Handbook on Applying Environmental Benchmarking in Freight Transportation (2012)

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55 7.1 Customer Demands One of the primary reasons to implement an environmental benchmarking program is to meet the needs of customers. Increasingly, customers are requesting data on the environmental per- formance of freight transportation. Many shippers and receivers are interested in understanding the environmental footprint of their supply chain. A benchmark- ing program can generate the data needed to allow companies to understand their own environmental footprint and share this information with customers. For instance, Wal-Mart is collecting data and measuring the environmental performance of its suppliers and contract carriers. Wal-Mart collects data from carriers and suppliers on energy use and greenhouse gas emissions, and encourages carriers to join SmartWay to set goals and improve performance. Wal-Mart uses a supplier sustainability questionnaire to request data on the car- bon footprint of their suppliers and their goals for improvement. DHL has implemented a “green carrier scorecard” to rate the airlines to which it subcontracts to transport the goods of DHL customers. This scorecard allows DHL to use environmental performance as one of the criteria for selecting carriers. Fleet- level measures of carbon efficiency are a key component of this. Another example of a company providing information to cus- tomers is Stonyfield Farms. The text box describes how they can provide data on the environmental performance of product transportation. Based on this data, they work with customers to reduce CO2 emissions associated with transportation. Under- standing the types of information that customers may need and designing a benchmarking program that collects this data is of the utmost importance. 7.2 Cost and Level of Commitment The cost of conducting environmental benchmarking is often considered a major barrier. Benchmarking studies can be imple- mented at different levels of sophistication, depending on the resources available. For instance, a detailed benchmarking study C h a p t e r 7 Benchmarking Implementation Issues Stonyfield Farms Customer Benchmarking Stonyfield Farms is a New Hampshire-based manufacturer of organic yogurt products. The company has always had a strong com- mitment to social responsibility; for example, in 1997 it became the first U.S. manufactur- ing operation to offset 100% of the CO2 emissions from its facility energy use. It also participates in EPA’s SmartWay Transport Partnership and won a SmartWay Excellence Award in 2009. In 2006, Stonyfield began working with Ryder System, Inc., to reduce the CO2 emissions from its supply chain, including transporta- tion and logistics. Integral to this initiative was a new information system that allows Stonyfield to calculate CO2 emissions in mul- tiple ways, including per case of product and per customer. In response to customer requests, the company can benchmark cus- tomers based on CO2 emissions associated with product deliveries. Based on this data, they can work with customers to reduce CO2 emissions by changing the frequency of deliveries or implementing other strategies. When managing its transportation opera- tions, the company uses CO2 emissions per ton of product delivered as a metric.

56 handbook on applying environmental Benchmarking in Freight transportation Con-way: Obtaining Comparative Benchmarking Data on Truck Fuel Efficiency Con-way has detailed data on its own internal fuel economy performance by tractor, engine, transmission, and trailer type. This data includes information from the truck computer on driver behavior (shifting and acceleration), the gross weight of the truck, and the origin and destination for each shipment. While the company cannot obtain data on a competitor’s fuel economy in anything like the detail it has for its own performance, the company is able to gather enough information to make useful comparisons about fuel efficiency in the rest of the industry. Managers at Con-way obtain information on competitors’ performance through a variety of informal contacts. Important sources are salesmen for original equipment manufacturers (OEMs) and discussions through industry groups such as the Technology and Maintenance Council (TMC) of the American Trucking Associations. OEM sales representatives usually have a good idea of the fuel consumption their customers are achieving with the tractors, engines, or transmissions that they sell. The fuel efficiency of their customers’ fleets is usually part of the dialogue between the sales representatives and potential buyers. The sales representatives need to know what they can offer buyers by way of improvement, and potential buyers are willing to share some information on the point, because they want to test what is being offered. “We’re averaging 6.05 MPG now, what can your [tractor, engine, transmission] do for us?” A similar conversation takes place between Con-way’s marketing people and private carriers. As do other sig- nificant truckload firms, Con-way Truckload offers dedicated contract service to large shippers that have private fleets. Dedicated contract service is essentially outsourced private carriage. Under a contract, a truckload carrier places a specified number of trucks and drivers at the complete disposal of a shipper, which uses them just as it would a private fleet—delivering goods to their customers or moving goods from their factories to their ware- houses. Con-way marketers want to show the private carriers the economies they can realize by augmenting their own fleets with dedicated service from Con-way or dropping their own fleets altogether. The private carri- ers want to show Con-way what it has to do to get their business. Off-the-record exchanges and discussions at meetings of groups like TMC are also helpful. Maintenance vice presidents or their staff attend these meetings, and there is usually considerable discussion of specifics of fuel efficiency. Useful public information is also available through EPA’s SmartWay Transport Partnership program, for example, and from other sources. with a number of other market leaders, site visits, and extensive data collection and analysis could involve substantial costs for a company. If resources are not available for a major in-depth study, desk benchmarking can be used to collect publicly available information. The scale of resources expended on a benchmarking study can be balanced against the scale of the organization and the likely cost savings. Reducing fuel consumption is an important way that environmental benchmarking can contribute to the bottom line, and benchmarking studies can often be justified based on the large potential benefits that accrue from implementing best practices that save on fuel costs. Less rigorous and time-consuming methods to collect data can be used in cases where the size of the opportunity is not as great. 7.3 Obtaining Comparative Data Obtaining comparative data is often identified as a major challenge for benchmarking studies. In many cases, detailed data on equipment populations, efficiency, and operations is considered proprietary by companies. There are numerous approaches to overcoming this barrier. In some

Benchmarking Implementation Issues 57 cases, it is possible to find individual companies that are not direct competitors but that have comparable operating features. For instance, in the trucking industry, private fleets owned by major shippers may be more willing to share data on their transportation operations, since they do not compete directly with for-hire truck carriers. In many cases, companies that are in differ- ent industries may serve as a source of new ideas and best practices. Industry associations can also provide opportunities to learn about the latest technologies and network with technical staff from other companies. Even if these relationships do not yield detailed data on the performance of equipment or operations at other companies, these infor- mal contacts can provide some guidance on what the benefits of new technologies may be and what types of performance may be achievable. Industry associations often conduct surveys or have other data in-house on industry operations. Many of these resources are highlighted in Chapter 6. Manufacturers of transportation vehicles, engines, and equipment are another source of com- parative data on fuel efficiency performance or other aspects of environmental performance. They often have an understanding of both the performance that the equipment is rated to achieve, as well as the performance that major customers have been achieving in the field. While data obtained from equipment sales representatives would require ground truthing, it can be an important supplementary source of valuable comparative data. Benchmarking programs provide an additional source of data. Some of these programs are sup- ported by public funding. Programs such as the SmartWay Transport Partnership collect data from individual partners on the environmental performance of transport operations and publish aggre- gated data on the performance of individual carrier industry segments. This data protects the con- fidentially of members while providing comparative performance data. Programs such as the Carbon Disclosure Project or the Clean Cargo Working Group release detailed data on member perfor- mance to the public. This can serve as a resource for both mem- bers and non-members alike. Private benchmarking services such as the Supply Chain Consortium make it their business to col- lect detailed data on participating members’ operations and to disclose aggregated industry performance data for purposes of comparison. While much of this data relates to business opera- tions, improving the efficiency of supply chain performance, such as improving vehicle utilization, has environmental benefits. This data can be useful for environmental benchmarking. A “desk benchmarking” process can be used for a less complex and rigorous benchmarking exercise. Publicly available data from industry trade publications, company websites, or sustainability reports can be used to compare performance. Benchmarking exer- cises can draw from a wide range of sources to obtain a more complete picture of the range of environmental performance achievable in different market contexts. SmartWay Transport Partnership: Source of Comparative Data for Benchmarking SmartWay is a major program for improving fuel efficiency and reducing greenhouse gases and air pollution from the freight sector. The program has over 2,900 participants, including most of the largest truck carriers, all Class 1 railroads, and many logistics companies. The program assesses emissions (CO2, NOx, PM) of carrier fleets and benchmarks them against peers. The primary metrics are grams of emis- sions per mile and grams per ton-mile. Truck fleets are ranked in 1 of 5 performance “bins” for CO2, NOx, and PM. These rankings can be used as a source of comparative data.