How do we link halal industries with green logistics to drive the Islamic economy responsibly and sustainably?

This article is contributed by Lina Anggraini S.Si and Dr. Sutan Emir Hidayat. Lina is Ocean Carrier Management (OCM) Manager at Kuehne +Nagel and an MBA candidate at the School of Business and Management, Bandung Institute of Technology (ITB), and Dr. Sutan is Director of Education and Research, National Committee of Islamic Finance (KNKS), Indonesia. 

We can be proud of Indonesia's recent achievement on the Global Islamic Economy Indicator (GIEI) from tenth to fifth in the State of the Global Islamic Economy 2019/20 report. It is contributed by many factors, such as government support in financing the halal industry.

Indonesia’s Ministry of Industry has set a target of $25 billion for the trade value of the country’s halal sectors in 2019, 20% higher than what was achieved in the previous year. This trade value consists of fashion products, pharmaceuticals and cosmetics, food, halal laboratories, and halal centers. Boosting the development of the halal industry is a good opportunity for Indonesia to increase its GDP, and will also open up many job opportunities. More of those opportunities will arise as there are also four halal industrial zones to be developed: Batamindo Industrial Estate, Bintan Industrial Park, Jakarta Industrial Estate Pulogadung, and Modern Cikande Industrial Estate.

However, as we move forward with planning and implementing plans to develop Indonesia’s halal economy, we must factor in their environmental costs and considerations. As Muslims, it is part of our belief to take care of the environment that will be inherited by our grandchildren. As part of this responsibility, it is unfortunate that logistics is one sector that is often under-addressed in the halal economy, yet the manufacturing and transportation sectors contribute 19% and 23%, respectively, to carbon emissions, according to the International Energy Agency.

How many of us, though, are familiar with green supply chain logistics that maximizes the utilization of raw materials and their delivery processes while striving for minimum waste?

Green logistics is meant to mitigate the harmful effects of social and environmental problems such as climate change, global warming, carbon emissions, and poisoning the atmosphere. Its practice is significantly under-explored in Indonesia, even as Jakarta was named the most polluted city in Southeast Asia in 2018 in a report from Swiss company IQAir AirVisual and non-profit organization Greenpeace. The report also said that Jakarta risks becoming more polluted than Beijing as the Chinese city’s air quality improves. This is a serious issue that directly and indirectly impacts the life and death of the world’s citizens: the World Health Organisation (WHO) estimates that seven million people worldwide every year are killed by exposure to fine particles in polluted air that lead to diseases such as stroke, heart disease, lung cancer, chronic obstructive pulmonary diseases and respiratory infections, including pneumonia.

Tackling our responsibilities to improving the quality of the air we breathe can be done while driving the economic development of the halal industry.

Logistics operations, particularly the efficiency of custom clearance processes, quality of logistics services, and trade transport infrastructure, have been shown to positively correlate with per capita income, according to one study published in January by Prof. Syed Abdul Rehman Khan of Beijing’s Tsinghua University. This means that if we focus on the development of green logistics we could increase our GDP.

The question now is how to link the halal industry with green logistics so that the Islamic sectors can play an important role in our economic development, with minimum environmental impact.

GOOD PRACTICES

In our opinion, there are several things that can be done to support the halal industry towards green logistics.

First, the halal industry could start to implement efficient production processes to minimize waste.

Second, government support on the regulation for the growth of the halal industry can focus on the use of renewable energy and minimizing waste.

Third, reverse logistics, by which end consumers return or reuse materials to the product company, could be implemented.

There are already examples the halal industry can look to with regards minimizing waste in logistics.

One is by reviewing transportation routing. We can maximize fuel use by selecting the closest or the least congested traffic routes.

Another example is by using battery equipment (forklifts and reach trucks) within warehouse inventory management instead of fuel-based equipment.

Government support can be in the form of regulations. The government can regulate the price of plastics, plastic utilization, and waste management. For example, increasing the price of plastics may reduce their use and move more businesses and consumers to biodegradable packaging. This would be a welcome move for Indonesia, which was identified in a 2017 global study as a “major contributor on the Asian continent” of waste mismanagement and plastic pollution in rivers.

In line with waste reduction, Starbucks is a good example of a company that has successfully encouraged a shift in consumer practice. The company awards those who bring their own tumblers or mugs with discounts, resulting in a saving of more than 42 million disposable cups as 1.3% of customers in the U.S., Canada and EMEA use their own, according to Starbucks Global Social Impact Report 2018.

Another example is the Coca Cola company which has started to produce bottles from ocean plastic waste.

These practices can be extended to the halal food and beverages industry.

REVERSE LOGISTICS FOR HALAL INDUSTRY

In our opinion, reverse logistics is a very attractive solution for the halal industry. The example of successful companies that implement reverse logistics are Hawlett-Packard and Xerox, both of which collect used cartridges and other consumables. Reverse logistics could reduce cost of the company by increasing product life cycle, production speed, and reduce transport cost.

The Body Shop has also successfully implemented reverse logistics. The company encourages its customers to return empty bottles or plastic cups to be recycled, rewarding them with points that can be used towards purchases.

Rewarding responsible practices the way The Body Shop and Starbucks do is a great way to engage customers, especially in this day and age when consumers look not only for good products but also consider their environmental impact.

In our opinion, we can start to use reverse logistics in halal cosmetics as well, a sector that has huge economic potential. Muslims spent $64 billion in 2018 on cosmetics and this is forecast to reach $95 billion by 2024, according to the State of the Global Islamic Economy 2019/20 report.

Implementing green logistics solutions will yield many benefits for halal industry players.

The Tsinghua University study in 2019 indicates that logistics operations improves economic growth in terms of per capita income, trade openness and industry value added activities, while logistics operations are negatively correlated with environmental sustainability due to carbon emissions, greenhouse gas emissions, fossil fuel and nitrogen emissions.

More efficient and green logistics practices can help the halal industry contribute more to the Indonesian GDP not only in terms of profitability but also towards environmental sustainability.

©  Lina Anggraini S.Si and and Dr. Sutan Emir Hidayat 2019