The conversation surrounding climate change has intensified in recent years, and everyone from corporations to consumers has taken notice. Once considered something of a niche interest, sustainability has gone mainstream. This is great news for the health of the planet, but it does mean shippers and carriers alike will need to be more cognizant of their carbon footprints and take actions to reduce them.
The U.S. is among the largest carbon emitters in the world, and transportation is the No. 1 source of greenhouse gas emissions in the country. According to the Environmental Protection Agency (EPA), the movement of vehicles accounts for 29% of all greenhouse gas emissions across the nation. Emissions also increased more in the transportation sector than any other sector between 1990 and 2019, according to the agency.
Global leaders have made it clear that cleaning up the supply chain is essential to achieving a healthier planet. While the U.S. federal government’s guidance on environmental best practices tends to change with the presidential administrations, many individual U.S. states are taking action to cut down on transportation emissions within their borders.
For instance, last summer, 15 states and the District of Columbia signed an agreement to work together to limit air pollution from commercial trucks. The states hope to accelerate the deployment of zero-emission medium-duty and heavy-duty trucks. It is the largest ever multistate action on clean transportation in the U.S.
While the onus is often placed on carriers to tackle carbon emissions within the industry, shippers and third-party logistics (3PL) companies are also being called on to address their own carbon footprints. One straightforward way for shippers to clean up their supply chains is through more targeted carrier selection.
In an industry known for its razor-thin margins, it is not uncommon for shippers to view price as the only factor that matters when moving a load. This approach, however, is being phased out in favor of newer, more nuanced carrier selection methods.
“We’re now getting away from just the dollar conversation with carrier selection,” said Jim Monkmeyer, President of Transportation, DHL Supply Chain North America. “Everybody – from the street to the customers to the employees – is interested in moving in a sustainable direction.”
The EPA SmartWay program provides carriers, shippers and 3PLs an accessible method of seeing where they – and their partners – stand in their quest for more sustainable operations. When companies participate in the SmartWay program, they report fleet statistics which produce performance rankings for air emissions. Bins within each fleet type enable ranking of performance across carriers. This data can be invaluable when integrated into the carrier selection process, and that is exactly what DHL Supply Chain has done.
“We developed proprietary algorithms that use these rankings to optimize and run different scenarios for customers, not only meeting service requirements but optimizing cost and SmartWay performance,” Monkmeyer said. “For example, we can look at the lowest cost solution based on SmartWay carriers’ data. We can measure carrier partners’ burn rates, then measure our customers’ carbon footprint reduction year-over-year. That’s something that just wasn’t available until recently.”
Due to DHL’s wealth of data and ability to optimize each shipment, Monkmeyer noted that customers did not end up spending significantly more money when a more fuel-efficient carrier base was selected. That means shippers were able to reduce their carbon footprints – helping the planet and gaining favor with consumers – without jeopardizing their bottom lines. It also provides, for the first time, a clear incentive to improve the fuel efficiency of their fleets.
Carriers are often perceived as being averse to change, but recent DHL Supply Chain survey results show that the company’s carrier partners are also excited about sustainability. The company hosts an annual carrier conference, allowing it to poll participants in real time. At the most recent event, 60% of carriers said sustainability is a key element of their strategic plan. Another 31% said sustainability is important and gaining attention, according to Monkmeyer.
“That’s a huge change from where we were a few years ago,” Monkmeyer said. “Perhaps most impressively, almost two-thirds of carriers said their company is investing in sustainability because it is the right thing to do even if there isn’t a clear financial return.”
For its part, DHL Supply Chain uses the tool in-house for internal emissions tracking and jumped 20 basis points in SmartWay carrier usage year-over-year. Monkmeyer said this was due to encouraging its carrier partners to participate in the program and generally being more conscious about carrier selection. Additionally, DHL Supply Chain is on track to achieve its goal of zero-emissions logistics by 2050, and Deutsche Post DHL Group recently announced plans to increase the pace of its planned decarbonization. The Group is investing a total of 7 billion euros over the next ten years in measures to reduce its CO2 emissions.
As the push for a more sustainable planet continues to grow stronger, companies across the supply chain will be expected to have a clear plan for cleaning up their operations. Companies that do not put forth the effort to become greener now may soon find themselves left behind, losing profits and relationships to their more eco-minded competitors.