HVO in logistics: an overview of services, impact, and future potential

As the pressure to reduce emissions builds on the regulatory front and beyond, driving sustainability in supply chains is essential. Logistics companies are in a position to lead the transition to greener fuels, responding to manufacturers’ aim of lowering their carbon footprint. Finding and adopting sustainable alternatives to fossil fuels is a fundamental step in this direction.

Hydrotreated Vegetable Oil (HVO) is a viable solution, cutting carbon emissions by up to 90% compared to traditional diesel. Unlike fossil fuels, HVO is sourced from renewable materials like waste oils and fats, serving as a cleaner and more sustainable option. However, the success of integrating HVO and other sustainable fuels into logistics depends on the cooperation of all involved parties, including customers, carriers, and oil companies. This is a viable route to ensuring that supply chains remain efficient while meeting ambitious climate goals.

Overview of HVO services in logistics

Logistics companies playing a leading role in the transition to renewable fuels like HVO. By implementing a selection of HVO service models, they can cater to different customer needs and focus on sustainability without compromising operational flexibility. Common approaches to HVO services vary from direct supply to partnerships and more flexible models like mass balancing and book-and-claim. Each service model presents unique advantages and challenges, offering different levels of control and sustainability impact across the supply chain.

Direct HVO supply

Logistics companies can offer direct HVO supply by integrating the fuel into their fleets, allowing customers to directly benefit from HVO-powered transport services. This involves a dedicated fleet of trucks running solely on HVO.

From a carrier’s perspective, direct HVO supply requires access to a consistent supply of HVO in service regions, along with infrastructure for storing and dispensing the fuel. For customers, direct HVO supply effectively reduces their carbon footprint and, in doing so, contributes to meeting sustainability targets. The latter advantage is also significant for carriers. However, this service model comes with some limitations as the availability of HVO varies by region, and securing a reliable supply can be challenging.

A successful application of this service model could involve logistics companies offering predefined round trips between predetermined locations within a region where HVO is available. For instance, dedicated HVO-fueled fleets could carry frequent shipments between two major distribution hubs, providing a cleaner, low-emission alternative for repetitive routes.

Indirect HVO supply

Indirect HVO supply involves logistics companies outsourcing HVO-powered transport services to third-party carriers or fuel suppliers. Rather than directly handling the fuel, logistics companies may partner with carriers that already use HVO, gaining access to a sustainable transport solution without additional infrastructure investments.

From a carrier’s perspective, indirect HVO supply can be more flexible, as it omits the responsibility of maintaining a dedicated HVO fleet. On the other hand, this service model relies on the availability and commitment of third-party partners. For customers, indirect supply gives access to greener transport services, but, compared to the direct supply model, it offers less control over the sustainability aspect of the supply chain.

An example of indirect HVO utilization could involve partnering with regional transport companies that already use HVO for specific routes, thus enabling logistics companies to incorporate these services into their broader transport offering.

Mass balancing

Mass balancing is a system used in supply chains where HVO is mixed with fossil fuels. In this case, the exact proportion of renewable fuel is a key metric for addressing the customer’s sustainability goals.?This method is particularly suited for cases where the same route, or trajectory, is repeatedly used. Often, multiple clients may share the same lane, further optimizing transport infrastructure and extending the reach of renewable fuel services into regions with variable HVO availability. Unlike direct supply, where the infrastructure must be dedicated to HVO transportation, mass balancing involves hybrid supply chains, extending service coverage into areas where the HVO availability is unstable.

From a carrier’s perspective, mass balancing allows reduced emissions in complex, long-distance supply chains. For customers, the key distinction is that, without receiving 100% HVO-powered transport, they get credited for the use of a certain amount of HVO within the supply chain. In conclusion, though the direct environmental impact might be less visible, this service model allows customers to meet sustainability targets without compromising on operational flexibility. However, it is also important to note that this model heavily relies on transparent reporting, which involves thorough documentation, auditing, and other administrative obligations.

Book-and-claim systems

This service method gives companies access to HVO services without physically using HVO fuel on their specific transport routes. More specifically, logistics companies or customers can “book” a certain volume of HVO by financing its production and distribution, in turn “claiming” this transaction as their sustainability effort. The claimed fuel is then used in a different location, but the environmental benefits are credited to the buyer.

From a carrier’s perspective, this system eliminates the need for HVO-specific infrastructure or fleet modifications, allowing a creditable sustainability practice to customers even in regions where HVO is unavailable. For customers, book and claim allowing to meet sustainability targets without drawbacks on flexibility. On the other hand, this service model is susceptible to criticism due to a lack of direct connection to the physical use of HVO. As a supportive measure, therefore, accreditation and reporting are critical in this service model, and companies need to ensure the HVO they have “booked” is verifiable and properly accounted for.

Scope 3 emissions and regulatory compliance

Logistics providers are pivotal in helping customers achieve their sustainability goals, especially in reducing Scope 3 emissions (indirect emissions that occur throughout the supply chain). By offering scalable solutions like HVO services, logistics companies allow manufacturers to lower their carbon footprints without requiring significant changes to their own fleets or infrastructure.

While battery electric vehicles (BEVs) and intermodal transport show significant potential as long-term solutions, high costs and the resources required to eliminate infrastructure limitations position them as impractical for widespread adoption today. In contrast, HVO offers an effective, readily available alternative that can be seamlessly integrated into existing operations. This concerns all four aforementioned service models, although it is necessary to note that different limitations, implementation requirements, and desired sustainability impact must be considered on a case-by-case basis.

Alternative solutions

In response to the growing demand for more sustainable practices within the supply chain, Girteka has integrated alternative fuels into its fleet solutions, offering HVO100 as an option. This allows manufacturers to reduce their Scope 3 emissions without compromising on operational efficiency - a clear impact of strategic partnerships with logistics providers committed to sustainability.

Alternative Fuel Program by Girteka is specifically tailored for companies with long-term contracts that are committed to sustainability and looking to significantly reduce their transport emissions. The process is simple - when customers opt for transportation services using HVO (Hydrotreated Vegetable Oil), Girteka utilizes trucks in areas with the necessary infrastructure to refuel with this alternative fuel. The amount of fuel required for the customer’s transport is matched, even if it’s used by another truck in the network. Customers then receive a detailed report showing the emissions reductions achieved through their participation. The program is available to customers with dedicated lanes, excluding spot market services.

The AFP’s structured reporting and certification allow customers to track their impact directly, making it an effective choice for companies looking to achieve tangible results in their decarbonization efforts.

Innovating for a sustainable future: where are HVO services headed?

Successive innovations in renewable fuel services are expected to not only ease the adoption of existing solutions but also expand the list of available service models in the future. Logistics providers are also doing their part by investing in advanced fuel-sourcing strategies and continually optimizing fleet assets for renewable fuel use. In combination, these two factors have significant potential for driving the next generation of sustainability in transportation in years to come. As a result of these improvements, HVO will also become more accessible, efficient, and impactful.

Today, the dynamics of the biodiesel market are mainly driven by the growth in demand for HVO (Hydrotreated Vegetable Oil), estimated at +15% between 2021 and 2022. Based on existing announcements, the global biofuels market could increase by another 23% over the next 5 years, with HVO and ethanol accounting for two-thirds of this growth, and FAME and biokerosene accounting for the remaining third.

When it comes to driving innovation in HVO services, the success of strong and lasting positioning of HVO as a viable route to sustainability within supply chains depends on a multitude of variables. With that said, some of the main steps that logistics companies are already taking include:

• Spreading information about the environmental impact and potential of HVO services and actively promoting them to existing and potential customers;
• Expanding service offerings to reach more regions and strengthen their appeal in different industries;
• Sourcing certified, sustainable HVO to promote transparency about HVO services and their environmental impact, as well as ensure the long-term availability of HVO. In this regard, transparency also involves the traceability of the fuel.

These efforts allow logistics companies to not only meet today's sustainability demands but also position themselves as key players in the future of green logistics.

Navigating Regulatory Differences and Challenges

The increasingly prominent adoption of HVO across Europe is also raising new challenges related to navigating the diverse and evolving regulatory landscape. The Renewable Energy Directive (RED II) is an overarching directive on the renewable energy front. This framework obliges EU countries to ensure that the share of renewable energy in the final consumption of energy in transport is at least 14% by 2030, including a minimum share of 3.5% of advanced biofuels. Moving forward, the regulatory push is expected to tighten further, with stricter mandates and incentives favoring renewable alternatives like HVO over traditional fossil fuels.

Logistics providers are instrumental in helping their customers comply with complex and regionally varied regulations. With their established networks, assets, and certification systems, they are well equipped to stay up to date with renewable fuel mandates, carbon credit schemes, and emission reduction targets and ensure that their clients meet local and European standards without disruptions.

By offering various services - from direct and indirect supply to innovative systems like mass balancing and book-and-claim - logistics providers are dedicated to driving a smooth transition to renewable fuels. As HVO takes center stage in green corridors and intermodal transport solutions, its potential for reducing carbon footprints at a global level looks promising. Therefore, choosing the right logistics partner for HVO services offers not only immediate benefits in emissions reduction but also long-term, strategic value.