability efforts are either succeeding or falling short. Increasingly, these tools are also evolving to provide large chemical manufacturers with shipment-level data that makes this analysis even more accurate.

Examples include digital twins for modeling emissions and for testing sustainability scenarios, IoT-enabled devices that offer real-time tracking to reduce fuel consumption and improve asset utilization, and AI-enabled route optimization tools to help dial in maximum efficiency. 

Outlook: Recent new regulations are likely the first of many to roll out in the coming years. Expect that each will increase the stringency of requirements to report sustainability metrics — not reduce it. Despite the difficulties of complying with new regulations, practitioners of chemical logistics will find themselves with a significant advantage over other industries: the ability to leverage long-standing experience in working under strict protocols. 

Resource Link: https://www.odysseylogistics.com/