When Nike this month accepted the Federal Maritime Commission Chairman’s Earth Day Award for outstanding shipper leadership and innovation in sustainable ocean transport practices, it affirmed the giant sportswear and equipment manufacturer’s longtime push into sustainable logistics.
No longer just a novel concept, sustainable logistics has evolved into a business strategy with tangible benefits to the bottom line. Witness the more than $8 million Nike saved in 2009 by shifting shipments from air to ocean, reducing its emissions per product moved by 4 percent.
For Nike and other shippers at the head of the environmental logistics movement, the transportation end of the supply chain is now painted in green.
Having already plucked a lot of the low-hanging fruit — reducing backhauls, optimizing routes and retrofitting equipment — shippers, carriers and third-party logistics providers are ready to take sustainable logistics into a new era of collaboration covering the entire supply chain. “There are point solutions, but to unlock the most potential, you have to look at the entire supply chain all the way upstream to the manufacturing process,” said Casey Chroust, executive vice president of retail operations for the Retail Industry Leaders Association.
Green logistics is here to stay for obvious reasons. Global freight transportation and distribution systems account for more than 3 billion metric tons of carbon emissions each year. That’s equal to more than 700 coal plants or the combined pollution output of Canada, Germany, Japan and Mexico.
By 2035, emissions from freight in the U.S. are expected to rise 74 percent, and China is expected to increase its use of freight transportation fuels by 320 percent in the same period, according to the Environmental Defense Fund.
In a freight market that is among the fastest-growing sources of fuel consumption and carbon emissions, 3PLs and shippers can make a huge environmental difference, especially by reducing carbon emissions and paving the way to meet future reduction targets. “There are a lot of operational conditions that shippers and 3PLs can implement that have significant potential to reduce fuel consumption,” said Jason Mathers, manager of the EDF’s Corporate Partnership Program.
Sustainable supply chain management encompasses many strategies and components, including mode shifting, collaborative distribution, supply chain and transportation optimization, alternative fuels, hybrid vehicles, recyclable packaging and carbon mapping. Key programs and organizations in the green logistics universe include the Environmental Protection Agency’s SmartWay Transport Partnership, Clean Cargo Working Group and the Greenhouse Gas Protocol.
Until now, shippers and 3PLs have focused on network efficiency and optimization because of the direct correlation between cost savings and carbon reduction. They recognize that alternative fuels and hybrid vehicles are likely the wave of the future, but not until they become cost effective.
“There’s such great synergy with cost savings and carbon reduction,” Mathers said. “They’re almost perfectly aligned.”
The advent of carbon mapping is significant because it allows companies to benchmark green logistics strategies against real data. That’s important because carbon trade-offs are complex and actually can increase emissions if they’re not properly measured and managed.
Retailers and their suppliers are embracing sustainability even as they redefine how far upstream it goes into the supply chain, said Jonathan Gold, vice president of supply chain and customs policy for the National Retail Federation. “Consumers are looking for the retail industry to step up and take the lead on sustainability,” he said.
There are scores of examples of successful green supply chain initiatives. Hewlett-Packard, like Nike, slashed costs and emissions by moving cargo from air to ocean freight.
Baxter International, a global medical products and service company, increased its use of U.S. shipments using intermodal from 9.6 percent in 2005 to 12.8 percent in 2010, reducing carbon emissions by 14,000 metric tons. Levi Strauss cut carbon emissions by 60 percent in some shipping lanes by switching to intermodal.
The Container Store, working with BNSF Railway and J.B. Hunt Transport Services, now supplies nearly a third of its stores via intermodal, reducing the carbon impact of deliveries to the stores by 41 percent and saving more than $300,000.
“The savings and sustainability benefits of intermodal were too big to pass up,” said Tom Sangalli, logistics and transportation director for The Container Store.
Macy’s and Schneider National collaborated on an empty miles reduction program developed by the Voluntary Interindustry Commerce Solutions Association in 2009. During the program’s pilot phase, Schneider eliminated more than 60 tons of carbon dioxide and 147 tons of particulate matter, while Macy’s reduced annualized transportation costs by an average of $25,000 per lane.
Cisco Systems saved $24 million annually in a pilot program to reduce packaging and use recyclable packing materials. The company digitized some paper documentation, began using boxes that were easier to compress and introduced recyclable plastic pallets.
“The leadership that leading companies like Wal-Mart and Nike have shown is critical to sending strong market signals to 3PLs and other market suppliers that sustainability is practical and doable,” Mathers said.
For many shippers, 3PLs function as their de facto supply chains. Package delivery giant UPS is such a big part of so many global supply chains that it was inevitable the company would be at the vanguard of sustainable logistics. With almost 100,000 delivery vehicles, 6,175 tractors and more than 500 jets operating in 220 countries, the $53 billion company has long sought to reduce fuel use and optimize transportation networks to lower costs and help the environment.
In 2009, UPS launched its Carbon Neutral program in the U.S. and took it international a year later. Businesses and individuals in 36 countries can mitigate the emissions impact of their shipments by requesting that UPS purchase carbon offsets for the shipments’ value. The offsets are financial instruments that support highly vetted pollution-reduction projects such as the Fujian landfill in China, the Garcia River Forest Project in California and the La Pradera landfill in Colombia.
In 2010, UPS joined the World Business Council for Sustainable Development, became an organization stakeholder of the Global Reporting Initiative and began reporting five of the 15 categories included in the new GHG Protocol Corporate Value Chain Accounting and Reporting Standard.
The Greenhouse Gas Protocol, the most widely used tool for quantifying and managing GHG emissions, classifies emissions in three scopes. Scope 1 emissions are direct emissions from owned or controlled sources, Scope 2 emissions are indirect emissions from purchased energy, and Scope 3 emissions are all indirect emissions that occur in the value chain of the reporting company.
The majority of emissions come from Scope 3 sources. For example, Kraft Foods, one of 60 companies to first test the GHG Protocol standards, reported value chain emissions accounted for more than 90 percent of its total emissions.
In 2010, UPS began offering assessment services for customer packaging based on packing materials, cube optimization and damage prevention capabilities. In addition to saving money, customers can create a greener profile by reducing packing material and increasing the use of recyclable content.
UPS employs a number of methods to optimize fuel usage, including intermodal shifting, next-generation air traffic management and proprietary routing technology. Telematics, which combines information about behavioral and mechanical variables that affect fuel efficiency, has helped eliminate more than 39 million minutes of idling time and improved miles per gallon in the company’s domestic package segment by
7.8 percent between 2000 and 2009.
As consumers become more aware of the impact of their purchases on the environment, the greening of the supply chain has gone beyond the bottom line. “There are a lot of things a company can gain from reducing its environmental footprint,” said Sarah Flagg, head of green logistics for Damco, the forwarding and logistics arm of A.P. Moller-Maersk Group. From a sustainability standpoint, Damco focuses primarily on increasing supply chain efficiency through carbon reporting and visibility, global standardization of carbon methodologies, packaging optimization and helping customers develop sustainability strategies.
Although consumer-facing industries such as retail, technology and lifestyle tend to take the lead in green logistics, most industries are moving in that direction. “There’s hardly a tender that we get that doesn’t have a question about sustainability practices at Damco and how we can help them become greener,” Flagg said.
Contact David Biederman at email@example.com.