Running on sustainable logistics
Damco's dashboard helps shippers control their transport carbon output.
By Chris Gillis
Getting a handle on carbon emissions for many shippers is like trying to contain a cloud of smoke.
Gaseous and transparent to the human eye, carbon output from manufacturing and transportation processes is difficult to measure and thus to understand how best to control. For now, many shippers are talking about it, but few actually know how to curtail their carbon emissions.
Damco, a market leader in forwarding and logistics services and a member of the A.P. Moller – Maersk group, has developed a sophisticated matrix to calculate a shipment's carbon output and continuously present those measurements on the shipper's computer screen in the form of a 'dashboard.'
'We have been mapping supply chains and trying to optimize them since the 1990s,' said Jordi Avellaneda, Damco's global head of green logistics, based in Copenhagen, Denmark. 'For us it's about introducing carbon emissions into the equation.'
Damco views carbon emissions not as a separate science but as another layer of measure within its supply chain calculations. Obtaining a shipper's total carbon footprint, however, required Damco to find carbon 'hot spots,' or those areas in the freight-handling process that generated the most pollution.
global head of green logistics,
|'What we have realized since the beginning is that carbon optimization is linked to cost savings and that's something we can show our customers.'|
'In the beginning of developing our proprietary mapping tool, it was a difficult exercise,' Avellaneda said. 'We, along with our customers, had to ask ourselves lots of questions. 'What's my baseline? What's my target? And how do I reach it?' '
Providing proof of carbon reductions in the supply chain to often skeptical shippers is tough at best. 'We don't have something like a wind turbine to show. But what we have realized since the beginning is that carbon optimization is linked to cost savings and that's something we can show our customers,' Avellaneda said.
Carbon studies indicate that cargo transport by ocean carrier is 50 percent to 70 percent more efficient in terms of emissions than air carriage. The measurements are based on the fuel consumed to move one ton of freight a distance of one kilometer.
'One could say 'we all know that air freight has more emissions and by increasing container use has an impact on the situation,' ' Avellaneda said. 'But to have that knowledge reflected on a dashboard so everyone can see the impact of their transportation mode decisions makes a huge difference to shippers.'
Doing It. One shipper that embraced Damco's dashboard is Nike. The Beaverton, Ore.-based sports footwear and apparel maker has been outspoken about its intention to reduce carbon emissions from within its operations since the mid-1990s. The company has set an ambitious target to reduce these emissions 30 percent by 2020.
Damco began working with Nike in Europe in 2001 and on environmental matters involving its supply chain since 2006. It was during this time Damco recognized that shippers were increasingly turning to their third-party logistics services providers for help to reduce carbon emissions, particularly in freight transportation.
'We talked about this dashboard concept with five to six of our biggest customers in the United States and Europe and Nike showed the biggest interest,' Avellaneda said. 'Nike is one of the few companies with a carbon reduction target for transportation and logistics.'
Nike offices have implemented energy saving measures that make them more energy efficient than 75 percent of comparable U.S. offices. In an outward expression of its 'green' initiative, the company powers its large European distribution center in Laakdal, Belgium, with six wind turbines.
Damco first deployed its carbon calculator with Nike's European operations as part of a 12-month pilot. In specific, the reports measured Nike's carbon footprint on its inbound and outbound transportation via the Laakdal facility, including ocean and air, rail, barge, port operations and consolidations. Nike then asked Damco to provide more details in the reports, which led to the development of the so-called SupplyChain Carbon Dashboard.
Damco executives said the quarterly reports give Nike logisticians a detailed understanding of what causes carbon emissions and allows them to track the effects of any new reduction initiatives. In specific, Nike is now able to better understand specific transport actions that may contribute to emissions.
Nike has also used Damco's dashboard to reduce its highest emissions contributor ' air transport. Nike has found ways to shift some air freight to cleaner, less expensive ocean transport by adjusting its supply chain for new product releases.
'We're not saying air freight is bad, because it's good for certain situations, such as emergency deliveries and fashion releases,' Avellaneda said. 'Our dashboard helps Nike find ways to better manage air transport's use.'
Logistics Trend. Large shippers have stepped up their pursuit to reduce carbon emissions, oftentimes starting with electric power use through renewable energy sources and waste reductions.
Earlier this year IKEA Group said it will build and operate its own wind farm in Dalarna County, Sweden, which when fully built in 2012 will generate enough electricity to power 17 area stores. This is not the first acquisition of this type made by IKEA. In 2009, the furniture retailer bought three wind farms in France, and added six German wind farms to its energy portfolio in 2010, for a total of 52 wind turbines. IKEA estimates these turbines provide 10 percent of its overall power. The company has set a goal to use 100 percent renewable energy sources to power its entire Swedish operation.
Even wind and solar energy systems manufacturers generate their share of carbon, both in production and freight transportation, and are actively seeking ways to reduce related emissions.
'LM Wind Power acknowledges that it must do more to become greener and cleaner throughout its operations,' said Roland Sund'n, the Danish wind turbine blade maker's chief executive officer, in a recent statement.
Earlier this year, LM Wind joined the U.N. Global Compact, the world's largest corporate voluntary sustainability initiative with more than 8,000 businesses and organizations. In addition to the environment, the compact includes sustainable principles for human rights, labor and anticorruption.
|Large wind turbines provide electric power to Nike's European distribution center at Laakdal, Belgium.|
'For LM Wind Power, sustainability is not about philanthropy or making us look better than we are,' Sund'n said. 'It's about confronting the environmental and social challenges we face in our business and achieving real change.' He added that 'Improvements like this make good business sense.'
According to a recent American Shipper survey, nearly 40 percent of 156 responding freight transportation buyers said they have asked their logistics services providers to submit a sustainability plan ahead of buying decisions. Nearly 80 percent of respondents said they will spend money on environmental sustainability initiatives in 2011, including systems and hardware, and 15 percent will spend a half-million dollars or more.
Consumer goods retailer Wal-Mart issued a 33-page document to its vendors explaining the retail giant's position on sustainability from the standpoint of environmental improvements and cost savings.
Avellaneda explained that some industry sectors, such as chemicals and electronics, are further along with sustainability programs due to necessary safety requirements. But large retailers like Nike, IKEA and Wal-Mart have pressed the overall logistics field to step up.
Shippers in Europe have been quicker to respond with carbon emissions controls due to more stringent country and regional pollution reduction regulations.
'In the U.S., there's been less of a regulatory push, and more of an internal realization that there are cost efficiencies from making these changes,' Avellaneda said.
'A lot has been driven by big corporations that have sustainability in their DNA,' he said. 'Nike has been open and encourages us to share our knowledge (as a logistics services provider) with others in the industry.'
Dominant U.S. retail industry groups, such as the Retail Industry Leaders Association and National Retail Federation, have witnessed a keener interest among their members to include sustainability in their dialogue with both product and transportation vendors. ('The green tiebreaker,' April American Shipper, page 6-10, or online at www.AmericanShipper.com/links.)
Nitty-gritty. Damco continues to upgrade its SupplyChain CarbonDashboard.
'We're constantly fine-tuning the scope of our dashboard to make it as accurate as possible,' said Marijn Visser, Damco's global account director for Nike, during a recent interview in Antwerp.
For Nike, the dashboard provides a quarter-by-quarter review of its European transport emissions, including:
' Total carbon emissions in metric tons.
' Average carbon emissions per cubic meter.
' Average emissions per unit (that is per shoe or apparel item).
'You can drill into the data and split your emissions out by mode ' ocean and air ' and we'll soon be adding truck for inland Europe,' said Bart Soetewey, Damco's European operations manager for Nike.
Carbon output measurement for trucked freight poses many challenges. 'We need to get the end customer involved in the process,' Visser said. 'You have to ask many questions. For instance, do you want to use a next-day or a greener transportation option like a once-a-week consolidation?'
Damco has found in Europe that many trucks operate at 40 percent utilization because shippers want to use their own truck space for deliveries, resulting in excessive carbon emissions. 'I think we'll see more shippers in the future share truck space instead of making individual shipments,' Visser said.
Damco has also moved its carbon analysis inside the container by offering shippers a service that helps improve their packaging. While package optimization is highly specialized, Damco notes that it often comes down to three questions for shippers:
' Do current packaging dimensions optimize handling and storage costs?
' Do cartons have the minimum thickness to guarantee strength?
' How much air is being transported and paid for in the shipper's supply chain?
Damco teamed up with Getzville, N.Y.-based packaging consulting firm Supply Chain Optimizers (SCO) to provide this service. 'We don't need to build an in-house expertise in packaging, but partner with the right company,' Avellaneda said.
Damco carries out these projects on a 'no cure, no pay' basis to limit risk to shippers interested in the service. If savings is realized for the packaging changes, Damco and SCO will get an agreed percentage of the first year of savings to the shipper.
'This provides us the opportunity to talk to people in the customer structure who we didn't traditionally talk to,' Avellaneda said. 'It helps us better serve our customers.'