CARBON FREIGHTPRINTS Transportation Emissions in the Shipping Industry e3 Solutions Inc 200-50 Richmond St. E. Toronto, ON M5C 1N7 Tel: (416) 640-7033 Fax: (416) 640-7040 contact@e3solutionsinc.com
WHY CARBON FREIGHTPRINTS MATTER In the world of carbon footprinting, companies are often quick to report on energy consumption. That s a good thing, since it s a major component of global greenhouse gas emissions. It s been estimated that buildings account for 35% of all GHGs entering the atmosphere. In addition, energy use often lends itself easily to reduction projects. Simple actions such as turning down the thermostat during off-hours and turning off unnecessary lighting can have huge impacts on a building s consumption, and by extension, its carbon footprint. However, there s an equally important component to the GHG emissions of many organizations, one that goes beyond the walls of the factory or office tower. It s a company s vehicle fleet. These are not vehicles used by employees to get to and from work, or postal trucks that courier packages to and from the office. These are vehicles owned by and used by the company itself. For most businesses, emissions from fleet vehicles are a side-note to more substantial source activities, such as natural gas heating and electricity consumption. However, for shipping companies, where fleet vehicles are their business, greenhouse gas emissions from this source take on a whole new meaning. In its most recent CSR report, UPS reported that its mobile emissions made up approximately 54.67% of its total GHG footprint i. FedEx, for its 2010 fiscal year, reported that approximately 86.77% of its total reported emissions were from Scope 1 sources, which include fleet vehicles, natural gas heaters and boilers, onsite generators, and fugitive refrigerant emissions ii. Clearly, when it comes to shipping companies and carbon footprints, vehicle fleets matter, and the task to reduce these emissions can be a daunting one. After all, using their vehicles is how they make profit! However, there are many actions that shipping companies can take, and indeed are already taking, to reduce their fleet vehicle emissions.
SHIP LESS This would seem to be a complete contradiction in terms for large delivery service organizations, but in fact, they can leverage this into a tremendous revenue stream with their clients because it utilizes their core competency. By offering education and technical solutions to their clients on how to reduce the amount they need to ship, they can help their clients save money. However, at the same time, these can be provided as billable services, thereby allowing shipping companies not only to mitigate future revenue shortfall, but also provide them with large quantities of up-front capital, which can in turn be used to fund other GHG reduction projects. The services themselves can include showing customers how to assess what really needs to be transported. For example, could several different types of product components be amalgamated into a single container, since it makes little difference in terms of working hours whether they are sorted before shipping or after? Have clients thoroughly examined whether the cost and additional wait times are justified for something that could be obtained locally? One of the biggest areas where shipping companies can assist their clients in reducing their transportation volumes is in choice of packaging. Many companies tend to operate within the confines of their industry where this is concerned. Shipping companies, on the other hand, have the benefit of having seen thousands of different packaging configurations. Therefore, they can proffer packaging solutions that their clients might not otherwise have considered. Perhaps the biggest trend in shipping reduction over the last few years has been companies going paperless. Everything from pay stubs to energy bills can often be sent and received online. Again, shipping companies can leverage their expertise with electronic record keeping and digital signatures to help their clients develop their own paperless systems.
CARBON FOOTPRINT REPORTING AND OFFSETTING This solution is attractive to many organizations because it requires little or no disruption of everyday service. A shipping company measures, or contracts a quantification firm to measure, its GHG footprint. It then has the report verified for accuracy and adherence to established standards by an independent third-party. After that, it purchases offset credits for a value equal to the quantity of greenhouse gases being emitted. In 2011, FedEx launched its carbon neutral document shipping program. The company stated that it would calculate on an annual basis the tons of carbon dioxide released through the shipping of envelopes. The company then will purchase the equivalent amount of carbon dioxide offsets from the not-for-profit BP Target Neutral, which invests in low carbon development or conservation projects. These projects include a biogas farm facility in the Netherlands, a reforestation project in the Tanzanian Southern Highlands that is converting degraded grassland to commercial forest, and a landfill gas collection system in Thailand. iii Initiatives like this do not actually reduce the organization s GHG emissions, but they ensure that corresponding reduction and sequestration (removal of GHGs from the atmosphere) projects are undertaken so as to quantifiably mitigate those emissions. This method is popular and convenient, but it is also costly, since it requires a large capital investment on an ongoing basis and provides no economic benefits, such as reductions in fuel use or cost. INCREASED VEHICLE EFFICIENCY Shipping companies already control their average fuel efficiency, to some degree, by the choice of vehicles they make when adding to or replacing their fleets. However, they only have so many choices available to them. At a certain point, it may benefit them to see how they can improve the fuel efficiency of their vehicles. There are generally three channels for improving vehicle efficiency: improved aerodynamics, improved powertrains, and weight reduction. iv The first two will be reflected in the company s vehicle purchasing decisions. However, shipping companies do have some control over vehicle weight. Obviously, the weight of the goods that need to be shipped is determined by the consumer, but are they being split up among vehicles so that each is loaded to its optimal weight? Remember that the force (which translates into fuel) required is equal to the mass times the acceleration, so the heavier the
vehicle, the more fuel is required to get it moving. That having been said, there is also a tremendous opportunity for shipping companies to work directly with automotive manufacturers in the development of more fuel efficient vehicles. Historically, many automotive manufacturers have been slow to invest in researching new technologies in this area. Reasons for this include lax regulation, low consumer demand, and the still relatively low price of oil v. By taking some of the financial burden on themselves, shipping companies can help drive the development of better performing vehicles, while providing for long term cost recovery in the form of patent royalties and discounts on vehicle purchases from the manufacturer when the technology becomes viable. Because a shipping company s core business is freight transportation, the quantity of goods each vehicle can transport plays a role in overall efficiency, as well. FedEx Ground uses dropframe trailers on its vehicles. Drop-frames have a depression in the floor, between the front and back set of wheels. This allows them to carry 12% more shipments than conventional straight-rail trailers. vi ALTERNATIVE FUELS By the end of its 2011 fiscal year, FedEx had 408 EV and HEV vehicles in its fleet, allowing it to save approximately 276,000 gallons of fuel and reduce CO 2 emissions by 2800 metric tonnes. vii Alternative fuels are an increasingly useful instrument in the reduction of greenhouse gas emissions from both stationary and mobile combustion sources. These are not necessarily new ideas. UPS had its first electric vehicles in 1935! viii However, it is only recently that alternative fuel technologies have seen more widespread acceptance. The good news is that there are a wide variety of technologies and fuel types to choose from. Companies may even opt to use some combination thereof. The bad news is that there are a wide variety of technologies and fuel types to choose from, and selecting the right ones can be tricky. For example, while all electric vehicles in and of themselves emit far less than traditional gasoline and diesel vehicles, their overall effect may vary greatly from region to region. This is because electric vehicles are usually charged with power from the grid. If the local power grid is rich in clean power generation, such as solar, wind, and hydro, reductions in greenhouse gas emissions will be substantial. However, if the grid relies primarily on coal and other fossil fuels, companies should examine carefully to see if investment in some other area might yield higher
overall GHG reductions than converting to electric vehicles. This represents an especially large challenge for multinational shipping companies, and it is important that vehicle conversion policies not be one size fits all. Another thing companies should examine closely is what potential fuel resources they may already have. For example, does the company produce substantial quantities of waste oils and fats as a by-product of its operations, such as from its employee cafeterias? If so, it may have a potential source of biodiesel. Biodiesel can be used in the company s existing diesel engines when mixed with mineral diesel. This means that companies can provide a component of their own fuel stocks with minimal up-front capital investment. The only aspect of the process that needs to be farmed out is the conversion, or transesterification, process, and government subsidies may be available to mitigate some of this cost. ix LOGISTICS While all of the above will likely have a role to play in the reduction of the shipping industry s transportation footprint, the old adage still rings true: The cleanest form of energy is the energy you don t use. Logistics for shipping companies is the optimization of their existing resources, toward the end of increasing efficiency and reducing cost. More recently, it has also become one of the principal instruments for helping shipping companies reduce their impact on climate change. Choosing a mode of transportation for various packages is an aspect of logistics that is already clearly understood. Everyone knows that the cost to ship is often directly related to mode of transportation, which is, in turn, related to travel time. However, the quantity of GHG emitted to transport the same amount of package weight over the same distance can vary quite widely. For instance, emissions from marine shipping can range from 4.5-12 g of carbon dioxide equivalent (CO 2 e) per t-km (tonne of freight transported one kilometre); emissions from rail transport average 17.85 g CO 2 e/t-km; and emissions from heavy truck transport average 114 g CO 2 e/t-km. x Many factors influence the difference in emission levels, but the principle one is likely the weight that can be transported per vehicle. However, emission levels also vary inversely with versatility. Trucks can deliver right to the door, whereas boats are limited to maritime destinations. In practice, shipping companies will use multiple modes for each shipment. The question is how to use each one in a way that minimizes cost and GHGs. Another large issue facing shipping companies is the placement and operation of distribution centres. Not only do distribution centres add to a package shipments overall carbon footprint
through such activities as HVAC, lighting, water, and waste, but, in some cases, they also add to the transportation footprint, since they can often add to the total distance travelled. A third issue is choice of route. Route selection can make a big difference in a shipping company s transportation footprint, especially on the ground. Many roads are statistically more prone to congestion than others. Certain routes allow for greater use of highways, which typically yields higher fuel efficiencies. And of course, it is ideal to deliver the maximum amount of packages on a single circuit, picking up as many as are delivered. All these ideas sound relatively simple, but implementing them can be far from easy. For one thing, ground transportation is something that simply cannot be avoided. Forty-eight percent of the U.S. population does not live in coastal areas. xi This means that the issue of maximizing truck efficiency is something every shipping company must deal with. A corollary issue to ground transport efficiency is road conditions. Although all modes of transportation must contend with shifts in weather, trucks must also contend with human-related changes to road accessibility. These can include accidents, planned and unplanned closures, limitations on vehicle class, as well as daily and seasonal congestion patterns. Furthermore, shipping companies are often forced to work around poor infrastructure planning, even when all other factors are favourable. Fourtunately, certain technological advances, especially in the areas of GPS navigation, have enabled shipping companies to ameliorate many of these problems. Some of the largest technical advancements over the last decade have been in the areas of data storage and transmission. This has allowed shipping companies to optimize intermodal shifting, using the most fuel efficient combination of transport modes to deliver the package. In 2011, UPS was able to avoid 2.8 mil metric tonnes of emissions by optimizing its intermodal shifting. xii In choosing its delivery routes, FedEx employs a technology called Route Optimization and Decision Support (ROADS). It allows FedEx to use variable delivery zone boundaries. The system takes into account weather disruptions, road conditions, and delivery load to ensure that one zone is not overworked, while another is idle. Furthermore, by planning on the front-
end, FedEx is able to put fewer trucks on the road, thereby reducing its transportation footprint. xiii FedEx has also improved its trailer capacity efficiency by adopting a system that scans the dimensions of every package. This allows FedEx to measure the percentage of each truck trailer s capacity actually being used. Loading teams can then be trained on the basis of this information to improve their performance. The aforementioned two initiatives, taken together, have allowed FedEx to use 10 mil fewer gallons of fuel annually. xiv UPS, using telematics and proprietary routing technology, achieved a similar reduction of 8.4 million gallons of fuel and 83,000 metric tonnes of emissions. NEXT STEPS While all of the aforementioned techniques will have some role to play in the shipping industry s future emission reductions, it is clear that improvement to fleet logistics will be at the core of new strategies. Furthermore, if recent advancements are any indication, new tracking and measurement technologies will enjoy the greatest share of investments. i Source: UPS Corporate Sustainability Report 2011: Logistics at the Core. Atlanta: UPS, 2012. Appendix B, Note 6. ii Source: 2010 Global Citizenship Update. Memphis: FedEx Corporation. p. 12. iii Source: King, Bart. FedEx To Offset Emissions of All Envelope Shipping. Sustainable Brands. Sustainable Life Media. 2012 04 11. 2012 08 09. http://www.sustainablebrands.com/news_and_views/articles/fedex-offset-emissions-all-envelopeshipping?goback=.gde_44932_member_107191998. iv Source: MacGregor, Rob. What are auto makers doing to increase fuel efficiency? The Globe and Mail. The Globe and Mail, Inc. 2010 09 09. 2012 08 09. http://www.theglobeandmail.com/globe-drive/car-tips/whatare-auto-makers-doing-to-increase-fuel-efficiency/article1379631/. v Source: Sperling, Daniel and Deborah Gordon. Two Billion Cars: Driving Toward Sustainability. New York: Oxford University Press, 2009. vi Source: 2010 Global Citizenship Update. Memphis: FedEx Corporation. p. 29. vii Source: 2010 Global Citizenship Update. Memphis: FedEx Corporation. p. 12. viii Source: UPS Corporate Sustainability Report 2011: Logistics at the Core. Atlanta: UPS, 2012. p. 8. ix Source: Biofuel. Wikipedia: The Free Encyclopedia. 2012 08 12. 2012 08 13. http://en.wikipedia.org/wiki/biofuel#biodiesel. x Source: Greenhouse Gas Calculator Emission Factors. CN: North America s Railroad. Canadian National Railway Company. 2012 02 16. 2012 08 13. http://www.cn.ca/en/greenhouse-gas-calculator-emission-factors.htm. xi Source: http://stateofthecoast.noaa.gov/population/welcome.html xii Source: UPS Corporate Sustainability Report 2011: Logistics at the Core. Atlanta: UPS, 2012. p. 68. xiii Source: 2010 Global Citizenship Update. Memphis: FedEx Corporation. p. 31. xiv Source: 2010 Global Citizenship Update. Memphis: FedEx Corporation. p. 29.