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How Sustainability’s Advantages Can Help Overcome Market Uncertainty

While February is the year’s shortest month — even with this year’s Leap Day of Feb. 29 — it was by no means a quiet month if you look at what topped the headlines. 

At Searoutes, we saw two predominant themes: market uncertainties brought by geopolitical and macroeconomic volatility, such as the ongoing Red Sea disruptions and attacks by Houthi rebels on ocean vessels, and the financial windfalls that companies received from adopting sustainable practices or working on projects that promote sustainability. 

Walmart Meets Emissions Targets Ahead Of Schedule

Walmart says it has met its goal of reducing Scope 3 emissions six years ahead of its 2030 target date. The Bentonville, Ark.-based retailer’s suppliers have reduced their carbon footprint by 1 billion metric tons of greenhouse gas emissions through sequestration or by eliminating or reducing emissions through strategies like package redesign, energy efficiency, and trucking-load optimization, according to the Wall Street Journal.

About 75% of Walmart’s net U.S. sales in fiscal 2023 came from suppliers participating in the emissions reduction initiative, which Walmart named Project Gigatron. Walmart first asked suppliers to reduce emissions in 2017. Read more details in the WSJ article (subscription required).

CMA CGM to reconsider transit via the Red Sea

French-based ocean carrier CMA CGM will resume transit in the Red Sea on a case-by-case basis. Supply Chain Dive cited a statement from the carrier stating that CMA CGM has reevaluated the situation in the Southern Area of the Red Sea and will assess it before a vessel starts its transit. CMA CGM declined requests for additional comment, citing crew and vessel safety concerns. 

Ocean carriers have been grappling with how to handle Houthi rebel attacks on vessels seeking passage on the Red Sea since mid-November. Other carriers, such as Maersk, ONE Line, MSC, and Hapag-Lloyd, have said they would reroute vessels through the Cape of Good Hope because of the attacks. 

Sustainability Projects Contribute to EPC Companies’ Profits

While profits were mixed, four major companies representing engineering, procurement, and construction (EPC) contractors saw their order backlogs grow by double-digits in recent financial reporting periods, the Journal of Commerce reported (subscription required)

According to JOC’s analysis of the companies’ comments during recent quarterly earnings calls, Fluor, KBR, TechnipFMC, and Worley are also optimistic that momentum for higher revenues will continue in 2024.

Impact Across the Globe 

The backlog for Australian-based energy services group Worley grew 11% to $9.6 billion for 2023, compared with the prior year, as the company witnessed revenue growth for its energy segment amid Worley’s shift toward sustainability-focused projects.

Meanwhile, multinational energy services contractor TechnipFMC saw double-digit growth for both quarterly and yearly revenue. Fourth-quarter 2023 revenue increased 23% to $2.1 billion, while 2023 annual revenue grew 17% to $7.8 billion amid improved performances in Technip’s subsea and surface technologies segments. 

JOC said a shift in the flow of global capital, an increased role for new technologies, and an expanded role for subsea services, which are driven in turn by the needs of growing and aging infrastructure, support Technip’s profits, attributing Technip CEO Doug Pferdehirt.

A  Boom in Texas, Too 

Texas-based Fluor Corp. said its order backlog grew 13% to $29.4 billion in 2023 amid growth in the company’s energy solutions segment, its missions segment supporting the defense market, and the urban solutions business unit for sectors such as technology, manufacturing, and mining. 

Also in Texas, Houston-based KBR said fourth-quarter 2023 revenue increased 8% year-over-year to $1.7 billion as the company witnessed heightened demand in its sustainable technology segment and growth in its government solutions segment.

3 Strategies to Overcome Supply Chain Uncertainties

In an op-ed for FreightWaves, Glenn Riggs, chief strategy officer for Odyssey Logistics, advised supply chain professionals to fortify their operations against evolving geopolitical and macroeconomic uncertainties by following three strategies. 

According to Riggs, the first strategy is to prepare alternate sources of supply and alternate transport routing possibilities to provide companies with options should a potentially disruptive event occur, such as the Red Sea attacks by Houthi rebels on ocean vessels, Lunar New Year, or port-labor strife at U.S. ports.

A second strategy is to develop a priority structure for the freight that needs to get shipped so that there is a hierarchy that can inform the supply chain professional which goods are worth the shipping premium and which are worth waiting until the situation improves. 

A third strategy is to diversify your partners and your shipping options to spread risks across the network of a 3PL or 4PL partner, as opposed to concentrating your options in one area. Riggs said volatility in 2024 might not be the opportune time to rely on a unimodal solution. 

On-Time Reliability for Ocean Carriers Plunges in January

Ocean carriers’ diversions of the Red Sea because of Houthi rebel activity have caused carrier schedule reliability to fall sharply in January, JOC reported, quoting multiple trackers. This includes a knock-off impact that is affecting major ocean trade lanes outside of the Asia-Europe and Asia-U.S. East Coast routes.

Monthly data from Sea-Intelligence Maritime Analysis showed that global on-time performance dropped to 51.6%, its lowest rate since September 2022, JOC said. Performance fell on 29 of the 34 lanes tracked. January’s on-time performance rate is in stark contrast to rates between 70% and 80% that were seen before the COVID-19 pandemic.  

The fallout to other lanes was a surprise to some. A possible explanation could be a “contagion” effect in which disruptions reverberate through the system, JOC quoted its analyst and Vespucci Maritime CEO and founder Lars Jensen as saying.

Jensen also said Asia-U.S. West Coast trade fell 9% to 48%, while trans-Atlantic, westbound ships slipped 6.5% from December to 44% in January.

Read more details in the JOC article (subscription required).

Easing Fears Through Data Visibility 

Supply chain professionals can meet global and macroeconomic uncertainties by arming themselves with knowledge. To learn more about how supply chain professionals are coming with the Red Sea disruptions, check out this webinar featuring Searoutes CEO Pierre Garreau and other esteemed market experts on how the Red Sea disruptions are affecting operations beyond the Middle East.

Another way to hedge against supply chain uncertainties and ensure that your company’s sustainability initiatives are being met is by utilizing technological tools that provide market insights. To help companies achieve this, Searoutes offers three tools: 

  • Vessel API helps you keep track of a vessel’s position and provides historical trace information of numerous vessels.
  • Routing API monitors fuel consumption, tracks carbon emissions, and calculates accurate routes and sea distances.
  • CO2 API enables users to search for optimal routes and their related carbon emissions.

Contact Searoutes today to learn how our tools can help you effectively implement sustainability initiatives during tender negotiations.