New reality and opportunities of Baltic Sea supply chains

Oskari Lähdeaho,
Junior Researcher,
LUT University, Kouvola unit,
Finland

Modern logistics companies face pressures to transform towards improved sustainability. These pressures originate from global, regional, and national legislation, as well as stakeholder demand. In other words, companies from their own perspective are experiencing “top-down” and “bottom-up” pressure simultaneously. While they are busy in complying with tightening legislation and regulation, they must please their clientele and other external stakeholders. Therefore, companies in logistics industry are more often recognizing possible competitive advantages attainable by improving sustainability performance of their operations. Some have even assumed a strategy to position as forerunner in sustainability related issues in the industry.

During the past two years, Covid-19 pandemic has had immense impact to supply chains globally. Baltic Sea is not an exception. Incumbent supply chains experienced shocks during the early days of the pandemic, and the after-effects are still visible today. Resilience of supply chains has been forced as a subject for rigorous stress-testing due to the pandemic circumstances. While this situation has had its negative impacts, it has also exposed weaknesses and illuminated possible improvements to status quo. One such improvement is in transport mode selection. As traditional supply chains are stretched to their limits, new ones are studied, piloted, and implemented. For example, majority of freight globally is transported by sea. However, after the pandemic, sea transportations have been congested and their prices have soared. Due to this, railway transports have gained popularity, for example between Europe and Asia.

For smaller logistics companies, turbulence during pandemic times have posed as a challenge for survival. While larger companies often have some cushion to fall back on temporarily, smaller companies usually lack this privilege. Also, reportedly smaller companies face difficulties in acquiring governmental aid. Unfortunately, survival mode in smaller companies has led to less focus to afford for improving environmental sustainability. Nevertheless, modern societies depend on small and medium enterprises as employers. Moreover, large corporations’ business practices heavily rely on subcontracting from these smaller actors. In logistics, this means that smaller actors usually perform the transportation itself. Thus, economic sustainability of Baltic Sea societies can be seen as depended on small and medium enterprises. In addition, supply chains and logistics operations in the region are powered by these enterprises via subcontracting.

Sustainability can be divided into three dimensions: economic, environmental, and social. Past two years has tested economic sustainability of businesses. Amid the challenging times, practices and managerial mindsets have improved in this regard. However, as market activity returns, it is important to apply the lessons in change resilience to other dimensions of sustainability. We are still facing steepening uphill battle for environmental sustainability. During the worst times of pandemic, companies did not settle for simple trade-offs in conducting business. Instead, those who performed best were able to find new opportunities amid the challenges. Similar mindset is needed to navigate through environmental challenges in business. Those who can adapt to the changing surroundings, turn challenges into competitive advantages, will prosper the most in coming decades. This applies to all sectors, but especially logistics.

While transportation is accountable for a significant share of negative environmental impact, it is also vital for modern societies. Fluent supply chains offer necessities and commodities required to lead normal living. Thus, societies are reliant on these supply chains and furthermore the transportation services enabling them. Environmentally sustainable societies are only achievable through environmentally sound transportations. Subsequently, environmental advances in transportation are realized by subcontractors in collaboration with large corporations. It seems that economical stability of subcontractors and the surrounding logistics systems is critical for further improvements in sustainability of Baltic Sea supply chains.

A possible solution for increasing stability and sustainability of Baltic Sea supply chains would be development programs in the region. These programs should involve consortiums with smaller companies, large actors, public sector, and academia. Also, cross-border collaboration is important, as it has been decreasing during the pandemic times. Programs of this sort have been successful in the past, for example Cross-border cooperation program between South-East Finland and Russia. Green InterTraffic was a project in this program, where Finnish and Russian partners collaborated in measuring environmental impacts of road transportation between these countries.

Green InterTraffic project website: https://en.greenintertraffic.ru/

Email: oskari.lahdeaho@lut.fi

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