Transforming Transportation Fuel for a Low-Carbon Future: A New BSR Guide

Authors

• Ryan Schuchard

  Former Associate Director, Climate Change, BSR

Twenty years ago this summer, Rolling Stone magazine confronted Nike about sweatshops in its supply chain, launching a series of events that led to the modern-day approach that global companies now apply to supply chain sustainability.

After initially rebuffing critics—claiming that, beyond following local laws, the company could not control what was happening outside of its own walls—Nike deviated from the standard industry approach and announced that it would extend U.S. operating rules and processes for sustainability to its overseas contractors. In doing so, Nike revolutionized supplier-engagement programs, and today, the philosophy of taking responsibility for lifecycle and supply chain initiatives has expanded well beyond apparel.

There are signs that a similar moment is upon us with climate change and transportation fuels, which account for more than 40 percent of global greenhouse gas emissions when the whole system of production and use is taken into account. Despite this, the Energy Information Agency predicts that without intervention, the fuel mix in the United States alone will not change much: Liquid fuels, which currently comprise 97 percent of transportation energy, are projected to make up 93 percent of fuel for transportation over the next 20 years.

Just as the apparel sector reconsidered its role in supply chain labor in the 1990s, now is the time for companies with large transportation fleets to consider their contributions to climate change and accelerate the transition to low-carbon fuels. The science is abundantly clear that we must hold global mean temperatures to less than 2°C above pre-industrial levels in order to avoid exposure to significant and potentially irreversible risks to the planet and people, and this cannot happen without dramatic changes to our current transportation fuel system.

Yet most companies that use transportation fuel are doing little to manage impacts beyond improving the efficiency of the vehicles they own. Conventional thinking is that at least 70 percent of fuel emissions occur during combustion, and, therefore, companies should focus on fleet efficiency. Furthermore, goes the thinking, fleet owners don’t make fuel or vehicles, so the market dictates which fuels and vehicles they can use.

While efficiency is essential—and deserving of more attention—fleet owners can influence the lifecycle impacts of fuels by developing a fuller understanding of the choices and trade-offs among different fuel types. Transportation fuel systems are undergoing profound change with the onset of natural gas, electric vehicles, unconventional oil, and synthetic drop-in fuels (just to name a few), and now is the time for companies with a stake in the fuel system to make smarter investments for a low-carbon future.

Today, BSR’s Future of Fuels is launching “Transitioning to Low-Carbon Fuel: A Business Guide for Sustainable Trucking in North America” to help fleet operators and their value chain partners—including energy producers, vehicle manufacturers, retailers that place shipments, and investors—develop impactful yet practical strategies that will accelerate the transition to low-carbon fuels, improve the sustainability impacts of all fuels, and advance dialogue and understanding about our shared challenges.

This guide addresses five key challenges that have hindered efforts to adopt low-carbon fuel:

1. The fuel marketplace is undergoing profound changes. The future mix of available fuels and vehicles is uncertain, and the most cost-effective sources of emissions reductions are diverse and changing.
2. Sustainable fuels are not yet scalable. The marketplace lacks cost-effective and large-scale alternatives to conventional, high-carbon, petroleum-based diesel. There is also a lack of fuel infrastructure and vehicle-maintenance equipment to support these fuels. Furthermore, even as new fuels become more attractive, it takes time to rotate new technologies into fleets, where companies amortize assets over many years.
3. The sustainability issues are multifaceted. There are many sustainability issues involved that vary between fuel types (e.g. oil, natural gas, and biofuels) as well as within the same type (e.g. Canadian oil sands versus heavy crude from Venezuela). There are trade-offs among issues (e.g. shifting from oil to natural gas may reduce greenhouse gas emissions while raising concerns about pollution from fracking), and getting new low-carbon fuels right requires addressing the potential and perceived concerns about impacts that may occur at untested scales.
4. Sustainability standards are underdeveloped. Fleet managers cannot fully understand and manage the lifecycle impacts of fuels because there are no accepted protocols for associating fuels with their full range of lifecycle impacts, and with current fuel systems, it is nearly impossible to track the sources of fuels.
5. Key stakeholders disagree about the path to progress. Because so many actors in the transportation fuel system work in isolation, the key stakeholders—such as civil society organizations, economists, and government agencies—do not always agree on which sustainability issues deserve the most attention, nor do they see eye to eye on what is possible for the necessary transformation.

To address these challenges, this guide provides fleet managers with a holistic approach to managing fuel sustainability. In doing so, the guide transforms the challenges mentioned above into opportunities, while giving companies practical guidance about what they can do today.

The guide breaks this process into four steps for trucking companies and companies with large truck fleets:

• Step 1: Understand your total fuel footprint. Measure and characterize the size of your company’s fuel-related impacts and the relative significance of fuel versus the other sustainability impacts of your company’s operations.
• Step 2: Optimize your use of available fuel and vehicles. Maximize commitments and investments that profitably support the use of low-carbon fuel in the context of the options that are available today.
• Step 3: Collaborate to support new low-carbon solutions. Play a constructive role in driving long-term, systemic improvements in the sustainability of the fuel value chain.
• Step 4: Advocate for a better policy environment. Work with governments and other stakeholders to promote policies that support more ambitious, effective deployment of low-carbon, sustainable fuel pathways.

The concept of a cross-fuel, lifecycle roadmap for fleet operators is new, but there is a wide variety of tools and approaches to draw from, including fleet-efficiency management, lifecycle assessment, supplier engagement, and policy advocacy. The framework provided in our guide draws connections among the many good case studies and resources that already exist.

This guide builds on BSR’s 2012 report, “The Sustainability Impacts of Fuel: Understanding the Total Sustainability Impacts of Commercial Transportation Fuels,” which assesses the total sustainability impacts of commercial transportation fuels as well as the market outlook for a complete range of fuel types. That report was aimed at helping large-scale fuel purchasers make viable decisions that lessen impacts on the environment and society and enhance economic growth and development. As that report shows, there is a great deal about sustainability that is not widely understood or managed, and the issues and risks involved are increasing in number. BSR’s new companion guide picks up where that report left off by providing companies and stakeholders with a considered, practical approach for addressing these issues and transitioning to low-carbon fuel more proactively.

Addressing the climate impacts of transportation fuel supply chains is different than managing supply chain labor impacts in garments and electronics. Yet there are also common themes that can be applied in transportation fuel sustainability: Individual companies are faced with systemic problems that are traditionally seen as the domain of governments, managing supply chain impacts implies taking responsibility for suppliers’ practices, and truly transforming the supply chain requires unique action by multiple sectors.

This guide highlights the opportunities and provides companies with the tools to lead the transformation of the transportation fuel sector. The question is: Twenty years from now, which companies will history look back on as leaders for transportation fuel?