Freight is the work horse of the global economy, ensuring that the products consumers want land on shelves or doorsteps any time they wish.
With 70 percent of goods in the United States being moved by truck, freight is a key source of our fuel consumption and corporate greenhouse gas emissions. Today, freight also offers companies a key opportunity to show leadership on climate.
In recent weeks, Ben & Jerry’s, Cummins Inc., Eaton Corp., FedEx, IKEA, PepsiCo and Waste Management have voiced strong support for the new fuel efficiency and emissions standards for medium and heavy-duty trucks.
PepsiCo Chief Executive Indra Nooyi summed it up like this in a recent Wall Street Journal op-ed post she co-authored with Environmental Defense Fund President Fred Krupp: “Less money spent on fuel means more to invest in our products, processes, people and communities.”
That kind of thinking is what we refer to as the business-policy nexus. It’s driving innovative companies to take the next step in corporate leadership, aligning corporate sustainability operations, strategy and policy.
The next wave of business leadership must include helping to shape and support the regulatory and policy changes required to preserve the natural systems that people, communities and companies need to thrive.
Here are three reasons corporate America is now making this connection on freight:
1. Business drives freight
Freight transportation exists to serve companies that make or sell physical goods — including brands and manufacturers that use trucks to bring in supplies and ship out final products, and technology companies that need trucks to deliver the hardware that powers their online services.
While medium and heavy-duty trucks only make up 7 percent of all vehicles on the road, they consume 25 percent of the fuel used by all US vehicles.
2. Inefficient movement of goods wastes fuel and raises costs
For firms such as PepsiCo that maintain their own fleets, as well as those that contract out for freight moves, fuel is the single largest cost of owning and operating heavy-duty trucks.
Truck fuel prices account for nearly 40 percent of total trucking costs, a strong incentive for increasing the efficiency of trucks that move freight.
Fuel costs are passed on to consumers, which can, in turn, affect a company’s competitiveness. Through everyday purchases, the average US household spends $1,100 a year to fuel big trucks. Strong fuel standards for trucks can cut this expense by $150 a year by 2030.
Over the life of the program, new standards will cut fuel consumption in new trucks by 1.8 billion barrels of oil and reduce carbon emissions by 1 billion metric tons – savings that benefit corporate balance sheets as well as the environment.
3. Supporting strong truck standards is good business
Strong standards will help companies meaningfully reduce their supply chain costs and carbon footprint.
In fact, with strong heavy truck fuel efficiency standards, companies could see freight rates fall nearly 7 percent as owners of tractor-trailer units see their costs fall by more than 20 cents per mile.
A big consumer goods company, for example, could save as much as 3 billion gallons of fuel and $11.5 million in freight costs per year in 2030 by using newer trucks produced under strong truck standards.
Supporting strong truck efficiency standards is also an important way for companies to proactively mitigate risk. In a world with higher oil prices, freight costs could soar — but even if oil prices were to remain low, savings would be significant.
Time to Speak Up
For those companies still considering their position, opposing or keeping quiet about the proposed truck rule is essentially committing to higher long-term costs, more greenhouse gas emissions and greater fuel use.
PepsiCo and the other leading brands speaking in favor of truck efficiency get it – and we think more forward-looking companies will soon join in.
Tom Murray is the vice president of the Environmental Defense Fund’s corporate partnerships program. His areas of expertise include corporate partnerships, business and the environment, fleet vehicles, green returns, paper and packaging, private equity and financial services. Prior to joining EDF, Tom held several positions at ICF International and Jellinek, Schwartz & Connolly, where he advised governmental agencies and Fortune 500 companies on environmental, safety and health compliance, pollution prevention, and legislative and regulatory strategy.