Introduction
Across the OEM motor vehicle aftersales space, transportation is a significant spend – approximately 7-8%(1) of sales. Further, the transportation sector has now surpassed the power sector as the largest emitter of greenhouse gases (GHGs) in the United States, responsible for over 29%(2) of total emissions within the U.S., and 24%(3) globally. This trend largely is driven by the growth of e-commerce, international and domestic shipping, and other activities related to globalization.
Many of the OEMs participating in Carlisle’s North American Parts Benchmark have released corporate statements committing themselves to reducing their climate impact, yet many organizations are early in the development of plans to address the greenhouse gas emissions associated with their transportation footprint. Fortunately, meaningful pathways to reduce transportation emissions are taking hold.
Where to Begin?
We’ve laid out our perspectives on how to pluck lower hanging fruit and to either start or accelerate the journey towards decarbonizing transportation-related emissions.
#1 Calculating an Organization’s Greenhouse Gas Emissions Profile
Calculating an organization’s greenhouse gas emissions profile or “carbon footprint” circumscribes an organization’s emissions and creates a heat map for understanding where and in what size emissions are occurring. It is like tracking a person’s caloric intake over time for the purpose of designing a diet that gets results while minimizing disruption to their lifestyle. Ice cream every night or just on weekends?
#2 Decarbonizing the Warehouse
Decarbonizing the warehouse can be a fertile ground for quick wins. Tried and true onsite energy minimization efforts — such as LED lighting, onsite solar installation, high efficiency space heating and cooling, or being paid to reduce energy use during periods of peak grid congestion — can offer attractive financial return profiles while providing greenhouse gas reduction benefits. When paired with backup battery storage systems, these efforts can also increase the energy resiliency of warehouse operations.
More recently, an increasing number of companies are deploying Material Handling Equipment (MHE) powered by lower carbon fuels, such as electric or hydrogen powered forklifts, and other non-road cargo equipment. Leveraging various sources of public funding for these vehicles, such as the Low Carbon Fuels Standards incentive regimes in California, Oregon, and a growing list of other states, can deliver attractive additional revenue streams. These funds can further enhance total cost of ownership economics and help support more rapid electric vehicle deployment that lowers the GHG emissions of owned or leased mobile sources.
#3 Transitioning to Low Carbon Shipping Fuels
The global transportation sector has begun integrating low carbon shipping fuels at an accelerated rate, in large part focused on last mile delivery and supported by decision tools that identify economically attractive alternatives to internal combustion engine (ICE) transport. Natural vehicle replacement cycles — both within and outside the warehouse — present good opportunities for organizations to begin to pilot electric, hydrogen, CNG, and other lower carbon fueled vehicles, again, especially for California and Oregon operations.
#4 Targeting the Remaining Unavoidable Greenhouse Gas Emissions
Many companies mitigate the impact of the remaining unavoidable greenhouse gas emissions through the purchase of high-caliber verified carbon emissions reductions, otherwise known as carbon credits or carbon offsets, as a stepping-stone to complement, rather than replace, existing decarbonization strategies throughout their own operations.
#5 Reducing the Need to Move Materials and People
Having said this, the best way to reduce greenhouse gas emissions in transportation is by reducing the need to move materials and people. A comprehensive review of your supply chain – including buildings, material flow, transportation modes, inventory deployment strategies, referral patterns, etc. will allow you to understand not only the cost/service trade-offs, but the environmental tradeoffs as well. For example, increasing forward-deployed safety stock may increase inventory costs, but may also reduce parcel/air referrals. Ideally, this should be a positive financial trade-off. But if not, is your organization willing to pay for reduced carbon emissions?
Takeaways
Combined with policy advocacy, vendor negotiation, and peer collaboration, the above strategies can represent a comprehensive approach to reduce the largest source of emissions globally.
Carlisle and its decarbonization partner, 3Degrees, have helped clients ranging from Rivian to Proterra understand and address the impact of their transportation-related emissions with a range of solutions customized to meet their unique business needs and sustainability goals.
(1) Carlisle & Company North American Benchmark, (2) Bloomberg Sustainable Energy in America Factbook, (3) IEA Tracking Transport Report
Authors
Harry Hollenberg
Managing Director of Carlisle & Company
Carlisle & Company is the leader in aftersales strategy and insights, partnering with a range of highly engineered clients to solve their most complex business problems, drive growth, and create value.
Dan Kalafatas
Chairman of 3Degrees and former Carlisle & Company Manager
3Degrees, a certified B corporation, helps Fortune 500 companies, utilities, and other organizations around the world achieve renewable energy and decarbonization goals.
