Reducing Carbon Emissions In The Automotive Value Chain

Reducing Carbon Emissions In The Automotive Value Chain

Agenda Panel Introductions Al Hildreth, GM AIAG GHG Workgroup Activities Sherry Mueller, Ford Importance of Supplier Engagement in Auto OEM GHG Reduction - Doug Andrews, Lear Delivering Sustainability Lee Kindberg, Maersk Let SmartWay track your carbon footprint Erik Herzog, US EPA SmartWay Panel questions and discussion

Sherry Mueller Ford Motor Company

Automotive Industry Guiding Principles Automotive Companies Are Expected To Pursue Environmental Responsibility Throughout The Supply Chain, including GHG management

GHG Workgroup Activities GHG Webinar Reporting & Reduction Start with the Why (Session 1) GHG Protocol boundaries, QA/QC, data gathering (Session 2) GHG calculation: Scopes 1-2 (Session 3) GHG calculation: Scope 3 (Session 4) Allocation to customers and Reporting Systems (Session 5) Global GHG Regulations 2016 Update CDP-Climate Change Questionnaire CDP Action Exchange Update DOE Superior Energy Performance Overview The AIAG GHG Workgroup Provides A Forum For Streamlining GHG Reporting & Promoting Emissions Reductions (webinar online at AIAG)

Automotive Carbon Footprint Sectors With High GHG Emissions Metals and mining Electric power generation Plastics and resin manufacture Chemical manufacturing GHG Sources in Supply Chain Source: GM Contributors to Automotive OEM Carbon Footprint Category Use of Sold Product (Driving) Purchased Goods/Services and Capital Goods OEM s Scope 1+2 Upstream/Downstream Transportation All Other Scope 3 Categories: Fuel & Energy, Waste, Franchises, Employee Commuting, Processing of Sold Products, Business Travel, Investments and Leased Assets Magnitude of Contribution Engaging OEM Supply Chain Is Key To Reducing An Auto OEMs Carbon Footprint

Global GHG Regulations (Emissions Trading Schemes) Used with permission from CDP GHG Regulations Continue To Expand Across The Globe

Delivering Sustainability: Supply Chain Transportation Lee Kindberg Director, Environment & Sustainability

Maersk Line is an enabler of global trade, connecting goods and services to people and economies around the globe Shipping affects the lives of billions of people, with 90% of the world s international trade travelling by sea With our global presence, we create local employment and stimulate business activity in more than 125 countries 9

Supply chain transportation environmental impacts can now be calculated. Factory Rail/ Truck Warehouse Truck Port Air/ Ocean Port Rail/ Truck Warehouse Truck Point of sale Factors include: Modes of transportation used Energy efficiency of each mode Distance traveled by each mode Cargo weight and volume How is the impact calculated?

Carbon Impacts of Logistics Operations Network Optimisation Equipment Utilisation Transport Mode Carrier Selection Packaging CO 2 per Transport Mode (g/ton-km) Air 560 Truck Barge 25 47 Rail 16 Ocean 6

M ode energy-efficiency is critical in supply chain transportation choices. Transport 1 pair of shoes from China to North Europe China 1800 g CO 2 100 g CO 2 18x more North Europe 0 Km 20 Km Shipping emits ~2% of the world s CO 2 emissions while transporting 90% of the worlds goods 12

Standard methods are available to report and verify the environmental impacts of ocean shipping. The best-accepted are from BSR s Clean Cargo Working Group, which includes >80% of the global container capacity. >85% of the global container capacity in 2015 membership Annual Data Collection Standardized CO 2 methodologies Verification protocol.

Calculating the CO 2 footprint of a single shipment or a global logistics network: Single shipment or route comparison: 1. Look up the CCWG CO 2 emissions factor for the trade lane (carrierspecific or industry average). 2. Determine the distance traveled between port of origin and port of destination using Dataloy or other nautical distance resources. 3. Multiply the CO 2 emission factor with the distance between the ports and the number of containers for that shipment. 14

To calculate a company s CO 2 footprint from ocean transport: 1. Identify the trade lanes and port pairs used. 2. Determine the number of containers shipped between each port pair on each trade lane. 3. Look up the CCWG CO 2 emissions factor for each trade lane and the distance travelled between each pair of ports. 4. Multiply the CO 2 emission factor times the number of containers for that port pair times the distance between the ports. 5. Add up the CO 2 emissions for all the trade lanes of interest. 15

FEASIBILITY INDEX Opportunities for supply chain impact reduction: Energy Efficient Buildings (<5%) Reverse Logistics (9%) Modal Switches (12%) Packaging Reduction (14%) Low Carbon Sourcing & Manufacturing (16%) Near Shoring (?%) Clean Vehicle Technologies (18%) De-speeding the Supply Chain (18%) Optimized Networks (13%) Source: World Economic Forum Supply Chain Decarbonization the Role of Logistics and Transport in Reducing Supply Chain Carbon Emissions ABATEMENT POTENTIAL

Transportation CO 2 Emissions can be reduced. Part of supply chain Driver of emissions Ways to reduce emissions (examples) Ocean transportation Volume moved km covered Higher container utilisation Use of more eco-friendly carriers Air transportation Port moves Domestic distribution Warehousing kg moved km covered Number of containers Transportation mode (truck vs. rail) km covered Volume moved Number of days in warehouse Number of CBM Air to Sea-Air conversion Higher container utilisation 20 to 40 conversion CFS-CY conversion Higher utilisation of delivery trucks/vans Double-decker trailers Increased use of rail Use of bio-fuel Reduce safety stock DC bypassing 17

Vessels are increasingly fuel efficient. This reduces fuel use, CO 2 and other air emissions. Key Initiatives: New vessels Eco-Retrofitting vessels Smart steaming Network design Focus on energy efficiency for sustained performance Verified by: 2015 results: 42% less CO 2 per container per km vs. 2007 2020 goal: Reduce CO2 by 60% vs. 2007 18

Decoupling growth and environmental impact Since 2007, Maersk Line has managed to grow our business while reducing emissions to the environment. Changes in Global Containers Shipped and Total CO 2 Produced 19

Comparing routes for CO 2 emissions Example: Central America to Atlanta, Georgia Routing via Total Distance CO 2 per FFE Miami 2574 km 1.47 kg Savannah 2601 km 0.82 kg Difference 1% -44% 20

Logistics Sustainability = Efficiency Improved Container Utilization Modal Shift: Air to Sea-Air As-Is Air Ocean Operational Impact: 15% reduction in container volume Cost Impact: 14% savings potential identified Carbon impact: 16% reduction in CO 2 Operational Impact: modal shift from 100% air to 50% air / 50% ocean Cost Impact: 50% savings potential identified Carbon impact: 69% reduction in CO 2 21

What we ve learned about supply chain calculations: 1. Use a consistent calculator approach 2. Transportation footprints can and have been reduced 3. It s the total lifecycle footprint that matters Transportation is just part of the total. You have to do the full analysis to see the big picture 4. Focus on improvements and incorporating CO 2 into business decisions 5. Opportunity: work together to reduce both CO 2 emissions and costs 22

Panel Discussion Q&A

CCWG produces CO 2 index factors for 25 trade lanes and provides industry averages. An Environmental Performance Survey also provides qualitative progress information. Dry Container CO 2 Index factors for Trade Lanes to/from North America (grams CO 2 /TEU km) Trade Lane CCWG 2011 Industry Average Maersk Line 2011 Trade Lane Averages Asia--North America East Coast (EC) 71.85 55.7 Asia--North America West Coast (WC) 65.10 58.0 North Europe--North America EC/Gulf 75.88 70.3 Mediterranean--North America EC/Gulf 79.29 63.8 North America--Africa 76.86 76.9 North America EC--Middle East/India 78.72 78.0 North America--South America (EC/WC) 71.44 103.9 North America--Oceania 85.52 82.7 Back-up The index includes weighted avg. of all vessels and services on that trade lane. ML s internal calculator uses route-specific factors. Example: ML s TP6 service 2011 was 49.1 2013 factors: ML TP6: 41.4 Asia USWC 43.3 CCWG avg: 56.2 Resources: BSR paper, Maersk Line overview, 2011 data 24

The CCWG How-To Guide provides resources for integrating sustainability into procurement processes Back-up http://www.bsr.org/reports/bsr_ccwg_ Calculate_Manage_Emissions_2015.pdf http://www.bsr.org/en/collaboration/group s/clean-cargo-working-group 25

Logistics Sustainability = Efficiency Back-up CFS Consolidation Study Container Backhaul Program As-Is To-Be Raw Material Import container Laem Chabang Port Finished Goods containe r Damco Cross- Dock Finished Goods container Thailand Plant Operational Impact: 15% increase in CFS usage, volume reduction of 15% (433 containers) Cost Impact: $852k identified cost savings Carbon impact: 583 ton reduction in CO 2 Operational Impact: eliminated 2.4 million empty running kilometers traveled Cost Impact: $170k identified cost savings Carbon impact: 700 ton reduction in CO 2 26