Just how widely accepted has the business case for supply chain sustainability become? So much that as the practice matures, global corporations and environmental advocacy groups such as the Environmental Defense Fund — once at the opposite ends of the ideological spectrum — no longer seem like strange bedfellows.
The EDF and a host of other organizations are working closely with companies in a variety of industries to develop new tools for monitoring and measuring corporate sustainability performance. Companies have enjoyed a positive return on investment from initial green investments — including reduced fuel use, recycling, optimization of routing and energy-efficient lighting — and are poised to take those efforts a step further by extending them throughout the supply chain.
“Folks are starting to show a higher level of sophistication and demonstrate longer-term commitments to sustainability,” said Jason Mathers, manager of EDF’s Corporate Partnership Program. “Most importantly, they are demonstrating a willingness to collaborate across industry and with partners such as the EDF.”
Supply chain and freight transportation activities have a significant global footprint, and that footprint is only getting bigger. By 2020, 90.1 million tons of freight a day is expected to move throughout the U.S., up 70 percent from 2002. Globally, freight transportation and distribution systems account for more than 3 billion metric tons of carbon emissions a year, 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 over the same period, according to the EDF.
The EDF, a Washington-based nonprofit environmental advocacy group, is comprised of scientists, economists, attorneys and other professionals. The group works closely with corporate partners to help them understand the environmental impact of supply chains and to adopt goals, metrics and practices that contribute to supply chain sustainability.
The adoption of performance-based metrics to reduce emissions per mile and improve container utilization rates, as well as using performance-based carrier scorecards is a priority for third-party logistics companies and their corporate partners. “Performance-focused goals are one of the things we really strive for in emphasizing the important role shippers have,” Mathers said.
Companies that took the lead in sustainable supply chain management by developing goals and metrics helped drive many of the innovations in equipment, technology and practices that are less harmful to the environment and add operational and cost efficiencies to freight transportation. These include reduction in idling times, auxiliary power units, reducing backhauls, optimized routing, retrofitted trailers, and tire inflation and driver programs to reduce fuel consumption.
Next-generation tools for driving supply chain sustainability, including hybrid vehicles, alternative fuels, truck electrification and diesel engines, and “green” ocean vessels and port and rail handling equipment are still too expensive to be deployed widely. But just as the earlier innovations came about through companies striving to meet sustainability mandates, development of the new tools will be spurred by ongoing commitments to specific carbon-reduction metrics and goals.
“By taking steps today to increase the carbon-efficiency of their logistics, companies can buy time for the new technologies, equipment and policies that ultimately are needed,” Mathers said.
Based on a study of corporate sustainability leaders, the EDF has developed five rules for cutting freight costs and emissions. Rule No. 1 is choosing the most carbon-efficient mode of transportation — planes emit 47 times more carbon than container ships, and trucks emit six times more than trains. Because ships obviously can’t handle all the cargo, the EDF recommends clearly differentiating freight that needs to be expedited from that that doesn’t. Other options include vendor-managed inventory and even moving final assembly closer to the client.
Other rules for building sustainable supply chains are collaboration with other shippers, including shared warehousing and backhauls; optimizing warehousing and distribution networks; maximizing container utilization; and increasing energy efficiency in distribution centers.
Distribution centers account for 11 percent of the carbon footprint of freight transportation. “Changes to HVAC, lighting, motor controls and refrigeration can be quick payback ways to save energy and emissions,” the EDF said.
Helping to drive collaboration between environmental advocacy groups and corporate partners is the fact that the business case for sustainability has been accepted broadly across the corporate landscape. “The business case is strong and growing; suppliers that do not measure, quantify and manage their greenhouse-gas emissions will soon see their business move to competitors that can provide better information and clearer evidence of change,” the Carbon Disclosure Project Supply Chain Report 2012 concluded.
In initial discussions with the EDF, companies are asked to decide how they want to position themselves in terms of sustainability. Do they want to be a leader or just keep up? EDF teams assist their corporate partners in assessing where they stack up in relation to their competitors, and to get a sense of where they show leadership and where they need to improve.
EDF takes a collaborative, multidisciplinary approach to environmental advocacy. The organization, founded in 1971, pioneered the concept of teaming up scientists, economists and lawyers to get results and has notched a string of signature achievements, including helping to bring all hunted whales onto the U.S. endangered species list (1970); lobbying federal regulators to end the use of leaded gasoline (1985); helping California enact first-in-the-nation emissions laws (2002); and partnering with FedEx to put hybrid electric trucks on the road (2004).
Working with the U.S. Environmental Protection Agency and the Coalition for Responsible Transportation, a national coalition of major shippers and carriers, the EDF helped launch the EPA SmartWay Drayage Program to reduce emissions at the nation’s ports. Under the program, carriers commit to specific emissions-reduction targets and to use newer, cleaner trucks. Shipper members of SmartWay are committed to using SmartWay carriers.
Most of the EDF’s work with corporate partners occurs at its Bentonville, Ark., office, where the group works closely with the Supply Chain Consortium. Initially funded by Wal-Mart in 2009, the consortium now includes dozens of global companies that work collaboratively on research and development of standards and IT tools for measuring and reporting environmental impacts across product lifecycles.
The Sustainability Consortium’s Open IO project consists of a fully accessible, transparent economic input-output Life Cycle Assessment Database that lets users understand cradle-to-consumer emissions and resource requirements for numerous commodities and product “bricks” based on the Global Product Classification Code.
The consortium also is developing a standardized framework, called the Sustainability Measurement & Reporting System, for communicating sustainability-related information throughout the product value chain. The SMRS is intended to serve as a common, global platform for companies to measure and report on product sustainability across their global supply chains, enabling lifecycle assessments to be done faster and at less cost.
“We work with companies to identify the energy content of products throughout their lifecycles, and to help them understand how their freight goals can fit in with their existing infrastructures,” Mathers said.
Success stories abound among the EDF and its partners. As part of a multipronged sustainability drive, Winston-Salem, N.C.-based Hanesbrands, a global consumer goods company, deployed an asset management system to track shipments, improve utilization of freight containers and optimize routing of shipping. The company enforces strict requirements for loading containers; shortly after the program was implemented, container utilization improved from 80 percent to 87 percent. Utilization rates are now around 90 percent.
Pawtucket, R.I.-based Hasbro, one of the world’s biggest toymakers, improved its efficiencies in shipments from China by committing to use more rail and barge transport, and to improve seaport efficiency. By 2010, 21 percent of all of the company’s products leaving China moved via rail, and 3 percent moved by barge.
As a part of Southern California’s PierPass program, Hasbro now moves almost 98 percent of its containers at the ports of Los Angeles and Long Beach during off-peak hours.
Logistics managers are usually overworked these days, and it’s asking a lot to keep up with the latest trends in sustainable supply chain management. The EDF sees one of its key roles as helping logistics professionals keep up with trends in sustainability and understand how they fit in within overall corporate frameworks.
As logistics managers gain a greater understanding of sustainability, it becomes easier for them to build support for green initiatives in internal discussions with top executives. “We can help them move rapidly beyond the information gathering stage,” Mathers said.
Contact David Biederman at email@example.com.