A green logistics strategy for a logistics service provider

TABLE OF CONTENTS

ACKNOWLEDGEMENTS

DECLARATION OF AUTHORSHIP

ABSTRACT

TABLE OF CONTENTS

LIST OF FIGURES

LIST OF TABLES

LIST OF FORMULAS

ABBREVIATIONS

1 CHAPTER: INTRODUCTION
1.1 Research aim and objectives
1.2 Scope of dissertation
1.3 Outline of dissertation

2 CHAPTER: LITERATURE REVIEW
2.1 Introduction
2.2 Supply chain management, logistics and freight transport
2.3 Externalities from freight transport
2.4 Corporate strategy alignment
2.5 Carbon management
2.5.1 Defining organisational boundaries
2.5.2 Defining operational boundaries
2.5.3 Carbon measuring and calculation approach and data collection
2.5.4 Choice of conversion factors and calculation of footprint
2.5.5 Carbon reduction measures
2.5.6 Evaluation of measures
2.6 Summary

3 CHAPTER: METHODOLOGY
3.1 Introduction
3.2 Statement of values
3.3 Research philosophy
3.4 Research type
3.5 Research approach
3.6 Research strategy
3.7 Data collection
3.8 Data analysis
3.9 Research quality
3.10 Summary

4 CHAPTER: CASE STUDY
4.1 Introduction and case study description
4.2 SMEs and the German road freight market
4.3 Outline of the company and its activities
4.4 Carbon footprinting
4.4.1 Definition of boundaries
4.4.2 Calculation approach
4.4.3 Conversion factors
4.4.4 Calculation and results
4.5 Carbon reduction measures
4.5.1 Improving vehicle utilisation
4.5.2 Optimising the routing of vehicles
4.5.3 Improving fuel efficiency
4.5.4 Alternative fuels
4.6 Evaluation of carbon reduction measures
4.7 Conclusion

5 CHAPTER: CONCLUSION and RECOMMENDATION
5.1 Conclusion
5.2 Recommendation to Gustav Strubbe GmbH and similar companies
5.3 Further research

REFERENCES

APPENDICES

Appendix 1: Carbon emissions factors in g CO2 / tkm for HGV with varying payloads and levels of empty running (McKinnon and Piecyk, 2010, p. 11)

Appendix 2: carbon emission reduction measures for road freight transport (McKinnon, 2011, no page)

Appendix 3: WTW, WTT and TTW emissions

Appendix 4: reduction of fuel consumption and increase in travel time for specific speed changes (own calculation for increase of travel time; values for reduction in fuel consumption were read off of chart by AEA Technology / Ricardo, 2011, p. 156)

Appendix 5: sample of gathered shipment data from Strubbe

Appendix 6: basic data from Strubbe including fuel consumption, fuel costs and mileage

Appendix 7: one day sample of engine idling data

ACKNOWLEDGEMENTS

First of all I would like to thank my tutor at Heriot Watt University , Kate Hughes, for her friendly assistance during the entire year.

Many thanks to my supervisor, Maja Piecyk, for introducing me to the topic of green logistics in her lectures as well as for her excellent advise and support during writing this dissertation.

I am very grateful to my family for their support during my studies and also for giving me the chance to work on this dissertation project in connection with their company. I would also like to thank James Wright for grammatical proof reading and providing helpful suggestions.

ABSTRACT

With climate change and global warming being indisputable the world, its people, economy and companies face severe consequences. These can be literally natural disasters, ambitious climate protection goals and tightened environmental legislation for companies. As freight transport is responsible for a significant proportion of man made CO2 emissions it needs to contribute heavily to accomplishing Kyoto Protocol CO2 reduction targets. Besides complying with legislation focusing on sustainable development of logistics can yield further advantages such as cost savings and enhanced reputation.

This dissertation is about developing a green logistics strategy for Strubbe as a logistics service provider mainly concerned with freight transport. In terms of freight transport considering green strategies means focusing on managing carbon emissions. As managing without measuring is not possible the first step was calculating Strubbe´s carbon footprint. The energy-based calculation approach revealed TTW emissions of 1,120.39 tonnes CO2e for 2012, equivalent to 0.057 kg CO2e per tkm. Even though this intensity figure is lower than default values it could still be reduced by applying carbon emission reduction measures. These measures needed to be applicable to a freight transport concerned small logistics service provider like Strubbe. The review of potential measures yielded five practically applicable options: use of biodiesel (36.27%), reduction of maximum speed to 80 km/h (2.33%), vertical collaboration (1.88%), aerodynamic profiling (1.7%) and reduction of engine idling (0.41%). Their resprective percentage carbon abatement potentials are displayed in brackets. Further analysis revealed following changes in operating cost, in other words abatement costs: use of biodiesel (+19.24%), reduction of maximum speed to 80 km/h (+3.33%), vertical collaboration (-1.88%), aerodynamic profiling (+0.05%), reduction of engine idling (-0.41%).

Due to the highly competitive freight transport market it is recommended that the affected companies strive for weak sustainable development of their operations. Any increase of operating cost should be avoided. Thus only carbon reduction measures which decrease operating cost should be applied. Strubbe should implement all of the reviewed measures except the use of biodiesel.

LIST OF FIGURES

Figure 1: Supply chain structure and the related areas of logistics and freight transport (based on Harrison and van Hoek, 2008 and Rushton et al., 2010)

Figure 2: Green logistics framework (Piecyk and McKinnon, 2010)

Figure 3: Carbon management process (based on BSI, 2011)

Figure 4: Relation of fuel consumption and HGV (40 to) speed (AEA Technology / Ricardo, 2011, p. 156)

Figure 5: Abatement cost curve for the transport sector in Germany (McKinsey & Company, 2007, p. 38)

Figure 6: Action research process extended with research steps undertaken in this dissertation (based on O´Brien, 2001; Coughlan and Coghlan, 2002; Rowley, 2003)...- 29 -

Figure 7: Data collection process with relation to data analysis (own illustration)

Figure 8: Calculation of Scope 1 TTW- and WTW-emissions (own calculation)..

Figure 9: Calculation of Scope 2 emissions (own calculation)

Figure 10: Abatement cost curve of Carbon Reduction Measures (own calculation and illustration)

Figure 11: Abatement cost curve of reduction of maximum speed (own calculation and illustration)

LIST OF TABLES

Table 1: GHG emission conversion factors for diesel, biodiesel, LPG and electricity from different sources (compiled from sources stated above)

Table 2: Estimated fuel savings, typical capital cost and additional weight for cab side fairings (compiled from sources stated above)

Table 3: Estimated fuel savings, typical capital cost and additional weight for tractor side panels/skirts (compiled from sources stated above)

Table 4: Estimated fuel savings, typical capital cost and additional weight for chassis/trailer side panels/skirts (compiled from sources stated above)

Table 5: Different characteristics of deductive and inductive research (Saunders et al., 2009, p. 127)

Table 6: Changes in fuel consumption, travel time and operating costs for maximum speed reduction to speeds between 85 and 80 km/h regarding analysed typical trips (compare Appendix 4) (own calculation)

LIST OF FORMULAS

Formula 1: Calculation of carbon emissions

Formula 2: Estimate fuel consumption

ABBREVIATIONS

illustration not visible in this excerpt

1 CHAPTER: INTRODUCTION

“Global warming must be seen as an economic and security threat [...]”

Kofi Annan in an interview with Reuters (MacInnis, 2009, no page)

Annan´s warning correlates with the increasingly apparent negative consequences of climate change and global warming for the earth. However, consequences such as natural disasters are only the visible tip of the iceberg. Annan also stressed that the scarcity of resources on the world, in combination with the temperature related changes can lead to political and economic conflicts.

Most scientists agree on climate change being already a fact, which is predominantly man-made (Helm, 2012) and mainly caused by carbon dioxide (CO2) as the major Greenhouse Gas (GHG) (UN IPCC, 2007).

The international community has attempted to tackle the climate change issue by agreeing on the GHG reduction objectives within the Kyoto Protocol including the target that the global temperature increase shall be limited to less than 2°C by 2100 (UNFCCC, 2013). However, there is doubt, if these ambitious targets can be reached (Harvey, 2011).

Consequences of climate change not only affect nations and the human kind in general, but also organisations and companies within the economy. This happens either directly through environmental issues or indirectly through environmental legislation. As direct consequences for many companies are not yet continuously apparent, inevitable compliance, gaining competitive advantage and cost cutting are the main motives for adopting green policies today. When it comes to companies expressing sustainable development intentions, the focus is often still on economic aspects (Hillary, 2000). However, the widespread notion of sustainable development encompasses the environmental, economic and social dimensions, the so called ´triple-bottom-line´ (McKinnon, 2012). Thus understanding sustainable development the right way means to ensure meeting the needs of the present generation without comprising the needs of future generations (Brundtland Commission, 1987).

Companies, however, usually trade off environmental benefits against economic benefits, when there is no binding contrary legislation, by searching for carbon reduction measures which save emissions and costs, the so called ´green-gold´ (McKinnon, 2012).

Searching for efficiency enhancing measures has long been part of good business management within the relatively uniform and nowadays highly competitive road freight market. Where historically economic sustainability was compelling, now environmental sustainable future development within this sector becomes more and more important. This becomes especially obvious when considering that 8% of worldwide energy-related CO2 emissions are freight transport related (UN IPCC, 2007) and road freight transport contributes a major proportion (Holmen and Niemeier, 2003).

Visualising the described situation makes it clear that all stakeholders of road freight transport will face severe challenges in order to accomplish the set objectives.

1.1 Research aim and objectives

Consequently, the key research question addressed in this dissertation is how to reduce the carbon footprint of transport operations of a small road haulage company. The primary research objective is to develop a customised, practically applicable, green logistics strategy for a small logistics service provider.

Achieving this primary objective involves pursuing the following steps:

1. Research objective: Calculate the carbon footprint of current activities.
2. Research objective: Identify potential carbon reduction measures.
3. Research objective: Determine specific carbon reduction estimates for the company´s operations.
4. Research objective: Evaluate the practical applicability of selected measures and estimate their environmental and economic consequences.

1.2 Scope of dissertation

Gustav Strubbe GmbH and its activities will be described in detail in Chapter 4. Out of the wide range of carbon reduction measures only those which are applicable for a small logistics service provider will be reviewed. It will then be stated which measures have already been applied by Strubbe. Thus, predominantly measures which have yet to be applied will be assessed.

Although the literal application and retrospect evaluation of reviewed measures to Strubbe´s operation cannot take place within this dissertation the ground for future action will be prepared.

1.3 Outline of dissertation

This dissertation consists of five chapters:

Chapter 1 is an introduction to the issue of climate change and its related consequences and challenges for a small logistics service provider. Furthermore it encompasses the derived research aim and objectives as well as the scope and outline of the dissertation.

Chapter 2 is concerned with reviewing academic literature in order to lay the theoretical foundation for this dissertation. The first part reveals the characteristics of relevant terms and deals with the strategic aspects of greening logistics operations. The second part explores carbon management starting with identifying and examining the relevant steps of the carbon footprinting process. Carbon reduction measures are subsequently outlined and discussed.

Chapter 3 approaches the research methodology. It provides the Researcher´s statement of values and exposes the used research methodology choices including data collection and analysis.

Chapter 4 is the case study where the reviewed literature is applied to Strubbe and its activities.

Chapter 5 concludes the dissertation. Specific recommendations are derived for small logistics service providers in general and for Strubbe in particular. These recommendations are based on the results arising out of the case study in Chapter 4 and the reviewed literature contents from Chapter 2.

2 CHAPTER: LITERATURE REVIEW

2.1 Introduction

Strubbe wants to enhance the environmental and economic sustainability of its operations. Improving environmental sustainability concerns reduction of carbon emissions, whereas improving economic sustainability mostly also means saving cost respectively enhancing the company´s competitive position. While many initiatives such as reduced fuel consumption affect both areas, other aspects, for instance, environmental certification predominantly affects economic sustainability as companies usually try to take a competitive advantage of such activities.

In order to take both sustainability areas into account carbon reduction measures and state-of-the-art carbon footprinting procedures will be reviewed. This will be carried out in the context of the transport operations of a small logistics service provider. Before doing so there is the need for clarifications about topic related terms as well as appropriate corporate strategy alignment to the more sustainable orientation. Subsequently, carbon management will be reviewed starting with discussing the carbon footprinting process of a specific transport service operation. Finally, a number of potential carbon reduction measures will be discussed. This includes providing the respective carbon saving measures.

2.2 Supply chain management, logistics and freight transport

The most relevant terms associated with greening logistics operations shall be defined within this section.

The Council of Supply Chain Management Professionals (CSCMP) (2013) defines Supply chain management (SCM) as:

“[...] the planning and management of all activities involved in sourcing and procurement, conversion, and all logistics management activities. Importantly, it also includes coordination and collaboration with channel partners, which can be suppliers, intermediaries, third party service providers, and customers. In essence, supply chain management integrates supply and demand management within and across companies” (no page).

Embracing the “unionist”¹ notion of Larson and Halldorsson (2004) logistics is considered as a part of SCM. Thus, Christopher (2011) defines logistics as:

“[...] the process of strategically managing the procurement, movement and storage of materials, parts and finished inventory (and the related information flows) through the organisation and its marketing channels in such a way that current and future profitability are maximised through the cost-effective fulfilment of orders” (p. 2).

The area of logistics which is concerned with the physical movement of goods from supply sources to manufacturing sites and distribution of goods to end customers is called freight transport (Stank and Goldsby, 2000).

Figure 1 provides a schematic overview of the relationship between SCM, logistics and freight transport.

illustration not visible in this excerpt

Figure 1: Supply chain structure and the related areas of logistics and freight transport (based on Harrison and van Hoek, 2008 and Rushton et al., 2010)

Considering these definitions helps with assessing opportunities and limitations of carbon reduction for organisations which carry out a specific function within the supply chain.

2.3 Externalities from freight transport

External impacts of logistics include atmospheric pollution, noise pollution, vibration, congestion, accidents and visual intrusion (Piecyk et al., 2012). While some impacts, for instance, visual intrusion from lorries and infrastructure are highly subjective, the impact of atmospheric pollution is indisputable. In relation to atmospheric pollution especially emissions of GHG play a central role and contribute significantly to global climate change (UN IPCC, 2007). The Kyoto Protocol (United Nations, 1998) comprises six different GHG categories (CO2, MH4, NOx, HFC, PFC, SF6). There is a global warming potential (GWP) assigned to each GHG. This makes it possible to convert emissions of any GHG into the unit of CO2 which is quantitatively the most frequent GHG and report them as carbon dioxide equivalents (CO2e) (UN IPCC, 2007; Piecyk et al., 2012). Even though carbon dioxide is the main GHG emitted by road freight transport there is also the issue of fine particles and nitrous gases emitted predominantly by diesel engines (Holmen and Niemeier, 2003). However, severe legislation tightening emission standards for diesel engines have brought emissions of these matters, which are hazardous to health, down to a relative low level (Piecyk et al., 2012). As there is hardly any direct influence of a logistics service provider on these emissions this dissertation will focus solely on assessment of CO2 emissions.

2.4 Corporate strategy alignment

Considering the looming global environmental issues and their impact on businesses, a company´s reaction in terms of strategic alignment is rational.

However, companies have mostly only been reactive and sporadic about environmental issues in the past (McKinnnon, 2012). A survey by Insight (2008) found compliance with regulation, enhanced brand image, innovation and cost cutting as main drivers for companies boosting environmental related activities. Such companies often adopt environmental management systems (EMS) such as EMAS and ISO 14001 (Hillary, 2004).

Principally all environmental initiatives should be aligned with the overall corporate strategy (Percy, 2000) as well as the logistics strategy (Fabbes-Costes and Colin, 2007). The corporate strategy defines the overall business objectives and characterises all subordinate strategies such as the competitive strategy, the logistics strategy and each functional strategic plan. The competitive strategy determines how a company acts in the market. In terms of logistics a company can essentially choose between either a service or cost leadership strategy, i.e., either it concentrates on highest service quality or on lowest cost. The logistics strategy leads to the development and design of various functional plans relating to network design, process design and information systems. These plans are then used for running a company´s supply chain effectively and efficiently while concentrating on customer satisfaction (Waters, 2007; Rushton et al., 2010).

illustration not visible in this excerpt

Figure 2: Green logistics framework (Piecyk and McKinnon, 2010)

As Figure 1 highlights, freight transport companies are the connection between the different functions across the supply chain (Christopher, 2011). They are inevitably connected with the logistics strategy of their customer and its supply chain (McKinnon, 2011). Thus, the logistics strategy of a logistics service provider must unconditionally be aligned with the customer´s logistical strategy. Piecyk and McKinnon (2010) suggest a green logistics framework (Figure 2), which aims at practically improving freight transport´s sustainability. This framework takes a very holistic approach. It contains parameters like the modal split, which are not within the control of an individual company, and parameters like energy efficiency, which is largely controllable by an individual company. Therefore, the further literature review will predominantly investigate parameters which can be influenced by an individual logistics service provider.

2.5 Carbon management

Managing carbon emissions requires a sound understanding of CO2 sources. Subsequently allocating these CO2 emissions to the corresponding business areas is called carbon footprinting. This activity can either be carried out for an individual entity such as companies and products or whole supply chains (Carbon Trust, 2012; Piecyk, 2012).

There are several publications available providing guidance on this issue: PAS 2050 (BSI, 2011), The Greenhouse Gas Protocol (WBCSD/WRI, 2004), ISO 14064:1 (ISO 14064:1, 2006), Carbon footprinting (Carbon Trust, 2007; Carbon Trust, 2012), Defra Guidelines (Defra, 2011; Defra, 2013) as well as industry specific guidance such as a report by McKinnon and Piecyk (2010) for Cefic and the guidelines published by the Association of German Freight Forwarders and Logistics Operators (DSLV, 2011). This list raises no claim to completeness. However it comprises the most relevant guidelines. Although they vary in detail, they share a huge common ground, including recommending the application of the following principles: relevance, completeness, consistency, comparability, measurability, accuracy and transparency.

One recently published source of precise guidance on measurement of carbon emissions for transport services is European Standard CEN EN 16258 (CEN, 2012). As this standard will likely be the basis for future European legislation it might be sensible to strongly orient oneself to this guideline for carbon footprinting one´s operations (Verkehrsrundschau, 2012).

The carbon management process is summarised in Figure 3. Scoping the project starts with defining boundaries. In order to achieve consistency as well as , comparability ISO 14064:1 requires defining organisational and operational boundaries (ISO 14064:1, 2006). Whereas McKinnon (2011) describes a “multidimensional boundary, with four dimensions” consisting of organisational, activity, system and geographic boundaries, the emphasis shall be on the former two categories. Nevertheless content from these further boundary concepts will be regarded.

illustration not visible in this excerpt

Figure 3: Carbon management process (based on BSI, 2011)

2.5.1 Defining organisational boundaries

Within an organisation either the control or the equity share approach can be applied. Once the approach is decided, applying it for all organisational levels and also between linked organisations will ensure consistency. Observing carbon emissions is only sensible where the organisation exercises control (WBCSD/WRI, 2004; ISO 14064:1, 2006).

Equity share approach:

When a company only represents a portion of the economic interest in an entity, the equity share approach shall be applied. Consequently the company then is only responsible for the corresponding emissions and should only account this portion of the emissions (WBCSD/WRI, 2004).

Control approach:

The control approach is applicable when the company exerts full operational and financial control over the activities. The company is not responsible for managing emissions from activities in which it has an interest but no power over (WBCSD/WRI, 2004; Defra, 2011).

- Financial Control, aiming on economic benefit, is exerted by the company over the entity. The company also bears the risks and gains the rewards of the entity´s activities (WBCSD/WRI, 2004).
- Operational control is present when the company or a subsidiary of it has the entire power over operational policies. It is assumed that the operator of a facility bears this described power (WBCSD/WRI, 2004).

Noticeable about the organisational boundaries is, that “if the reporting company wholly owns all its operations, its organisational boundary will be the same whichever approach is used” (WBCSD/WRI 2004, p. 17).

2.5.2 Defining operational boundaries

Defining operational boundaries is mainly about classifying direct and indirect emissions within the arranged organisational boundaries (WBCSD/WRI, 2004). Within the field of logistics systems, emissions of “core activities of transport, warehousing and materials handling should be included” (McKinnon, 2011, no page).

Furthermore, in this area the concept of “scope” is widely accepted across science:

- Scope 1 encompasses direct emissions from owned and controlled facilities, which therefore are directly allocable to the company. Reporting of non Kyoto Protocol GHG is not envisaged at this point (WBCSD/WRI, 2004; ISO 14064:1, 2006).
- Scope 2 encompasses indirect emissions, which arise from the use of purchased electricity, from within the company´s organisational boundaries (WBCSD/WRI, 2007).
- Scope 3 encompasses all other indirect emissions, which are result of the company´s activities, but they are not owned or controlled by the company. These emissions can occur inside and outside the organisational boundaries (WBCSD/WRI, 2004).

The Greenhouse Gas Protocol (WBCSD/WRI, 2004) requires including Scope 1 - 3 into carbon footprinting as well as accounting for these scopes separately. CEN EN 16258 (CEN, 2012) requires inclusion of activities, which can be subsumed under Scope 1 and 2. The standard specifies the processes which should be included or excluded for application to transport services in detail. For instance, the energy consumption related emissions of extraction, transport and consumption of fuels and electricity shall be considered. On the contrary, direct GHG emissions from, for instance, maintenance and leakages of vehicles are to be excluded from the carbon footprinting process.

Further research on operational boundaries has been done by a Swedish environmental organisation, called NTM, cited in McKinnon and Piecyk (2010), used the term “system boundary” (p. 8). Five levels, SB1 - SB5, were developed to structure transport operations. SB1 encompasses direct emissions from transport operations such as fuel combustion by vehicles; SB2 represents emissions from the energy supply, often called “well-to-tank”. SB3 to SB5 correspond to Scope 3 emissions.

2.5.3 Carbon measuring and calculation approach and data collection

Fundamentally carbon emission assessment can be carried out with a “bottom-up” approach on the micro / single company level or with a “top-down” approach on the macro level (Nisbet and Weiss, 2010; Piecyk, 2012).

At the company level, first of all a detailed data collection plan should be prepared. Whether a company has access to the relevant energy consumption data or not is the crucial question about measuring carbon emissions (Carbon Trust, 2012). Depending on the respective availability of data the appropriate approach should be selected. The “top-down” approach is often used where no explicit activity data is available. Emissions are calculated from aggregated data like fuel accounts from company´s annual report using conversion factors as secondary data.

When specific primary data is available the “bottom-up” approach is feasible and favourable within the context of carbon management as it includes in-depth “Process Analysis” (Wiedmann and Minx, 2008, p. 5). This deep understanding of the carbon generating processes and activities enables executives to manage carbon emissions more efficiently compared to using the “top-down” approach. However, this approach provides dependable and comprehensive emission figures for a company (Piecyk, 2012). When it comes to complex business processes it can be difficult to build up these comprehensive emission figures with the “bottom-up” approach. Nevertheless, both approaches should be balanced against each other to ensure the highest possible accuracy and consistency (Piecyk, 2012).

Quantifying carbon emissions from road transport:

In order to estimate CO2 emissions in this area McKinnon (2007) described an “input- based” and an “output-based” (McKinnon 2007, p.5) approach. The “input-based” approach calculates carbon emissions on the basis of fuel purchased. The “output- based” approach uses output figures such as tkm or vehicle-km. WBCSD / WRI (2005) developed similar approaches called “fuel based” and “distance-based” (p. 5). Piecyk (2012, p. 63) named the approaches “fuel based” and more generally “activity- based”. McKinnon (2011) used the terms “Energy-based” and “Activity-based” (p. 3). All of the latter approaches share the need for activity data such as vehicle km, tkm, fuel consumption, load, load factor, vehicle capacity, empty distance and vehicle type information (NTM, 2008; Piecyk, 2012; CEN EN 16258, 2012). This information must be obtained from company sources (McKinnon, 2011). The “input- or fuel- based” approach relies on fuel purchasing account data.

NTM (2008) suggests a multistage process to estimate GHG emissions from road transport:

1. Pick applicable vehicle type;
2. Determine appropriate fuel type and the fuel consumption according to the vehicle type. Available secondary data / default values on fuel consumption per vehicle type can be used to calculate carbon emissions as these increase linear to fuel consumption. However, NTM (2008) recommends the user to strive for specific primary data on fuel consumption for the respective use case;
3. Calculate vehicle energy use and corresponding carbon emissions.

Although it is recommendable to use accurate primary data, secondary data from official sources is perfectly appropriate as well (DSLV, 2011; Piecyk, 2012). Secondary data can also be used as test values for verification purposes. Primary data for the fuel-based or energy-based approach is readily available and recommendable for logistics service and freight transport providers (McKinnon, 2011). This approach will reveal more accurate results than the “distance-based” approach (CEN, 2012).

2.5.4 Choice of conversion factors and calculation of footprint

There are several sources addressing the calculation of carbon emissions from road transport, amongst others: NTM (2008), CEN EN 16258 (CEN, 2012); WBCSD/WRI (2005), BSI (2011), DfT (2010a), DSLV (2011) and Defra (2011). Most of these sources agree on the basic way to calculate carbon emissions shown in Formula 1.

illustration not visible in this excerpt

Formula 1: Calculation of carbon emissions

Activity data can be used in several different units such as kg, litres, km, tkm, kWh. Also the emission factor can be expressed in kg CO2e either per kg or litre or kWh or km or tkm (BSI, 2011). However, CEN EN 16258 (CEN, 2012, p. 11) requires to express GHG emissions “in gram (g) of carbon dioxide equivalent (CO2e) or multiple thereof such as kilogram (kg) or tonne (t) of CO2e.

According to ISO 14064:1 (2006) this calculation should match the calculation approach and boundaries.

The principle of converting all other greenhouse gases apart from carbon dioxide into the unit CO2e by using the GWPs (ISO 14064-2, 2006; Carbon Trust, 2007) has been introduced earlier within this chapter.

In cases where no fuel consumption data is available WBCSD/WRI (2005) recommends an alternative approach to estimate the fuel consumption, shown in Formula 2.

illustration not visible in this excerpt

Formula 2: Estimate fuel consumption

There are two major sources for appropriate conversion factors: Defra (2012) and CEN EN 16258 (CEN, 2012). Most reports, guidelines and publications such as Defra (2011), Piecyk (2012) and DSLV (2011) refer to these standards. While Defra (2012) is a popular basis for calculations, CEN EN 16258 (2012) is a rather new European standard aiming at standardising the process of quantifying carbon emissions from road transport across Europe. The German guideline published by the Association of German Freight Forwarders and Logistics Operators (DSLV, 2011) likewise refers to CEN EN 16258. Defra (2012) provides a conversion factor for direct emissions from diesel (Table 1). CEN EN 16258 (CEN, 2012) requires calculation of direct emissions, called “tank-to-wheels”, as well as vehicle and energy creation emissions, called “well-to-wheels” (p. 11) and provides the corresponding conversion factors (Table 1). This separation between direct and indirect emissions reflects the operational boundaries which need to be set in advance of the calculation process.

Other reports provide more sector specific distance-based conversion factors. NTM (2008) calculated a conversion factor per tkm for HGVs in Sweden. NTM used data from the EU FP5-project ARTEMIS (ARTEMIS, 2013). McKinnon and Piecyk (2010) established a conversion factor specifically for road transport in the European chemical sector. Furthermore, the variation of this factor depending on the empty running and payload of the vehicles was investigated (Appendix 1).

These distance-related conversion factors could serve as default values for outputbased calculation approaches.

There are possibilities to carry out verification calculation of carbon emissions, for instance, at EcoTransIT (EcoTransIT, 2013).

After completing the carbon footprinting process the results should be reviewed and verified to ensure consistency, completeness and accuracy. If disclosure of results is intended, it is recommendable to involve external expertise (Piecyk, 2012). Where environmental certification is sought, the company needs to demonstrate compliance to ISO 14064-3 (2006) requirement via external audit.

In the context of reporting the calculated emissions Defra (2011) suggests to extend reporting of carbon emissions by adding intensity figures to basic absolute figures. Intensity figures state the carbon emissions, for instance, per pallet or tonne transported. Naturally it is the absolute figure that needs to be managed. However intensity figures will much more likely be appropriate for benchmarking results as well as identifying starting points for potential reduction of carbon emissions.

illustration not visible in this excerpt

Table 1: GHG emission conversion factors for diesel, biodiesel, LPG and electricity from different sources (compiled from sources stated above)

2.5.5 Carbon reduction measures

Generally before considering carbon reduction, targets should be set (WBCSD/WRI, 2004). Reduction targets can be set as absolute or relative figures, i.e. intensity targets (McKinnon, 2011). Intensity figures should preferably be generated with identical units as this ensures best consistency.

Concerning the formulation of reduction targets on the single company level McKinnon (2011) argues that a company can “either develop its own specific target or align its target with that recommended by an industry or trade body, [...]” (no page) as there are no industry sector specific carbon reduction targets established by any government. The existing general Kyoto Protocol reduction targets would not necessarily be applicable to any particular sector. However, in the UK the FTA in cooperation with the Heriot-Watt University developed a recommendation target of 8% for freight transport operations for the period 2010 until 2015 (McKinnon, 2011). Whether precise or crude reduction targets have been set, ascertained starting points for carbon reduction must be identified. Several reports and publications have been conducted in this field. Almost all carbon footprinting guidelines, such as BSI (2011), DSLV (2011) and Defra (2011) also provides indications regarding the mitigation of carbon footprints. These sources suggest improvements in terms of vehicle efficiency, fuel efficiency and driving behaviour. The World Economic Forum (2009) conducted a study aiming at identifying possibilities of carbon reduction within supply chains. Although recommendations are provided for all participants in the supply chain, the World Economic Forum provided particular recommendations for logistics and transport providers including the application of new technologies, enhanced driver training and, where possible, switch of transport mode.

While investigating carbon reduction possibilities McKinnon and Piecyk developed a green logistics framework (Figure 2), which has been published across various papers (McKinnon, 2007; McKinnon and Piecyk, 2009; Piecyk and McKinnon, 2010; McKinnon, 2012). In this framework they identify seven key parameters which determine the carbon emissions of freight transport operations. McKinnon (2011) provides a comprehensive list of carbon reduction measures (Appendix 2) grouped into eight areas, which are aligned to the parameters of the forementioned framework. This list encompasses a wide range of specific and general measures, not all of which are applicable to a road haulage company. Such a logistics service provider will have little or no influence on decisions about the supply chain structure and network design in terms of choice of suppliers, shifting of production plants etc. Furthermore, it is not in the interest of a contractor operating in the road freight market to alter the customer’s choice of mode of transport towards possibly more environmentally friendly modes.

Thus, only measures applicable in this context will be review in further detail below.

Improving vehicle utilisation:

The amount of freight transport activity, particularly vehicle kms, needed for a certain amount of goods can be reduced by improving vehicle utilisation (McKinnon, 2000). As the standard vehicle utilisation measure of “tkm per vehicle per annum” (McKinnon and Edwards, 2012, p. 206) is a productivity figure, it is not suitable as a measure of the actual level of capacity utilisation. Therefore either weight- or volume- related loading factors should be used because depending on their density goods either ´weigh-out´ or ´cube-out´ (McKinnon and Edwards, 2012). A crucial aspect of this measure is the understanding that vehicle utilisation depends on two separate factors: vehicle loading factors and empty running (McKinnon, 2007). As a high loading factor is rather a minor issue in bulk road freight, special emphasis should be placed on empty running. This factor is especially important because incompatibility of vehicles and equipment as well as transport sector specific requirements strongly boosts empty running within bulk freight transport operations (McKinnon and Edwards, 2012).

Empty running is the proportion of km without load to total vehicle km. According to Eurostat (2007) the average overall empty running in Germany was 22% of total lorry km in 2005. For ´hire and reward´ operations this proportion is down to 19%. McKinnon (2007) identifies “five sets of constraints: regulatory, market-related, inter- functional, infrastructural and equipment-related” (p. 33) affecting vehicle utilisation. In order to improve utilisation McKinnon (2007) suggests several measures including use of longer and heavier vehicles, improved packaging and handling equipment and inter-company collaboration. Because of its broad scope collaboration appears particularly promising. In addition to inter-company collaboration, collaboration between different business functions within a company should be oriented to developing the highest possible economic and environmental efficiency (McKinnon, 2007). Inter-company collaboration can either be horizontal or vertical. Horizontal collaboration means the collaboration of competitors, whereas vertical means that companies from different value-added steps collaborate (Christopher, 2011). Such collaboration has been tested by Nestlé and United Biscuit in the UK. Through sharing vehicle capacity commuting between their production sites and distribution facilities the two competitors were able to save 280 000km lorry-kms and 250 tonnes of CO2 in 2008 (IGD, 2013). Vertical collaboration was promoted, for instance, by the British supermarket chain Tesco establishing a ´supplier collection´ and ´onwards delivery´ scheme. This means for ´supplier collection´ that delivery vehicles would pick up goods from suppliers and for ´onwards delivery´ that supplier vehicles unloading at Tesco would pick up again goods to delivery to Tesco stores instead of going back empty to the point of origin (McKinnon, 2000). Besides these approaches empty running can be reduced, for instance, by the use of freight exchange platforms, relaxing of schedules and improvements in the reliability of operations (McKinnon, 2011). Few sources specify expectable saving measures from applying abovementioned measures. McKinnon and Ge (2006) retrospectively screened 20 000 trips within the UK food supply chain for back loading opportunities. They determined 100 km as the threshold distance and looked at every longer empty journey leg. Eventually, suitable backloads were found for 2.4% of these legs. This proportion accounts for 2% of total empty vehicle kms. As main constraints for further back loading opportunities the relatively short length of the empty journey legs, tight scheduling and vehicle compatibility were identified.

Furthermore, a study focused on European chemical transport was conducted by McKinnon and Piecyk (2010). They also exposed the relationships between varying load factors, varying empty running and carbon emissions of road freight transport in this specific sector (Appendix 1).

Optimising the routing of vehicles:

The challenge is to find the most efficient route for the vehicle towards and between the different points of loading and unloading on delivery as well as collection rounds.

[...]