DHL Says Small Efficiencies Can Deliver Big Carbon Savings

"The first thing you need to understand about greening a supply chain is that the term 'green' is not specific enough. It has the wrong connotations. This is about saving money and becoming efficient."

That is the view of Karl Feilder, chief executive of DHL Neutral Services, a subsidiary of the delivery giant set up to improve the efficiency of both DHL's and its customers' supply chains.

It is a daunting task considering that DHL has set itself the ambitious target of cutting emissions by 30 percent by 2020 — a task made more challenging by that fact that the company's global operations span 220 countries and boast 400 aircraft, 170,000 staff, 4,500 warehouses and other properties, and thousands of trucks.

With a huge chunk of its carbon footprint resulting from transport, Feilder accepts that the company's emission targets are challenging, but he insists they are achievable as long as DHL addresses the entire supply chain.

"It's about making a lot of small changes," he says. "By focusing ruthlessly on carbon reduction in all parts of the supply chain we think we can do it."

Every reduction project DHL has undertaken as part of the initiative has also resulted in a reduction in operating costs, according to Feilder, providing executives with the business case to push ahead with the program.

He explains that the company's emission reduction program has been divided into four areas: assessment, reduction, replacement and neutralization.

Assessment

Assessment of a supply chain's carbon footprint can be very difficult, according to Feilder.

"Between a grower and a retail store there can be as many as 47 companies involved," he explains. "And each of their carbon metrics change every day, so getting accurate numbers is very difficult."

Rather than manually assessing the carbon outputs at all these points in the supply chain and feeding them into a computer system, DHL Neutral Services is installing IT systems that will collect the information and process it automatically — so any changes are monitored in real time.

"Bad data seeds could mean you end up hedge-buying fuel when you don't need it, or vice-versa — the information needs to be up to date and accurate," says Feilder.

Reduction

Carbon emissions reduction is obviously essential to meeting emission targets, but according to Feilder the strategy goes beyond simply addressing emissions. "This is about more efficiently using current assets," he says.

A series of efficiency measures — including lagging the roof space of warehouse buildings, measuring power more accurately, installing more accurate fuel gauges, hedge-buying fuel when prices are low, sharing warehouses with other logistics firms and energy housekeeping — have all been introduced in an attempt to cut costs and emissions.

The firm will also launch a pilot program next month looking at how it can share trucking facilities with different retailers to decrease distribution distances.

Replacement

Ultimately, a 30 percent cut in emissions can only be achieved by embracing new, more efficient technologies and DHL is planning to replace a number of its older technologies with newer, more efficient versions.

For example, the company has embraced electric vehicles and is keen to expand its fleet.

"When the oil price is at $125 (£72.40) a barrel or higher, it's cheaper for us to use our electric trucks," says Feilder. "We need 5,000 [new electric trucks] next year, 5,000 the year after that, and 5,000 the year after that," says Feilder.

The problem is no one is making them fast enough.

DHL can't find suppliers to deliver the 15,000 vehicles it wants, despite three manufacturers being located in the UK.

Feilder hopes that within the next three to four years, EU regulations will help cajole manufacturers into producing more carbon-efficient vehicles. But in the meantime, the company is taking matters into its own hands, setting up an incubation unit that will provide capital for cleantech startups that the company hopes can address its transport challenges.

It then hopes to trial any low-carbon technology they develop, which will primarily relate to vehicles, before rolling it out across its global fleet.

"The cleantech bubble hasn't yet given us the opportunities we were hoping for and this is our way of giving it a boost," says Feilder.

Neutralization

All these initiatives will take time to deliver deep cuts in emissions, so in the interim DHL has committed to a program of carbon neutralization.

"The environmental industry has done a bad job of persuading people about the benefits of carbon offsets, but many schemes are kosher," argues Feilder. "The key is to make all the other possible changes that you can first, and then offset to meet your targets."

The company is buying offsets currently, but hopes this will be a short-term fix. "We absolutely believe it's possible to get to a carbon neutral supply chain eventually, and that is our aim," says Feilder.

Of course, it remains to be seen if a company that is so reliant on global supply chains can deliver such deep emission cuts over the next decade. But if it can provide a template for other firms to follow, the global economy will have taken a major step towards decarbonizing its sprawling supply chains.