August 20, 2008

Environmental Supply Chain Planning – Expanding Accountability

Regardless of where one stands on the subject of climate change, we are all impacted by rising energy prices. Carbon-based energy fuels our economy, in turn producing carbon dioxide (CO2) as a by-product. Any effort to reduce fuel usage will also reduce emissions of greenhouse gases, nitrous oxide (NOx) and particulate matter (PM). Fuel conservation, therefore, is a win-win position both for the economy and for the environment.

The freight sector plays a significant role in greenhouse gas production, so it is imperative that the industry’s logistics and supply chain sectors assume more environmental accountability and become committed to developing long-term solutions for more sustainable operations. As logistics and supply chain professionals, we are poised to be a significant part of the solution, while also helping to increase profitability and competitive advantage for our businesses.

The EPA estimates that overall, the transportation industry accounts for two-thirds of oil consumption and one-third of total CO2 emissions in the United States, and that, on an annual basis, commercial truck and rail freight services:

• Travel more than 200 billion miles
• Consume more than 55 billion gallons of fuel - 27 percent of the United States’ overall oil consumption
• Produce approximately 350 million metrics tons of CO2 - equivalent to 13 percent of the United States’ carbon emissions

The EPA estimated total NOx and PM emissions in the United States in 2004 at 6.3 million tons and 305,000 tons, respectively.  Of this, the freight sector was responsible for 56 percent of NOx emissions and 32 percent of PM emissions.

The federal government’s SmartWay program helps to ease the ill effects the freight industry has on the environment.  The voluntary SmartWay program is a U.S. Environmental Protection Agency (EPA) initiative that establishes incentives for fuel efficiency improvement and greenhouse gas reductions for truck, rail and sea freight operations. By 2012, the initiative aims to reduce between 33 and 66 million metric tons of CO2 emissions, up to 200,000 metric tons of NOx emissions and up to 150 million barrels of oil in fuel savings each year.

As part of their involvement in the program, carriers recognized as SmartWay transport partners commit to improving their performance within three years, as measured by the SmartWay Transport Fleet Logistics Energy and Environmental Tracking (FLEET) performance model for carriers. Shippers must commit to shipping a minimum of 50 percent of their goods with SmartWay carriers and to improving facility transport emissions within three years. They are also required to assess their current operations carriers using the FLEET performance model for shippers, which allows a company to quantify the percentage of freight shipped or received with SmartWay fleet partners and estimate the CO2, NOx and PM emissions generated from its entire shipping operations.

Sharp Electronics Corporation is an example of a SmartWay participant that has achieved a measurable impact on its environmental bottom line. Sharp joined the SmartWay program in 1994 with clear goals for its shipping practices: strict pick-up times on Less-Than-Truckload shipments, a no idle policy on trucks waiting to be loaded and Customs-Trade Partnership Against Terrorism (C-TPAT) certification. Within ten years, 28 percent of Sharp’s 85 carriers were SmartWay members and 33 percent of shipments (by volume) were transported via SmartWay carriers.  By 2007, the number of carriers climbed to 90 percent and almost all (98 percent) of the company’s shipments were done with SmartWay partners.  The EPA calculates that Sharp, a two-time SmartWay Excellence Award winner, achieved a reduction of 918 tons of CO2 emissions, .8 tons of PM, 18.5 tons of NOx and more than 82,000 gallons of diesel fuel between 2004 and 2007.

Adding more ocean carriers as participants is the next step to bolstering the effectiveness of the SmartWay program. Ocean carriers would have to commit to using low-sulfur bunker fuels and other fuel improvements, and making engine improvements such as the use of slide valves, fuel injection and exhaust gas recirculation. Carriers could also investigate using after-treatments like scrubbers, catalysts, bonnets and innovations such as cold-ironing, speed reduction and hull coatings. Furthermore, establishing a SmartWay transportation program in the European Union or setting an international standard on greenhouse gases for ocean carriers would make significant inroads in reducing emissions on a global level.

Participation in a program such as SmartWay is a critical first step in fostering sustainable practices. However, companies must aim to exceed – not just meet – the mandated requirements, in order to maintain a competitive edge and a substantial and lasting impact on the environment.

Mark Servidio is VP – Logistics & Environmental Supply Chain for Sharp Electronics. Buddy Polovick works for the US Environmental Protection Agency, Office of Transportation and Air Quality, SmartWay Transport Partnership.

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