Green supply chains: transportation and logistics role needs to expand for a sustainable energy future

Jeff Berman, Senior Editor -- Logistics Management, 7/27/2007

ATLANTA—It is not a stretch to say that environmental issues have taken center stage in many supply chain, logistics, and transportation circles. All things green, such as the world’s limited oil supply, the push to reduce fossil fuel emissions and corporate mandates and incentives based on environmentally-based drivers, have taken added importance for logistics professionals in recent years.

This was especially true at last month’s eyefortransport 3PL Summit/Outsourcing Logistics conference in Atlanta. A session entitled “Can the transport and logistics community lead the way on sustainable energy?” raised some interesting points on ways in which initiatives such as businesses energy consumption and carbon footprint plans will have a major impact on how they operate in the future, as well as their bottom lines.

The concept of “sustainability,” said Joe Madden, principle of Sustainable Transport Systems, impacts transportation on three levels: environmentally, economically, and in the government (to a certain extent).

In terms of economics, Madden explained that energy costs comprise approximately 11.2% of the United States GDP, which means a 30% increase in fuel costs would result in a 3.4% increase in inflation. And he noted that if we are vulnerable from a security standpoint and volatile from an economic standpoint, it raises many questions about the long-term viability of our energy system and resources.

This, said Madden, is where the environment comes in, and climate is becoming a bigger and more important issue, as evidenced by all the media attention Global Warming and fossil fuel reduction continues to receive.

“Climate is becoming an issue,” said Madden. “Natural systems ability to absorb emissions from our global economy are being taxed.”

And in a high profile industry such as transportation, where trucks, vessels, and planes are frequently associated with emission, it makes it a prime sector for politicians to push legislation. As an example, he noted that last summer the state of California passed AB 32: The Global Warming Solutions Act, which mandates that the state’s global warming emissions be reduced to 1990 levels by 2020, and is causing changes across several industries in California.

In the last four months, according to Madden, large oil shippers like Dupont, Shell, and Alcoa, among others, have lobbied Congress for these same type of stringent policies in their respective states.

“In our industry, these are some of the main players that are taking action, and they are moving forward in a more sustainable direction,” said Madden.  

Other shippers are carriers that are focused on sustainability, noted Madden, include:
• Wal-Mart increasing fleet efficiency by 25% in three years and 50% within 10 years and also establishing a “scorecard” designed to apply new rules of supply chain sustainability to retailers service products and reduce the environmental footprint of its product shipping business and logistics network;
• FedEx Express developing hybrid electric power train with Azure Dynamics;
• UPS’ initiative to have its drivers make right turns only to get to its destinations
• General Electric’s “Ecomagination” and BP’s “Beyond Petroleum” branding campaigns
• the EPA’s SmartWay Transport Partnership, which helps shippers and for-hire carriers lower greenhouse gases and other emissions while giving the average truck $2,000 in yearly fuel savings

Things like this make the transportation and logistics industries uniquely positioned to be a catalyst in the area of sustainability, because they are the ones that most actively collaborate with all types of businesses, said Madden.

“If businesses are focused on these issues, and we are focused on the supply chain, transportation and logistics companies are able to drive this sustainability evolution,” said Madden.

The four areas to focus on in regards to this evolution, he commented, are efficiency, alternative fuels, information and engagement, and reverse logistics.

Implementing alternative fuel strategies are feasible and quite effective from a national security standpoint, in the sense that it keeps money out of the hands of countries that the U.S has conflicts with, Madden said, as 25% of the national deficit is due to oil imports.