Soon after Maersk Line CEO Eivind Kolding challenged ocean carriers to compete on the basis of sustainability in June, Danish consulting firm SeaIntel Maritime Analysis unveiled the Container Carrier Environmental Benchmark, a measurement of the environmental footprints of the world’s biggest container lines.
The ratings could become an industry standard as major retail importers prod carriers and other supply chain partners to become more sustainable.
“Retailers have clearly discovered that green operations bring more green (in the form of cost savings) to their bottom lines,” said Casey Chroust, executive vice president of retail operations for the Retail Industry Leaders Association.
SeaIntel’s benchmark is a sign of the increasing burden the global transportation industry faces, and the opportunities companies have up and down the supply chain — from carriers, to shippers and third-party logistics providers — not only to clear the air, but capitalize from it. Indeed, sustainable logistics is here to stay, and 3PLs increasingly are providing performance indicators to measure it.
“People realize that lowering their carbon footprint can lead to substantial cost savings,” said Jordi Avellaneda, global head of green logistics for Damco, the combined brand of A.P. Moller-Maersk’s logistics activities.
Having initially focused on operations and assets they own, global companies, especially major retailers, have turned their attention to logistics and transportation partners, he said.
A turning point occurred in July 2009 when Wal-Mart, at a meeting with more than 1,500 suppliers, announced a long-term project to develop a worldwide sustainable product index. More than 100,000 suppliers were given surveys to evaluate their environmental footprints.
Wal-Mart, the largest U.S.-based importer with 696,000 TEUs in 2010, according to The Journal of Commerce survey of the Top 100 Importers, works with more than 70 government and private organizations to develop the data, tools and protocols for a product sustainability measurement and reporting system that could serve as a single source of data for evaluating the sustainability of products.
The retail giant in February announced plans to cut some 20 million metric tons of greenhouse gas emissions from its supply chain by the end of 2015, equivalent to removing approximately 4 million cars from the road annually.
And, the public and private sectors increasingly are working together in forging and expanding sustainable logistics partnerships. The federal Environmental Protection Agency in July, for example, extended its SmartWay Transport Partnership to include drayage trucking, and included some of the biggest U.S. importers in the plan, including Wal-Mart, Target, Home Depot, Lowe’s, Best Buy, Hewlett-Packard, J.C. Penney and Nike.
Damco began working with footwear and apparel company PUMA last year to map the carbon footprint of PUMA’s North American supply chain operations over a one-year period as part of a five-year company effort to reduce carbon, energy, water consumption and waste by 25 percent.
Most companies want their 3PLs to provide a snapshot of the environmental impact of their global supply chains rather than using sustainability as criteria for choosing providers, said Aaron Baker, Damco’s senior director of supply chain development. “Retailers want us to show them sustainability initiative with a return on investment,” he said.
After initial reluctance to embrace sustainable logistics, companies now realize they don’t have to invest in greener trucks, ships or airplanes, because 3PLs do that for them. As a result, greener often means cheaper, Avellaneda said.
With PUMA, for example, Damco was able to provide the global carbon footprints not only for the transportation providers it manages as a 4PL but of all the company’s providers. “Customers are starting to see sustainability as something that will drive business, bring additional revenue and increase customer satisfaction,” Avellaneda said.
Damco’s SupplyChain CarbonCheck service, the company’s primary carbon footprinting assessment tool, uses a five-step methodology that incorporates operational insights, live data and detailed emissions standards and calculations. In a study last year by the MIT Center for Transportation & Logistics, CarbonCheck was found to be up to 25 percent more accurate than publicly available emissions standards used as carbon footprinting assessment tools in the ocean logistics sector.
Damco also rolled out a new product offering, the Supply Chain Dashboard, that allows PUMA and other clients to monitor emissions proactively.
One of Damco’s first customers for carbon mapping was Nike, which had set a goal of reducing its global carbon footprint 30 percent by 2020. After developing a carbon map for Nike, Damco realized it could implement a carbon modeling service integrated with its supply chain optimization services.
“Looking at the physical movement of goods as well as the financial impact is the great next lens of visibility,” Baker said. “Once you have carbon emissions as part of your visibility, the information becomes truly actionable.”
Sustainable logistics is a top priority in the ocean container industry, which has embraced slow-steaming to reduce greenhouse gas emissions. Last year, Evergreen Line, the world’s fifth-largest container line, ordered 10 8,000-TEU L-class environmentally advanced container vessels, the first to be delivered in 2012. The vessels join Evergreen’s S-type green ships that were first introduced in 2003.
“We believe it is our responsibility to address these issues proactively, using the most advanced design and shipbuilding technology to protect the environment,” Chang Kuo-Cheng, Evergreen’s vice group chairman, said in a keynote address to The Journal of Commerce’s Trans-Pacific Maritime Conference in March. “We should not passively control the damages to environment only when accidents occur. We must take initiative to minimize the impact of our operations on the environment.”
Evergreen also participates in the Port of Los Angeles speed-reduction program to reduce emissions from vessels in transit. The carrier recently implemented the Port of New York and New Jersey’s Ocean-Going Vessel Low-Sulfur Fuel Program, which asks operators of oceangoing vessels to use low-sulfur fuel and reduce vessel speed to an average of 10 knots within a designated zone.
And Maersk Line’s next generation Triple-E ships are so-named with the environment in mind: The “E” stands for energy efficiency, economies of scale and environmentally friendly. Maersk has 20 of the colossal 18,000-TEU vessels on order.
Most major 3PLs have become proactive in promoting sustainable logistics. Penske Logistics has been using a carbon footprint calculator for about five years. The diagnostics tool calculates the carbon output of trucks on the road, taking into account multiple factors including weight, distance and miles per gallon, said Tom McKenna, Penske’s senior vice president of logistics engineering.
Customers increasingly are asking Penske to run pilot programs in a wide range of hybrid technologies as they look for new ways to reduce carbon emissions. “Companies are saying that this is the right direction to be going in,” McKenna said.
San Mateo, Calif.-based Menlo Worldwide Logistics has implemented a number of abatement programs for environmental impact, said Tony Oliverio, vice president of supply chain services. These include carbon and energy use reporting, recycling, packaging and LEED-certified facilities, or Leadership in Energy and Environmental Design.
Using its lean logistics approach as a model, Menlo engages with customers to pull in relevant data on resource consumption and reports back using a visual model that identifies where the carbon drivers are.
“We want to connect nodes and flows into a value stream map so we know what the carbon associated with that looks like,” Oliverio said.
Earlier this year, UPS expanded its carbon neutral option to more than 400,000 customers in WorldShip, the company’s full-featured, Windows-based shipping software system. For a fee, UPS calculates and offsets carbon emissions associated with customer shipments. It collects the fees for environmentally responsible projects worldwide, and matches offset purchases up to $1 million.
The carbon-neutral program is available in 35 countries and territories. In the U.S., the fees range from 5 cents for a ground package and 20 cents for an air package to 75 cents for an international package.
The key to supply chain sustainability is transparency enshrined by UPS in a triple-m acronym — measure, manage and mitigate, said Steve Leffin, UPS director, global sustainability.
UPS in March appointed Scott Wicker as its first chief sustainability officer, a signal it is taking a long-term, holistic approach to sustainable logistics. Wicker, an engineer and 34-year company veteran, said UPS’s long experience with supply chain optimization lends itself to developing sustainable logistics practices.
“The discipline and systematic analytics we use in engineering are extremely valuable when devising internal sustainability programs,” Wicker said. “Quantitative methodology ensures that our sustainability programs measure impact and keep us moving toward continuous improvement.”
UPS has been engaged with the Carbon Disclosure Project, the World Resources Institute and the Global Reporting Initiative, a widely used sustainability reporting framework. The company adheres to the Greenhouse Gas Protocol for reducing emissions in three scopes: direct emissions from sources owned or controlled by the company; purchased electricity; and emissions from transportation partners including airlines, motor carriers, railroads and shipping lines.
About 53 percent of UPS global emissions are from its airline — one of the world’s most efficient, with an average fleet age of just 12 years, Leffin said. The company also emphasizes mode shifting, a key contributor to reducing emissions.
The science of measuring greenhouse gas impact is evolving into a lifecycle model in which the cradle-to-grave environmental impact of products can be quantified in detail. Other trends include integrated reporting — joining financial and sustainability reporting — and more discussions about water conservation, Leffin said.
Experimenting with numerous alternative fuels and vehicles, UPS earlier this year purchased 48 heavy tractor trucks equipped to run on liquefied natural gas. The vehicles reduce greenhouse gas emissions by about 25 percent and use 95 percent less diesel fuel than the older trucks they are replacing.
The company’s current fleet of 11 LNG tractors is based in Ontario, Calif., from which they make 450-mile round trips to Las Vegas on a single tank of fuel. UPS is working closely with the Department of Energy’s Clean Cities program to construct an LNG fueling station in Las Vegas. Once that facility is completed this year, UPS will base the 48 new LNG tractors in Las Vegas and dramatically expand the number of western long-haul routes on which they’re used.
UPS now has more than 1,100 natural gas-powered vehicles in service and almost 2,000 alternative fuel vehicles. Powered by LNG, compressed natural gas, propane, liquid petroleum gas and electric and hybrid electric motors, the fleet has logged more than 200 million miles since 2000.
“We consider it a rolling laboratory approach,” Leffin said. “There is no single silver bullet idea.”
In April, President Obama visited a UPS facility in Landover, Md., to announce the National Clean Fleets Partnership, a public-private partnership that helps large companies reduce diesel and gasoline use in their fleets. UPS is a charter member, along with FedEx, Pepsi-Frito Lay, Verizon, AT&T and Staples. The president previously had committed the U.S. to greenhouse gas reductions of 17 percent below 2005 levels by 2020.
In June, UPS began installing 1,036 solar panels on its 70,000-square-foot Lakewood, N.J., facility. The panels, consisting of 62,160 individual photovoltaic cells, are expected to provide 30 percent of the building’s annual energy needs. The company, which also operates a solar facility in Palm Springs, Calif., expects a full return on its investment within four years, Leffin said.
Contact David Biederman at email@example.com.