Category Archives: Carbon GHG

Carbon Tracking is Important — But a Calculator or a Credit is Not A Solution!

We need sustainability. But that’s a heck of a lot more than just calculating the carbon in your supply chain or buying credits from an unknown seller of dubious origin. However, in the last two years, we’ve seen dozens (upon dozens) of startups that, as of now, do just that — and only that.

If they have plans to do more, that’s great, we need more — a lot more, but for now, all they are adding is unnecessary duplication of capability and confusion to a space that needs more clarity.

First of all, you don’t need a custom “carbon calculator” to compute your carbon footprint. All you need is the data on the products you produce — specifically, how many units you buy, the carbon output by the factory on an annual basis, and how many total units it produces. Then, you can compute a carbon contribution by product. (Yes, this is a bit simplified, but you can have the factory track daily production by product and daily output and improve the estimate if you like. It’s still a simple calculation.)

And, most importantly, you can do all of these calculations easily in any Business Intelligence (BI) or Spend Analysis Tool. Just load the factory carbon / GHG output for a day and the number of products produced per day in a tracking table and create a derivation dimension for carbon and each GHG you want to track and that’s your output per product. Then, on your product purchase table you create a derived dimension that calculates how much carbon (and GHG) the products you bought contributed. Dump the table and there’s your report, which you can format how you like.

And you can even do all this work in, gasp, Microsoft Excel if you don’t have a spend analysis tool — you don’t need someone to build a custom mini spreadsheet tool to do this for you (or pay for it).

But even worse is an unregulated someone who will take your money and invest it in “carbon offsets” for you. Especially when the enterprises that someone invests it in may or may not be doing anything that’s actually reducing the amount of carbon in the atmosphere. The reality is that, today, many “carbon offset” investments are a complete and utter scam, as per this John Oliver segment, and many more that look like they are doing activities that will capture atmospheric carbon are just wasting time and money. For example, just planting a tree does nothing if the tree doesn’t survive. In many areas of South America and other locales undergoing rapid deforestation, especially where droughts are common, the climate quickly becomes similar to that of a semi-desert part of the year — and a young sapling in this climate generally won’t survive without irrigation. Also, if the entity doing the planting decides to plant a non-native species of tree that they believe should “grow faster”, chances are those trees won’t survive the climate either.

What we really need is a few internationally regulated organizations that create requirements and standards for an operation to be a real carbon offset operation and auditing requirements that must be met in order for an operation to be certified as being a true carbon offset operation — before it takes a dime of your money. Otherwise, yet another organization just wanting to do good is NOT enough.

And then, we need these companies that care to take the next step and provide meaningful guidance to global enterprises as to the steps these global enterprise clients can take to reduce their carbon footprint — technologies they, and their suppliers, can invest in to reduce carbon and GHG production, alternative raw materials and components they can use in their designs that produce less carbon in their mining and production, and ways to reduce consumer demand for carbon intensive products. (Which, by the way, doesn’t have to reduce profit — conscientious customers will pay more for sustainable products, especially if those products now last longer as a result!)

In short, we need actions, not calculations!

Key Priorities for Ethical Supply Chains – An Interesting Study

Software Advice, a software review company which covers the supply chain management space, recently posted the results of its Key Priorities for Ethical Supply Chains Industry View 2014 that discussed the results of two surveys distributed to over 1,100 consumers. The findings are interesting, generally indicative of the current state of affairs, but, as far as SI is concerned, specifically off, though not due to any fault of Software Advice or the methodology employed by the researcher. What do we mean? Read on.

In the first survey, the group of over 1,100 consumers was split into three and each group of consumers was asked how much more they would pay for a product, normally priced at $100, that was produced more ethically with respect to one of three ethical initiatives: ethically sourced materials, carbon emission offset, and good working conditions. The first group said they’d pay an average of $18.50 more if the raw materials were ethically sourced, the second group said they’d pay an average of $19.70 more if the product had its carbon emissions offset, and the third group said they’d pay as much as $27.60 more if the product was made by workers working in good working conditions. A deeper dive revealed that 35% of consumers would not pay a penny more for products made under these ethical initiatives. And while the second finding does not surprise the doctor, he does not believe the first finding in its entirety. But more on that later.

In the second survey, the respondents were asked which of the three broad ethical initiatives would make them more likely to purchase a company’s products: working conditions, reduced environmental impact, or community involvement. The results were more-or-less evenly split. This does no surprise the doctor either.

So why doesn’t the doctor believe the average consumer would pay considerably more (an average of 21.93% if the above survey is to be believed) for an ethically sourced product? Three reasons.

  1. In the vast majority of verticals, it is not the most socially responsible company that is the market leader.
  2. Fly Research’s recent survey, which attempted to determine what factors are really important to consumers in their purchasing decision, found that only 9% of UK and 16% of US consumers rank “ethical company/brand” in their top 3 attributes but the vast majority are more concerned with value for money (86%), price (76%), and quality (73%). (See SI’s recent post on Do As I Say, Don’t Do As I Do!
  3. The study did not take into account the inherent bias of the consumer. As a result of recent disasters and media storms — including the fire in Bangladesh, the BP oil spill, and underground sweatshops in Russia — not only is corporate ethics and supply chain sustainability on the mind of many caring consumers, but it is stirring up their emotions. And an emotional subject is not an unbiased one. While a consumer might try her best to be unbiased when responding to a survey, when all of the questions stir emotional responses, her responses are going to be skewed relative to what they would be compared to the situation where only a small portion of the survey contains questions or answers that stir emotions. So had these been just three factors in a pool of ten or more that she is asked to consider when defining what is most important to her when selecting a product for purchase, and the other seven plus do not stir any emotion, she will be able to better balance her emotion with her objectivity. And this is why when you compare the results of this survey with the Fly Research study, you find a discrepancy (that cannot be easily accounted for unless there is emotional bias in the consumer responding to the surveys). How else do you explain that a third of consumers expressed a wilingness to pay over 10% more (and up to 100% more) while another third expressed a willingness to pay up to 10% more when the Fly Research study found that less than 43% would pay more than 5% extra and the percentage of respondents who would pay more than 5% declined much faster than the percentage of respondents in the Software Advice Study.

In other words, consumers are starting to care, aren’t necessarily sure which issue they care about the most, will definitely choose a socially responsible product over one that is not socially responsible if all things are equal, but if the cost differential is too high, the average consumer will not be swayed to a more socially responsible product, despite their desire for social responsibility. So while the issues are likely spot on, the relative worth to the average consumer is still in question.

However, in addition to confirming our suspicions that there is no high level issue with respect to social and environmental responsibility that is considerably more important than the others, the study did reveal that if you drill down, there are some specific issues that concern consumers more than others. For example, where environmental responsibility is concerned, more consumers care about reduced water use and biodegradable packaging than reduced carbon emissions. Where community involvement is concerned, 43% believe that the best thing a company can do is to open a factory where jobs are needed (and not outsource to another country). And where working conditions are concerned, 45% believe workers should be paid a fair wage. This gives you starting points in your CSR efforts that will earn you brownie points and increase your brand’s reputation if appropriate initiatives are undertaken. It will be interesting to see how these trend over the coming year.

Procurement Trend #21. Increased Raw Material Scarcity

Eighteen anti-trends from the bush country still remain. As much as we’d like this series to be nearing the end of its run so that LOLCat can come out of the bag and once again explore the world, this lunacy has to stop. We have to shine the light on all these half-truths and lies and put an end to them once and for all. We will continue until each one is laid bare in the hopes that the boondock futurists run back into the bush lands from once they sprang and leave us alone to push forward.

So why do so many historians keep pegging increased raw material scarcity as a future trend? Besides their inability to recognize the twenty first century, there are a few reasons, but among the top three are:

  • We’re burning fossil fuels like there’s an endless supply
    and there isn’t. New drilling technology might allow us to tap more reserves then we thought we could, but this only gives us two or three extra decades before we run out. Since most of our current fossil fuel reserves formed over hundreds of millions of years, and are from plant remains before the time of the dinosaurs, it should be obvious that they are not renewable.
  • We’re using rare earth minerals as fast as we can mine them
    and demand is still increasing as mobile mania hits the world!
  • Global food reserves recently hit an all time low
    back in 2009 and with population steadily increasing, the situation is not going to improve.

So what does this mean?

Fossil Fuel being burned like there’s no tomorrow might mean there is no tomorrow

Non-renewable energy reserves are running out, pollution is on the rise, and if you aren’t already being hit with rapidly increasing energy costs, expect to be taxed to the hilt by way of carbon credits. At some point, where fossil fuels is concerned, there will be no tomorrow. Thus, you have to start moving towards renewable energy resources — wind, solar, water — as soon as possible and make sure that you are only using fossil fuels for transport, at least until such time as there are suitable hybrid bio-fuel/battery-powered transport options for you to choose from.

Rare Earth Minerals are on the verge of extinction

They are called rare earth minerals for a reason — they are few and far between compared to regular earth minerals and in a very limited supply. You need to find alternate designs that, at the very least, require less of these materials if you can’t eliminate the need for them completely. And you definitely need to start designing for recycle and reclamation.

Food Reserves at an all time low

Food costs are going to increase through the roof, and severely impact your bottom line, unless you do whatever you can to eliminate waste through the supply chain end-to-end. In many countries, a third of food is needlessly wasted. Not only can we do much better than this, but we need to. Even though there are now almost 7.3 Billion people in the world, we are still able to produce enough food to feed everyone, but yet over 870 Million people are chronically undernourished. Simple math says that if 2/3rds of global food production feeds about 6 Billion people, then we can easily feed 7.5 Billion people with sufficient nourishment. However, it also says that as the population grows, our ability to produce more than we need decreases substantially and any natural disaster that wipes out a major crop will have huge repercussions if we cannot eliminate waste. So you need to review all of your transportation, storage, and production processes to make sure you get total supply chain waste as low as possible as soon as possible.

Can Trucking Clean Up Its Act?

A recent article over on Inbound Logistics on Going Green to Save Green (which you all know is true after reading SI for years) had a scary statistic: freight trucks are on pace to increase their carbon emissions by 40 percent over the coming decades, according to the Department of Energy’s Annual Energy Outlook. Ouch!

With strict new fuel economy standards for passenger vehicles, which were never the big emission culprit in the first place (they just took the blame for all the pollution caused by ocean shipping, which contributes approximately 3,500* times the pollution produced by all personal automobiles on the planet, and ground transport), this means that trucks are going to become the biggest producer of road sector emissions. The logistics sector constitutes about 6% of the total man-made GHG emissions, with transport as a whole constituting about 12%. This says that the personal automobile, which is 50% to 60% of road sector emissions, depending on the source, accounts for less than 2% of total CO2 and GHG emissions as road transport is only about 25% of logistics emissions (with the rest coming from rail, aviation, and ocean shipping) and that trucking will soon account for more than 2% of total CO2 and GHG emissions.

This does not bode well for the trucking industry which is already hard hit with an impending driver shortage of 240,000, a 100%+ annual turnover, and onerous regulations. With the growing desire of the Millennials (Generation Y) to only work for companies that are socially responsible, this is going to make it even harder to recruit young drivers (which is a must! How long do you think an industry with an average new graduate age of 54 can last without fresh blood?)

So what can it do? While hybrid is an option for smaller trucks, such as UPS and Fedex parcel delivery trucks, it’s not a great option for 18 wheelers (which have to roll on, and will have to continue to do so even after America rediscovers rail). The first thing the trucking industry needs to do is switchover to clean diesel (ULSD) vehicles as fast as possible. Not only is it 97% cleaner than regular diesel, but a well-designed diesel engine can be 40% more efficient than a gasoline engine.

The next thing it needs to do is switch to lightweight pallets and containers. For example, as illustrated in the Inbound Logistics article, a heavy-duty plastic container has only one third the weight of a steel container, and is just as effective. Lower shipment weight translates into a lower fuel requirement which translates into lower emissions.

The third, and most important, thing it needs to do is eliminate empty miles. An empty trailer can weigh as much as 7.5 tons / 15,000 lbs, which is almost 20% of the maximum allowed weight of 40 tons on most US highways. This says that if a truck has to return to its origin point empty, it’s using 120% of the fuel requirement. So how does it do this? First of all, it only works with buyers who recycle containers and pallets so that at least one trip out of every X is full just with reusable containers and pallets. Secondly, it balances its routes by way of the right mix of contract and spot-market deliveries. As hinted at in our recent post on which noted that you could expect to pay an average of 15% less on the spot market, an optimization-powered spot-market hub which analyzes a buyer’s need against all of the “empty miles” of all carriers in the area can help a carrier identify the right customers to insure that it’s trucks stay full.

And while trucking may not be able to keep pace with the passenger automobile, if it does these three things, it will be pretty close. Clean diesel has at most half the sulfur content of gasoline (which has to average 30 ppm from any single manufacturer, compared to 15 ppm for clean diesel), diesel engines will be (on average) one third more efficient, lighter weight packaging has the potential to reduce emissions by one sixth, and eliminating empty miles by 80%+ (which spot-market hubs have have the potential to do) will reduce GHGs by another one-sixth. Put this altogether and the GHG emissions from clean diesel engines, which are already twice as clean as gasoline engines, can be effectively reduced by about another five sixths, or 83%. In other words, a 40% GHG reduction is within reach, and close to the mandated 45% reduction from the federal vehicle standards which mandate a fuel economy increase of new passenger vehicles from approximately 30 mpg in 2011 to 54.5 mpg in 2025.

So, if it wants to, Trucking can clean up its act. The question is, will it?

* As per this historical post on SI, 15 of the world’s biggest cargo ships emit more pollution than the roughly 750 Million cars in operation around the globe. The world fleet in 2011 was 104,304 ships. Some are Post-Panamax and emit more pollution than 50 million cars, some are much smaller. Given the average size, the factor of 3,500 is a good approximation.

If You Really Want to Reduce Carbon (And Costs) in Your Logistics

The answer is really, really simple.

Don’t waste miles and
Don’t waste space.

Every mile you have to travel burns fuel, which burns cash and produces carbon. Thus, the best way to minimize your logistics cost is to reduce the amount of fuel, which is best done by reducing the number of miles you have to travel and maximizing the return from every mile. This is clarified by a recent article over on the Supply Chain @ MIT site on Delivering Green which presents three case studies in low-carbon logistics.

The article, which studied logistics operations at Ocean Spray, Caterpillar, and Boise found that each could reduce cost, and carbon, by optimizing their logistics network to reduce the number of miles travelled and optimizing the shipments to maximize the use of the space available in the truck, railcar, or shipping container.

For example, in the Ocean spray case study, when Ocean Spray partnered with the rail operator and fruit shipping companies to ship more product intermodally, they were able to reduce the n umber of empty boxcars that were returning empty to the Florida region, reduce transportation costs by 40%, and reduce emissions by 65%.

In the Caterpillar case study, when shipping and packaging efforts were combined and streamlined, which resulted in denser and more efficient shipments, Caterpillar, which imports parts from all over the globe for assembly at its Illinois manufacturing facility, was able to reduce its overall carbon emissions by over 340 tonnes of CO2 per year.

In the Boise Inc case study, Boise was only loading its railcars two pallets high and leaving a significant space between the second pallet and the roof. When it redesigned its pallet, it was able to fully utilize the capacity of the railcar. Doing so allowed the company to reduce its overall CO2 emissions by 190 tons.

Efficiency makes a big difference.