Scoping Out a Green Logistics Partner
Companies increasingly are under scrutiny for their environmental impact. And the microscope isn't just focused on company assets. To be truly green, you also are accountable for your supply chain, including the transportation and logistics partners that operate on your behalf.
There's no getting around it: transporting goods and people burns fossil fuels. According to a recent World Economic Forum report, the global transport and logistics industry accounts for 2,800 megatons of greenhouse gases. This impact reverberates up and down the supply chain. In fact, between 5% to 15% of product-lifecycle emissions come from logistics and transportation.
For most companies, transportation and logistics are indirect emissions, called Scope 3 under the Greenhouse Gas (GHG) Protocol. Introduced in 2001 by the World Resources Institute and the World Business Council on Sustainable Development, the GHG Protocol guides companies on how to quantify and measure their output of six kinds of greenhouse gases, including those that encompass a company's direct and indirect carbon-emission contributions.
As defined by the GHG Protocol, Scope 1 emissions are direct emissions from operations or on-site energy production. Scope 2 accounts for electricity that is purchased from an outside provider. Scope 3 is much broader and can include emissions embedded in purchased products or emissions associated with transporting and disposing of the firm's products. Scope 3 carbon accounting obviously is the trickiest, because it requires companies to look beyond their own operations and consider the green worthiness of supply-chain partners.
Since the environmental impact of their operations can have a significant impact on your own company's footprint, the question is: How do you evaluate which potential logistics partners have made the most environmental progress?
When evaluating Scope 3 logistics partners, it's helpful to consider at least four key environmental dimensions:
- Mode flexibility
- Network optimization
- Clean-fuel technologies
- Complete carbon accounting
Let's look a little closer at these four dimensions.
Modal Flexibility: Getting There Greener
The four different transport modes used in the transportation of packages and freight -- truck, rail, ship and air -- each have very different energy intensity and carbon-emission profiles. Air transport is six to eight times more energy intensive than trucking. Trucking is four times more energy-intensive than rail. Rail is twice as energy intensive as ocean shipping.
These differences mean you should look for a logistics and transport partner that offers maximum intermodal flexibility. If the carrier's ground network is extensive enough, express shipments can sometimes travel by truck rather than air, saving significant fuel and emissions. In other cases, road packages and freight can be shifted to rail. For international shipments, multiple orders bound for the same country can sometimes be consolidated into a single shipment as it crosses the border, helping to speed delivery and minimize the need for domestic air transport.
There is no global carrier that owns and operates fleets across every single transport mode, but some do own and operate their own trucking, airline and last-mile delivery networks. Integrated carriers also have agreements with railroad operators and ocean-shipping lines to carry customer shipments, which enables single-point management of multi-modal transport. Some logistics companies offer full supply-chain visibility and tracking systems as the shipments change hands and change modes. The more integrated a carrier's multi-modal network, the more flexibility the carrier has to choose the right transport mode to maximize speed and efficiency while also minimizing fuel usage and carbon emissions.
Mode switching is the most powerful tool carriers can employ to reduce their environmental impact. In fact, a logistics partner with modal flexibility can realize startling reductions in Scope 3 carbon footprint. UPS is a prime example. By downshifting a portion of our air-express packages to ground (trucks), UPS has been able reduce our emissions by the equivalent of every UPS-owned package car in the world -- while still meeting time-definite requirements.
UPS is also one of the nation's largest users of rail. By incorporating rail as part of our multi-modal strategy, our package-delivery network has reduced emissions equivalent to 1.4 million metric tons of CO2.
Network Optimization: Taking the Greener Route
A second key dimension to look for in green logistics partners is the degree to which they are optimizing their transport networks. The way carriers design, schedule and dispatch their routes can reduce the number of miles traveled and the amount of fuel and emissions burned. Techniques and technologies they might use to make their trucks and airplanes more fuel-efficient can have a similar impact.
Asking the right questions can reveal the degree of optimization of a logistics partner's network. Have they redesigned their trucking routes to reduce the number of miles traveled and minimize the number of stops needed to serve customers? What information-technology systems have been incorporated to automate sorting and loading and maximize the number of packages or freight that fit on a vehicle or airplane? Do drivers follow well-defined and well-enforced policies that control speed and braking and minimize idling to reduce energy usage?
At UPS, we have experienced the impact of network optimization firsthand. We recently leveraged a combination of hardware and software tools to undertake a massive redesign of our routing, loading and sorting processes. This multi-year initiative -- called Package Flow -- includes process enhancements like shortening routes, minimizing idling times, loading packages in the precise order they're delivered and combining multiple deliveries into a single stop. In all, Package Flow has shaved 100 million miles from our delivery routes since 2003 and has reduced fuel use by ten million gallons and carbon emissions by more than 100,000 metric tons.
Similar green-friendly network-optimization processes can be applied in the air transportation mode. If you utilize air express or air freight services, check to see if your carrier implements programs like lower flight speeds; computer-optimized flight plans that minimize fuel burn; and taxiway-management systems that minimize aircraft taxiing time. Probably the most important consideration is the fuel efficiency of the carrier's airplane fleet.
One sure way to evaluate an airline's fuel efficiency (or your Scope 3 transport partner's efficiency) is to compare key performance indicators such as gallons per package, CO2 emissions per available ton mile, aviation gallons burned per ton miles and aircraft emissions per payload capacity.
Clean-Fuel Technologies: Less Fuel, Fewer Emissions
A third dimension to consider when evaluating Scope 3 logistics partners is incorporation of clean-fuel technologies. Technologies such as alternative-technology vehicles and telematics can allow fleet operators to reduce fossil-fuel consumption and carbon emissions.
Clean-fuel vehicle technologies like electric, hybrid-electric, hybrid-hydraulic, compressed and liquefied natural gas and propane are in various stages of maturity. But they are starting to be adopted across commercial transport fleets. By the end of 2009, for example, UPS will operate more than 2,000 alternative-technology vehicles worldwide.
It's important to understand that there is no silver-bullet alternative-fuel technology. Each technology has its own advantages and disadvantages. And each offers varying fuel-consumption and emissions benefits, different optimal driving ranges and load-hauling characteristics, unique infrastructure considerations and varying acquisition-cost premiums over gasoline and diesel vehicles.
Carriers should deploy alternative-technology vehicles where they are best suited for specific transport and delivery applications. Hybrid-electric vehicles, for instance, are ideal for the frequent stops and starts of last-mile deliveries. Liquefied natural-gas engines are appropriate for larger, long-haul tractor trailers. When you're evaluating Scope 3 partners, ask about their plans for alternative-technology vehicles -- and how these technologies will help them reduce fuel usage and carbon emissions.
Clean-vehicle technologies aren't just focused on the engine. Find out if your logistics partners are deploying telematics technologies in their ground fleets to enhance operational efficiency.
Telematics is a technology that places sensors in the transportation vehicles. These sensors collect operations information that the fleet operator can use to monitor vehicle maintenance and improve vehicle efficiency. Telematics sensors can collect up to 200 vehicle-related elements, everything from speed, RPMS and oil pressure to amount of time spend idling.
These monitored statistics can help support operational changes that can reduce a fleet's carbon footprint. At UPS, telematics helped us determine that our delivery vehicles were idling more than we expected. We were able to make changes to our routes and procedures that reduced idling time by 15 minutes per driver per day -- saving a surprising amount of fuel and emissions. Unnecessary idling hurts overall fuel economy and causes unnecessary engine wear and tear.
Carbon Accounting: Making Carbon Transparent
A fourth dimension to consider when evaluating Scope 3 logistics partners is the completeness and transparency of their carbon accounting. Just as your own company needs to include Scope 3 partners in your carbon inventory, your transportation and logistics vendors should fully account not only for their direct contributions but also for the carbon footprint of their own supply-chain partners.
However, most logistics companies -- indeed, most companies of all kinds -- fail to fully account for Scope 1, 2 and 3 emissions. A 2008 survey by Accenture revealed that only 10 percent of the companies surveyed captured emissions from their supply chain.
Make sure you choose logistics partners that include data and calculations for subcontractors within their logistics networks -- as well as for other carbon contributions like shipping lines and railways. Ideally, your transport partner should publish annual Sustainability Reports that track environmental key performance indicators over time.
It's true: you're only as green as your supply chain. That's why evaluating the environmental performance of your logistics partners is an essential responsibility of your company's environmental stewardship.
Bob Stoffel is senior vice president of engineering, strategy, supply chain, and sustainability for UPS. www.ups.com
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