The Effect of European Environmental Regulations and Innovation Strategies on the Competitiveness of Intra-European Logistics Service Providers

Abstract

In the upcoming years, freight transportation demand is expected to increase, and thus, raise the environmental impact of logistics service providers (LSPs). Transport and logistic activities are the second-largest emitters of greenhouse gas emissions (GHGE) and have a significant impact on air quality, noise pollution, water quality, and, among many other, land take. In efforts to collectively reach the goal of reducing GHGE by at least 55% by 2030, compared to the 1990 levels, there is an increasing number of initiatives such as the Fit for 55 package, European Climate Law, EU strategy on adaptation to climate change, CO2 emissions from transport, EU emissions trading system, effort sharing, land use and forestry, and clean energy. Through these initiatives, governments aim to fight climate change and drive urban action that reduces greenhouse gas emissions and climate risks, while increasing citizens’ health, well-being, and economic opportunities. As part of the transport and logistics industry, LSPs play a significant role in changing the current trajectory of GHGE and other environmental problems. However, not many companies are acting upon these issues, and those who are, have not been ambitious enough. Some of the reasons include: the highly competitive, low margin, and capital-intensive market LSPs operate in, as well as the high level of green investment needed, the uncertainty of their payback period, the lack of employees with a focus on environmental initiatives, and the lack of a well-defined regulatory framework and financial incentives. In this context, research indicates that many of the barriers are highly influenced by how regulations are designed and how governments support LSPs in improving their environmental performance. To this end, many researchers have evaluated the relationship between environmental regulations, innovation, and a firm’s competitiveness. In this regard, evolutionary economists believe that environmental regulations can trigger innovation that may partially or more than fully reduce the costs of complying with them (increase in competitiveness) (i.e., Porter Hypothesis). In contrast, neoclassical economists believe that this “win-win” situation does not exist. To this date, the overall findings of the Porter Hypothesis have been inconclusive and context specific. Therefore, the objective of this study is to carefully evaluate the Porter Hypothesis in LSPs and understand whether environmental regulations are appropriately designed, understand the importance of the involvement of LSPs in the development of environmental regulations and provide insights on how they can design practical corporate environmental approaches. More specifically, the main research question the study aims to answer is: “Under which conditions can European environmental regulations increase competitiveness for Intra-European Logistics Service Providers (LSPs)?”...