Carbon Footprint Needs in Logistics Diego 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 Parcel Shipper FAP 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

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