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In partnership with Accenture

The Role of Logistics and Transport inReducing Supply Chain Carbon Emissions

Report prepared with the support of Accenture

Supply Chain

Decarbonization


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Any errors in this review are the responsibility of the authors. The views expressed are not necessarilythose of the consultative group, the World Economic Forum or its partner companies.

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SupplyChainDecarbonization

Supply Chain Decarbonizationwas produced in

January 2009 by the World Economic Forum,within the framework of the Logistics andTransport Partnership Programme.

The significant contribution of Accenture isgratefully acknowledged.

World Economic Forum

GenevaCopyright 2009

EDITORSSean Doherty

Associate DirectorHead of Logistics & Transport Industry Group

World Economic Forum

Seb HoyleManagerSustainable Supply Chain

Accenture

PROJECT ADVISORNarendra MulaniPartnerGlobal Head of Supply Chain Management

Accenture

CONSULTATIVE GROUPChristopher LoganHead of Strategy (Global)

Agility

Samuel SidiqiDirector of Strategy (Europe)

Agility

Raji HattarChief Projects Officer

Aramex International

Adrian DickinsonScientific AdviserDHL Neutral Services

Martin AndersonGlobal Director of Safety & EnvironmentDP World

Charles HaineManager, Global Environment, GSEDP World

Winfried HaeserDirector, Environmental Reporting and PolicyDPWN

Rod FranklinVice President, Product DevelopmentKuehne & Nagel

Edgar UribeLead, Corporate Environment ActivitiesKuehne & Nagel

David Simchi-LeviCo-Director, Supply Chain Innovation ForumMassachusetts Institute of Technology

Yossi SheffiProfessor of Engineering SystemsMassachusetts Institute of Technology

Lynsey MacIverHead of EnvironmentPanalpina

Toon TessierChief Advisor Environmental PolicyPort of Antwerp

Johan RoosDirector, EnvironmentStena AB

Rob Rijk

Environmental ManagerTNT

Ruben van DoornManager, CEOs OfficeTNT

David GuernseySenior Sustainability Program ManagerUPS

Mark van der HorstDirector EU Affairs

UPS


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Patrick BrowneSustainability Program Manager

UPS

Antonia GawelGHG ProtocolWBCSD

Andrea BrownGHG ProtocolWBCSD

John Moavenzadeh

Senior Director, Head of Sustainable MobilityWorld Economic Forum

Randall KrantzAssociate Director, Environment InitiativesWorld Economic Forum


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Executive Summary

Significant movement is expected towardsreduced supply chain carbon intensity. This willcreate both opportunities and risks for logisticsand transport firms, with changes in supply anddemand driven by:

Regulation of carbon emissionsHigher and more volatile fuel pricesEvolving consumer and client demand

The sector can play an influential role in

decarbonization, both in its own operations andthrough broader supply chain optimisation. Thisprovides direct benefits through reduced costs,managed risks and business growth.

Findings

Human activity generates annual greenhouse gasemissions of around 50,000 mega-tonnes CO2e.We estimate that 2,800 mega-tonnesor 5.5% ofthe totalare contributed by the logistics andtransport sector.

Key to supply-chain-wide decarbonization is anunderstanding of CO2emissions across thesystem. Corporate-level reporting, guided by thewidely-used Greenhouse Gas Protocol, is aspreading reality. Product level foot-printing is animportant step towards supply chain carbonrationalisation. It has been given a boost by theagreement of the first standards.

Supply Chain Decarbonization

Opportunities

Commercially viable decarbonizationopportunities which could be enabled by thelogistics and transport industry are of the order of1,400 mega-tonnes CO2e in the medium term.

Around 60% of this potential carbon abatementoriginates from the sectors own emissions.

Others come from the broader supply chain andcan be achieved through changed logistics andtransport configurations:

Supply Chain DecarbonizationOpportunities

PotentialAbatement

Mt CO2e

AssessedIndex of

Feasibility

Clean Vehicle Technologies 175 HighDespeeding the Supply Chain 171 HighEnabling Low CarbonSourcing: Agriculture

178 Medium

Optimised Networks 124 High

Energy Efficient Buildings 93 High

Packaging Design Initiatives 132 High

Enabling Low CarbonSourcing: Manufacturing 152 Medium

Training and Communication 117 Medium

Modal Switches 115 Medium

Reverse Logistics / Recycling 84 Medium

Nearshoring 5 MediumIncreased Home Delivery 17 MediumReducing Congestion 26 Low

Recommendations

Logistics and Transport Providers

Adopt new technologies industry-wideImprove training and communicationindustry-wideSwitch modes where possibleDevelop recycling offeringsDevelop home delivery offeringsPromote carbon offsetting of shipments

Shippers and Buyers

Understand and reduce carbon impact ofmanufacturing through alternative sourcingPlan to allow slower and better optimisedtransport

Reduce packaging materialsWork on product carbon labelling,standards, auditing tools, and useIncrease shared loading

Policy Makers

Reflect cost of carbon in energy tariffsSupport carbon measurement and labellingstandardsBuild open carbon trading systemsInvest in infrastructure and flowmanagement

Facilitate recycling along the supply chainEncourage retrofitting of buildings to betterenvironmental levels

RoadFreight

OceanFreight

Air Freight

RailFreight

LogisticsBuildings

0

500

1,000

1,500

2,000

2,500

3,000

Logistics and Transport ActivityGHGEmissions(mega-tonnesCO2eperyear)

TotalMobilityEmissions:

~2,5

00MegaTonnesCO2e


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Contents

Executive Summary ........................................... 4

The Need for a Review ...................................... 5

Understanding Supply Chain Decarbonization 5

Context of Decarbonization .............................. 6

Regulation of Carbon Emissions ...................... 6

Response to Higher and More Volatile Fuel

Prices ............................................................... 6

Evolving Consumer and Client Demand .......... 6

Logistics Sector Response ............................... 6

Objectives and Approach ................................. 7

Objectives ......................................................... 7

Approach .......................................................... 7

Findings .............................................................. 8

Logistics and Transport Sector Carbon

Footprint ........................................................... 8

Total Supply Chain Carbon Footprint ............... 9

Pressures for a Shift to Decarbonization ....... 10

Supply Chain Decarbonization Framework .... 12

Main Opportunities for Decarbonization ....... 12

Summary of the Main Opportunities for

Decarbonization ............................................. 14

Overview of the Scorecards ........................... 15

Recommendations ........................................... 29

Logistics and Transportation Providers .......... 29

Shippers and Buyers ...................................... 29

Policy Makers ................................................. 30

Conclusions ..................................................... 31

Annexes ............................................................ 32

Annex 1: Definition of Key Terms................... 32

Annex 3: Further Reading .............................. 40

Annex 4: List of Industry Partners .................. 40

Contact Information ......................................... 41

The Need for a Review

To date, logistics and transport companies havemostly taken a tactical and internal view of supplychain decarbonization. This has resulted inimportant, but nevertheless small scale,responses to climate change. Point solutionshave included increased use of battery poweredtrucks, automated scheduling applications andgreen building technologies.

The need to look more strategically at the end-to-end supply chain, encompassing all aspects ofthe product life cycle from raw material todisposal, is now being evidenced. Across sectors,firms and policy makers have spoken of therequirement to consider the total product lifecycleimpact of carbon, before optimising acrossboundaries.

Near-term economic uncertainty has changed theimmediate outlook for the logistics and transportsector. Nonetheless, even in this operatingenvironment, the underlying business imperativesfor supply chain decarbonization remain valid.

Understanding Supply ChainDecarbonization

This report is constructed from the viewpoint ofthe worlds largest logistics and transport firms,capturing the commitment of the sector to be atthe heart of supply chain decarbonization efforts.

We provide both a contextual and an initialquantitative assessment of the supply chaindecarbonization challenge. It looks at likelyopportunities for abatement, purposefully pushing

the boundaries of current knowledge seeking toclarify controversial topics.

Communicating the findings through a series ofaccessible scorecards, we take a first steptowards assessing the scale and feasibility ofpotential emission abatement options across thesupply chain.

Overall, we aim to move the global dialogueforward and to help carriers and buyers alike to:

Take practical and cost-effective stepstowards decarbonization strategies

Anticipate external drivers for changewhichmay have significant effects on the long-termdemand for freight


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Context of Decarbonization

Of humanitys 50,000 mega-tonnes of annualCO2e greenhouse gas emissions, around 2,800mega-tonnes can be assigned to logistics andtransport activities.

Though there is significant uncertainty in thefigures, it seems possible that significantemissions reductions could be achieved in themedium term1by implementing changethroughout the end-to-end supply chain. Thiscould be primarily achieved through wider

adoption of available technologies, leveragingnew commercial relationships and developingnew business strategies.

The conditions required to enable these changesare being created. We see three developmentsproviding the necessary business environment forimplementation.

Those three fundamental drivers of change are:Regulation of Carbon EmissionsResponse to Higher and More VolatileFuel Prices

Evolving Consumer and Client Demand

Regulation of Carbon Emissions

Supply chain carbon emissions will increasinglybe regulated through a variety of legal standardsas numerous policy developments are underway.By December 2009, the 192 member countries ofthe United Nations Framework Convention onClimate Change have agreed to launch amechanism to achieve deep cuts in emissions2.

Independent targets in developed nations call forsignificant cuts in emissionsthe EuropeanUnions Energy Policy calls for a 20% reduction ingreenhouse gas emissions by 20203whileCalifornias AB 32 Global Warming Solutions Actseeks state-wide emissions reductions of 25% by20203. The UK Climate Change Act mandates an80% cut in national carbon emissions by 20503.There is increasing convergence in the debatetowards a universal price for carbon.

Response to Higher and MoreVolatile Fuel Prices

1 Refer to calculations on page 14

2 CEO Climate Policy Report to G8 Leaders, WEF, 2008

3 With respect to 1990 level

A further clear driver of decarbonization is the linkbetween carbon emissions and energy cost. For

the most part within supply chains, there is asimple win-win on cost and carbon, with initiativesto decrease fossil fuel to reduce costs.

Less financial risk can also be the result: reducedfossil fuel consumption decreases exposure tovolatility in the cost base in an operatingenvironment which hasand will continue tosee significant energy price volatility.

Evolving Consumer and ClientDemand

Evolving customer demand for products, inresponse to changing expectations onsustainability, feeds through the supply chain intwo ways:

Direct consumer response in the form ofchanging retail purchasing patternsIndirect effect as retailers and distributorschange sourcing decisions to respond to- and pre-empt - consumer requirements

Logistics Sector Response

The sector has started to make meaningfulchanges in its own right, targeting substantialreductions in carbon intensity within its demandenvelope.

Major levers of change have been seen as beingoperational efficiency and new technology; greenvehicles such as battery powered vans andhybrid or alternative fuel trucks are increasinglyconsidered, while aerodynamic technologies,such as those supported by the US EPA

SmartWay programme, are commonly seenacross fleets of all types.

In parallel, most large logistics and transport firmspublish annual corporate social responsibilityreports, detailing their path towards moresustainable operations. Several of these includedetailed carbon footprint information, calculated inline with the Greenhouse Gas Protocol - themostly widely used accounting tool for emissions.

To maximise the carbon abatement potential fromtheir investments, logistics and transport firms are

seeking to engage with both policy makers andshippers to make cohesive changes across theentire supply chain. An end-to-end view of thesupply chain is a vital step towards achieving thechanged behaviours which can bring aboutefficient change.


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Objectives and Approach

Objectives

This report examines opportunities for carbonemissions reduction across supply chains.

We provide a quantitative and segmented outlineof the size of carbon emissions across productlife cycles.

We articulate potential trends in future demandfor global supply chain services, in response toexternal drivers of change.

We outline and indicatively quantify the mainopportunities for decarbonization within end-to-end supply chains.

Finally, we identify specific actions logistics andtransport executives can take to most effectivelydecarbonise supply chains: within their businessoperations, in collaboration with shippers andthrough engagement with policy makers.

Approach

There is a clear need to move beyond corporateand geographic barriers in addressing supplychain carbon emissions. Tactical approaches(using specific technologies to meet the needs ofa particular situation) and even sectoralapproaches (whereby initiatives are implementedwithin the boundaries of the logistics andtransport sector) do not meet the requirement todecarbonise end-to-end supply chains as a

whole.

In fact, tactical approaches can serve to shiftcarbon emissions between different parts of thesupply chain, rather than boosting overallefficiency.

We have taken a strategic approach to the end-to-end supply chain, looking at opportunities toaddress carbon emissions across the productlifecycle. The opportunities we outline areintended to be transformational and, in somecases, are unashamedly ambitious.

Nevertheless, we have sought to make theoutcomes commercially relevant to supply chainorganisations and achievable under currentcircumstances. We have not, for example,assumed the adoption of any technologies whichare not already commercially available.

In the development of the report, we have worked

closely with the corporate social responsibility(CSR) and strategy leads of major logistics andtransport firms. We have also been assisted byrepresentatives from NGOs, particularly theCarbon Trust and World Business Council forSustainable Developmentfor which we are verygrateful.

The materials presented in this report aretherefore built on two forms of data and analysis.Firstly, we have used data from official sources,particularly OECD, IPCC and governmentstatistics organisations to understand and begin

to size specific decarbonization opportunities.Secondly, we have put those opportunities intocontext, outlining which may be viable, throughqualitative research and interviews withcolleagues from industry and NGOs.

From an initial outline of around 75 potentialtopics, we have slimmed this down to 13opportunitieswhich are of most relevance to thesupply chain sector. These have been validatedwith our key stakeholders and advisors. Thenature of the topic means that a very substantialdegree of uncertainty and estimation remains,

although we have sought to validate ourassumptions and estimates at each stage.


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Findings

Our high level findings are structured as follows:

Logistics and Transport Sector CarbonFootprintTotal Supply Chain Carbon FootprintPressures for a Shift to DecarbonizationSupply Chain Decarbonization

Logistics and Transport SectorCarbon Footprint

Key findings:

The logistics and Transport Sector has acarbon footprint of around 2,800 mega-tonnes CO2eRoad freight is a major element of thisfootprintMinerals and food transportation are thelargest contributors by product category

Using OECD emissions data, combined withGHG Protocol emissions factors and other data

points, we have estimated the size of the logisticsand transport sectors carbon footprint. Usingsource data for transport emissions, we excludedpassenger transport emissions and then soughtto build in emissions from warehouses andsortation facilities.

Overall, we estimate that the logistics andtransport sector has a carbon footprint of around2,800 mega-tonnes. In absolute terms, roadfreight is the greatest part, at around 57% of thetotal, with ocean freight some way behind at17%.

Figure 1: Emissions Share per Logistics Activity

Of course, this does not imply that road transportis the least efficient mode however. Assessed interms of emissions intensity per tonne-km, air

freight is considerably more carbon intensive thanroad. Overall, the most carbon efficient modes

are rail and ocean freight. Carbon intensity ofboth modes is quoted by UK Defra as beingaround one sixth of that of road freightor onehundredth of that of airfreight4.

Figure 2: Emission Efficiency per Transport Mode

Eurostat road freight data suggests that acrossthe EU and Norway crude and manufacturedminerals, building materials make up 17% of alltonne-km moved, with foodstuff and animalfodder being a further 16%5.

In the USA, looking across all modes, coal makes

up 17.6% of all ton-miles moved, with cerealgrains accounting for a further 8.2% of volumes6.

Taken together, these calculations allow us toidentify the key characteristics of carbonemissions in the freight sector:

Road freight is the principle contributor tofreight transport emissions globally

Air freight is an highly carbon intensivemodeOcean and rail freight are the mostcarbon efficient modesMinerals and food products are majorsources of transport emissions

The current trend is for freight transport carbonemissions to grow over coming years. In theOECD countries, freight transport tonne-km grewby an average of 3% per year from 1990 to 2004 7.The continuing shift to more globalised supplychains, combined with the underlying economicgrowth is likely to continuean assumptionwhich is confirmed by the available country-leveldata after 20048.

4 Defra emissions factors, April 2008

5 Road Freight Transport by Type of Goods, 2006, Eurostat

6 http://www.bts.gov/programs/freight_transportation/,

extracted 9/11/087 WEF analysis, using OECD data

8 OECD Environment Data, 2006,2007

RoadFreight

OceanFreight

Air FreightRail Freight

LogisticsBuildings

0

500

1,000

1,500

2,000

2,500

3,000

Logistics and Transport ActivityGH

GEmissions(mega-tonnesCO2eperyear)

TotalMobilityEmissions:

~2,5

00MegaTonnesCO2e

0.0 0.2 0.4 0.6 0.8 1.0 1.2 1.4

Sea - Long Haul

Sea - Short Haul

Rail

Road - Long Haul

Road - All

Road - Light Capacity

Air - Long Haul

Air - Short Haul

Emissions Factors in CO2e kg / tonne-km

TransportationMode
http://www.bts.gov/programs/%20freight_transportation/http://www.bts.gov/programs/%20freight_transportation/


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In India, diesel fuel consumption in the transportsector grew by 1.5% per year from 1990 to 20069.

In China, the number of tonne-km of freightmoved by road increased by a massive 14% peryear over the same period10.

Total Supply Chain CarbonFootprint

Key finding:

Logistics and transport emissions are 5 to15% of product lifecycle emissions

There are a number of approaches which look atcarbon emissions across the entire supply chain.Methodologies are not yet sufficiently advancedto draw emissions profiles for the entire industry,but we can draw some initial insights.

Figure 3: End-to-End Supply Chain Process

Using the product-level carbon emissions

calculation methodologies developed by theCarbon Trust, firms have been able to build ameaningful picture of the total product lifecycleemissions of individual products.

An early application of this approach led to thecarbon labels on bags of Walkers Crisps11. Laterprojects have looked at other consumer products,including T-shirts, light bulbs, orange juice andpotatoes12. The number of detailed studiescompleted at product level remains small. Theyare, however, likely to prompt more firms to take

9 WEF analysis, using Indian Ministry of Petroleum and Gas

data10

WEF analysis, using National Bureau of Statistics ofChina data

11 http://www.pepsico.co.uk/carbonlabel, extracted 9/11/08

12 http://www.carbon-label.com/product.html, extracted

9/11/08

an initial look at the lifecycle emissions of theirproducts, particularly as major retailers

increasingly stipulate carbon reduction targets intheir suppliers contracts.

Economic Input Output Life Cycle Assessment(EIO-LCA) approaches provide an approximateidea of the carbon footprint of more products, withknown accuracy limitations. We have used theCarnegie Mellon University Green DesignInstitute model13to look at logistics and transportwithin the lifecycle emissions of products.

One limitation of the EIO-LCA model is that theuse and disposal phases of the product lifecycle

are out of scope. Logistics and transport iscommonly found to be a 5-15% of the emissionsof each productaround 9% for telephonemanufacturing and 10% for sugar manufacturingin the following examples.

Figure 4: Share of Emission per Product Type

Clearly it is important that the logistics andtransport sector works internally to slow and thenreverse the rate of growth in its emissions. There

is, however, an equally valuable role for the

13 Carnegie Mellon University Green Design Institute. (2008)

Economic Input-Output Life Cycle Assessment (EIO-LCA), US 1997 Industry Benchmark model [Internet],Available from :Accessed 12October, 2008.

Procurement ProductionTransport and

Distribution

RetailConsumptionDisposal

Recycling

Waste

33%

9% 6% 4%4%

4%

3%

2%

2%

2%

31%

Mobile Phone ManufacturingGreenhouse Warming Potential per Activity

Power generation and supply

Waste management andremediation servicesTruck transportation

Semiconductors and relateddevice manufacturingIron and steel mills

Industrial gas manufacturing

Air transportation

Telephone apparatusmanufacturingWholesale trade

Paper and paperboard mills

Other sectors

31%

21%

15%9%

5%

2%

2%

1%

1%

1%

12%

Sugar ManufacturingGreenhouse Warming Potential per Activity

Sugar manufacturing

Sugarcane and sugar beetfarmingPower generation andsupplyTruck transportation

Nitrogenous fertilizermanufacturingOil and gas extraction

Waste management andremediation servicesPipeline transportation

Petroleum refineries

Natural gas distribution

Other sectors
http://www.eiolca.net/http://www.eiolca.net/


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sector to play in enabling emissions reductions inother parts of the product lifecycle.

Pressures for a Shift toDecarbonization

Key findings:The main commercial determinants of supplychain decarbonization will be:

Carbon regulationFuel price volatilityConsumer carbon awareness

Decarbonization pressures from policy makerswill not go away during a recession, with thecontinued development of carbon tradingschemes being evidenced. A significant amountof the cost of energy is already tax take for manyparts of the supply chain. Further fiscaldisincentives to emit carbonsuch as limit-basedapproaches and tariff-based schemescouldintroduce markets to address environmentalexternalities from supply chain activities.

The major precedent has been the introduction ofEU ETS to heavily polluting industries in the EU.

While the first phase of EU ETS was hit by over-supply, it is expected that this will be addressedin future phases.

EU ETS will be extended to the aviation sector in2012 and there are some discussions aboutextension to ocean freight. There is currently littleor no discussion about direct extension into theroad transportation sector. This is due to pre-existing fuel taxes. However; feed-through effectsfrom changes in manufacturing strategy in energyintensive industries could be expected.

A carbon price applied at the current market ratesfor EU ETS credits would add a further 5% to16% to todays prices of crude-based fuels.

Figure 5: Effect of Potential Carbon Price Additionto Fuel at EU-ETS Market Rates

Reducing fossil fuel consumption in supply chainsis the single most important lever to cut carbon

emissions. It also substantially reduces operatingexpenses in a sector where energy purchasescan range from 5 to 35% of the total cost base14.

In the decade from 1991 to 2001, energy marketssaw a period of low and stable prices. In the tenyears to October 2001, the average price of abarrel of crude was US $ 21. Furthermore, therange from maximum to minimum price was onlyUS $ 27 over the whole period15.

Implementing decarbonization also reducesbusiness exposure to energy cost volatility,

helping to de-risk the cost base. The era of lowand stable energy costs ended in 2001, perhapslinked to growing scarcity and uncertainty ofsupply. Through 2008, businesses experiencedthe effects of fuel price volatility and exposure. Inthe two years from October 2006 to October2008, oil prices averaged US $ 86 / barrel. Thelowest spot price of a barrel in that period was US$ 50; the highest was US $ 144 in July 200815.

Figure 6: Fuel Price Evolution

Many businesses in the supply chain, bothlogistics operators and more widely, wereseriously impacted when oil prices spiralled up ashigh as US $144 / barrel in July 2008. Yet others,for example those who hedged at the time ofpeak prices and were unable to unwind theirpositions, lost out as prices fell back.

Additional pressure to reduce emissions comesfrom de facto standards which are not directlylegislated. These are driven in large part by

NGOs, think tanks and public policyorganisations. Attention here is increasinglyfocussed on the supply chain:

14 Accenture analysis

15 Accenture analysis, using US Energy Information

Administration data on Cushing, OK spot prices

0

20

40

60

80

100

120

140

Diesel FuelUK

Carbon Price

Distribution

VAT

Product

Duty

0

20

40

60

80

100

120

140

Diesel FuelUS

Carbon Price

Distribution

Taxes

Refining

Crude Oil

0

20

40

60

80

100

120

140

Jet Fuel

Carbon Price

Current Price

0

20

40

60

80

100

120

140

160

SpotPrice(WTICrude,Cushing)inUS

$/BBL

Daily Evolution in Oil Prices (1986 to Date)

Oil Price

Oil Price adjusted for inflation


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The Carbon Disclosure Project launcheda supply chain programme in 2007.

Requests for information were sent toover 2,000 firms16The Greenhouse Gas Protocol created ade facto standard for emissions reporting.Specific supply chain guidance comesfrom the Logistics and Transportsupplement of the Global ReportingInitiative17

Recent initiatives have moved towards thecalculation of the carbon footprint of a productthrough its entire lifecycle. Standards here aregenerally still in development, but the Carbon

Trust was instrumental in the October 2008launch of the PAS 2050 methodology18, while asimilar scheme has been launched in Japan19. Itseems likely that initial frameworks such as thesewill form the basis of later ISO standards.

On the demand side, consumers still want tobecome greener, withcarbon on top of theirminds. 85% of consumers in a recent worldwidesurvey were either extremely or somewhatconcerned by climate change, and 81% thought itwould directly impact their lives20. And, as SirTerry Leahy, CEO of Tesco plc, commented, the

current economic situation means that we needto ensure that green products are not luxuryitems, but can be bought by those on a tightbudget21, further fuelling pressures to cut bothcost and carbon.

In the short term, consumers are hampered intheir direct response by the limited availability ofinformation; few products are carbon labelled andthere is not yet a global labelling standard.

Consumers instead respond to proxy indicators ofcarbon emissions, with a degree of inaccuracy.

One obvious example has been the dialogueabout air miles22for supermarket groceries.Consumer awareness campaigns have not, bycontrast, focussed on the emissions impact ofmanufacturing location, though this is likely tohave a larger impact on product lifecycleemissions

22.

16 Carbon Disclosure Project, Supply Chain Brochure 200917 http://www.globalreporting.org/Reporting

Framework/SectorSupplements/LogisticsAndTransportation/ Dec 2008

18 Carbon Trust website, extracted 10/11/08

19 AFP, Japan to label goods' carbon footprints: official,Aug 19, 2008

20 Accenture End Consumer Survey on Climate Change,

200721

Sir Terry Leahy, speech to British Council of ShoppingCentres annual conference, 11 Nov 2008

22 Review of Food Miles Carbon and African Horticulture:

Environmental and Developmental Issues, COLEACP

Nevertheless, consumers have becomeincreasingly carbon-aware: research by the

Carbon Trust23

found that 64% of consumers inthe UK are more likely to use a businessmarketing itself as low-carbon. 67% of consumersin the UK were likely to buy a low-carbon product,and similar trends are seen across much of theEU. In the USA, the data is less compelling, withretailers focussing on price-driven marketing,although the cost-carbon linkage remainsrelevant24.

Looking again at analysis from the CarnegieMellon Universitys Green Design Institute model,it is evident that the carbon footprint of products

varies significantly in dollar value terms. For basicindustrial commodities, such as iron and steel,emissions are three to four tonnes of CO2e perUS $ 1,000 of value. For consumer electronicslike laptops and phones, the figure isconsiderably less than half a tonne.

Figure 7: Lifecycle Emissions in Dollar-ValueTerms with Transport Highlighted

It is possible that changing consumer awarenessaround carbon emissions will impact on demandfor products in different ways, particularly ifcarbon calculation and labelling schemes bringfootprint information to the fore. The effects ofchanging consumer demands, combined with asupporting response from the large globalretailers, could therefore have a profound effecton supply chains.

Retailers and distributors increasingly see carbonemissions performance as a source ofcompetitive advantage, on the supply side and on

the demand side25

. Carbon management can be aroute to lower costs and greater visibility of thecost base. The obligation to reduce emissions will

23 Carbon Trust Nov 2006 survey

24 Carbon Catalogue Organisation25

Accenture Executive Survey on Climate Change 2008

0.0

1.0

2.0

3.0

4.0

MetricTonnes

ofGHGEmissions

inCO2epe

r$1,0

00ofTrade

Emissions from Transportation
http://www.globalreporting.org/Reporting%20Framework/SectorSupplements/LogisticsAndTransportation/http://www.globalreporting.org/Reporting%20Framework/SectorSupplements/LogisticsAndTransportation/http://www.globalreporting.org/Reporting%20Framework/SectorSupplements/LogisticsAndTransportation/http://www.globalreporting.org/Reporting%20Framework/SectorSupplements/LogisticsAndTransportation/http://www.globalreporting.org/Reporting%20Framework/SectorSupplements/LogisticsAndTransportation/http://www.globalreporting.org/Reporting%20Framework/SectorSupplements/LogisticsAndTransportation/http://www.globalreporting.org/Reporting%20Framework/SectorSupplements/LogisticsAndTransportation/


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be partly borne by the retailer directly, but thatresponsibility will also pass back up the supply

chain.

Already, Wal-Mart has adopted a comprehensiveapproach to sustainability in its supply chainstrategy to realise cost and carbon reductionopportunities across logistics, production andinnovation. Through internal initiatives andengagement with its suppliers, the worlds largestretailer will make its truck fleet 25 percent moreefficient in three years, double in 10 years. Itplans to share [its] innovations throughout thesupply chain, which [it] believes will create aripple effect and magnify these solutions on a

global scale26.

Supply Chain DecarbonizationFramework

In preparing this report, we have worked on alarge number of strategic opportunities for supplychain decarbonization. We have identified a set ofcommon characteristics across theseopportunities, generating a high-level frameworkfor supply chain decarbonization as a result.

The framework establishes potential for end-to-end supply chain emissions reduction in ninefocus areas (Figure 8, page13).

The framework therefore supports businessesseeking to develop more focussed and specificinitiatives for decarbonization in supply chains. Itoutlines the likely target areas for all types ofsupply chain. It also allows easy development ofspecific opportunities beneath this, once theemissions in each area have been sized.

26 www.walmartstores.com/sustainability, extracted 08-11-08

Main Opportunities forDecarbonization

Based on the nine-point framework, workshopswith the World Economic Forums membersallowed us to identify around 75 individualopportunities which displayed potential to reducethe carbon intensity of supply chains.

In the analysis phase for this report, we havenarrowed these down to the top thirteen itemswhich present a real and credible opportunity forcost-effective and attainable decarbonization.These are the thirteen opportunities which areoutlined in the scorecards presented on pages16-28.

Key findings:

Deploying clean road vehicletechnologies, optimising logisticsnetworks and implementing greenbuilding programmes all retain significantpotentialSourcing goods from more efficientproduction locations can provide carbon

abatements which substantially outweighthe additional emissions from moretransportNearshoring in many cases is counter-productive in reducing emissions.However, slowing ocean freight vesselsin transit would have significantabatement potentialIncreasing recycling and reducing the useof packaging materials provides verymeaningful abatement opportunitiesThe potential gains from increasing thetake-up of home delivery are more limited


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Figure8:The

NineFocusAreasinSupplyChainforPotentialEmissionsReduction


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14

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tion

Summary of the Main Opportunities

for Decarbonization

Based on the analysis which is shown in theindividual Scorecards (pages 16-28), the relativesignificance of the thirteen supply chaindecarbonization opportunities can be plotted,giving consideration to two factors:

Emissions abatement potentialon thex-axis: the normalised abatementpotential that we have calculated, Withrespect to the maximum carbonemissions abatement potential from allthe opportunitiesFeasibilityon the y-axis: the indexed,qualitative value that has been placed onthe opportunity, considering likely barriersto deployment, and the extent to whichthe potential to deploy is controlled by thevarious stakeholders in the supply chain.

The specific value has been determinedvia a number of workshops with the

strategy and CSR leads from the WorldEconomic Forums Logistics andTransport Industry Partners.

The three opportunities that offer the mostpotentialin absolute termsto reduce supplychain carbon emissions within the Logistics andTransport sector are:

Scorecard 1Clean Vehicle TechnologiesScorecard 2Despeeding the Supply ChainScorecard 4Optimised Networks

These three opportunities also appear to offer agood balance between carbon abatementpotential and the likely feasibility (or ease ofimplementation) in supply chains.

Figure 9: Effectiveness of Each Opportunity

Decarbonization Opportunity Description

Potential

AbatementMt CO2e

Assessed

Index ofFeasibility

Clean Vehicle Technologies Introduce clean and environmentally efficient technologies 175 0.8Despeeding the Supply Chain Decrease transport speed and increase load fill 171 0.8Enabling Low CarbonSourcing: Agriculture

Optimise the location of agriculture 178 0.6

Optimised Networks Improve network planning through transformation projects 124 0.8

Energy Efficient Buildings Minimise emissions from operating activities 93 0.9

Packaging Design Initiatives Reduce weight and volume of packaging 132 0.7

Enabling Low CarbonSourcing: Manufacturing

Optimise manufacturing location 152 0.6

Training and CommunicationProvide training to road transport contractors and buildingoperators

117 0.8

Modal SwitchesTransfer freight from air and long-haul road freight to ocean,road and rail freight

115 0.7

Reverse Logistics / Recycling Improve percentage of total supply chain waste which isrecycled

84 0.6

Nearshoring Transfer long-haul air and ocean freight to road and rail freight 5 0.7

Increased Home Delivery Rely on alternate transport services to deliver goods home 17 0.5Reducing Congestion Introduce traffic management techniques 26 0.3

Figure 10: Summary of the Thirteen Opportunities

0.0

0.5

1.0

0.0 0.5 1.0

Feasibility

Emissions Abatement Potential

1 - Clean Vehicle Technologies

2 - Despeeding the Supply Chain

3 - Enabling Low Carbon Sourcing: Agriculture

4 - Optimised Networks

5 - Energy Efficient Buildings

6 - Packaging Design Initiatives

7 - Enabling Low Carbon Sourcing: Manufacturing

8 - Training and Communication

9 - Modal Switches

10 - Reverse Logistics / Recycling

11 - Nearshoring

12 - Increased Home Delivery

13 - Reducing Congestion

37

6

1

8 2

11

10 9

5

12

4

13


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tion

Overview of the Scorecards

For each decarbonization opportunity presentedbelow, an indicative estimate is given of thecarbon abatement potential of that opportunityacross the global supply chain.

We have identified carbon reductions which couldbe reasonably achieved over the medium term,given current technologies and given commercialrates of return on the investments required.

Necessarily, given that the project hasdeliberately sought to push the current state of

knowledge on the topic, there is a degree ofestimation and assumption here. Where this has

a material impact on the calculations, we haveoutlined this in detail in the scorecard.

For the purposes of the calculations, the size ofthe global supply chain is taken As-Is, so noassumptions have been made about potentialfuture growth in the sector.

The mechanism of each scorecard is shownbelow. More details on each calculation and theunderlying assumptions can be found in Annex 2.

Figure 11: Example Scorecard

Appendix ReferenceLinks to an appendix

containing a fulldescription of the

analysis

Effectiveness ChartScoring feasibilityagainst abatementpotential

Maximum AnnualGlobalAbatementPotential as calculated

AnalysisGiving context on the nature

of the opportunity and thelikely requirements for

successful implementationacross supply chains

Key FindingsBased on indicative

analysis by the WorldEconomic Forum

Overall OpportunityScoreRed / Amber / Green

ImplementationFeasibilityLow / Medium / High

List of OpportunitiesOpportunity consideredin the scorecard is

highlighted

Position of thisOpportunityCircled in red on thechart

Affected Part(s) of theSupply ChainLogistics and TransportSector, Wider Supply Chainor End-to-End SupplyChain

Opportunity Name

OverviewOutlines the specific

opportunity and relatedbenefits


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16

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Analysis

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tion

Key Findings

Additional information and details are presented in Annex 2

0.0

0.5

1.0

0.0 0.5 1.0

Feasibility

Abatement Potential

37

6

1

8 211

109

5

12

4

13

Maximum Global

Potential

175 MT

Implementat ion

Feasibi l i ty

LOWMEDIUMHIGH

Abatement Mainly

Affects

Logistics and TransportSector

1. Clean Vehicle Technologies

2. Despeeding the Supply

Chain

3. Enabling Low Carbon

Sourcing: Agriculture

4. Optimised Networks

5. Energy Efficient Buildings

6. Packaging Design Initiatives


Sourcing: Manufacturing

8. Training and Communicatio

9. Modal Switches

10. Reverse Logistics /

Recycling

11. Nearshoring

12. Increased Home Delivery

13. Reducing Congestion

Clean Vehicle Technologies

Equation 1

Increasing attention has been focussed on clean vehicletechnology, through:

o Improving the efficiency of vehicles in their day-to-dayoperation

o Switching to alternative or hybrid fuel technologysources

While adoption rates have been low for both bio-fuelled andbattery powered vehicles, these technologies are becomingincreasingly viable, mostly in urban operations.It is forecast that adoption rates will rise over time

Less visible technologies such as cruise control and automaticengine shut down also have a role

We looked at the potential for technology across both road andrail transportation, but not at air and sea in this assessment

Air and sea was taken out of the scope because of the limitedamount of robust data on savings and adoption rates which isavailable in the public domainWe took averaged CO2e emissions per tonne-km for eachmode, before considering the likely abatement potential fromthe principal technologiesusing data from past studies

We have only examined the potential from increased adoptionof currently available technologies in this analysis, and did notinfer savings from future developments

Previous governmental research established the abatementpotential from green vehicle technologies:

o 12.0% for railo 9.7% for road

Reapplying this abatement potential across global emissionscalculations by mode, we found that increasing road vehicleefficiency represented about 90% of the total abatementpotentialIncreased adoptionrates of alternativefuels, particularly nextgeneration biofuels, islikely and could makea significant furthercontributionperhaps around 30%of the total


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17

Overview

Analysis

Maximum Global

Potential

171 MT

Implementat ion

Feasibi l i ty

LOWMEDIUMHIGH

Abatement Mainly

Affects




Chain









9. Modal Switches


Recycling

11. Nearshoring



Supply

ChainDecarboniza

tion

Key Findings


0.0

0.5

1.0

0.0 0.5 1.0

Feasibility

Abatement Potential

37

6

1

8 211

109

5

12

4

13

Despeeding the Supply Chain

The high speed of response needed in many supply chainactivities means that consumer demand is met effectively, butat a price of increased CO2e emissionsSpeed in the supply chain is driven by factors such asleadtimes, deadlines and booking windows. This increasesemissionsfor example through switches to less efficientmodes of transport, increases in the number of expeditedorders, and increased vehicle and trip speedsIt is thought that easing leadtimes and delivery stipulationscould lead to emissions abatements through despeeding

We have analysed three different sources of potentialabatement forms:

o Slower road vehicle speedo Slower ship speedo Potential loadfill improvement with increased time

windowsWe looked at the typical savings which have been achieved byfirms in slowing down their vehiclessuch as Con-Waysspeed reduction from 65 mph to 62 mph in the USA27

We also looked at a similar scenario for ocean freightwherea linear decrease in ship speed brings about a squaredecrease in carbon emissionsWe calculated the abatement potential from each of the threeeffects, before combining to give the total opportunity potential

The single biggest opportunity within this calculation is toreduce the speed at which ships travel as a result of thesquared relationship between speed and emissionsReducing road vehicle speeds is also a highly effective way toreduce carbon emissions while having only a small impact onoperationsMaking reductions in emissions through loadfill improvement ismore difficultthemagnitude of anyabatement is smaller,partly because emissionsrise slightly with theassociated increase invehicle weight

27www.con-way.com


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Analysis

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ChainDecarboniza

tion

Key Findings


0.0

0.5

1.0

0.0 0.5 1.0

Feasibility

Abatement Potential

37

6

1

8 211

109

5

12

4

13

Maximum Global

Potential

124 MT

Implementat ion

Feasibi l i ty

LOW MEDIUMHIGH

Abatement Mainly

Affects




Chain









9. Modal Switches


Recycling

11. Nearshoring



Optimised Networks

In network logistics, optimising the networks nodal points,hierarchy and inter-related transport flows can bring significantreductions in both cost and carbonResearch has shown that many networks remain at leastpartially inefficient as a result of both inertia to change and lackof durability in supply chain strategy decisionsTypical studies show that in As-Is networks, restructuring thenetwork gave both an 11% cost reduction and a 10% CO2e

emission abatement28.

We looked at the extension of that principle across the widersupply chain

Assessing the high-level potential from network optimisation,we estimated potential flexibility within the:

o Distribution hierarchyo Nodal structureo Optimisation of planning decisions

We studied the typical savings achieved in pasttransformational projects, before reapplying these savings to

relevant sub-sectors of the road transport industryThe output here is the potential average abatement availablefrom network optimisation at a global, total supply chain level

Significant abatement through transport network efficiency isstill achievable, for example:

o 24% of goods vehicle kms in the EU are running emptyo When carrying a load, vehicles are typically only 57%

loaded as a percentage of maximum gross weightOverall the total abatement potential across the sector globally

could be 124 mega-tonnes of CO2e per yearOf this, around 30% may be due to the potential to improveeconomic transaction sizes in freight movements

28Accenture internal research


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Analysis

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tion

Key Findings


0.0

0.5

1.0

0.0 0.5 1.0

Feasibility

Abatement Potential

37

6

1

8 211

109

5

12

4

13

Maximum Global

Potential

93 MT

Implementat ion

Feasibi l i ty

LOW MEDIUMHIGH

Abatement Mainly

Affects




Chain








8. Training and Communication

9. Modal Switches


Recycling

11. Nearshoring



Energy Efficient Buildings

Energy efficient improvements can be found from:o Improved specification of new buildingso Making incremental improvements to old facilities

Significant cost and carbon savings can be made in threeprincipal ways:

o Through behavioural change (considered separatelywithin Scorecard 8, page 23)

o Implementing more efficient point technologies, suchas new lighting or cooling systems

o Integrating systems together more effectively, to allowthem to collaborate better, and prevent solutionsworking against each other

Local energy sourcing can also be a consideration for energyefficient buildings, with the inclusion of energy green sourcessuch as an on-site wind turbine or solar panels

Overall, buildings are calculated to make up approximately13% of the freight sectors carbon emissions or around 371mega-tonnes of CO2e emissions per yearBy finding average savings across a number of green buildings

projects from the public domain, we were able to calculate ahigh level potential abatement figure across the sector

Across several studies, green building technologies typicallydeliver savings in the region of 10% to 15% of energyconsumption

Additional savings are achievable with the inclusion ofintegrated building management systemswhich in their ownright have delivered further, similar magnitude savingsThe potential savings from retro-fits are larger than from up-scaling the technologies used in new builds


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Analysis

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tion

Key Findings


0.0

0.5

1.0

0.0 0.5 1.0

Feasibility

Abatement Potential

37

6

1

8 211

109

5

12

4

13

Maximum Global

Potential

132 MT

Implementat ion

Feasibi l i ty

LOWMEDIUMHIGH

Abatement Mainly

Affects

End to EndSupply Chain



Chain









9. Modal Switches


Recycling

11. Nearshoring



Packaging Design Initiatives

Sustainable packaging initiatives can make a substantialcontribution to carbon abatement across the supply chainPackaging initiatives can consider either transit or consumerpackaging and should assess the carbon impact of packagingthrough the entire supply chainTechniques such as packaging elimination, light-weighting andthe selection of alternative materials are already used byleading firmsin this analysis, we have assessed the potentialfor further deployment of these techniques

Our initial analysis assesses the total volume of consumerpackaging estimated to be linked to consumer goods logisticsgloballyWe then used figures taken from packaging initiatives such asthe Courtauld Commitment to project the size of savings whichmay be available across the sectorThese potential savings are converted into a carbonabatement potential, in just the production and distributionphases of the product lifecycleThe waste management potential from less packaging isconsidered separately in Scorecard 10 on page 25

There are a variety of estimates available on the weight ofconsumer packaging, which is typically put at around 5% of thetotal weight of consumer goods shipmentsThe carbon abatement of eliminating packaging is significant inthe production phase of the lifecycleat up to 125 mega-tonnes of CO2e per yearSavings in distribution are considerably smaller, in the regionof 3 mega-tonnes per year


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tion

Key Findings


0.0

0.5

1.0

0.0 0.5 1.0

Feasibility

Abatement Potential

37

6

1

8 211

109

5

12

4

13

Maximum Global

Potential

152 MT

Implementat ion

Feasibi l i ty

LOWMEDIUMHIGH

Abatement Mainly

Affects

WiderSupply Chain



Chain









9. Modal Switches


Recycling

11. Nearshoring



Enabling Low Carbon

Production:Through changes in manufactur ing sourc ing

In lifecycle assessments, the contribution of manufacturing canbe around 25% of total emissions, with energy consumption inthe manufacturing phases playing a significant roleReductions in manufacturing emissions are envisaged to comefrom two different sources in this analysis:

o Achieving economies of scale in productiono Switching to lower carbon energy sources

Based on the IPCC Fourth Synthesis Report emissions formanufacturing, we have assessed the potential abatementfrom:

o Optimising manufacturing processeso Selecting less carbon intensive energy sources

We have then adjusted these calculations to take into account:o Only the elements of manufactures which are traded

globallyo The limitations of contractual terms and the likely

available potential for relocation

This gives the maximum abatement potential that is reported inthis scenario

The carbon intensity of manufacturing changes significantlyacross geographiesthe carbon intensity of power generation also changessignificantly with geographies: emissions intensity in China isaround 175% that of the EU average carbon intensityReviewing a series of factory merger studies, the average costsaving through efficiency was around 11%which weassessed as being broadly indicative of a CO2e emission

reductionAround 70% of total manufactures are traded internationally,creating theoretical potential for these volumes to be switchedalternatives sourcesWe anticipate thatdifficulties inachieving changecould come from theinertia effects of assetlife, contractorsobligations andgovernment policies


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tion

Key Findings


0.0

0.5

1.0

0.0 0.5 1.0

Feasibility

Abatement Potential

37

6

1

8 211

109

5

12

4

13

Overview

Analysis

Maximum Global

Potential

117 MT

Implementat ion

Feasibi l i ty

LOWMEDIUMHIGH

Abatement Mainly

Affects




Chain









9. Modal Switches


Recycling

11. Nearshoring



Training and Communication

Programmes

Increasing attention is being focussed on the behaviouralaspects of managing climate change, both for demand side(consumer) activity and supply side (supplier) actionsIn the logistics and transport sector, attention to date haslargely focussed on the fuel savings achievable through drivertraining programs, helped in part by the significance of fuel inthe transport cost base, and legislative activities such as theintroduction in the EU of mandatory driver trainingThere is a wider potential for emissions abatement from

training and communication programmes

We have looked at the theoretical potential which comes fromtraining and communication programmes in two areas:

o Road freight emissions from fuel useo Building emissions from energy use

Due to the limited public research currently available on thesubject, we have not looked at the effect in other modesHowever, there may be additional abatement potential in theseareasfor example from a switch to continuous descentapproach in aviation or changed acceleration and deceleration

patterns in railWe quantified the total emissions for road freight andwarehouse / sortation facilitiesWe then considered the typical reported savings from trainingand communication programmes, before reapplying these tothe addressable part of the carbon emissions build-up

Looking across a number of studies, we found that drivertraining programmes achieve an average of 9% fuel economyimprovement, with smaller savings coming from behavioural

building efficiency programmesThe larger footprint of road emissions relative to buildingsmeans that 95% of the total calculated abatement potentialcomes from road freightMany articles refer tothe tail-off of savings inthe period after trainingand communicationactivities, which iswhere reinforcingtechnologies probablyhave an important roleto play


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24

0.0

0.5

1.0

0.0 0.5 1.0

Feasibility

Abatement Potential

37

6

1

8 211

109

5

12

4

13

Supply

ChainDecarboniza

tion

Key Findings


Overview

Analysis

Maximum Global

Potential

115 MT

Implementat ion

Feasibi l i ty

LOWMEDIUMHIGH

Abatement Mainly

Affects




Chain









9. Modal Switches


Recycling

11. Nearshoring



Modal Switches

Significant differences exist in CO2e emissions betweendifferent freight transport modes when expressed in terms ofemissions per tonne-km shippedUK Defra data suggests that shipping emissions are in theregion of 1% to 2% of those of airfreight per tonne-km, whencomparing long haul air to ocean freight container vesselsWhere absolute emissions from the less efficient modes aresignificant, switching small volumes of freight in percentageterms to another mode may have a significant impact on

emissions

Our initial analysis suggested that three mode switches wereworth detailed investigation:

o Intercontinental air to ocean freighto Short haul air to road transporto Long distance road freight to rail or waterways

We discounted other mode switches as being less practical orof significantly lower abatement potentialFor each potential switch, we used a variety of WTO, Eurostatand USA Department of Transportation data to calculate:

o Total As-Is Emissions from the existing modal splito Switchable Emissions which could realistically be

moved to a different modeo Maximum Abatement Potential that can be achieved

Emiss ions

[Mt CO2e]

Mode Switch

Total

As-IsSwitchable

AbatementPotential

Long Haul Air to Sea Freight 54 10 10

Short Haul Air to Road Freight 95 18 17

Long Haul Road Freight to Rail or Water 340 114 87

Overall, the largest abatement potential comes from switchinglong haul road transportation to rail or waterwaysThere is an additional benefit from switching out of air freight,although the savingsmay be harder to achieveand are of a muchsmaller scaleThe key criteria maytherefore be toimprove thecompetitiveness ofthe modal alternativesto road freightfor

example by addingrail spurs, ordecongesting long-haul rail flows


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Overview

Analysis

Maximum Global

Potential

84 MT

Implementat ion

Feasibi l i ty

LOWMEDIUMHIGH

Abatement Mainly

Affects

WiderSupply Chain



Chain









9. Modal Switches


Recycling

11. Nearshoring


13. Reducing Congestion0.0

0.5

1.0

0.0 0.5 1.0

Feasibility

Abatement Potential

37

6

1

8 211

109

5

12

4

13

Supply

ChainDecarboniza

tion

Key Findings


Reverse Logistics / Recycling

There is potential to address CO2e emissions throughincreases in the take-up of recycling and reverse logisticsactivitiesThese operations divert volume from waste, addressing landfilland incineration carbon emissionsThey also reduce the resource requirementand thereforeassociated carbon emissionsfrom raw material extractionand processing activitiesFor nearly all types of waste, recycling operations are more

carbon efficient than virgin material procurement and wastedisposal operations

Given that the amount of waste recycled globally is highlyvariable by geographyfor example ranging from 10% to 60%

just across the EUthere is a significant opportunity in somegeographies to promote the growth of recycling solutionsWe have built a dataset which supports modelling of differentrecycling and reuse combinations for various waste streamsThis allows consideration of the impact of different:

o Waste processing options, such as landfill comparedto incineration

o Types of waste, for example metals, plastics, paperso Recycling and reuse scenarios

We assessed the amount of carbon abatement achieved withcurrent recycling rates then calculated the abatement potentialwhich would result from all countries moving to best-in-classrecycling ratesThis gives an assessment of the global potential fromincreased waste diversion

Waste volumes grow in parallel to GDP, suggesting that theopportunities for emissions abatement and associated

business revenues will both grow over timeMaterials with the largest environmental benefit from recyclingare aluminium, steeland other metals,along with someplastics and paperproductsOverall, theabatement potentialfrom raising recyclingrates globally to thebest-in-class level isequivalent to around

84 mega-tonnes ofCO2e per annum.


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Key Findings


0.0

0.5

1.0

0.0 0.5 1.0

Feasibility

Abatement Potential

37

6

1

8 211

109

5

12

4

13

Overview

Analysis

Maximum Global

Potential

5 MT

Implementat ion

Feasibi l i ty

LOWMEDIUMHIGH

Abatement Mainly

Affects

WiderSupply Chain



Chain









9. Modal Switches


Recycling

11. Nearshoring



Nearshoring

The era of cheap transport and wage arbitrage potentialresulted in a large swing to low cost country sourcingWith rising volatility in fuel pricesplus other effects such asthe growing need for flexibility in supply chainsnearshoringmay be both a cost-efficient and carbon- friendly choice inmanufacturing location decisionsDiscussions across the literature have focused on switches toMexico for the US and Canadian market, and to EasternEurope for high tech manufacturing for the European market

Our assessment looked at the impact of reducing long haulfreight volumes by replacing it with shorter nearshore flowsIn our calculations, we used current modal splits for both thelong haul freight removed and the short haul freight addedWe used current emissions factor data per tonne-km,assuming no future changes from efficiencies or technologiesFor the long haul volumes removed, only types of freight whichcould be readily re-directed were consideredfor example,raw material shipments from other geographies were not usedWe then reapplied the switchable volume into a new model,which used the As-Is modal split and current average journeylengths for the relevant parts of the EU and USA freightmarkets

While significant reductions in tonne-km volumes are seen withnearshoring, the impact on emissions remains smallThis is due to the relative carbon inefficiency of road and railtransportation when compared to ocean freightThe average flow length could fall from over 5,000 km to around

700 km but with an emissions reduction of only approximately 5mega-tonnes CO2eConsidering the effect of switching air freightand assumingthat 25% of volumesmay be able to switchtheir sourcing locations

there may besignificant saving in thespecific relocation ofmanufacturing facilitieswhich require fast orexpedited ordersThis nearshoring of

airfreight opportunitycreates savings ofaround 20 mega-tonnes of CO2e

Mode Abatement frommode switch [Mt]

New emissions fromalternative modes [Mt]

Net Abatement[Mt]

Sea 37 -50.2 -13.4

Air 19 -0.3 18.7


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Key Findings


0.0

0.5

1.0

0.0 0.5 1.0

Feasibility

Abatement Potential

37

6

1

8 211

109

5

12

4

13

Overview

Analysis

Maximum Global

Potential

13 MT

Implementat ion

Feasibi l i ty

LOWMEDIUMHIGH

Abatement Mainly

Affects

WiderSupply Chain



Chain









9. Modal Switches


Recycling

11. Nearshoring



Increased Home Delivery

It is perceived to be more efficient in many cases for retailersto deliver purchases to consumers homes than to haveconsumers drive to stores to make purchasesHome delivery was boosted in certain segments of the retailmarket in western economies in recent years by theemergence of the internet retail channelThere remains significant potential in the market for growth,with market volumes growing by around 20% per annum inseveral Western economies

We have modelled the impact of more home delivery oncarbon emissions in selected Western economiesWe were able to use existing studies to establish the numberof shipping trips that may be eliminated and the number ofadditional delivery trips createdKey considerations have been the relative efficiency of deliveryvehicles, the number of drops achieved and some of the directbehavioural implications for consumer activityWe have not considered indirect consumer behavioural effectsin this analysis, such as substitution of shopping time with

more leisure activities which emits carbon

The number of shopping trips and number of kilometrestravelled per year by consumers is significanton average 50trips per shopper per year, with around 126 billion vehicle kmof travel covered for shopping among the larger economiesIn our analysis, home delivery is shown to be around fourtimes more efficient in carbon emissions terms, assuming thatthe home delivery service is able to eliminate the travel journeyentirely

Although the absolute savings (in global emission terms) maybe relatively small here, it is likely that there may be significantcommercial opportunitiesfor firms in new serviceofferings


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Key Findings


0.0

0.5

1.0

0.0 0.5 1.0

Feasibility

Abatement Potential

37

6

1

8 211

109

5

12

4

13

Overview

Analysis

Maximum Global

Potential

26 MT

Implementat ion

Feasibi l i ty

LOWMEDIUMHIGH

Abatement Mainly

Affects




Chain









9. Modal Switches


Recycling

11. Nearshoring



Reducing Congestion

Transport congestion across all modes has grown in mosteconomies, as a result of traffic volume growth outstripping thesupply of new infrastructureThe cost and carbon impact is significant in road transport:

o 6% is added to the EU road transport fuel bill by trafficcongestion (Eurostat)

o In the USA, the 1.5% of fuel purchases which are burntin traffic jams equates to 2.4m gallons of fuel per year(US Bureau of transportation statistics)

Bottlenecks also cause congestion in other modes, includingair and rail:

o 35% of European flights arrive more than fifteenminutes late due to congestion

o Up to 20% of freight trains in the USA are delayedarriving at their destination

uation 2

Congestion is believed to cause increased emissions in twoways:

o Directly through increased emissions per km whenvehicles are not moving at efficient speeds

o Indirectly through increases in the number of expedited

orders and through re-routing of vehiclesOur analysis focussed on the total amount of road freightcarbon emissions which may be associated with congestionBased on previous studies, we then approximately identifiedthe global potential from implementing successful congestionreduction strategies such as demand management system

It is easier to quantify the carbon impacts of congestion in roadtransport than other modes due to greater data availabilityIllustratively, a 6% fuel bill due to congestion would equate tothe global emissions of 90 to 100 mega-tonnes of CO2e peryearThe savings achieved through demand management schemesare variablehoweverthey may be up to 20to 25% with congestionchargingThe total abatementpotential fromreducing congestioncould be in the regionof 25 Mt of CO2e peryear


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Recommendations

To successfully decarbonise global supplychains, co-ordinated action is required.

Past tactical or sectoral initiatives have beensuccessful in raising the profile of the carbonemissions challenge and in beginning to fostersmall-scale actions. However, they have not beensuccessful in reversing the trend towards supplychain emissions growth.

We see carbon abatement remaining relevant ina downturnand possibly even being moredesirable. As much of managing carbonemissions is about reducing energy consumption,supply chain decarbonization often brings with iteconomic benefits. This makes now the time forthe foremost companies to work together to bringabout change.

To achieve the substantive change necessary,three main groups must collaborate acrossgeographies and organisations:

Logistics and transportation providers

Shippers and buyersPolicy makers, both governmental andnon-governmental

We hope that the recommendations from thisreview can lay the groundwork for meaningfuldialogue between industry, customers and policymakers.

Logistics and TransportationProviders

We see three key responsibilities andopportunities for logistics and transportbusinesses:

Reduce emissions using internalsolutionsEncourage external shippers and buyersto change their behaviour

Actively engage policy makers

Our specific recommendations for the internalactions the logistics and transport sector can takeare:

Clean vehicleso Speed up the industry wide

adoption of new technologies,fuels and associated processesby implementing where there is apositive business case

Optimise networks

o Deploy network reviews of largeclosed networks to ensureefficient hierarchies and nodalstructures

o Seek to integrate optimisationefforts across multiple networks,for example integrating own andcustomers networks into onemodel

Mode switcheso Work on mode switches within

own networks where possible, forexample in the large closed

networks operated by postaloperators, parcel carriers andpallet networks

Co-loadingo Enable further collaboration

between multiple shippers and/orbetween carriers to make greateruse of co-loading opportunities

Green buildingso Encourage wider industry

commitment to improve existingfacilities through the retro-fittingof green technologies, via

individual and/or sector-wideactions

o Work towards industry-widecommitments to boostinvestment into new buildingtechnologies

Training and employee engagemento Set budgets for sustainability

training and engagementprogrammes across theorganisation

Recycling and waste managemento Develop new offerings around

recycling and wastemanagement, workingcollaboratively with customers

Home deliveryo Develop new home delivery

offerings, working collaborativelywith customers

Carbon offsettingo Develop carbon offsetting

solutions for own operations andclients as part of a balance suiteof business offerings


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tion

Shippers and Buyers

By determining the source of supply, deliverylocation and many supply chain characteristics forproducts, shippers and buyers of products lockin much of the carbon emissions associatedwithsupply chains. They determine how much carbonis designed into a product through raw materialselection, the carbon intensity of the productionprocess, the length and speed of the supplychain, and (at least partly) the carboncharacteristics of the use phase.

Shippers and buyers can take decisions whichactively drive positive change up and down thesupply chain. For example, if a large retailerchanges its buying requirements, its supplierssupply chains are amended accordingly.

Our specific recommendations are that logisticsand transport businesses engage shippers andbuyers of products in conversations that supportimprovements in:

Product and packaging designo Agree additional standards and

targets around packaging lightweighting and elimination

o Seek cross-industry agreementson modularisation of transitpackaging materials

Low carbon sourcingo Develop sustainable sourcing

policies that consider the carbonimpact of primary production,manufacturing and reworkactivities

Tactical nearshoring opportunitieso Integrate carbon emissions

impact into the business case fornearshoring projects

Mode switcheso Support efforts to make mode

switches across supply chainso Begin to despeed the supply

chain, allowing economic orderquantities to rise and deliveryfrequencies to fall

Carrier incentivisationo Build environmental performance

indicators into the contractingprocess, particularly aroundcarbon emissions

Consumer incentivisationo Support better understanding of

carbon footprints & labellingwhere appropriate

o Work with consumers to make

recycling easier and moreresource efficientTechnologies and techniques to helpsynchronise supply chains

o Encourage collaborationamongst shippers and carriers

o Invest in data exchanges toincrease visibility of co-loadingand other collaborationopportunities

Policy Makers

Policy makers have a key role to play indecarbonising supply chains. Substantialintervention by international regulatory bodies,governments and de facto policy makingauthorities is necessary to support the emissionsreduction required across the sector. The policyinterventions we envisage will further reduce theextent to which carbon is an externality acrosssupply chains and will create supportiveenvironments to help businesses deal with thescale of change required.

Our specific recommendations for policy makersare:

Energy pricingo Ensure that the full cost of

carbon is reflected in energytariffs across all geographies andall modes of transport

Carbon reportingo Work with the logistics and

transport sector to developuniversal carbon measurementand reporting standards

Carbon tradingo Build an open carbon trading

systemo Review tax regimes to remove

counter-productive incentivesCongestion

o Promote further expansion ofintegrated flow managementschemes for congested roads

o Make specific, point investmentsin congested nodes or sectionsof infrastructurearoundcongested road junctions, portsand rail junctions

Capacity expansiono Actively promote mode switches

to rail, short sea and inlandwaterways

o Consider re-opening idle rail


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lines, waterways and port

facilities with government supportCarbon labellingo Support efforts to move towards

further carbon labellingRecycling and waste management

o Address anomalies inincentivisation around recyclingmonetarising the potentialenvironmental benefits fromrecycling

Green buildingso Encourage industry to commit to

improvements, which consider

the boundaries of possibilitieswith current and futuretechnologies, through individualand sector-wide actions

Conclusions

Through this research, we have identified thatlegislative and commercial imperatives willcontinue to support the case for supply chaindecarbonization.

Legal and de facto standards, energy costvolatility and evolving consumer expectationscreated the circumstances for the logistics andtransport sectors initial response and makenow the time to move towards more strategic

responses.

The types of responses required often transcendfirms, sectors and geographical boundaries. Ofthe three top opportunities for supply chaindecarbonization identified, two can only beachieved with a truly multi-sectoral response. Thethird, speeding up adoption rates of green vehicletechnologies, would be greatly benefited bysupporting action from policy makers to aidimplementation.

We have therefore recommended that three

groups (logistics and transport providers,shippers, policy makers) collaborate to achievedecarbonization.


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Annexes

Annex 1: Definition of Key Terms

CO2eExpression of greenhouse gas emissions incomparative units of carbon dioxide emissions,calculated by multiplying the mass of a givengreenhouse gas by its global warming potential

DecarbonizationA reduction in the carbon intensity of a process orset of linked processes, such as a supply chain

EIO-LCA ModelA model developed by the Green Design Instituteat Carnegie Mellon University to estimate theoverall environmental impacts from producing acertain amount of a commodity

Freight transportTransportation of goods and products by ship,aircraft, train or road means

Logistics and transportActivities, resources and means associated withthe movement and handling of goods andproducts

Mega-tonne (Mt)1,000,000 tonnes

PAS 2050Publicly Available Specification document givingthe specification for the assessment of thelifecycle greenhouse gas emissions of goods andservices, created by three UK authorities: BSI,Defra, Carbon Trust

Product lifecycleConsecutive and linked stages in the creation of aproduct from raw material acquisition orgeneration of natural resources to end of life,inclusive of any recycling or recovery activity

Supply chainThe system of organisations, technologies andactivities which is involved in the achievement of

the product lifecycle

Tonne-kmStandard unit resulting from the multiplication of apayload in tonnes by a distance travelled in km


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Annex 2: Summarised Analysis

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Annex 2: Summarised Analysis Lifecycle Processes Modes Considered

Scorecard

Opportunity

RawMaterials

Manufacturing

Distribution

Consumption

EndofLife

Ocean

Air(longhaul)

Air(shortHaul)

Road

Rail

Warehouse

MtCO2eAbatement

Stepsandkey

valuesusedto

computethe

feasibleabatement

potential

Outputs

Sources

Principalsource

Assumptionsand

Notes

1 Clean VehicleTechnologies

X X 175

1. Abatement in road transport, considering:Total emissions for road 1620 Mt OECD 2005 data

Savings from road emissions model improvement 6.80% Department for Transport

Savings from road emissions with biofuel 2.90% Department for Transport

2. Abatement in rail transport, considering:

Total Emissions for Rail Transport 147 Mt OECD 2005 data

Savings from rail emissions 12% Department for transport

2 Despeeding theSupply Chain

X X X 171

1. Abatement in road freight with slower speed:

Road freight total emissions 1620 Mt OECD 2005 data

Abatement from achievable with slower speed 3.40% Columbus Business First

Emissions saved from road freight speed 55 Mt

2. Abatement in road freight with loadfill increase:

Road freight Emissions 1620 Mt OECD 2005 data

Abatement from Load fill improvement target 0.50% WEF Analysis

Resulting increase in emissions from load fill -0.21% WEF Analysis derived fromDEFRA

Emissions saved from road freight load fill 5 Mt3. Abatement in ocean freight with slower speed:

Ocean freight emissions 481 Mt OECD 2005 data

Abatement from achievable slower speed

Documents

Supply Chain Decarbonization (WEF)