To avoid the worst consequences of climate change, companies must reduce their reliance on diesel-powered trucks to move goods — and they must act quickly. Transportation is expected to be the largest source of new greenhouse gas (GHG) emissions through 2050, and a major driver of dangerous air pollution, disproportionately concentrated in low income communities and communities of color. By committing to zero-emissions shipping, companies can drive a more resilient and equitable future.
An innovative new financing mechanism uses private and public finance to enable companies to accelerate electric vehicles adoption for non-owned vehicles in their supply chain. This fills a critical gap: Until now, companies have not been able to secure zero-emissions shipping when they don’t own or operate their own vehicles.
Through the financing model, companies leverage their collective purchasing power to enable carriers to provide zero-emissions delivery options. Financiers provide the capital needed to purchase the zero-emissions vehicles (ZEVs) and make them available for carriers to use, if necessary with the help of an EV manager. Companies "sponsor" these ZEVs through payment plans and use guarantees, and therefore procure clean shipping options in their supply chain.
This novel approach is an opportunity for companies to accelerate the transition to 100 percent clean shipping, manage against the ESG risk of diesel-powered trucks, make progress against their climate goals and protect the health of communities in which they operate. Because while the financing model could be used for vehicles based anywhere, the greatest benefit can be achieved by prioritizing depots in a ZED Zone, where communities suffer disproportionate health and equity impacts from air pollution.
Diesel exhaust adds to high burdens of pollution and health harm in neighborhoods near port facilities and distribution centers — often communities of color and communities that face economic inequities.
Without fleet electrification, meeting climate and shipping goals is slim
The online shopping "boom" following the onset of the pandemic set in motion a flurry of at-home deliveries. Companies and carriers expanded services and delivery networks to meet demands, causing the number of diesel-powered trucks on the road to skyrocket. Projections estimate that last-mile service will grow 12 percent annually through 2050, increasing the need for more trucks on the road.
Many companies have set ambitious climate goals and reducing delivery emissions will be a critical component for meeting them. Companies, too, have set transportation-specific targets. IKEA committed to achieve 100 percent zero-emissions last-mile delivery and to become climate positive. Unilever committed to zero-emissions shipping using a phased integration of electric vehicles into their owned and leased fleets.
Most companies contract for shipping services through carriers rather than, or in addition to, owning their own fleets. In many cases, carriers optimize delivery by shipping multiple items from different companies in the same truck. The logistics and costs make it near impossible for companies to request specific vehicles be used by carriers to make their deliveries. Which means, without owning or leasing a vehicle and managing shipping directly, there is currently no way to secure zero-emissions shipping.
Unlocking environment, social and financial opportunities for your brand
Embracing a ZED Zone financing model is an attractive business opportunity for any delivery-dependent company. Here’s why:
- Meet climate commitments. Emissions from transportation are the fastest growing source of global GHG emissions, accounting for 25 percent of CO2 emissions. Getting to net zero will require the transportation sector to reverse that trend and rapidly decarbonize. As a delivery-dependent company, prioritizing your transportation footprint is key. A ZED Zone financing model enables you to clean up trucking in operations and supply chain and meet your climate goals.
- Reduce air pollution and disproportionate health burdens. Diesel exhaust adds to high burdens of pollution and health harm in neighborhoods near port facilities and distribution centers — often communities of color and communities that face economic inequities. A ZED Zone financing model enables companies to focus and accelerate ZEV deployment in communities that face a disproportionate health burden from air pollution. And through it, a shipper or group of shippers can catalyze $1 million of air pollution benefit by sponsoring just 15 electric delivery vehicles.
- Maintain shareholder confidence. Investors are increasingly pressuring companies to take responsibility for and proactively manage against environmental and social risk. The ESG risks from fossil fuel trucks is more clear than ever as transportation makes up the largest source of climate pollution. For investors, this risk will manifest as unfavorable policies, lost revenues and increased costs at portfolio companies. Through a ZED Zone financing model, companies can show investors that they are actively working to minimize their risk, proving to be a favorable investment opportunity.
Innovative technological solutions for achieving zero-emissions shipping is possible today.