Supporting the shift towards a sustainable supply chain in global logistics

Client Challenges

Similar to many organizations, Hapag-Lloyd is facing significant pressure from both customers and regulatory bodies to prioritize sustainability. Yet, the company is also intrinsically motivated, driven by a deep-seated commitment to sustainable practices and a greener future. As part of their corporate strategy, Hapag-Lloyd has established ambitious sustainability goals. These are particularly focused on creating a decarbonization roadmap aimed at achieving net-zero emissions by 2045 and ensuring compliance with sustainability-related laws and regulations, such as the German Supply Chain Act.

Procurement, being the manager of all supplier relationships, recognized its pivotal role at an early stage. With the responsibility of managing scope 3 emissions and ensuring social standards within Hapag-Lloyd's supplier base, procurement is confronted with five significant challenges:

1. Modifying existing procurement processes to ensure sustainability is a vital element in category and supplier management, and a decisive factor in selection and awarding processes.
2. Activating the supplier base to guarantee that "green solutions" can be leveraged to expedite the company's decarbonization roadmap.
3. Assessing suppliers' sustainability performance and ensuring that this performance is reflected in supplier-related work.
4. Guaranteeing compliance with social standards from all suppliers on a global scale.
5. Developing an organizational structure to ensure that concepts and strategies are converted into action on a global scale.

H&Z Approach

We began by pinpointing Hapag-Lloyd's main sustainability hot spots through a materiality analysis. The majority of the activities examined were related to transportation services (including truck, rail, barge, and feeder shipping), where we identified key social and environmental aspects.

From this analysis, we derived the core purpose, set the ambition level, and crafted the strategy for procurement.. This was achieved in cross-functional workshops, where the role of procurement was outlined and the expectations from the organization were identified. Driven by the newly defined purpose – "we deliver a green, fair, and transparent supply chain" – Hapag-Lloyd procurement began transforming their ambition into action by modifying core procurement processes:

Supplier Management: We formulated a questionnaire to assess suppliers' sustainability performance, which was then used for onboarding, classification, and auditing processes. Moreover, we developed an on-site audit procedure, and established a “collaboration & innovation workshop” with suppliers.

Category Management: To strengthen the procurement department, a sustainability-focused category directory was developed. This instrument assists in examining the market for eco-friendly solutions and enhances communication between regions, particularly regarding the emergence and accessibility of new technologies.

Selection and Awarding: By integrating sustainability into the supplier evaluation method, a "bonus-malus" approach was adopted. This mechanism assesses suppliers based on their ESG contributions, converts this evaluation into a rating, and modifies the actual cost either by adding a premium or by offering a discount, depending on the rating.

Following these procedural changes, we built a global network of "sustainability champions" – a procurement professional per region who is responsible for ensuring the successful roll-out of concepts and identifying green solutions within their respective region. We developed sustainability-specific training concepts, in both virtual and physical format. They fostered a sustainability mindset throughout the entire organization and strengthened the expertise on recent technologies and developments that can support Hapag-Lloyd's journey to net zero.

To monitor progress and performance, we established a set of KPIs and assisted Hapag-Lloyd in choosing a digital tool to provide transparency about their carbon footprint, encompassing all three scopes.

Results

H&Z's approach led to the successful implementation of a comprehensive sustainability strategy for Hapag-Lloyd's procurement organization. This project has fostered a global awareness for sustainability within Hapag-Lloyd. Now, the company is not only able to assess the sustainability performance of its suppliers but also to actively collaborate with them to reduce their scope 3 footprint. In the medium term, this will enable Hapag-Lloyd to provide fully green, door-to-door transportation services, establishing a significant differentiating factor in the global container shipping industry.