As a global transportation and logistics company, UPS is all too familiar with the myriad of challenges greenhouse gas (GHG) emissions pose to both the environment and the global economy. To reduce impacts and remain competitive in an ever-changing economic landscape, the company, since 2009, has been making moves to drive innovation and spur change within the shipping industry — including investing in alternative fuels, advanced technology vehicles and renewable energies.
In its latest Corporate Sustainability Report, released this week, UPS laid out aggressive new goals to further its sustainability commitments. Following extensive materiality assessments, UPS has pledged to reduce its absolute GHG emissions from global ground operations 12 percent by 2025, a goal developed using the methodology of the Science-Based Targets Initiative.
Sustainable Brands spoke with Director of Global Sustainability Patrick Browne to discuss UPS’s future and how the company plans to put these bold new plans into action.
What did the materiality assessment performed at the beginning of 2016 reveal about current operations? Were there any surprises?
Some examples of local issues that were identified during these assessments include:
- the Indian Subcontinent, Middle East, and Africa - The need to safeguard the security and safety of employees, communities and assets due to operations in difficult markets affected by terrorism and political unrest. In addition, compliance is critical to maintain operational integrity and prevent bribery, corruption and human rights violations.
- Canada - UPS corporate priorities and Canada’s strategic priorities are closely aligned, however diversity is a political priority and increasingly on the minds of regulators and customers.
- Europe - Concerns about air pollution and congestion locally, and climate change globally, make emissions a strategic priority.
- Asia-Pacific - Skilled labor is in high demand, and employees are seen as critical to business success. High emphasis is placed on employee recruitment, training and development; fair treatment, and health and wellness.
- Mexico - UPS corporate priorities and Mexico’s strategic priorities are closely aligned, but environmental regulation is becoming increasingly important to the Mexican government.
What is the benefit of developing region-specific emissions solutions and sustainability strategies? Can you provide some examples of how this is being deployed?
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PB: Our regional operations and business units have the ability to develop strategies, initiatives and local targets that not only support our enterprise-wide goals but address those sustainability issues most important to their region. A good example of this is in Europe, where concerns about air pollution and congestion locally, and climate change globally, make emissions a strategic priority. UPS and our European city partners have a shared interest in reducing congestion, promoting sustainability, and enhancing quality of life for those we serve. We engage with city officials and business leaders, and work toward collaborative logistics solutions that minimize congestion, noise and pollution:
- In London, city officials are planning to expand and accelerate the Ultra-Low Emissions Zone to further reduce emissions of NO2 and particulate matter in the city center. Working with the Freight Electric Vehicles in Urban Europe (FREVUE) project, we continue to convert select model delivery trucks from diesel to electric power, which eliminates tailpipe emissions and circumvents the limited availability of brand new electric delivery vehicles. In 2016, we ramped up efforts and continued deploying these vehicles in London, Paris and various cities in Germany. At year end, we were operating 52 electric vehicles in central London — approximately 30 percent of our fleet in the city center — 40 of which were diesel-to-electric conversion vehicles. In 2016, we concluded a successful test of a range-extended electric vehicle, which allows us to serve long-range routes while still operating as a fully electric vehicle in the city. We plan to deploy up to 15 range-extended electric vehicles in the UK in 2017.
- In Hamburg, we use electric tricycles to pick up and deliver packages from a stationary trailer, significantly reducing our vehicle presence. This “Cargo Cruiser” model is also being used in Offenbach and Oldenburg, with a similar first eBike test pilot in motion in Portland, Oregon. Toulouse is also using a lighter model of the electrically assisted tricycle. Other cities are being considered for future projects, generating new ideas among UPS engineering teams, academic and professional researchers, city leaders, and other urban mobility experts around the world.
What science-based methods has UPS used to inform decision-making and strategy developments?
PB: As a global transportation and logistics company, UPS recognizes GHG emissions pose a serious challenge to the environment and ultimately to the global economy. For our part, we have established a science-based goal to reduce absolute GHG emissions 12 percent by 2025 throughout our global ground operations [which] UPS utilized the Sectoral Decarbonisation Approach (SDA) methodology to develop. The SDA is a freely available open-source methodology on http://sciencebasedtargets.org/ that allows companies to set emission reduction targets in line with a 2°C decarbonisation scenario.
The use of renewable energy is critical to achieving this ambitious goal. To do so, we intend to have 25 percent of our total electricity come from renewable sources by 2025. We have also committed to increase the use of alternative fuels to 40 percent of our total ground fuel use by 2025. These commitments will result in cleaner emissions and help to commercialize the market for alternative fuels, such as renewable diesel and natural gas. This pathway, however, is not without challenges. Large-scale production of renewable fuels will require significant supplier investments and, in the case of organic sources for renewable diesel, could potentially disrupt other markets. At this time, we have elected not to set absolute reduction targets for our airline, where the use of renewable fuel is more challenging. Though jet fuel represents 58 percent of our total GHG emissions, large-scale refining of next-generation renewable fuels and aviation biofuel solutions is not economically feasible without significant government incentives and subsidies. Aviation biofuels also have commercial scale challenges.
Which alternative fuels is UPS focusing on to achieve its alternative fuel goals? How can UPS overcome 'headwinds' such as a lack of viable alternative fuels for aviation, and other barriers to achieving its goals in this area?
PB: Our search for alternative fuels involves many considerations — including performance, cost, availability and refueling infrastructure — and has resulted in one of the most diversified fleets in private industry today. As we have assembled this fleet, we’ve used it to test alternative fuels and advanced vehicle technologies in our rolling laboratory. Most important, the laboratory allows us to quickly deploy viable alternative fuel equipment at scale, based on market and operating conditions.
The insights we gain are used to plan investments and develop future strategies. We also share these insights with vehicle manufacturers and energy suppliers to enhance their understanding of how products can help make transportation more sustainable. When a particular fuel or technology demonstrates sustainability benefits in the laboratory, we take it to commercial scale through large purchases or infrastructure development, if required. We demonstrate this approach through actual use of renewable fuels, as well as a commitment to help commercialize them.
The use of alternative fuels — defined as fuels that produce lower lifecycle CO2 emissions than conventional diesel and gasoline — is a key strategy to achieving our absolute GHG reduction goal of 12 percent by 2025. The alternative fuels UPS is currently using are CNG, LNG, propane, renewable diesel, renewable natural gas (RNG), biodiesel and ethanol. In 2016, we used over 97 million gallons of alternative fuels to fuel our ground fleet, which represents 19.6 percent of our total ground-fleet fuel purchased.
RNG is produced in landfills and other places where organic matter decomposes and releases methane, which can be captured to provide a viable source of renewable transportation fuel. Because methane is 28 times more powerful a GHG than CO2, the use of RNG provides a compelling, two-for-one GHG solution by replacing diesel and other petroleum-based truck fuels and avoiding the release of methane into the atmosphere. Our RNG purchases are not only helping to commercialize this fuel, but also demonstrate how our scale plays a role in that commercialization process. We can often generate enough demand volume from a landfill so that they can streamline their selling process to one purchaser rather than multiple parties.
Also known as synthetic diesel, renewable diesel is an emerging alternative fuel that offers numerous benefits over first-generation alternative fuels such as biodiesel and ethanol. This fuel is chemically identical to conventional diesel fuel and can be produced at commercial scale from a variety of organic sources. In addition to renewable inputs, the most significant advantage to this alternative fuel is its ability to serve as a “drop-in” replacement for traditional petroleum-based diesel without blending or infrastructure constraints. This means that renewable diesel could be used in both existing conventional engine technology [and] refueling infrastructure. The development of this fuel, however, presents challenges that include cost and, depending on the organic source used, potential disruption to other markets.
Alternative fuels present a significant challenge to aviation, since the fuel must meet stringent operating and airworthiness certification requirements. Alternative aviation fuel pathways have received certification, and select projects are underway. Globally, five refiners produce “drop-in” renewable fuels (which can be used in existing conventional engine technology and refueling infrastructure) at a meaningful scale, and a handful of these facilities have the ability to produce renewable jet-blend stocks. However, yields and economics significantly favor the production of other products, including renewable diesel. UPS is the largest global user of “drop-in” renewable diesel in ground transportation and has established relationships with four of the five current producers. Long term, we believe that meaningful incorporation of renewable content into the jet fuel stream will result from co-processing rather than the development of high-cost, small-scale boutique facilities. Co-processing utilizes the existing crude oil refining infrastructure to process synthetic crude oils that are bio-based. In the future, low-carbon fuel policies could incent petroleum refiners to incorporate renewable content directly into their crude oil feedstocks, utilizing existing infrastructure. This would result in renewable content being dispersed across a wide variety of refined products, including gasoline, diesel, and jet fuel, and would ultimately lower the well-to-wheels carbon intensity of all products.
Absent low-carbon fuel policies and with the price of crude oil at record lows, the financial incentive for fuel companies to advance lower-carbon alternative fuels has waned. We continue to participate in the Commercial Alternative Aviation Fuels Initiative, which provides us with a forum to monitor and engage in developments in alternative fuels and technologies for the airline.
UPS and Sealed Air recently opened a Packaging Innovation Center, at which you are working to create solutions for packaging and shipping challenges by maximizing efficiency, minimizing waste and reducing shipping costs. What are some other examples of strategic partnerships UPS has undertaken to further its sustainability goals?
PB: An example is our alliance with Optoro, a reverse logistics technology platform that helps retailers and manufacturers manage, process, and sell returned and excess inventory. Logistics plays a key role in enabling the circular economy, and we support our customers’ circular strategies through efficient collection and speedy return of goods that are unused, damaged or have reached their end of life. This strategic alliance with Optoro provides a one-stop shop solution for retailers and manufacturers to optimize the transportation and disposition of returns and excess inventory. Our joint reverse logistics solutions combine UPS’s century of operational and logistics expertise with Optoro’s world-leading software platform that helps retailers maximize recovery value and reduces environmental waste.
As I just mentioned, another instance of a successful collaboration was when UPS and city of Hamburg officials came together to find a solution for getting more vehicles off the streets in their city center. The idea of using Cargo Cruisers to pick up and deliver packages from a stationary trailer in crowded towns was born of this interaction. Now it’s being replicated in multiple cities. Ideas like these illustrate the types of innovative solutions that can be cultivated when civic and business leaders come together to work toward a common sustainability goal.
UPS has been issuing an annual sustainability report for 15 years. How has reporting helped you change business practices to improve your sustainability performance?
Reporting has helped us hold ourselves accountable — by setting goals and targets, and then tracking our progress each year. The reporting process also helps us evolve our business and sustainability practices with the emergence of new material issues, through better-informed shifts in strategy. In addressing these emerging issues, we have found more sustainable and efficient ways to do our business worldwide.
Through increased accountability and transparency, we have demonstrated to our stakeholders how we manage the issues most important to them. Transparent disclosure gives us the opportunity to share what is working well and where we need to focus our efforts make progress in other areas.
At UPS, data informs everything we do — from how we load our trucks to how we plan our routes for the day. We take the integrity of our data very seriously, and hold our sustainability data reporting to the same high standards as our financial reporting.