Indian warehousing industry has undergone a massive transformation in the last few years. Warehouses are no longer spaces to store raw materials or inventory, but they are playing a significant role in the entire logistics and supply chain ecosystem.
Amid this changing landscape, warehouse sustainability has become a critical facet of modern business practices, emphasising environmentally conscious operations. Focused on minimising ecological impact, sustainable warehouses are prioritising energy efficiency, waste reduction, and renewable energy adoption. Apart from reducing carbon footprints, sustainable practices extend to supply chain management, promoting responsible sourcing and packaging. Not only do these initiatives contribute to environmental preservation, but they also often result in cost savings, aligning with the growing demand for socially responsible and eco-friendly business models.
“Supply chain businesses are prioritising sustainability due to three main reasons. One is the push from the stakeholders, especially the investors and governments, for businesses to be environmentally and socially responsible. For most companies, the supply chain is responsible for the bulk of their environmental impact, so making changes in this area is the most impactful. Besides, optimising traffic movements not only reduces onsite activities but also ensures quick turnarounds, ultimately cutting operational costs,” RK Narayan, President of Strategy & Business Development, Horizon Industrial Parks said.
Importance of reducing warehousing cost
In order to make domestically manufactured goods globally competitive, the governments, both the Central and state are taking various initiatives to reduce the overall logistics cost. According to government data, India’s logistics cost is as high as 14 per cent of the GDP as compared to the same in China, which is only 9 per cent of the country’s GDP while the US and Europe record an average of 8 per cent of their respective GDPs.
Industry experts believe that nearly 92 per cent of the total logistics and supply chain expenditure is attributed to transportation, inventory, and warehousing costs. Among these, transportation expenses hold the highest share, while warehousing constitutes nearly 11 percent of the overall cost. To address the challenge of high transportation costs, governments have introduced numerous infrastructure projects aimed at enhancing last-mile connectivity and minimising turnaround times. However, tackling warehousing expenses requires the industry to explore innovative solutions.
Today, warehouses are the backbone of logistics, serving as hubs for the storage and distribution of goods. Broadly, warehousing costs can be categorised into rental and operating expenditures. Rental costs are predominantly market-driven, contingent on factors such as the warehouse’s location and the space it occupies. On the other hand, operating costs exhibit more variability, encompassing expenditures like maintenance, energy and utility costs, and staffing expenses.
The efficient management of energy resources in these facilities not only contributes to environmental sustainability but also plays a pivotal role in reducing logistics costs.
Switching to solar to reduce energy cost
Undoubtedly, operating a storage facility or warehouse requires a substantial amount of energy, often emerging as a primary cost for numerous businesses. To mitigate expenses, the first step involves curbing energy consumption. The efficient management of energy resources in these facilities not only contributes to environmental sustainability but also plays a pivotal role in reducing logistics costs.
In today’s world, dealing with high energy consumption in warehouses is a major challenge, requiring the adoption of strategies to reduce energy use. One of the solutions that the industry is adopting to reduce the energy cost as well as the carbon footprint is to switch to renewable energy. Most of the players are installing solar panels on the rooftops of the warehouses and fulfilment centres. Industry experts believe that the potential for solar energy in India is significant, with large amounts of sunlight available throughout the year. The rooftop solar panels could generate hundreds of terawatt-hours (TWh) of solar electricity annually, enough to power millions of households or even the warehouses themselves.
Warehouses and distribution centers have large, flat, open roofs that typically receive direct sunlight, making them ideal for solar panel installation. Furthermore, these solar panel arrays would not take up additional land and would not cause any disturbance to local residents.
“Sustainability in warehousing has gained importance for reducing operational costs due to the environmental impact of increased carbon emissions in the supply-chain. High energy consumption from heating, cooling, lighting, and equipment contributes to the carbon footprint. Adopting sustainable practices, such as solar panels for energy optimisation, high-efficiency LED lighting, rainwater harvesting, strategic location proximity, and roof insulation, helps conserve resources and lower pollution,” Krishnan S Iyer, Chief Executive Officer, NDR InvIT Managers, said.
He noted that these measures not only address environmental concerns but also enhance investment and productivity. “By minimising operational costs through sustainable practices, companies can simultaneously reduce their carbon footprint, demonstrating a commitment to a cleaner environment for stakeholders. NDR has also embraced a comprehensive sustainability approach. The goal to equip warehouses with 90 per cent solar panel capacity by 2025 aligns environmental objectives with long-term operational efficiency,” Iyer said.
Challenges in implementing solar systems
Implementing rooftop solar systems on warehouses presents notable challenges. Initial costs can be prohibitive, deterring some businesses. While the availability of sufficient rooftop space is no longer a challenge as the new warehouses are being developed as per Grade A standards, technical complexities, including integrating solar infrastructure with existing electrical systems, demand expertise can act as a deterrent. Additionally, regulatory hurdles and varying incentives across regions create uncertainties for businesses considering solar adoption. Balancing aesthetic concerns and structural modifications further complicates implementation.
According to Narayan, rooftop solar systems have the potential to fulfil 30-80 per cent of occupiers’ power needs. “But it depends on factors like if it is net metering or captive set up, energy intensity and consumption patterns of the users, and seasonal fluctuations. But even so, the savings can range from 40-70 per cent, varying by state. However, despite these factors, rooftop solar is effective in reducing energy costs with low capital expenditure, thanks to the influx of imported modules. So, both initial investment and operational costs are manageable and not a deterrent. But solar power generation fluctuates. Going forward, making Battery Energy Storage Systems (BESS) affordable for large capacities can make the combination of solar and BESS a viable solution for uninterrupted green power in the near future,” he added.
Narayan noted that the company is implementing rooftop solar installations across all its parks, with a current capacity of 14MWp and plans to add an additional 10MWp each year. “We engage with our tenants on a regular basis with their operation, environment and renewable teams to assess consumption requirements and patterns for optimal capacity planning,” he added.
Anshul Singhal, Managing Director, Welspun One noted that while solar energy can contribute significantly to reducing operational costs, its seasonal nature and the high initial capital investment in installation and maintenance poses challenges. “To ensure uninterrupted power supply while reducing costs, a hybrid approach can be adopted. This involves using solar power supplemented by other renewable or more traditional energy sources. Additionally, investing in energy storage solutions, improving energy efficiency in other areas, and participating in renewable energy credits or government incentives can help in managing costs and reliability. Welspun One also helps amortise the large initial capital investment for its customers by providing built-to-suit solutions and offering long-term leases, for which costs have been spread out over a longer time period. We also set up EMS (environment management systems) to track and measure data to ensure we move towards meeting global sustainability standards while setting the benchmark for this sector in India,” he added.
Iyer suggested that to ensure uninterrupted power supply it is necessary to install the solar system with battery backup to ensure the excess power generated during the day is used during night operations. By adopting these strategies, companies can optimise energy resources, minimise pollution, and ensure sustainability, he added.
Adopting other sustainability solutions
In addition to solar systems, warehouses are also integrating various other sustainability measures. Energy-efficient technologies, such as LED lighting and smart HVAC systems, using advanced insulation materials to reduce heating and cooling needs, etc., are optimising energy use. Apart from this, industry players are also adopting waste reduction initiatives to prioritise recycling and eco-friendly packaging, contributing to a circular economy.
Industry experts noted that recognising the environmental consequences, the logistics industry is seeing an increase in demand for sustainability, which includes using energy-efficient technologies electric trucks and lower carbon footprints.
“Grade A facilities are now expected to prioritise sustainability measures, aligning operational efficiency with environmental responsibility to reduce overall warehousing costs. Clients emphasise the incorporation of solar panels for clean, renewable energy, addressing both economic and ecological concerns. Additionally, energy-efficient lighting solutions, such as LED lights and skylights for natural lights, are sought after for their dual benefits of sustainability and cost-effectiveness,” Iyer said.
Mahesh Fogla, Executive Director, Patel Integrated Logistics, noted that clients are increasingly interested in initiatives like using electric vehicles (EVs), reducing carbon footprints, and integrating clean energy tools in operations. “Energy costs make up a significant portion of logistics expenses. While sustainability initiatives may not show immediate financial benefits, they create lasting impacts by gradually lowering overall logistics costs. With traditional energy sources projected to become pricier due to surging global demand, sustainability initiatives play a pivotal role in managing logistics costs effectively. Quantifying the exact reduction in logistics costs due to these initiatives is premature. Nonetheless, they undoubtedly contribute to long-term savings and promote a more sustainable operational framework.”
Expressing similar views, Akshat Pushp, Chief Business Officer, Apollo Supply Chain, opined that due to technological advancements, evolving consumer demands, and a growing emphasis on sustainability, the warehousing industry has undergone significant transformation. “Sustainable warehousing is a multifaceted approach that is meticulously crafted to minimise environmental impact while delivering value to the customers. This approach has various integrated eco-friendly practices that help in shaping up the core of logistics operations like energy-efficient design, resource management, waste reduction and emissions control, which contributes to sustainable warehousing,” he said.
According to Narayan, clients also expect energy efficiency in common infrastructure usage. “But that is dependent on how efficient their equipment, machineries, lighting and load distribution are. Providing a rooftop solar thus, aids in cost reduction, but that’s not all. Some clients committed to RE100 goals benefit from our green power solutions to achieve their sustainability targets, and solar helps them achieve their carbon reduction goals as well,” he added.
Conclusion
The Indian warehousing industry has undergone a substantial transformation, evolving from traditional storage spaces to integral components of the logistics and supply chain ecosystem. Within this dynamic landscape, warehouse sustainability emerges as a pivotal aspect of contemporary business practices, emphasising eco-conscious operations. The sector’s focus on minimising ecological impact extends beyond energy efficiency, waste reduction, and renewable energy adoption, encompassing responsible sourcing and packaging.
As governments strive to reduce logistics costs and enhance global competitiveness, the adoption of sustainable practices, including solar energy integration, is imperative. Despite challenges, warehouses are actively embracing innovative solutions, ranging from solar systems to energy-efficient technologies, waste reduction initiatives, and the use of electric vehicles. These multifaceted sustainability measures not only contribute to environmental preservation but also align with the broader shift toward socially responsible and eco-friendly business models, ensuring a more sustainable and cost-effective future for the warehousing industry.
In addition to the financial benefits, embracing solar energy could help the warehousing industry contribute to India’s renewable energy targets and reduce its impact on the environment. With the warehousing market in India set to expand at a CAGR of 12.5 per cent to 324 million sqft by FY28, there is a significant opportunity for the industry to make a positive impact on India’s energy transition.
