It's not just about the trucks, but we can't do it without the trucks

A great piece in the Wall Street Journal caught my eye last week.  The article highlighted the impressive productivity gains trucking fleets have made recently. These, in turn, have led to a reduction in average truck miles of two percent from 2006. 

Two percent might not seem like much. But, by increasing the productivity of these assets, this change avoided over 8 million tons of carbon pollution last year.That’s no small feat.

As the article noted, these gains weren’t the result of a new technology or a superior truck. These gains were driven by operational improvements, such as  moving more goods per truck because of lighter weight and smaller packages, and better planning and routing so there are fewer empty trucks on the road. These are the exact types of operational strategies that comprise our Five Principles For Improving Supply Chain Efficiency And Sustainability.

When it comes to the carbon reduction potential of these  strategies, an 8 million ton reduction is just the tip of the iceberg.  Supply chain optimization and modal switches can save millions more tons. Collaborative logistics strategies have the potential to cut annual emissions by 200 million tons. These steps save companies money too – as Ocean Spray Cranberries has demonstrated.  We need to do all of these … and we need to do a lot more too.

For as important as these efficiency steps are, they are not going to be sufficient on their own. 

Fact of the matter is that emissions from freight transportation are projected to increase by nearly 200 million metric tons over the coming years.  For context, this increase is greater than what is expected in the commercial, industrial or residential sectors.  Freight already accounts for over half-a-billion tons of carbon pollution each year in the U.S.  We simply can’t afford to see such a significant growth in freight emissions.

So, how do we not only avoid this growth in emissions, but actually bring them down?  We need to pair increases in significant productivity gains with radically more efficient trucks.

Trucks are expected to account for over 80 percent of the increase in freight greenhouse gas emissions. Successful efforts to not only slow the growth in freight emissions – but actually reduce emissions from today’s levels, must improve trucks first and foremost.

Increasing the productivity of trucks is a needed step forward.  Every time a company gets more products on a truck or avoids an empty backhaul it equates to fewer trucks on the road. Using more carbon efficient modes is critical too.  Rail emits six times less carbon per ton mile than trucks. Ultimately, there will still be a lot of trucks on the road and we need for these to be as efficient as possible.

It was, therefore, great to also read in the article the interest truck buyers and truck makers have in more efficient trucks.  As the piece noted,

“Truck makers are pinning their hopes on more fuel-efficient vehicles to stimulate replacement demand, looking to emulate the success of auto makers in driving demand back to pre-recession levels.” And;

“A loaded heavy-duty tractor with a detachable trailer typically uses a gallon of fuel every 5 to 6.5 miles. Getting just one more mile a gallon saves thousands of dollars a year on the fuel cost for a single truck.”

How far can we push these trucks? Cummins and Peterbilt recently revealed that they built a truck for the DOE Supertruck program that "averaged 9.9 miles a gallon in road tests last fall."

Also, the CEO of Daimler Trucks North America (DTNA) Martin Daum recently called for his company to deliver a 10 MPG truck to the U.S. market. He noted that the company – which is the market leader for truck chassis and number two for truck engines – already manufactures a tractor that combined with a full trailer aerodynamic package can produce today a 9.3 mpg tractor-trailer today.

We have the technology to build radically more efficient trucks today. We also have the knowhow to use them much more productively. Let’s do it.

Posted in Behavior, Fleet Vehicles, Goods Movement, Greenhouse Gas Emissions, Innovation, News Commentary, Supply Chain Management | Leave a comment

Sustainable Freight: Just the Facts

Freight is an essential part of a globalized, modern economy. It is also responsible for eight percent of all U.S. greenhouse gas emissions. This is significant in itself, but even more concerning is that emissions from freight transportation are also growing. And fast.

The good news is that there are actions we can take today to reduce this growth in freight emissions and actually achieve significant absolute reductions in carbon pollution. These actions can be cost-effective and will enable freight to be moved more efficiently and responsibly.

The sustainable freight infographic below brings to life facts and figures that illustrate the challenge and opportunity freight presents us today. We need both strong new policies and bold corporate leadership to reduce freight emissions.

The most import fact of all that are presented below is this: it is in our power today to choose a future that embraces a strong freight transport sector that also dramatically cuts carbon pollution.

Posted in Energy Efficiency, Goods Movement, Greenhouse Gas Emissions, Innovation, Supply Chain Management, Tools | Leave a comment

EDF on the road to share strategies for innovative Sustainable Logistics

Freight transportation's contribution to greenhouse gas emissions and carbon fuel consumption is set to rise significantly in the coming decades unless we do something to halt the trend now.

The good news is there's plenty that can be done, simply and effectively, with minimal capital outlay and rapid results. And a lot of companies are already taking advantage of a wide range of operational strategies that improve environmental performance and cut costs.

Our role at Environmental Defense Fund (EDF) is to raise the bar for environmental performance in logistics operations in the private sector. One of the ways we do this is by sharing success stories of leading companies that are choosing cost- and carbon-saving transportation strategies.

Last month EDF held a workshop at the GreenBiz Forum in New York titled "Smarter Moves: Practical Supply Chain Strategies." Jason Mathers was joined by Kristine Young of Ocean Spray and Edgar Blanco of MIT’s Center for Transportation and Logistics to discuss the case study we released in February.

On April 2, 2013 EDF will be participating in another panel discussion with some of our valued partners. This time we’ll be in Newport, RI at the CONECT (Coalition of New England Companies for Trade) Trade & Transportation Conference.

CONECT is a non-profit, membership-based association for businesses involved in international trade and/or transportation.  CONECT's 750+ members consist of importers, exporters, customs brokers & freight forwarders, 3PLs, ports, air/ocean/ground cargo transportation providers, banks, law firms, colleges, insurance companies and other related service providers active in international trade. CONECT’s members represent a range of significant stakeholders in the freight industry so this event is a prime opportunity for EDF to share practical advice on how to reduce carbon emissions throughout the entire freight system.

The “Innovative Sustainable Logistics: Operationalizing Carbon Reductions in Your Supply Chain” panel will feature Peter Diehm of nora, Edgar Blanco of MIT, Cynthia Wilkinson of Staples, Ed Poloway of Ocean Spray and Jason Mathers of EDF. The focus of the panel discussion will be on providing practical examples of how Staples and Ocean Spray have improved the carbon-efficiency of their supply chain.

To learn more about what your company can do today to reduce transportation costs and freight emissions, join us at CONECT’s Trade & Transportation Conference. The conference will be in Newport, RI. If you are able to attend, mention that you heard about the event through this blog from EDF and you will receive the discounted member rate for the conference.

Posted in Events & Activities, Goods Movement, Greenhouse Gas Emissions, Innovation, Supply Chain Management, Tools | Leave a comment

EDF’s private equity work highlighted in Environmental Finance

Last week, Environmental Defense Fund (EDF) was featured in Environmental Finance. The piece centers on results from our work with the private equity sector on environmental initiatives like EDF Climate Corps and our ESG Management Tool. Below are a couple interesting excerpts from the article:

Creating a competitive advantage

When it comes to managing environmental, social and governance issues, the private equity industry is moving from 'why?' to 'how?', say Tom Murray and Lee Coker

Can you hear it? The private equity (PE) drumbeat for responsible investment is growing louder. 

In five years of leading this effort, Environmental Defense Fund (EDF) has seen the conversation shift fundamentally from why PE firms should care about environmental, social and governance (ESG) factors, to how they can leverage ESG management to improve financial performance – while also driving better environmental and social outcomes.

Today, a whopping 92% of fund managers plan to increase their focus on ESG management in the next three to five years, according to research by Malk Sustainability Partners.

And our ongoing conversations with leading firms support the thesis that ESG issues are increasingly becoming top-of-mind, and not just from a theoretical perspective.

Simply put, PE firms are recognizing the importance of ESG assessment and integration throughout the investment process to decrease risk, improve returns and responsibly manage their institutional investors’ money…

Keys to getting started

Another terrific resource for getting started is EDF’s Climate Corps programme, which places specially trained MBA students in companies to develop practical, actionable energy efficiency plans. It is a powerful way to obtain measurable results for investors, companies and the environment. Since 2008, we have placed 20 Climate Corps fellows at 12 different PE-backed portfolio companies. On average, EDF Climate Corps fellows have found $1 million in savings for their hosts with a total of $1.2 billion in identified savings since the programme began four years ago.

PE sponsors have included Apollo, Carlyle, CD&R, General Atlantic, KKR, Oak Hill Capital Partners and TPG. PE firms have also hosted fellows at the firm level, including CD&R, Carlyle Group’s Real Estate Fund and KKR’s Capstone.

 

To read the full article, visit Environmental Finance

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ESG Management Takes Center Stage at SuperReturn Berlin

Last week, I attended Europe’s largest private equity event of the year, where 1,400 of the world’s leading private equity sector professionals gathered to discuss the future of the industry, fundraising opportunities and the economic climate.

I spoke at two events: a panel entitled “ESG: Theory vs. Practice – Discerning quality ESG from claims of best practice” and a more informal roundtable discussion on creating value through ESG initiatives, which I was pleased to host. My primary goal was to spread adoption of EDF’s new ESG Management Tool, which defines the building blocks of a successful ESG management program at private equity firms of all sizes.

Four themes of the conference stuck out for me:

1)      ESG management can improve the reputation of the industry. 

Carlyle co-founder David Rubenstein repeatedly mentioned the eroding reputation the private equity sector has experienced over the past several years. When asked how to fix the reputation, he suggested one method is for all GPs to better understand that investors and other stakeholders are interested in more than just financial returns. “They want to hear about the environmental impact of what we do. ESG factors are very important to what we do at Carlyle,” Rubenstein said in his keynote address.

2)      ESG management plays an important role in fundraising.

In an increasingly difficult fundraising environment for GPs, having ESG as a core part of your value creation strategy can assure LPs that the firm is adequately managing risks and identifying opportunities. GPs ignore ESG at their peril, as highlighted by a comment by Dushy Sivanithy, a principal at Pantheon who is a member of their European Investment Committee. “I just met with a GP that stated when he hears ESG his eyes glaze over. We haven’t invested in him in the past and we will not in the future,” Sivanithy remarked during our "ESG: Theory vs. Practice" panel.

3)      ESG management will be increasingly important as natural gas investing spreads worldwide.

Not only is the fracking boom here to stay, but it is quickly going to spread around the globe, as will the related environmental challenges. I learned from William E. Macaulay, chairman and CEO of First Reserve Corp. that China has more shale reserves than we do here in the U.S. This further highlights the importance of EDF’s work in getting the science, policy and best practices for unconventional gas right in the U.S. not only for environmental protection but also the numerous financial risks that exist in shale extraction, as the industry goes global.

4)      ESG management is even more important with continued lower economic growth.

The current economic climate creates an increased need for better risk analysis and operational excellence. Private equity firms are still expected by their LPs to make returns in the 20 percent range, just as they did when interest rates were 5 or 6 percent. With returns across asset classes declining and PE firms still expected to perform as they did pre-crisis, two things will happen. The first is that firms will look to riskier investments and strategies, making improved ESG analysis even more critical in the due diligence process. The second is that operational performance will play a bigger role than ever before in creating value. Firms that can capture the value from ESG initiatives in their portfolio companies by improving ESG performance in areas like energy efficiency, worker productivity and supply chain transparency will outperform their competitors.

My most important take away was that the importance of ESG management is increasingly understood by all the players in the global private equity sector.  It’s not just Europeans anymore but also an increasingly diverse array of global stakeholders that includes GPs, placement agents, insurers and deal professionals that understand the value creation potential of ESG integration.

 

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Study Intends To Determine Methane Leakage Associated With A Growing Natural Gas Transportation Sector

The use of natural gas to power our nation’s freight fleet vehicles is a hot topic in these days of rising diesel and falling natural gas prices. There are several reasons to be excited about this opportunity, including operating cost savings, use of a domestic fuel source, and the potential for a reduction in greenhouse gas (GHG) emissions compared to diesel heavy-duty trucks. However, significant concerns remain with the development of new gas supplies, including the threat of fugitive methane emissions from natural gas vehicles and the fuel supply chain.

Methane is the main ingredient in natural gas and a GHG pollutant many times more potent than carbon dioxide (CO2), the principal contributor to man-made climate change. Even small amounts of methane leakage across the natural gas supply chain can undermine the climate benefit of switching to natural gas from other fossil fuels for some period of time.

In a paper published last year, EDF scientists and other leading researchers examined the impact of potential fugitive emissions on the climate benefits of a switch from diesel to natural gas heavy-duty trucks. The study found that, according to the best available data, methane leak rates would need to be below 1% of gas produced in order to ensure that switching from diesel to natural gas produces climate benefits at all points in time. They also found that – using the EPA leakage rate estimates at that time – converting a fleet of heavy duty diesel vehicles to natural gas would result in increased climate warming for more than 250 years before any climate benefits were achieved.

EDF is working with leading researchers and companies in a series of studies designed to better understand and characterize the methane leak rate across the natural gas supply chain. The studies will take direct measurements at various points across the production, gathering and processing, long distance transmission and storage, local distribution, and transportation. The first study, led by researchers at the University of Texas, is measuring emissions from natural gas production. Results will be released in the coming months.

This content was originally published on EDF's Energy Exchange blog.

 

Posted in Fleet Vehicles, Goods Movement, Greenhouse Gas Emissions, Innovation, Supply Chain Management, Tools | Leave a comment

Pitchbook webcast sheds light on ESG trends in private equity

Private equity (PE) firms are increasingly aware of the need for environmental, social, and governance (ESG) management, a trend likely to continue, with 55 percent of firms recently surveyed by PitchBook saying they plan to increase their attention to ESG issues in the future.

The biggest challenge that PE firms cited in establishing an effective ESG program was effective metrics, followed by implementation, cost and employee participation, said PitchBook editor in chief Adley Bowden on a recent webcast, in which I was happy to participate.

The primary driver of PE interest in ESG is limited partners' growing attention to the issue, followed by environmental or social consciousness, brand or image, risk management, corporate governance, portfolio companies, government regulation, operational efficiency, cost management, employee interests and competitors, the survey found.

"Increasingly, we are being sent ESG questionnaires as part of the due diligence that LPs are doing on our fund," said Carlyle Group principal Bryan Corbett, on the webcast. "We view our program at Carlyle as providing them an answer and serving as a jumping off point for a broader conversation with our LPs about what their interests are and how we at Carlyle can do a better job of addressing them."

PE firms at the beginning stages of ESG management should start small and look for opportunities for early wins, without trying to achieve their goals all at once, Corbett said. Also, bear in mind that every firm is different in what drives adoption and what resources are needed, he said, urging firms to make use of free resources like EDF's Climate Corps fellows and ESG management tool. (I'll be speaking about the tool during a panel discussion at SuperReturn International in Berlin, Feb. 25-28.)

TPG senior advisor Beth Lowery agreed, noting that a couple of TPG's portfolio companies participated in Climate Corps. "You get a real product that can really improve energy efficiency and reduce costs; it's an excellent program," she said.

Some PE firms mistakenly believe that an ESG program will be expensive and that investors don't care about ESG issues, she said. In fact, successful ESG management should improve the bottom line, and many LPs care both about return and ESG management — you have to be careful how you word the question. Lowery stressed the importance of leadership support for ESG at both the firm and portfolio company levels.

"We found that our companies were interested in ESG to the extent that we could (1) show them value creation (and) (2) show them how it would benefit their relationships with customers and suppliers," Corbett said. "Very quickly, the companies begin to see it not so much as a bureaucratic, administrative task being pushed on them by their GP owner but rather as a business development tool that's going to help them expand their revenue base."

Both Corbett and Lowery stressed the importance of understanding your internal firm culture and building support with all stakeholders, rather than moving too quickly and losing buy-in. TPG's sustainability and leadership council has spread best practices among its portfolio companies, a framework that Carlyle and others have adopted with great results.

Overall the theme of the webinar was that a network of professionals is rapidly emerging across the private equity sector and collaborating in a way that is unusual for the industry. "We're all competitive. We're all trying to get the highest returns. We're all fighting over LPs, but on these issues, to a certain extent we're all in the same boat," Corbett said.

Posted in EDF Climate Corps, Energy Efficiency, Innovation, Private Equity, Tools | Leave a comment

How Ocean Spray cut its shipping emissions 20 percent

Corporations aren't paying enough attention to the massive global impact of their carbon emissions from transporting freight — yet there are simple steps they can take to reduce their shipping footprints.

Last month, EDF released the first in a series of case studies intended to draw attention to the significant potential for emission improvements and cost reductions from this sector.

The challenge

Freight transportation is a small component of the overall lifecycle environmental impact for most products. For example, it’s less than 5 percent for a pair of Timberland shoes, 8 percent for a six pack of Fat Tire craft beer, and 10 percent for an iPad. Companies have to prioritize where in their supply chain to focus on environmental improvements. It is natural for them to focus first on the largest contributors to their footprint.

Of course, every single product has a transportation footprint. So those percentages add up across the economy. Moving freight within the U.S. creates over 500 million metrics ton of carbon emissions each year.  Freight already emits more carbon pollution than lighting, cooling, heating, ventilating and powering equipment in all U.S. commercial office space. Worse still, freight emissions are projected to increase nearly 40 percent from current levels by 2040 — even with the enactment of the first-ever truck efficiency standards.

The good news

Companies that take a systemic metric-based approaches to freight sustainability are finding significant savings. Example number one is Ocean Spray Cranberries. By making smart process changes to one of its primary transportation and distribution routes, it reduced emissions for the route by 20 percent while cutting costs for the route by 40 percent.

To achieve these impressive results, Ocean Spray deployed three of EDF’s Five Principles of Carbon-Efficient Shipping. It chose the most carbon-efficient mode possible, collaborated with other shippers, and redesigned its network for efficiency.

As this case demonstrates, shippers — the consumers of freight services that don’t own or directly operate trucks, trains, ships or planes — have significant control over the environmental footprint of logistics operations. Their decisions on where products are made and stored, how they are designed and packaged, and how much time is allotted for transit have a tremendous impact on carbon efficiency.

The proof

EDF believes all shippers have a significant opportunity to advance their sustainability goals by improving their supply chain logistics.

Through this case study series, conducted in collaboration with Dr. Edgar Blanco of the MIT Center for Transportation & Logistics, we will demonstrate how several very different companies have been able to identify carbon- and cost-reduction opportunities in their supply chain logistics operations.

Are there emissions reductions ready to be harvested from your supply chain logistics operations?  Yes. The biggest challenge is knowing where to look. We hope that this case study series will help to direct you to undertake similar improvements in your supply chain.

Learn more about EDF's work in supply chain logistics.

*****

To learn more about the efforts of Ocean Spray or this case study series, sign up to attend the GreenBiz Forum being held in New York February 19-21.  Representatives from MIT, EDF, and Ocean Spray will hold a workshop, Smarter Moves: Practical Supply Chain Strategies, the afternoon of February 20th.

This content was originally published on Greenbiz.com.

Posted in Behavior, Fleet Vehicles, Goods Movement, Greenhouse Gas Emissions, Innovation, Partnerships, Supply Chain Management, Tools | Leave a comment

Where You’ll Find Us in February

In honor of Valentine's Day, we're showing our love for these conferences this month. Here's where you can find us in February:

Kate Hanley is attending The Retail Supply Chain Conference: Logistics 2013 or RILA Logistics from February 17-20 in Orlando, FL.

On February 20-21, Jason Mathers is hosting a workshop at the Greenbiz Forum in New York. He is joined by Kristine Young of Ocean Spray and Edgar Blanco of MIT’s Center for Logistics and Transportation. This group is discussing our recent collaboration on an Ocean Spray case study. Chris Riso and Scott Wood are exhibiting a booth at the event, so be sure to come and say hello.

Switching coasts for a bit: Sitar Mody is hosting a workshop on the Virtuous Cycle of Energy Efficiency at the Greenbiz Forum in San Francisco on February 27-28. Christina Page from Yahoo! Inc. and Nicola Peill-Moelter of Akamai are joining the panel to share experiences about EDF Climate Corps.

Join us at the Greenbiz Forum!

Use this priority discount code: gbf13EDF to receive 10 percent off the registration fee. Register here for the New York Forum or here for the San Francisco Forum.

February 25-28, Lee Coker is headed to Berlin for a panel discussion at SuperReturn International, “ESG: Theory Versus Practice – What Counts as Good ESG?”

Look for us at these conferences – and let us know if you'll be there so we can watch for you as well!

You can always see where we're going to be – and what other conferences we know about– on the EDF Biz Calendar.

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Corporate Sustainability 2012: Some Standout Companies… But Most Mired in Rampant Incrementalism

Each winter in Davos, world leaders and captains of industry gather to discuss the most pressing issues on the planet. For the past seven years, this amazing event has also hosted the launch of the annual “Global 100 Most Sustainable Companies,” published by the Canadian media and research firm, Corporate Knights.

Sustainability ratings matter! And few matter more than the Global 100, which is recognized as one of the most extensive, data-driven, corporate sustainability assessments in the world. The results are published in the Corporate Knights quarterly magazine and distributed at the World Economic Forum in Davos.

I had the privilege of authoring a piece in the Corporate Knights just – published fall issue. The core questions I was asked was: “What is the state of corporate sustainability right now?”

My answer, though disappointing to me personally, is in our newest issues of Insight titled Corporate Sustainability 2012: Some Standout Companies…But Most Mired in Rampant Incrementalism." Having tracked hundreds of companies globally on their march to sustainability for the past fifteen years, our core conclusion is this: While a handful of standout companies truly lead the way today, most companies are mired in “rampant incrementalism.”

For information about recent projects and clients, visit our website at www.hedstromassociates.com.

About the Author

Gib Hedstrom has 25 years of experience in helping boards of directors, CEOs, and senior executives manage risk and reap opportunities associated with the environment and sustainability. After 20 years leading Arthur D. Little’s environmental auditing, strategy, and governance work – and co-leading the company’s sustainability initiative – he founded Hedstrom Associates in 2004.

 

 

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