Carbon Footprint Needs in LogisticsDiego Klabjan, Northwestern University, Evanston, IL

Shippers Want to Know Carbon Footprint

• Why?• Green image• Innovations to drive economical benefits

• Cannot manage if you cannot measure

• Proactive to future mandates• Wal-Mart’s eco labels

• Large logistics services provider• A year ago a handful of requests for footprint• Now more than a hundred

• A different one• Each shipper receives carbon footprint

Not so Fast

• Picture is not so rosy• Many large less-than-truckload (LTL) operators do not provide

such service• Too few requests• Do not yet view it as a competitive advantage

• Shippers not yet trading cost for eco image• Cost being equal, selection based on eco attributes

• Different in EU• Regulations require trade-off• Proctor & Gamble

• Switch from truck to rail in Western Europe• Ship on Amazon river instead of trucking south

• 40% longer lead time, but 60% lower emissions

EPA SmartWay

• SmartWay transport partnership • Commitment to conserve fuel and reduce emissions in transport

• SmartWay is free to join and open to companies

• Trucking companies• Commit to improve fuel efficiency and reduce emissions

• Shipping companies • Commit to ship with SmartWay trucking partners

• Improve freight operations

EPA SmartWay

• Freight Logistics Environmental and Energy Tracking (FLEET) Performance Model

• Carriers• Calculate tons of CO2, NOx, and PM• Determine effectiveness of strategies used in the fleet

• Aerodynamics, idling reduction

• Project the effectiveness of strategies a fleet could add in the future

• Estimate cost savings and payback period for strategies

• Shippers• Track percentage of freight shipped with SmartWay Transport

Carrier Partners• Measure the environmental footprint

Challenges in Carbon Footprint Accounting

• Challenges• Data

• Collection

• Transparency

• Quality

• Processes• Not in place

• Find the source, pick up the phone

• SmartWay• How will the new tool affect me?

Complexity

CO2 Emissions

FAP

FAP

FAP

FAP

Parcel

Shipper

FAP

Parcel

Parcel

Parcel

Shipper FAP

Division 3

Division 2

Division 1

Country X (all divisions)

FAP = freight audit and payment

Uncertainty

Data Collection

CO2 Emissions Calculations

Different Angle

• “Easy” to derive emissions of the entire system• LTL carrier can account for the total emissions

• How to allocate emission contributions to individual users of the system?• Shared resources

• Split by weight or volume?

Allocations

• Two parcel carriers – direct competitors• Internally developed allocation schemes

• No alignment

• Need for guidance

• What is the carbon footprint of a package from Peoria, IL to Fresno, CA?

LTL Example

• Relay network of an LTL carrier

Needs Statement

• SmartWay• Reporting at a macro level

• Total quantity shipped during a year

• Receive a score

• Works nicely in a static environment

• Today’s environment is dynamic• Routes and quantities change often

• What is the value of a more micro level reporting?• What is left on the table?

Summary of Challenges

• Data• The same old story

• Source• Quality• Governance

• Allocation schemas• Empty moves

(backhauls)• Shared resources

• Consolidation• Rail cars

• Terminals

• Allocation by• Weight• Volume• Bill

Different Perspective

• One third of total emissions in the US coming from transportation

Emission in Intermodal

Slice it and Dice it

• Region

• State

• Corridor

• Industry

• Operation

Infrastructure

• Intermodal investment decision based on• Economics benefits

• Emission control

• Technological investment• Mode, process

• Investment in which region, corridor

Policies and Regulations

• Cap emissions• Region, mode, process

• Price on freight greenhouse gases

• Accounting standards and guidance• UPS and FedEx: Each does it differently

THANK YOU VERY MUCH!

d-klabjan@northwestern.eduSMS: 847-691-1148