Charting a Course for Cleaner Cargo in the Transport Sector

Charting a Course for Cleaner Cargo in the Transport Sector

Image CC licensed by Flickr user bk2000

[Editor's note: This article was authored by BSR, a global business network and consultancy focused on sustainability.]

During the past 20 years, global commerce has come to depend on an intricate web of supply chains that have revolutionized the way even the most basic products are sourced, assembled, and distributed.

The transportation and logistics sector linking these networks has become critical in supporting greater speed to market, more efficient and cheaper production, higher profits, and sustainable growth.

In spite of this function and its decade-long focus on creating more responsible supply chains, transportation and logistics remain a mostly overlooked area for potential risks and certain opportunities related to climate change.

Understanding greenhouse gas emissions across this complex system -- which includes vehicle and vessel owners, logistics providers and freight forwarders, and warehousing and distribution points -- will require a greater level of collaboration to support two key things:

•    Common language: Most supply chains today are measured by key performance indicators (KPIs), and although current KPIs can be used to measure supply chain efficiency, they do not adequately address sustainability. Partnerships across these networks need to develop common standards, tools, and methods across entire value chains.

•    Increased transparency: For reduced carbon emissions in the freight sector as a whole, shippers can shift to more carbon-efficient modes of transportation, optimize routes, and rethink supply chains only if they can quickly and accurately compare options. In order to do this, both carriers (companies that transport products) and shippers (companies that produce the products) need to increase visibility into the transportation supply chain.

This article uses BSR's Clean Cargo Working Group as a case study to examine how one part of the sector -- ocean freight -- has begun working on common metrics and increased transparency. It also discusses the opportunities that remain for transportation and logistics industry as a whole to collaborate to reduce emissions.

Clean Cargo Working Group: Starting with Ocean Freight

Ocean transport carries more than 90 percent of the world's traded goods and contributes between 3 percent and 4 percent of global emissions -- or more than those generated by Germany.

Although ships trail behind road and air freight when it comes to emissions, the fact that a large shipping line can transport more than 3 percent of the globe's gross national product at any given time places the industry in the spotlight. And driven by efforts from retailers and major companies to reduce costs and increase efficiency in the supply chain, carbon emissions represent the most material impacts from container shipping today.

To promote sustainable growth, organizations such as BSR's Clean Cargo Working Group (CCWG), a supply chain collaboration between carriers (in this case, ocean freight companies) and shippers, are working to collectively address issues such as emissions. The CCWG has done this by developing tools and standards that allow carriers to benchmark performance, and allow shippers to access accurate data on which to base decisions about which carriers to use on a given route.

In 2007, CCWG created a standardized data-collection process that has resulted in the launch of current, industry-leading emissions factors, based on actual data, for ocean freight on all global trade lanes. Already, these efforts have allowed shippers to begin comparing carrier performance and have allowed carriers to identify higher- and lower-performing routes. The group is also finalizing a process to verify the annually collected data, and is seeking to align with other leading supply chain efforts to encourage consistent assessment and quantification of environmental impacts.

While these developments signal progress, they represent only one part of the transportation and logistics sector. In practice, shipments move across multiple modes of transport: truck to rail to ship to truck. In order consider all challenges and opportunities, increased levels of transparency and collaboration are needed among all modes of transport.

What's Next: The Power of Networks

Standards developed to quantify GHG emissions across the supply chain, including the variety of product-related footprinting protocols, are only beginning to experiment with methods that measure transportation impacts.

The sector should begin sharing its tools and processes through an "open source" approach that will allow parallel efforts to be complementary, rather than overlapping.

To take advantage of networks, several things are needed:

•    More shipper involvement: Efforts such as CCWG have made progress in bringing a significant portion of the sector together, with more than 60 percent of the container capacity being actively engaged. But it "takes two to emit," meaning that in order to have a meaningful impact on the sector, more shippers are needed to play more active roles, including retailers, manufacturers, and all those whose goods need to be shipped. To support carriers' investments in cleaner technologies and processes, shippers must clearly and strongly indicate their commitment to use greener carriers.

•    Increased alignment among groups focused on logistics and transportation emissions: A growing number of organizations are currently working on overlapping efforts. CCWG, EPA's SmartWay Transportation Partnership, EcoTransIT, NTM, and other transportation-focused groups have all made strides in developing tools and methods for different parts of the sector. Additionally, the field of calculator tools for GHG accounting is growing.

What's missing is active alignment among these tools so that the best methodologies are used consistently and various efforts combine to create a more complete global emissions picture for the sector. Companies seeking to implement these tools can benefit by understanding what is behind them and influencing their development. If companies signal the need for more accurate data across the transportation supply chain, collaboration among organizations will help the industry combine, or make available, the best of each approach.

The payoff for pursuing collaboration is also positive in other regards: Collaboration can enable longer-term solutions such as product innovation among competitors, as evidenced by Maersk Line and NYK's joint development of emission-reduction technologies and initiatives including waste-heat recovery, emission-abatement technologies, emission-cleaning systems, ballast-water treatment, and alternative fuels. Collaboration can also lead to new service opportunities and increased power to shape public policies that reduce barriers and enable incentives for sustainability.

By taking advantage of opportunities within networks, shifting to lower-emitting modes of transportation, and slowing down supply chains for greater fuel efficiency, collaborative groups have developed the most promising near-term solutions for portions of the supply chain.

The next opportunity -- to significantly reduce emissions across the entire sector -- will require a step-change in the amount of coordination between networked partners: a greater number of shippers engaged with all modes of transportation.

Raj Sapru is director of advisory services at BSR.

Image CC licensed by Flickr user bk2000.