Today's DCs are kicking the oil habit and looking to the elements for their power. Here's hoping the sun continues to shine brightly and the wind never dies.
John Johnson joined the DC Velocity team in March 2004. A veteran business journalist, John has over a dozen years of experience covering the supply chain field, including time as chief editor of Warehousing Management. In addition, he has covered the venture capital community and previously was a sports reporter covering professional and collegiate sports in the Boston area. John served as senior editor and chief editor of DC Velocity until April 2008.
As it plots its $2 billion U.S. invasion later this year, the giant British retailer Tesco isn't just thinking red, white, and blue. It's also thinking green. That's green as in the green-shaded "Fresh & Easy" logo that will adorn the string of convenience stores it plans to open on the West Coast. That's green as in the greengrocer-type merchandise—fresh foods and organic produce— to be offered in these stores. And that's green as in environmentally friendly operations. "We have decided that American consumers want to go back to neighborhood retailing, which is about bringing high-quality affordable foods … into their neighborhoods and, in addition, being good stewards of the environment," says Tesco USA CEO Tim Mason. "And that's what we intend to do.
Going green is good public relations these days, but Tesco's commitment to eco-friendly practices looks to be more than just talk. The retailer's green initiatives go well beyond the plastic bag recycling programs at its retail stores. They also reach deep into its backend distribution operations. Tesco recycles 71 percent of its cardboard, plastic, and paper waste (with a goal of 80 percent by next year). It has introduced a dedicated train to move stock between two U.K. DCs—a move that allows it to shift freight from the highways to a more fuel-efficient mode of transport. And it's investigating wind turbines and other sources of renewable energy in an effort to cut greenhouse gas emissions. In January, Tesco began using a 50/50 blend of biofuels and diesel to power three-quarters of its European distribution fleet. The retailer says the reduction in emissions over the fleet's lifetime will be the equivalent of taking more than 20,000 medium-sized cars off the road.
In recent months, it has become increasingly clear that Tesco intends to bring its eco-friendly practices to the colonies. Exhibit A is the distribution center it's building in Riverside, Calif., to support its U.S. expansion. The 820,000-square-foot DC will be more than a roof over workers' heads; it will also be a solar power plant. Built right into the DC's roof are flexible photovoltaic solar panels capable of generating two megawatts worth of electricity, about one-fifth of the building's power needs.
Tesco is spending $13 million for the integrated photovoltaic roofing system, which is believed to be the world's largest roof-top solar panel installation. The panels, which were developed by Los Angeles-based Solar Integrated Technologies, will be installed on two of the site's five DC buildings, covering 500,000 of the 640,000 square feet of roof space. The company says the solar panel system will produce over 2.6 million kilowatt hours and eliminate 1,200 tons of carbon dioxide emissions each year.
green resources
Looking to go "green" but don't know where to begin? Help is
as close as your computer. The following organizations maintain Web sites that can help point you in the right direction.
U.S. Department of Energy Green Power Network www.eere.energy.gov/greenpower
The Green Power Network provides up-to-date information on green power providers, product offerings, consumer protection issues, and policies affecting green power markets. It also maintains a reference library of relevant papers, articles, and reports on the Web site. The Green Power Network is operated by the National Renewable Energy Laboratory (NREL) for the U.S. Department of Energy.
National Renewable Energy Lab www.nrel.gov
This site, maintained by the Department of Energy's National Renewable Energy Lab, provides information on renewable energy and energy efficiency, with sections for homeowners, businesses, students and teachers, electricity providers, and farmers.
World Resources Institute www.wri.org
The World Resources Institute is an environmental think tank that goes beyond research to find practical ways to protect the earth and improve people's lives. Its mission is to move human society to live in ways that protect the environment and its capacity to provide for the needs and aspirations of current and future generations. WRI organizes its work around four key goals:
People & Ecosystems: Reverse rapid degradation of ecosystems and assure their capacity to provide humans with needed goods and services.
Access: Guarantee public access to information and decisions regarding natural resources and the environment.
Climate Protection: Protect the global climate system from further harm due to emissions of greenhouse gases and help humanity and the natural world adapt to unavoidable climate change.
Markets & Enterprise: Harness markets and enterprise to expand economic opportunity and protect the environment.
U.S. Green Building Council www.usgbc.org
USGBC connects interested parties with the people, knowledge, and tools they need to leverage green building throughout their businesses. It is the overseer of the Leadership in Energy and Environmental Design (LEED) Green Building Rating System—the nationally accepted benchmark for the design, construction, and operation of high-performance green buildings.
Kicking carbon to the curb
Tesco is not alone in its efforts to green up its corporate act. As evidence mounts of a link between CO2 releases and global warming, companies around the world are racing to find ways to reduce their carbon footprints. Often as not, they're finding opportunities within their logistics and distribution operations, where much of that carbon dioxide is generated. Their solutions have ranged from solar power and wind turbines to environmentally friendly fuel alternatives for fleets and forklifts.
"A lot of companies are becoming focused on being good stewards of the environment," says Jim Bowes, president and CEO of Peach State Integrated Technologies, an Atlanta-based logistics and distribution engineering firm.
"It's definitely something that everyone is starting to take much more seriously, from how companies handle their waste, to power requirements and power management."
One corporation that's taking environmental sustainability seriously is office supplier Staples. Staples is an inaugural member of the Environmental Protection Agency's Fortune 500 Green Power Challenge, a 13-month-long campaign that challenges corporations to roughly double their purchases of green power, which is electricity generated partially or entirely from solar, wind, geothermal, biomass (plant materials), and other clean energy sources.
Staples' efforts last year earned it one of the EPA's Green Power Leadership awards. In 2006, Staples purchased 121.4 million kilowatts of green power, raising its overall 2006 renewable energy use to about 20 percent of its estimated yearly electricity usage. This is more than twice the amount of green power Staples purchased in 2005, and is equivalent to the electricity consumed by 11,240 houses.
Power roof
Staples is looking to the sun for a big part of its savings. In January, Staples unveiled the largest solar power installation in New England at its 300,000-square-foot retail distribution center in Killingly, Conn. The DC's 433-kilowatt commercial solar photovoltaic system is nearly the size of two football fields and covers close to 74,000 square feet of roof space. The system has the capacity to produce enough energy to power 14 percent of the DC, or the equivalent of 36 homes per year. The annual reduction in carbon emissions will be comparable to the emissions produced by the average car driving 420,000 miles.
The Killingly DC is the fourth project that Staples has completed with solar-service provider SunEdison. It currently has six more projects under construction—five at retail locations in California and another at a DC in Stockton, Calif. Altogether, Staples has identified 150 locations where the solar power model could be applied.
"The solar power system at our Killingly DC is part of an integrated strategy for a 7-percent reduction in our U.S. carbon emissions by 2010 on an absolute basis, starting from a base year of 2001," says Mark Buckley, vice president of environmental affairs at Staples. "Through our relationship with SunEdison, we're able to purchase solar energy off our rooftop at a rate below or equal to the cost of electricity off the grid. This reduces our operating costs, while freeing up more electricity during peak times for use by local homes and businesses."
Blow ye winds
Harvesting electricity from the sun is only one portion of Staples' green initiative, however. The company is also expanding its product line to include a broader array of what it calls "environmentally preferable" products. These include everything from paper with high recycled content to re-manufactured ink cartridges to electronics that have earned the government's Energy Star rating. In addition, Staples has programs that make it easy for its customers to recycle ink jet and toner cartridges, cell phones, PDAs, digital cameras, rechargeable batteries, and some electronic equipment, all free of charge.
"We're really trying to take a very integrated approach to energy management, so we are committed to use less of it," says Buckley, "whether it is kilowatt hours, gas therms, or gallons of fuel. Obviously there is a direct bottom line benefit to doing that, but there is also a corresponding environmental benefit in terms of reducing emissions. We're committed to reducing our impact as it relates to climate change by reducing our carbon footprint, and reducing energy use is certainly the first step. The second step is taking a look to see what we can do to incorporate more green elements into our buildings."
One of those strategies is designing DCs to make optimum use of available daylight, using ambient light for activities like picking wherever possible. When lights are needed, they are controlled by motion sensors and photo sensors that click on when a forklift operator enters a certain aisle. In addition, Staples has retrofitted miles of conveyor lines to reduce energy consumption.
While Staples is looking to the sun for some of its power needs, Buckley sees great promise in wind power as well. Staples has identified distribution sites in Rialto, Calif., and Portland, Ore., for possible construction of 600-kilowatt wind turbines to power the DCs. The company also has a pilot program under way to harness power from the wind through a modular wind turbine system installed at its 220,000-square-foot fulfillment center in Ontario, Calif. The building-integrated installation is a beta test of AeroVironment's Architectural Wind, a new concept in wind energy systems in which the small roof-mounted turbines are actually tied in with the structure's utility grid.
Which type of power does he consider more promising? As much as he likes the idea of wind power, Buckley concedes that there are practical limitations to its use. "Universally, solar has more applications in more places because the sun shines everywhere," he says. "Wind, on the other hand, is very much dependent geographically on where the wind is good."
Most of the apparel sold in North America is manufactured in Asia, meaning the finished goods travel long distances to reach end markets, with all the associated greenhouse gas emissions. On top of that, apparel manufacturing itself requires a significant amount of energy, water, and raw materials like cotton. Overall, the production of apparel is responsible for about 2% of the world’s total greenhouse gas emissions, according to a report titled
Taking Stock of Progress Against the Roadmap to Net Zeroby the Apparel Impact Institute. Founded in 2017, the Apparel Impact Institute is an organization dedicated to identifying, funding, and then scaling solutions aimed at reducing the carbon emissions and other environmental impacts of the apparel and textile industries.
The author of this annual study is researcher and consultant Michael Sadowski. He wrote the first report in 2021 as well as the latest edition, which was released earlier this year. Sadowski, who is also executive director of the environmental nonprofit
The Circulate Initiative, recently joined DC Velocity Group Editorial Director David Maloney on an episode of the “Logistics Matters” podcast to discuss the key findings of the research, what companies are doing to reduce emissions, and the progress they’ve made since the first report was issued.
A: While companies in the apparel industry can set their own sustainability targets, we realized there was a need to give them a blueprint for actually reducing emissions. And so, we produced the first report back in 2021, where we laid out the emissions from the sector, based on the best estimates [we could make using] data from various sources. It gives companies and the sector a blueprint for what we collectively need to do to drive toward the ambitious reduction [target] of staying within a 1.5 degrees Celsius pathway. That was the first report, and then we committed to refresh the analysis on an annual basis. The second report was published last year, and the third report came out in May of this year.
Q: What were some of the key findings of your research?
A: We found that about half of the emissions in the sector come from Tier Two, which is essentially textile production. That includes the knitting, weaving, dyeing, and finishing of fabric, which together account for over half of the total emissions. That was a really important finding, and it allows us to focus our attention on the interventions that can drive those emissions down.
Raw material production accounts for another quarter of emissions. That includes cotton farming, extracting gas and oil from the ground to make synthetics, and things like that. So we now have a really keen understanding of the source of our industry’s emissions.
Q: Your report mentions that the apparel industry is responsible for about 2% of global emissions. Is that an accurate statistic?
A: That’s our best estimate of the total emissions [generated by] the apparel sector. Some other reports on the industry have apparel at up to 8% of global emissions. And there is a commonly misquoted number in the media that it’s 10%. From my perspective, I think the best estimate is somewhere under 2%.
We know that globally, humankind needs to reduce emissions by roughly half by 2030 and reach net zero by 2050 to hit international goals. [Reaching that target will require the involvement of] every facet of the global economy and every aspect of the apparel sector—transportation, material production, manufacturing, cotton farming. Through our work and that of others, I think the apparel sector understands what has to happen. We have highlighted examples of how companies are taking action to reduce emissions in the roadmap reports.
Q: What are some of those actions the industry can take to reduce emissions?
A: I think one of the positive developments since we wrote the first report is that we’re seeing companies really focus on the most impactful areas. We see companies diving deep on thermal energy, for example. With respect to Tier Two, we [focus] a lot of attention on things like ocean freight versus air. There’s a rule of thumb I’ve heard that indicates air freight is about 10 times the cost [of ocean] and also produces 10 times more greenhouse gas emissions.
There is money available to invest in sustainability efforts. It’s really exciting to see the funding that’s coming through for AI [artificial intelligence] and to see that individual companies, such as H&M and Lululemon, are investing in real solutions in their supply chains. I think a lot of concrete actions are being taken.
And yet we know that reducing emissions by half on an absolute basis by 2030 is a monumental undertaking. So I don’t want to be overly optimistic, because I think we have a lot of work to do. But I do think we’ve got some amazing progress happening.
Q: You mentioned several companies that are starting to address their emissions. Is that a result of their being more aware of the emissions they generate? Have you seen progress made since the first report came out in 2021?
A: Yes. When we published the first roadmap back in 2021, our statistics showed that only about 12 companies had met the criteria [for setting] science-based targets. In 2024, the number of apparel, textile, and footwear companies that have set targets or have commitments to set targets is close to 500. It’s an enormous increase. I think they see the urgency more than other sectors do.
We have companies that have been working at sustainability for quite a long time. I think the apparel sector has developed a keen understanding of the impacts of climate change. You can see the impacts of flooding, drought, heat, and other things happening in places like Bangladesh and Pakistan and India. If you’re a brand or a manufacturer and you have operations and supply chains in these places, I think you understand what the future will look like if we don’t significantly reduce emissions.
Q: There are different categories of emission levels, depending on the role within the supply chain. Scope 1 are “direct” emissions under the reporting company’s control. For apparel, this might be the production of raw materials or the manufacturing of the finished product. Scope 2 covers “indirect” emissions from purchased energy, such as electricity used in these processes. Scope 3 emissions are harder to track, as they include emissions from supply chain partners both upstream and downstream.
Now companies are finding there are legislative efforts around the world that could soon require them to track and report on all these emissions, including emissions produced by their partners’ supply chains. Does this mean that companies now need to be more aware of not only what greenhouse gas emissions they produce, but also what their partners produce?
A: That’s right. Just to put this into context, if you’re a brand like an Adidas or a Gap, you still have to consider the Scope 3 emissions. In particular, there are the so-called “purchased goods and services,” which refers to all of the embedded emissions in your products, from farming cotton to knitting yarn to making fabric. Those “purchased goods and services” generally account for well above 80% of the total emissions associated with a product. It’s by far the most significant portion of your emissions.
Leading companies have begun measuring and taking action on Scope 3 emissions because of regulatory developments in Europe and, to some extent now, in California. I do think this is just a further tailwind for the work that the industry is doing.
I also think it will definitely ratchet up the quality requirements of Scope 3 data, which is not yet where we’d all like it to be. Companies are working to improve that data, but I think the regulatory push will make the quality side increasingly important.
Q: Overall, do you think the work being done by the Apparel Impact Institute will help reduce greenhouse gas emissions within the industry?
A: When we started this back in 2020, we were at a place where companies were setting targets and knew their intended destination, but what they needed was a blueprint for how to get there. And so, the roadmap [provided] this blueprint and identified six key things that the sector needed to do—from using more sustainable materials to deploying renewable electricity in the supply chain.
Decarbonizing any sector, whether it’s transportation, chemicals, or automotive, requires investment. The Apparel Impact Institute is bringing collective investment, which is so critical. I’m really optimistic about what they’re doing. They have taken a data-driven, evidence-based approach, so they know where the emissions are and they know what the needed interventions are. And they’ve got the industry behind them in doing that.
The global air cargo market’s hot summer of double-digit demand growth continued in August with average spot rates showing their largest year-on-year jump with a 24% increase, according to the latest weekly analysis by Xeneta.
Xeneta cited two reasons to explain the increase. First, Global average air cargo spot rates reached $2.68 per kg in August due to continuing supply and demand imbalance. That came as August's global cargo supply grew at its slowest ratio in 2024 to-date at 2% year-on-year, while global cargo demand continued its double-digit growth, rising +11%.
The second reason for higher rates was an ocean-to-air shift in freight volumes due to Red Sea disruptions and e-commerce demand.
Those factors could soon be amplified as e-commerce shows continued strong growth approaching the hotly anticipated winter peak season. E-commerce and low-value goods exports from China in the first seven months of 2024 increased 30% year-on-year, including shipments to Europe and the US rising 38% and 30% growth respectively, Xeneta said.
“Typically, air cargo market performance in August tends to follow the July trend. But another month of double-digit demand growth and the strongest rate growths of the year means there was definitely no summer slack season in 2024,” Niall van de Wouw, Xeneta’s chief airfreight officer, said in a release.
“Rates we saw bottoming out in late July started picking up again in mid-August. This is too short a period to call a season. This has been a busy summer, and now we’re at the threshold of Q4, it will be interesting to see what will happen and if all the anticipation of a red-hot peak season materializes,” van de Wouw said.
The report cites data showing that there are approximately 1.7 million workers missing from the post-pandemic workforce and that 38% of small firms are unable to fill open positions. At the same time, the “skills gap” in the workforce is accelerating as automation and AI create significant shifts in how work is performed.
That information comes from the “2024 Labor Day Report” released by Littler’s Workplace Policy Institute (WPI), the firm’s government relations and public policy arm.
“We continue to see a labor shortage and an urgent need to upskill the current workforce to adapt to the new world of work,” said Michael Lotito, Littler shareholder and co-chair of WPI. “As corporate executives and business leaders look to the future, they are focused on realizing the many benefits of AI to streamline operations and guide strategic decision-making, while cultivating a talent pipeline that can support this growth.”
But while the need is clear, solutions may be complicated by public policy changes such as the upcoming U.S. general election and the proliferation of employment-related legislation at the state and local levels amid Congressional gridlock.
“We are heading into a contentious election that has already proven to be unpredictable and is poised to create even more uncertainty for employers, no matter the outcome,” Shannon Meade, WPI’s executive director, said in a release. “At the same time, the growing patchwork of state and local requirements across the U.S. is exacerbating compliance challenges for companies. That, coupled with looming changes following several Supreme Court decisions that have the potential to upend rulemaking, gives C-suite executives much to contend with in planning their workforce-related strategies.”
Stax Engineering, the venture-backed startup that provides smokestack emissions reduction services for maritime ships, will service all vessels from Toyota Motor North America Inc. visiting the Toyota Berth at the Port of Long Beach, according to a new five-year deal announced today.
Beginning in 2025 to coincide with new California Air Resources Board (CARB) standards, STAX will become the first and only emissions control provider to service roll-on/roll-off (ro-ros) vessels in the state of California, the company said.
Stax has rapidly grown since its launch in the first quarter of this year, supported in part by a $40 million funding round from investors, announced in July. It now holds exclusive service agreements at California ports including Los Angeles, Long Beach, Hueneme, Benicia, Richmond, and Oakland. The firm has also partnered with individual companies like NYK Line, Hyundai GLOVIS, Equilon Enterprises LLC d/b/a Shell Oil Products US (Shell), and now Toyota.
Stax says it offers an alternative to shore power with land- and barge-based, mobile emissions capture and control technology for shipping terminal and fleet operators without the need for retrofits.
In the case of this latest deal, the Toyota Long Beach Vehicle Distribution Center imports about 200,000 vehicles each year on ro-ro vessels. Stax will keep those ships green with its flexible exhaust capture system, which attaches to all vessel classes without modification to remove 99% of emitted particulate matter (PM) and 95% of emitted oxides of nitrogen (NOx). Over the lifetime of this new agreement with Toyota, Stax estimated the service will account for approximately 3,700 hours and more than 47 tons of emissions controlled.
“We set out to provide an emissions capture and control solution that was reliable, easily accessible, and cost-effective. As we begin to service Toyota, we’re confident that we can meet the needs of the full breadth of the maritime industry, furthering our impact on the local air quality, public health, and environment,” Mike Walker, CEO of Stax, said in a release. “Continuing to establish strong partnerships will help build momentum for and trust in our technology as we expand beyond the state of California.”
That result showed that driver wages across the industry continue to increase post-pandemic, despite a challenging freight market for motor carriers. The data comes from ATA’s “Driver Compensation Study,” which asked 120 fleets, more than 150,000 employee drivers, and 14,000 independent contractors about their wage and benefit information.
Drilling into specific categories, linehaul less-than-truckload (LTL) drivers earned a median annual amount of $94,525 in 2023, while local LTL drivers earned a median of $80,680. The median annual compensation for drivers at private carriers has risen 12% since 2021, reaching $95,114 in 2023. And leased-on independent contractors for truckload carriers were paid an annual median amount of $186,016 in 2023.
The results also showed how the demographics of the industry are changing, as carriers offered smaller referral and fewer sign-on bonuses for new drivers in 2023 compared to 2021 but more frequently offered tenure bonuses to their current drivers and with a greater median value.
"While our last study, conducted in 2021, illustrated how drivers benefitted from the strongest freight environment in a generation, this latest report shows professional drivers' earnings are still rising—even in a weaker freight economy," ATA Chief Economist Bob Costello said in a release. "By offering greater tenure bonuses to their current driver force, many fleets appear to be shifting their workforce priorities from recruitment to retention."