Companies are taking sustainability more seriously after the pandemic shone a spotlight on how disruption can wreak havoc on supply chains.
"The lack of resilience and the current supply chain disruption we're seeing has been, for many, a demonstration of the need to double down on climate change resilience," said Simon Fischweicher, head of corporations and supply chains for CDP North America.
Still, companies face major roadblocks in reducing their environmental impact. Green technology remains limited, and the pandemic has supercharged demand for single-use products.
Read the stories below to learn about sustainability goals are evolving and how businesses are adapting to new challenges.
Retailers leverage open calls to add diversity, sustainability to supply chains
Faced with empty shelves, companies like Kroger, Lowe's and QVC are looking for new or more local suppliers that meet their needs.
By: Jen A. Miller• Published July 22, 2021
In an effort to bolster their supply chains and offer opportunities to suppliers who may have been cut out of the corporate pitch process before, retailers like Kroger, Walmart, QVC and HSN are putting out open calls for new vendors. The goal: adding diversity and substantiality to their supplier base.
"We’re dedicated to fostering innovation and investing in local, regional, and small businesses that make the best of food accessible to all," Dan De La Rosa, Kroger’s group vice president of fresh merchandising, said in a press release announcing a call for companies to participate in their "supplier accelerator".
These efforts by big chains might seem like publicity stunts, especially in light of small retailers being decimated during the pandemic. The home improvement store Lowe's is even working with Daymond John of ABC’s Shark Tank on a program called "Making It…With Lowe's."
"[There are] a lot of people who are looking at this and thinking 'what are the ulterior motives that might be at play?'" said Brendan Griffith, senior vice president at Reputation Partners Communications.
But even if the motivation is to check boxes on previously announced DEI and sustainability goals, "this is truly a good thing," he said. "As large global organizations, they are finding a meaningful way to actually connect with local businesses, local suppliers, and make a better connection with their customers."
Open calls, with a diversity and sustainability focus
The concept of open calls like this isn’t new. After all,"requests for proposals" or RFPs, are based on the same concept.
Before, a company might put out a request for proposals to solve a specific business problem, like an oil and gas company looking for submersible drones to inspect underwater pipelines, said Chad Gottesman, global managing director of procurement operations at Accenture.
What is new is the way open calls are being handled. Enterprises are looking at publicly stated sustainability and diversity goals and are "using this type of approach to help influence those metrics and those outcomes," Gottesman added.
Indeed, in Kroger’s announcement, Stuart Aitken, chief merchant and marketing officer, pointed out that they had invested $4.1 billion in diverse suppliers, a 21% increase from the previous year, with the goal of reaching $10 billion by 2030.
"These companies are being challenged to put their money where their mouth is," said Douglas Kent, executive vice president of strategy and alliances for the Association for Supply Chain Management. In terms of DEI goals, “a lot of companies have made these statements at overarching, broad levels. This is where we're seeing it come together.”
It’s also what customers want. "Consumer facing companies have a customer base that is demanding to understand more about the company’s commitment to DEI, to improving equality. They want to shop from those companies and buy from these brands," said Gottesman.
Walmart’s Open Call is part of the company’s commitment to buy an additional $350 billion on items made, grown or assembled in the U.S. More than 900 companies pitched products that met these requirements in June. Of those, 167 products, including tortillas and fire kits, are advancing to the next stage of the competition with an additional 705 receiving further consideration.
"It worked out for us; we got a deal that day," Sherm Hubbard, owner of Speedy Blaze, which makes the fire kits, told WBKB 11.
Bottom-line benefits go beyond marketing
Beyond the reputation and marketing benefits of doing open calls, having a diverse supply chain, and companies located closer to retail locations, makes financial sense.
During the pandemic, retailers saw the consequences of global supply chains: empty shelves. Having suppliers closer to stores, not relying on global supply chains that can be easily disrupted by a pandemic or a hurricane or a boat stuck in the Suez Canal, means being able to keep shelves stocked and keep customers happy, said Gottesman.
Open calls like this create a supply base that’s closer to their stores, which invests in local companies will "lead to fewer supply shortages and keep their shelves full. It’s good for the local community. It’s a win-win."
For companies like QVC and the Home Shopping Network, open calls fill the pipeline with new products. Their open call, called "The Big Find," started in 2019. In 2020, they chose 102 brands, 64 of which are owned by people who self-identified as women or as a minority-owned business.
E-tailers like these don't traditionally "manufacture their own products, they have to re-invigorate that product all the time," he added. No one is going to "turn on that channel and watch the same stuff. It’s really important that they use these efforts to diversify what that portfolio looks like."
Article top image credit: Retrieved from Walmart on July 22, 2021
Executives lead the charge in supply chain sustainability efforts: report
Business leaders are paying more attention to sustainability as they learn "more about how much money they can add to the bottom line," one expert said.
"Respondents who felt that their employers have high commitments also reported that the strongest pressure was from company executives," said David Correll, a research scientist at Massachusetts Institute of Technology's Center for Transportation & Logistics. MIT CTL authored the report alongside the Council of Supply Chain Management Professionals (CSCMP).
It's the second year the two organizations conducted the report, and in 2020, during the coronavirus pandemic, commitments to sustainability grew from the previous year. The report found that 52% of respondents said their company had supply chain sustainability goals, a 4% increase from 2019. And 82% said their companies' commitments to these goals had either remained or increased since the start of the pandemic, compared to 9% of respondents that decreased commitments.
Whether from investors, regulators, consumers or local communities, the pressure companies are facing to become more sustainable is increasing.
Compared to 2019, survey respondents felt a greater or equal push to pursue sustainability from every type of stakeholder, except corporate buyers. And while pressure from investors and government regulators increased the most, each by 8% YoY according to the report, executives are the ones expected to turn questions into commitments.
"We had quite a lot of 'internal pressure' already, as we had ambitious 2020 targets set already in 2009–10. Today, the pressure is both internal and external. This is creating a lot of momentum to innovate in this area," Sergio Barbarino, a research fellow in sustainability at Procter & Gamble, said in the report.
The report, which was based on a survey of 2,400 professionals, a review of 250+ documents, and 21 executive interviews, said there were several reasons why companies increased their commitments to sustainability. Some executives cited the pressure from stakeholders while others said 2020 provided a unique opportunity to drive organizational change due to the start of the decade or "the extreme volatility" experienced from the pandemic, according to the report.
But beyond the commitments, the report also reveals supply chain professionals lack a shared definition for what counts as sustainability and often prioritize different elements as they look to meet their goals.
"A lot of people are interested in sustainability but I think everyone's definition unarticulated in their own mind is a little different," Correll said.
When survey respondents were asked about the specific practices they took to advance supply chain sustainability, they said practices surrounding employee welfare and energy savings were the most commonly included in corporate goals.
Considering the survey was conducted in 2020, "it's not surprising in a way that the social issues came out, you know, fairly highly in the ratings given all the publicity surrounding those issues," said Ken Cottrill, editorial director at MIT CTL. "So, the interesting question will be what are going to be the more permanent sort of issues?"
Earlier this moth, Kevin Smith, CEO at Sustainable Supply Chain Consulting, said executives are paying more attention to sustainability as they learn "more about how much money they can add to the bottom line."
"The supply chain managers that I've talked to today are still very much interested in pursuing sustainability but it's not tree-hugging sustainability," Smith said when asked about sustainability on a press call to discuss the results of a different report. "It's more about efficiency drivers that you can morph into your business."
Article top image credit: Courtesy of Apple
Raising the bar on sustainability reporting
Why transparency and accuracy in emissions calculations helps improve the entire industry
Setting a reporting standard for shipping is key to assessing and improving corporate sustainability. Because freight transportation contributes heavily to every business’s environmental impact, efforts by shippers to track and reduce greenhouse gasses (GHG) are especially important.
Measuring supply chain emissions and publicizing footprint reduction tactics aren’t yet standard procedures, but shippers must take it upon themselves to drive industry change. Shippers can start by pressuring their partners to implement sustainable practices and provide accurate reporting.
Sustainabilityremains at the forefront of our mission, and as Flock FreightⓇ has grown, so too has our ability to record, analyze, and increase the accessibility of our emissions data. Using the most credible information available, we recently updated our methods for tracking our sharedtruckload(STL) solution’s environmental impact with the hope that it sets a higher standard for sustainability transparency and drives change across the entire supply chain.
New formula for comparing truckload and shared truckload emissions
It’s commonplace for truckloads (TL) to move partially filled, making for inefficient use of resources. Conversely, STL maximizes trailer space by combining freight from multiple shippers to top off trucks. By pooling multiple shipments into a single, multi-stop truckload, STL reduces waste and optimizes efficiency.
Although an STL load carries more freight and gets fewer miles per gallon than a TL load, STL mileage distance is lower. The reduction in the number of trucks and miles makes STL emissions significantly lower than TL emissions.
Flock Freight’s formula for calculating STL emissions when switching from partially-filled TL includes several key variables: distance of the load, MPG of the truck based on weight of the load, an emission factor converting diesel to carbon dioxide (CO2), and measurements of CH4and N2O.
Using these conditions, we estimate switching from truckloads with underutilized capacity to STL can lower emissions by about 40%.
Additionally, booking STL for smaller loads that might otherwise move with TL service can result in even higher emission reductions.
Accurate measurement and reporting practices are critical to improving the freight industry’s environmental performance and empowering shippers to drive change for the greener. That’s why we took the initiative to implement transparent emissions calculations and continue to be critical of our own impact.
Take action with us
Informational transparency plays an essential role in enabling a lasting change. However, the current state of the industry clouds information. By demystifying emissions information, Flock Freight is setting a new standard in the freight industry.
As we work together on reducing emissions to make freight shipping more sustainable, we encourage everyone to join us in our mission: reimagine and reinvent the freight industry by relentlessly eliminating waste and inefficiency.
A surge in e-commerce has driven changes in consumer perception of waste, prompting retailers to reassess packaging.
By: Jen A. Miller• Published Jan. 5, 2021
Shifting consumer shopping habits during the COVID-19 pandemic drove changes all up and down the supply chain — including in the way goods are packaged.
"COVID has pulled the future forward," Clark said. In fact, she believes COVID-19 has pushed automation in packaging up by three to five years.
The pandemic-accelerated shift to e-commerce has also driven changes in packaging size, consumer perception of packaging and waste, and design for more return-friendly packaging. The shift may finally get rid of the need to encase every item in impossible-to-open plastic.
Packaging: Small but mighty
The pandemic pushed consumers toward e-commerce, which drove retailers to rethink how they got product into customers' hands. For a lot of retailers, that meant adding ship from store, essentially turning brick-and-mortar stores into fulfillment centers, albeit ones that sent smaller packages.
"We had a number of different smaller retailers further solidifying their omnichannel strategies and shifting to a distribution strategy of shipping out of store," said Clark. For Sealed Air, that meant a higher demand for smaller packaging and also smaller packaging equipment to fit into backrooms of stores not necessarily designed as fulfillment centers.
"Packaging is the one and only communication vehicle that you’re 100% guaranteed will come in contact with your customer."
Vice president of global strategy and business development at Sealed Air
Larger retailers like Amazon, Walmart and Target went smaller on packaging too — but in a different way from small businesses. Instead of a new demand for smaller packaging because of facility space constraints, large retailers are sizing down packaging to reduce the empty space inside.
"Corrugated has long been the tried and true shipping method for years, but we’re seeing a lot of customers moving more and more toward mailers," Clark said. They cost less to make, cost less to ship, don’t leave as much empty space at the top that needs to be filled, "and they’re faster for their personnel to pick and fill," she said.
From the supply chain to the end user
Mailers also have a smaller environmental footprint, a goal that hasn’t been lost with the pandemic. In fact, said Johnathan Foster, principal consultant at Proxima, an interest in less packaging will most likely grow given what’s used to transport items, particularly online grocery orders.
"The packaging is changing now that it’s ending up in people’s houses and they’re dealing with more of that waste and that packaging," he said. "Eventually, people will become much more aware of this and the importance of recycled materials."
McKinsey & Company's Sustainability in Packaging: Inside the Minds of Global Consumers report, which surveyed 10,000 consumers around the world, found that the overwhelming majority of respondents say they're willing to pay more for sustainable packaging. The highest percentage was in China at 86% willing to pay more for sustainable packaging in the food service industry; the U.S. clocked in at 68%.
U.S. consumer perception on package sustainability (1 is most sustainable)
Type of packaging
Glass bottles and jars
Plastic films made from renewable, compostable materials
Fully recyclable plastic bottles/containers
Fully recyclable plastic films
Plastic bottles/containers made from recycled plastics
Aluminum foil wraps
Packaging combining plastic, paper and aluminum foil
Source: McKinsey Packaging Survey
With far fewer consumers going into stores, packaging will also become a bigger part of the branding experience, said Clark.
"How do you interact otherwise?" she said. "Packaging is the one and only communication vehicle that you’re 100% guaranteed will come in contact with your customer."
Touchless packaging was in demand from customers too. In a September survey of more than 1,500 U.S. consumers, Sealed Air found shoppers were more likely to interact with QR codes on packages if scanning them revealed certain kinds of information. Specifically, consumers wanted to know where the item was produced and packaged, and also the extent to which the product was processed in a touch-free environment.
Sealed Air also found that 28% of respondents were very interested in purchasing perishable packaged foods that feature a claim or certification of being packed in a "touch-free" environment.
E-commerce returns demand a packaging rethink
Foster expects the pandemic to push one packaging trend out the door: wrapping items in hard shell plastic. The intent is to prevent in-store theft, but with e-commerce driving sales, the plastic might not be worth it because it affects returns.
He cited the example of something he bought during the pandemic himself: a replacement remote for a ceiling fan. He ordered three, and had to open the packaging on each one to test it out.
What happens to the two remotes he returned? Retailers can’t realistically expect to sell a new item if it’s not packaged the same way. "Companies will either need to plan for those losses or they’ll have to give up the plastic," he said. "If they put that item in a store at some point, they might have to absorb the risk of theft."
"COVID has pulled the future forward."
Vice president of global strategy and business development at Sealed Air
Instead, companies might opt for slip sheet packaging.
"All parts and components are sent in a plastic sheet inside a box. You pull it out and you try it. If it doesn’t work, you drop it back in and return the box," he said, adding that "the dynamic of how we obtain goods is impacting packaging in an unintended way."
Aircraft emissions present a roadblock to supply chain sustainability goals
FedEx's Chief Sustainability Officer says true aviation sustainability "is an intractable problem." Will environmentally conscious shippers move away from airfreight?
By: Max Garland• Published Sept. 8, 2021
FedEx's globe-spanning air cargo network looks much different than it did five years ago. It has added dozens of aircraft to its fleet, expanded major shipping hubs and cut down on emissions — although it fell short of a goal set a few years earlier.
In 2011, FedEx sought to reduce aircraft emissions 30% by 2020, from a 2005 baseline. The cargo airline aimed to reach this target, revised from a 20% reduction goal announced in 2008, in part by replacing aging aircraft and using more sustainable fuels.
But as the decade progressed, FedEx's e-commerce volume ballooned. Older, less efficient aircraft stayed in service to keep pace with demand, the company said in its 2021 ESG report. The COVID-19 pandemic exacerbated this trend, leading FedEx to fall short of its goal. The company ended up reducing its aircraft emissions 27% from 2005 levels.
The fuel burned by FedEx and other air cargo carriers' jets remains a substantial roadblock toward reaching their — and customers' — ambitious sustainability goals.
"Unlike other transport activities that can be powered by batteries or already have wide availability of low-carbon fuels, achieving 'true' sustainability in aviation is an intractable problem," said FedEx Chief Sustainability Officer Mitch Jackson in an email.
FedEx is among many airlines that have made progress in reducing their energy intensity, but aviation remains a notable source of global emissions. Aviation produced 2.8% of global CO2 emissions in 2019, according to the International Energy Agency. And an Environmental and Energy Study Institute report said airfreight generated 19% of aviation's emissions the year before.
Aviation emissions will see slight decline by 2030
Roei Ganzarski, executive chairman of electric aircraft maker Eviation, said the technology for making large freighter aircraft like the Boeing 777 all-electric will be available, at the earliest, 30 years in the future.
"Even if we could create a propulsion system that was big enough, powerful enough, lightweight enough to go on that size aircraft, right now and in the foreseeable future there's no energy storage system that could even come close to competing with Jet A fuel," Ganzarski said.
Shippers want lower emissions, but need more airplanes
Companies are taking notice of aviation's emissions challenges as they lay out their own sustainability goals. L'Oreal found reducing its reliance on airfreight by shifting more volume to rail and sea would have an outsized impact on its supply chain emissions.
"I think what we'll see in the future is … airlines that make those changes to reduce those emissions faster than everybody else will be utilized more and will grow faster," said Greg Bollefer, executive vice president of commercial and product development at freight forwarder Green Worldwide Shipping.
Glyn Hughes, director general of The International Air Cargo Association, agrees. He noted many shippers are now reporting how much their supply chains produce in emissions, and they're looking for carbon-neutral transportation options. In the long-term, TIACA supports manufacturers having "a blended series of supply chains" that use ocean shipping as well to reduce environmental impacts.
"Unlike other transport activities that can be powered by batteries or already have wide availability of low-carbon fuels, achieving 'true' sustainability in aviation is an intractable problem."
FedEx Chief Sustainability Officer
"We would support that because we think it's much better to have a globally efficient economy that has the least environmental impact and the maximum benefit for society," Hughes said.
But the COVID-19 pandemic has underscored the importance of air transport in supply chains. Speed, not cost, was the priority as companies transported personal protective equipment from China to the U.S. for use by frontline health care workers. Air transport also plays a key role in e-commerce delivery, with online retail giant Amazon using its Air network to replenish its warehouses. Some companies have relied more on air transport during the pandemic to avoid a congested ocean freight environment.
Those needs are helping overall air cargo demand grow, even if some companies are reducing their reliance on the transport mode. Seventy-two percent of airline CFOs and heads of cargo surveyed by the International Air Transport Association in July expected cargo demand would increase in a year, aided by growth in passenger flight activity. That's an improvement from the previous survey's result in April of 56%.
Airfreight isn't exclusive to all-cargo carriers, with IATA estimating 50% of cargo volumes fly in the belly of passenger aircraft. Transporting passengers brings its own sustainability challenges: Passenger operations contributed to around 85% of the industry's emissions in 2019, while dedicated freighter and belly cargo operations each contributed around 7%, according to the International Council on Clean Transportation.
Sustainable aviation fuel has short supply, high cost
Like FedEx, UPS has seen its demand spike during the COVID-19 pandemic, leading to more flights. The majority of UPS' CO2 emissions (61.3%) come from airline fuel, and the amount emitted from its air fleet increased 12% from 2019 to 2020, according to its Global Reporting Initiative report. UPS aims to increase its use of sustainable aviation fuels, which it called "the only decarbonization path for the aviation sector," to reduce emissions from its air fleet.
Sustainable aviation fuels, known in the industry as SAFs, use an alternative feedstock to crude oil, such as cooking oils, plant oils or municipal waste, according to the IATA. FedEx is eager to use more SAFs, Jackson said, "but there's not nearly enough supply currently available. Plus, the limited supply that is available costs at least three times as much as conventional jet fuel."
Jackson said the Sustainable Skies Act, which was introduced into Congress in May, would encourage additional SAF production via a tax credit for producers. House and Senate versions of the bill remain in their introductory phases.
There's currently "no choice" to substantially reduce large aircraft emissions outside of SAFs, Ganzarski said. Smaller, feeder aircraft used in carriers' shorter flights, however, are already on the path to electrification. DHL Express announced in August it ordered 12 all-electric Alice aircraft from Eviation for regional routes in the U.S.
"It's really a complement to the current fleet, not a replacement of it currently, unless you're a small operator whose fleet happens to be Cessna Caravans, then yes, it's a replacement," Ganzarski said. "But if you're talking about the major airlines, it's a complement."
Ganzarski said in the future, larger aircraft — "maximum 100 seats" and similar in size to the ATR 72 turboprop airliner — will be able to be supported by electric power. Additionally, flight ranges should improve as batteries do.
"If you look at how our cell phone batteries have evolved in the last few years, I think that the investment in different battery technology means that [electric aircraft] will start small and short distance," Hughes said. "Probably within a 10-year timeframe, we're talking about significantly longer ranges with significantly larger payloads."
With aviation's fuel challenges not going away any time soon, Bollefer said LCL express services are popular for shippers looking to reduce the costs and emissions that come with air transport while still keeping transit times brisk.
Sourcing products closer to the end user is another way for companies to reduce their carbon footprints if their operations allow, he added.
"If something's sourced in China that can be sourced in Mexico for the same price, but you lower your overall CO2 emissions by 10,000 tons, that's a huge impact," Bollefer said.
Article top image credit: Andrew Burton / Staff via Getty Images
Procuring sustainable coffee cups presents a blend of challenges
Increased global demand and recycling setbacks during the pandemic point to the need for better systems within the supply chain.
By: Jen A. Miller• Published Sept. 23, 2021
A takeout coffee cup can be a lot of things: a status symbol to show you go to the "right" coffee shop; an annoyance if the insulating sleeve is missing; a mere convenience. But they and cups for cold takeout drinks are also a waste problem.
At least 250 billion of these cups are distributed globally every year, with many ending up in landfills, although some are recyclable.
"The cup itself is often made of mostly virgin fiber, and many of that is considered really good quality fiber to then go into the recycling stream," said Nina Goodrich, director of the Sustainable Packaging Coalition and executive director at GreenBlue. That fiber is valuable because "it brings those much needed long fibers into the mix."
But getting it is the challenge.
The polyethylene lining on most cups make them difficult for mills to recycle. And inconsistencies with recycling collection and infrastructure mean that even the cups that can be recycled by mills (with the technology to do so) end up in the trash anyway.
"I’m a big fan of compostable packaging, but we have to continue to build our infrastructure to recycle [cups]," Goodrich said.
Building better cups and recycling systems
The solution to reducing overall waste and creating more recyclable cups is a multi-pronged challenge.
In 2018, the NextGen Consortium launched the NextGen Cup Challenge to "identify and commercialize existing and future solutions for the single-use, hot and cold fiber cup system," Dan Liswood, senior project director at Closed Loop Partners, wrote in an email.
That includes replacing polyethylene liners (they prevent leaks but are less recyclable than other paper products), testing new plant-based materials, and creating reusable cup service models "that harness technology and design to keep valuable cups in circulation," he wrote.
"I’m a big fan of compostable packaging, but we have to continue to build our infrastructure to recycle."
Executive Director of GreenBlue
CupClub, for example, which is part of the NextGen Consortium Circular Business Accelerator, is a U.K.-based company that operates a returnable cup ecosystem, like bike sharing but for cups. This set up allows for would-be discarded cups to stay in use, cutting down on waste.
The NextGen Consortium is also working on fixing inconsistencies with recycling collection and infrastructure so cups that can be recycled are, and to let users know that the cups are actually recyclable.
"A large portion of paper-based foodservice packages are discarded in the U.S. each year as, historically, this packaging has not been widely accepted in recycling programs," Patrick Lindner, president of consumer packaging at WestRock, told the Sustainable Packaging Coalition in 2019 when the company was given an SPC Innovator Award.
"WestRock’s acceptance of foodservice packaging at its mills — as well as our research and development work on new, more recyclable and compostable packaging designs — exemplifies our commitment to finding ways to make packaging more sustainable," he said.
'Exacerbated and exposed' by the pandemic
The pandemic temporarily sidelined the use of reusable cups because of uncertainty about how the virus was transmitted, Liswood said. But he also recognized that the pandemic "exacerbated and exposed the already growing piles of waste" due to food waste and takeout food packaging.
"This not only brought the global waste challenge to the fore, but also laid the groundwork for reuse solutions, underscoring the need and strong business case for resource efficiency," Liswood said.
Demand for global recovered paper is also on the rise and will continue to grow through 2025, according to Fastmarkets RISI.
That, in turn, has driven up the price of recycled paper. This is happening at the same time as an "explosion of people" move from plastic to paper, driving up demand for paper and recycled content, Goodrich said.
The effect is that virgin fibers in polyethylene-coated cups are all the more valuable. So, too, is the importance of an entire recycling system. From a consumer grabbing that coffee cup to knowing to put it in a recycling rather than trash container, to recycling streams processing it, to that cup ending up at a mill that can recycle it.
"It’s just paper, and most U.S. mills can handle it. That’s a huge change from 2018," Workman added. "Would [mills] want a truckload of cups? I don’t think it’s as much of an issue as it was three years ago."
Article top image credit: Christopher Furlong via Getty Images
5 freight technologies send supply chains on a greener path
A growing level of shipper interest, along with pressure from the public and regulators, is driving carriers to invest in more sustainable delivery options.
By: Matt Leonard and S.L. Fuller• Published April 21, 2021
Scope 3 emissions have come into the spotlight as shippers set sustainability goals. The extended supply chain is often the largest contributor to emissions yet the toughest scope to tackle, as it requires third-party involvement and supplier engagement.
The most recent supply chain report from CDP noted that just "37% of suppliers are taking action and engaging with their own suppliers, down from 39% in 2019."
But CDP also estimated that more than 1,000 companies are now working to reduce scope 3 emissions, and 94% of companies with science-based targets include details on how they'll accomplish it.
The growing level of shipper interest, along with pressure from the public and regulators, is driving carriers to invest in greener delivery options.
FedEx, for example, recently said it plans to achieve carbon-neutral operations, globally, by 2040. In testimony on Capitol Hill weeks after this announcement, FedEx CEO Fred Smith said the decision was based on the increasing economic viability of sustainable solutions and concern about carbon pollution.
"Our customers are increasingly focused on this issue. They want to do business with transportation providers that are environmentally responsible," Smith said. "But we also — as a commercial enterprise — have to produce for our shareowners."
Carriers across the supply chain — from ocean, to air, to rail, to road — are investing in green technologies and tools to reduce emissions and boost sustainability.
Ocean: LNG-powered container ships
Last year, a set of regulations took effect in the global ocean shipping industry. The International Maritime Organization's sulfur regulations, referred to as IMO 2020, limited the sulfur emissions from ships to 0.5% mass by mass, down from 3.5%.
Since then, carriers have found ways to comply, including the addition of scrubbers and the adoption of new fuel types. One of the fuels gaining traction is liquefied natural gas.
This year, CMA CGM CEO Rodolphe Saadé announced the carrier was dedicating six LNG-powered ships to a trade lane that calls on the U.S.
"Maybe LNG is not the technology of the future," Saadé said. "Maybe there will be technologies that are far better than an LNG — maybe. But today, what is important is not so much to criticize LNG, but to take action. And that is why we feel that LNG is the way to go. It is the best technology available for today."
The stats that CMA CGM shares on the fuel and ships are indeed encouraging: 99% less in sulfur dioxide, a 91% drop in in particulate matter emissions, 92% less nitrogen oxide emissions and 20% less CO2 than traditional fuels, according to the carrier.
But as Saadé alluded to in his plea to not criticize LNG, the fuel has plenty of critics.
A report released last year by The International Council on Clean Transportation provided a particularly bleak outlook for the use of LNG. The ICCT report found that LNG can indeed result in a 15% reduction in greenhouse gases over its lifecycle. But this assumes a high-pressure injection dual fuel is used and the upstream-methane emissions are well controlled.
"However, the [well controlled upstream-methane emissions] might prove difficult as more LNG production shifts to shale gas, and given recent evidence that upstream methane leakage could be higher than previously expected," the report reads. "Additionally, only 90 of the more than 750 LNG-fueled ships in service or on order use [high-pressure injection dual fuel] engines."
A spokesperson for CMA CGM said the goal is to move beyond fossil fuel.
"While the shipping industry’s ultimate goal is to deploy non-fossil fuel options, the requisite renewable energy technology is not yet available and may not be for some time," the spokesperson said. "Rather than wait for the perfect solution, we are taking steps today to improve our emissions rates by offering alternative solutions, including LNG."
One of these non-fossil fuel powered ship ideas might seem like a step backward in terms of maritime technology: windpower. The Swedish shipbuilding company Wallenius Marine has developed the concept ship Oceanbird, a wind-powered automobile carrier that can carry 7,000 vehicles. The ship could be in service as early as 2024, one of the company's executives told Reuters last year.
Air: Sustainable aviation fuel
Logistics companies and airlines have been making a number of announcements around sustainable aviation fuel in recent months. Kuehne+Nagel and American Airlines in March announced plans to invest in 11 million liters of sustainable aviation fuel.
"Over the past two to three years, the demand has really started to rise" for sustainable aviation fuel, said Maxime Molenaar, a program manager at SkyNRG.
Sustainable aviation fuel can be made using a variety of different sources including plants, used cooking oil and solid waste. It is very similar to traditional fuel, and the two can be mixed without any changes to engines, according to the International Air Transport Association.
Molenaar said airlines are starting to feel the pressure from customers to provide a lower-emission option, and companies want to reduce their scope 3 emissions from business travel and airfreight.
The fuels "are considered to be a critical lever for decarbonizing aviation," according to draft guidance for the airline industry released by the Science Based Targets Initiative at the end of last year.
Right now, SAF is still "a very small percentage" of the jet fuel in use, but producers are working to build supply to meet demand, Molenaar said.
"There is a lot of production capacity that is being planned right now," she said.
In an attempt to show demand to help build up supply, SkyNRG has started the Board Now program, which tracks sustainable fuel volumes and enters them into the nearest airport's system.
"You don't have to produce fuels on one side and then ship them around the world to be able to put it into the literal plane of the cargo owner, because from an emissions management perspective that would be really inefficient," Molenaar said.
The program allows corporations to claim the reduction of the SAF even though their cargo won't be flying with SAF onboard.
SAF will mean a reduction in emissions, not the elimination of them. While some are working toward electric air travel, it is likely decades away, according to Molenaar.
A report released last year on SAF by the Department of Energy reached a similar conclusion.
"Unlike light-duty vehicles, the low energy density of even the best batteries severely limits opportunities for electrification," the DOE noted. "While many are working on electrification, efforts are for smaller aircraft and airlines will have no alternative for some time but to use SAF to operate in a GHG-emission-constrained future."
"If 25% of the truck traffic moving at least 750 miles went by rail instead, annual greenhouse gas emissions would fall by approximately 13.1 million tons," The Association of American Railroads said on a fact sheet last year.
BMW told Supply Chain Dive that reducing emissions was one of the goals for switching from truck to rail for moving cargo from the Port of Charleston to its plant in Greer, South Carolina. Intermodal companies have also started taking a similar approach. Schneider made an increase in intermodal use a core part of its sustainability plan, noting it has about one-third of the carbon footprint of trucking alone.
The investments also make financial sense for the railroads, Tim Bader, the senior business communications leader at Wabtec, said in an interview.
"If you're saving fuel, you're also saving money and you're reducing carbon at the same time," Bader said.
Wabtec's electric locomotive doesn't have any engine, but the entire back end is a giant battery that provides power. It has already hauled freight with BNSF in a three-month pilot that ended in March on a route between Stockton, California, and Barstow, California. Trains are propelled using multiple locomotives, and the pilot used one battery-powered locomotive and two powered by a traditional engine.
Bader said Wabtec plans to start selling its technology to railroads "in the near future," but didn't provide an exact timeline for when that might happen. And railroads can run their locomotives for "well over two decades," he said. So transitioning the entire fleet likely won't happen in the near future.
Road: Route optimization
Route-optimization software is not yet ubiquitous in the trucking industry, said Neil Menzies, a managing director at L.E.K. Consulting. But for fleets that have invested in the technology, cost savings is the biggest motivation. Less carbon is an added bonus.
"It just follows on naturally that, if you decrease the amount of miles, you decrease the amount of fuel burned and, therefore, the carbon. The incentives are perfectly aligned with respect to saving costs and being greener," Menzies said.
Routing technology optimizes long-haul and short-haul operations. It can help over-the-road drivers reduce deadheading, and it can help reduce last-mile inefficiencies, especially when paired with software that enables communication with a consumer, Menzies said. Efficient routing can also help navigate delivery windows and cut down on idling.
And there's no shortage of routing technology vendors on the market. From SkyBitz, to KeepTrucking, to Samsara, to Omnitrax — numerous options at various price points offer different suites of functionalities.
"In general, these solutions as a category are pretty high [return on investment]. But it depends on the individual set of circumstances around your particular business," Menzies said.
Truck: Alternative fuels
The trucking industry knows the supply chain is moving toward a more sustainable future, which means, eventually, the diesel truck will go out of style — or become a violation of state regulation.
Battery-electric vehicles, fuel-cell-electric vehicles and vehicles that run on renewable fuels are perhaps the most talked about alternatives.
Large truck-makers are developing BEVs and FCEVs, betting on their eventual ubiquity at the hands of governmental and societal pressures. Each type of technology, though, has its obstacles.
For BEVs, the challenge is batteries. So far, the BEVs participating in pilots are completing short, regional hauls. Smaller batteries take less time and energy to charge, and they’re lighter.
Tesla boss Elon Musk has been saying for at least a year that the OEM's inability to scale battery production is the only thing holding back the development of the Tesla Semi. That vehicle is projected to have a 300-mile range.
Hydrogen is viewed as the solution for longer hauls, though Musk recently said the use of hydrogen to power vehicles is "just crazy, basically" and "not realistic" to keep in liquid form.
Multiple OEMs are betting on hydrogen, though. Cummins and Navistar announced last November they would produce a Class 8 hydrogen truck that Werner would test for regional hauls in California.
While batteries are the sticking point for BEVs, electric passenger cars have led the way in developing charging infrastructure. Infrastructure is the biggest obstacle for FCEVs. Setting up a national system of hydrogen fueling stations is a large undertaking that will likely require an extended timeline.
But, truckers have options already on the market. Energy company Neste said late last December that more than 1,000 customers in North America were using its My Renewable Diesel offering. Neste calls renewable diesel a "drop-in" replacement, as it is compatible with all diesel engines. The company said the fuel cuts greenhouse gas emissions by up to 80%, compared to petroleum diesel.
Walmart’s journey to a robust scope 3 emissions program reveals a shift in the way sustainability advocates see the supply chain and the urgency with which companies need to address it.
By: Emma Cosgrove• Published Nov. 5, 2020
When Walmart first decided to take a serious look at reducing supply chain emissions, head-scratching ensued. It was 2010, and many of the tools and programs now in place to encourage and advise businesses on their emissions reduction work were in their infancy.
At the time, Walmart measured the emissions created by its own operations. Powering stores, offices and owned vehicles is the brunt of what the sustainability industrial complex calls scopes 1 and 2. Scope 3 goes deeper, and measuring it means getting external players involved.
"We obviously knew what [Scope 3] meant, but it was hard to figure out the right way to galvanize action and lead suppliers toward creating more and more emissions savings," Walmart's Senior Director of Sustainability Zach Freeze said.
Scope 3 emissions derive from what companies purchase through the tiers of their supply chains, including the transportation resources and how products are used and disposed. Reducing scope 3 requires buy-in and action from other companies, making it a higher hurdle than scopes 1 and 2, which cover operations and energy purchasing for a company’s owned operations. Scope 3 is about influence and exerting constructive pressure into the supplier base.
"There were certain projects that we identified, but when you thought about scale, which is really the power of Walmart, we didn't quite figure it out with that project," Freeze said of the work in 2010.
Seven years later, Walmart launched Project Gigaton — a plan to eliminate 1 billion metric tons of supply chain greenhouse gas emissions by 2030. "Gigaton was our way to take everything we had learned in our own business and really just try to make it much easier to involve more and more suppliers," Freeze said.
Getting a handle on the scopes
Direct emissions including owned vehicles and owned or controlled facilities and grounds.
Emissions stemming from purchased power including electricity, heating and cooling, steam, or any other power source.
Indirect emissions not included in scope 2 including all procurement, direct and indirect, along with travel, waste and water.
Walmart’s journey to a robust scope 3 emissions program reveals a trend within corporate action to combat climate change. There has been a shift in the way sustainability advocates see scope 3 and the urgency with which companies address it — just in the last few years.
Possibly starting in 2016 with The Paris Agreement, consumers and investors have had "an awakening on this issue," said Dexter Galvin, global director for corporations and supply chain at CDP. Undeterred by the pandemic, the pressure is not letting up. Perhaps in part, because the problem is becoming more pressing.
Recent research concludes that not only are natural disasters like hurricanes and wildfires more intense because of climate change — some disasters may not have happened at all without it. Climate scientists are currently debating whether efforts to stop global temperature rise at 1.5 degrees celsius are enough — and if doing so is even possible.
CDP has seen an uptick in emissions disclosures since the pandemic began, but still, only 2% of the companies that disclosed their emissions to CDP last year made the "A" list, and that's a measure for transparency, not action.
For its part, Walmart has pledged to reduce scope 3 emissions by 1 billion metric tons by 2030, from a 2015 baseline. But how are such goals formulated so that they are achievable and sufficient to make an impact?
Part of Walmart’s challenge 10 years ago was the company lacked a roadmap for action. Since then, emissions-focused nonprofits have joined together to create one.
The Science-based Targets initiative started in 2015 to give companies a standard for setting emissions reduction goals in all three scopes that would adequately contribute to stopping global temperature rise at 1.5 or 2 degrees Celsius (the SBTi allows goals pegged to both).
"The good thing about the Science-based Targets initiative is it gives buyers and procurement professionals a simple North star to point companies toward, " said Galvin. "They don't have to become experts on sustainability to say to their supplier: ‘Listen, your competitor has a science-based target. This is just increasing the best practice. You need to get one,’ " he said.
"Build the muscle of tracking and reporting. Because once you start doing that, you start to really understand where your money's going and where your emissions are going."
Senior Director of Sustainability, Walmart
The prevailing thinking a year ago was that if every company reduced scopes 1 and 2, scope 3 would take care of itself, said Galvin. But as urgency increases to combat climate change, so does the pull toward scope 3 work.
The supply chain often makes up more than 90% of total emissions for any company producing a physical product. A partnership between CDP, the UN Global Compact, The World Resources Institute and the World Wildlife Fund, SBTi requires companies with more than 40% of total emissions within scope 3 to set a scope 3 target.
"If the entire S&P 500 was to set SBTs, the vast majority of them would have to do scope 3 just because for the majority of companies, their supply chain accounts for the majority of their emissions," said Steven Clarke, director for corporate clean energy leadership at Ceres. Supply chain emissions often add up to about five times that of direct operations and energy purchasing put together, Clarke said citing CDP research.
Depending on where companies are starting, it can be an immense task to set targets. Once committed to developing a target within SBTi, they have a year to submit for approval.
Roughly 200 companies have set targets in 2020, while 240 more have committed to do so within one year. That means approximately 40% of the 1,045 of companies involved with SBTi got involved within the last year.
Not every climate-conscious company has signed on. Apple pledged to reach carbon neutrality in its business, supply chain and product life cycle by 2030. The company discloses its emissions to CDP but does not have a science-based target registered with the SBTi organization.
Whether setting a science-based target or not, Freeze’s advice to other companies looking to reduce scope 3 emissions? Just start.
"Build the muscle of tracking and reporting. Because once you start doing that, you start to really understand where your money's going and where your emissions are going. And I think by doing those two things, we can really get a better handle on how you start to tackle climate, " he said. Deep knowledge of the supply chain and of the greatest sources of emissions volume within it is essential groundwork.
Elements of scope 3
1. Purchased goods and services
6. Business travel
11. Use of sold products
2. Capital goods
7. Employee Commuting
12. End-of-life treatment of sold products
3. Fuel and energy-related activities not included in scopes 1 and 2
SBTi recognizes the complexity of scope 3 and allows companies leeway in how they structure a reduction goal, as long as their goal addresses at least two-thirds of the emissions produced within it. Corporate targets generally fall into four buckets:
Reduction of carbon intensity per unit of output.
Convert suppliers to SBTi.
Walmart’s goal represents an absolute reduction. But Target’s goal is to recruit 80% of its suppliers (by spend) to set their own science-based scope 1 and scope 2 targets by 2023 (type 4). Ben & Jerry's has a goal structured around emissions per output — pledging to reduce greenhouse gas emissions from all three scopes by 40% per pint of product sold by 2025 from a 2015 baseline.
Choosing a structure depends on what kind of visibility and control companies believe they will be most able to exert — and what they can realistically track.
"I think the variance in targets is probably quite a good thing. And … actually speaks to the achievability of the target, " Galvin said.
The type of scope 3 goal companies choose often comes down to their existing supplier base and their relationships with those suppliers, said Clarke.
If a company’s direct supplier base is particularly energy-intensive, the company may choose an intensity-based goal since changing energy sourcing may go a long way to reduce total supply chain emissions. Companies with more diffuse emissions or more tiers within their supply chain may choose to convert a number of suppliers to set targets, rather than reducing emissions by a percentage, since addressing the vast under layers would require a level of visibility they may not have.
Galvin offered the example of Walmart and Project Gigaton. In addition to reducing total emissions, the company said its top 100 would set science-based targets. Walmart’s top 100 suppliers are likely to be large companies, like L’Oreal and Unilever, which have their own goals and emissions reduction programs in place making that goal more achievable in the short term.
L’Oreal has committed to reducing absolute scope 3 emissions by 25% by 2030 from a 2016 baseline. And Unilever has pledged to reduce emissions from its products, taking into account their entire life cycle, by 50% by 2030 from a 2010 baseline.
"And the good thing about the Science-based Targets initiative is it gives buyers and procurement professionals a simple North star to point companies toward."
Global director for corporations and supply chain, CDP
"If you look out into your supply chain, of course, there will be a huge amount of your suppliers that are still at the quick win phase or haven't even started on their journey, so they'll have a huge amount of opportunity to reduce their emissions, " Galvin said.
A few best practices have emerged with several heavy hitters like Walmart a few years into scope 3 reduction work. Freeze credits Walmart’s success in recruiting more than 2,000 suppliers to join Project Gigaton to the tools and resources Walmart provides to make accounting for reducing emissions easier for suppliers without an internal sustainability apparatus.
Walmart has built a dashboard of digital tools where suppliers can game out the emissions impact of operational adjustments. The retailer has also partnered with HSBC and Schneider electric to offer more favorable loans terms and a smoother path to energy transition for suppliers within the program.
Freeze and his team developed a framework built around energy, waste, packaging, agriculture, deforestation, and product use and design. Suppliers are encouraged to pick the segment most likely to make a dent in total emissions and start there with a basic goal.
"We created a really easy platform for suppliers to track progress so they can list the activities that they've done based on the volume of the product that they're making. And that easily converts to greenhouse gas, " he explained. Digital calculators allow suppliers to easily run hypotheticals to see where the biggest emissions bang for their change management buck is.
"Minimizing resources, minimizing energy, working to reduce packaging a little bit at a time — these are things that can just incrementally be done, but when you add it up, over our volume that we purchase … it's a big deal, " Freeze said.
Offering tools to make getting started a lighter lift is one way to get suppliers on board, but buyers like Walmart have plenty of power to wield through the supply chain to encourage conversion too. Telegraphing the importance of emissions tracking and reduction can go a long way. Unilever's recent upgrade of its scope 3 goal stipulates that it will favor and seek out suppliers with their own emissions reduction programs — sending a signal to existing suppliers to get on board.
Making the business case
Transportation tends to be one of the largest contributors to scope 3 emissions, according to Anand Gopal, program officer at the William and Flora Hewlett Foundation. It's also a place where the business case for emissions reduction is easy to see, he said, depending on the mode.
"For marine and aviation, you’re only left with just a few levers, " said Gopal — namely to optimize the amount of payload per mile or nautical mile traveled by batching shipments and ensuring container space is fully utilized. Reducing transportation emissions will almost inevitably involve reducing airfreight usage — the mode with the highest emissions per freight-ton kilometer.
For rail and road, Gopal said there are more levers to pull in terms of routing and vehicles. Shippers can book with fleets that have some degree of electrification — an easier task in Europe compared to the U.S.
"I think that combination of leadership, plus experience, has really empowered them to really take this to the next level, and really put solutions in place that can help them go faster than many of us thought was even possible even two or three years ago. "
Director for corporate clean energy leadership, Ceres
In any transport mode, how shippers pack their goods can make a difference. Home Depot, which has not set a scope 3 target, removed pallets from trucks to maximize space usage, allowing the retailer to save emissions and costs through more efficient trucking.
Walmart had similar intentions at the start.
"Gigaton was really centered on actions that are good for business and actions that are good for the planet and if you can do both, that really makes clear sense, " Freeze said.
Emissions reduction beyond scopes 1 and 2 somewhat comes down to leadership making climate change mitigation a priority and acquiring fluency with concepts over time, Clarke said. Walmart’s Freeze has been in various environmentally-focused roles at Walmart for 10 years.
"They become increasingly confident over time as to how they can deploy these solutions at scale, " Clarke said of executives who commit to scope 3 emissions work. "I think that combination of leadership, plus experience, has really empowered them to really take this to the next level, and really put solutions in place that can help them go faster than many of us thought was even possible even two or three years ago. "
Article top image credit: Adeline Kon/Supply Chain Dive
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