Transport Partnership
U.S.ENVIRCINMINTJU. PRorecriori AGENCY
Shipper Partners and
Stakeholder Meeting Summary
JC Penney Corporate Headquarters
Piano, Texas
July 28-29, 2008
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Participants
Joe Anadraski, Voluntary Interindustry
Commerce Solutions Association
Sean Broderick, Procter & Gamble
Toby Brzoznowski, Llamasoft
Ruben Casso, U.S. Environmental
Protection Agency—Region 6
Casey Chroust, Retail Industry
Leaders Association
Chris Conley, Johnson & Johnson
Sarah Froman, U.S. Environmental
Protection Agency—SmartWay
Bob Gable, JC Penney Company
Susan Ghertner, H-E-B
Mitch Greenberg, U.S. Environmental
Protection Agency—SmartWay
Steve Karrmann, JC Penney Company
Michael Keany, Johnson & Johnson
Gay MacGregor, U.S. Environmental
Protection Agency—SmartWay
Brenda Mathison, Best Buy Company
Susan Moran, Limited Brands
Bryan Most, Wal-Mart Stores
Mike Moynahan, H-E-B
Steven Palmer, Lowe's Companies
Matt Payne, U.S. Environmental
Protection Agency—SmartWay
Kevin Perry, Lowe's Companies
Buddy Polovick, U.S. Environmental
Protection Agency—SmartWay
Wendy Rigterink, Target Corporation
Rick Schart, JC Penney Company
Mark Servidio, Sharp Electronics
John Sheehy, PepsiCo
Kerry Sobieck, Best Buy Company
Sabina Strautman, IKEA
Jim Thomas, JC Penney Company
John Turina, Nike
Dawn Vance, Nike
Mark Whittaker, PepsiCo
Steve Wysmuller, IBM
Overview
EPA updated attendees on the state of the Partnership, existing greenhouse gas (GHG) quantification
methods, SmartWay's supply chain vision, and potential improvements to Partner performance
evaluations. Additionally, attendees learned about the industry's own sustainability initiatives and EPA's
hopes for making data available to commercial software providers for integration into their supply chain
management software packages. EPA is encouraging SmartWay Partner input on the long-term vision of
the program. Key discussions included:
• What do Shipper Partners want out of SmartWay?
• What are Partners' long-term goals?
• How EPA can assist Partners, considering resource and data constraints?
• What will SmartWay 2.0 look like?
Highlights
Carrier Participation/Data Needs from Carriers
* Shippers are encouraging carrier participation in SmartWay. Several Partners encourage (but do
not require) carriers to join SmartWay. There was substantial discussion regarding how
aggressive the different shippers are in encouraging their carriers to join SmartWay. Some
Partners indicated that they actively shop around for carriers in order to improve cost and fuel
efficiencies.
• A Partner indicated that there should be more focus on recruiting shippers because carriers will
follow, or recruiting retailers because shippers will follow them.
• Shippers are encouraging carriers to obtain credit for efficiency initiatives they have already
undertaken.
• Shippers can also apply more leverage by emphasizing operational/logistics benefits for carriers
(in addition to technology improvements) and facilitating information exchange between shippers
and carriers.
• Shipper Partners want to work with carriers to help them succeed.
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• Shippers drive demand for more detailed data from carriers—they want additional/better
performance quantification from carriers in order to facilitate more refined and accurate shipper
selection of carriers.
• One Partner stated that "demand is there for depth of data. Otherwise, what you get out [of the
benefit estimation models] is only as good as you put in." This Partner agreed that shippers are
not getting the level of detail required for carrier-specific business decisions regarding supply
chain carbon footprints.
• Shippers agreed that quality assurance of carrier data submissions is critical to program success.
• Participants disagreed about whether having carriers submit data more frequently than the annual
requirement would significantly improve performance assessment accuracy. Some Partners would
find such data helpful as a "tie breaker" when selecting carriers; other Partners indicated that
annual reporting may be sufficient.
• Another participant suggested using an online data collection system allowing carriers to bypass
EPA and submit new data as often as they like. It was noted that the problem is compounded by
contract terms between carriers and shippers (two years, typically). For example, a shipper may
make a carrier selection based on year-old data, and be locked into a particular carrier for a two
more years. It may be possible, though, to modify current contract arrangements to help minimize
the reliance on out-of-date data.
• A Partner pointed out that greater transparency in performance data reporting will help carriers
improve over time, although this goal is in conflict with the carrier's stated concerns about
confidentiality. This Partner also believes it is reasonable, especially for big shippers, to ask
carriers for additional data. If carriers aren't willing to provide facts about their environmental
performance, it is fully within the shipper's prerogative to select a different carrier.
GHG Quantification
• EPA is working on a proposal to develop guidelines for reporting GHGs across sectors, possibly
including transportation, in the United States. The proposal, due this fall, will attempt to minimize
administrative/reporting burdens.
• Most companies have previously compiled and reported some sort of GHG numbers, primarily
for direct fuel consumption and power purchases. Only a few have ventured into Scope 3
reporting for indirects, or have even determined what's included in Scope 3.
o There is no standardization for what's considered Scope 3.
o One company includes commute miles traveled by employees; another includes customer
trips generated by their stores; a third includes the impact of employees' compressed
work schedules and is considering estimating impacts for a number of consumer uses.
o There is generally limited thinking about upstream sources. Some Partners are looking at
quantifying packaging reduction impacts.
o One Partner is considering having upstream manufacturers join SmartWay.
o Marks & Spencer in the United Kingdom has reported its Scope 3 emissions under the
Carbon Disclosure Project.
• IBM created its Carbon Tradeoff Analyzer to help clients determine their carbon footprint. The
analyzer uses NREL emission factor data to calculate rail, air, truck factors. The NREL factors
are point estimates based on industry averages, so integrating SmartWay data would result in an
improvement.
• Llamasoft's Supply Chain Guru software models supply chains and optimization options.
Evaluation metrics include weight, quantity, distance, time, and GHG emissions, among others.
The package considers several elements including products, sites/facilities, inventory strategies,
strategic sourcing decisions, and potentially the cost of carbon offsets. Other constraints can also
be set. A partnership with SmartWay will allow for improved GHG outputs. The model is an
optimization system and can have multiple constraints, unlike simulation models. Application of
multiple constraints increases the complexity of the optimization routines exponentially—all
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• Shippers noted that while other supply chain modeling packages are commercially available, few
offer the level and sophistication of Llamasoft's package. However, only high-end shippers can
take advantage of sophisticated routing software tools.
• Several questions arose regarding supply chain GHG quantification, including how to take credit
for home delivery and service support vehicles, logistics improvements, consumer product
takeback programs, non-traditional teaming arrangements (to improve overall system
performance), small package deliveries, and LTL trailers.
• Regarding the use of absolute or relative methods of quantification, one Partner attempts to
quantify improvements on a relative basis, whereas another attempts to specify an absolute
number. Methodologies must eventually account for the fact that companies may be growing, so
the evaluation metric is critical.
• Company-specific, or even SCAC code-specific, CO2 scores were requested.
• At this time EPA is focused on links rather than nodes for SmartWay 2.0.
Performance Evaluation
• EPA and Shippers broadly agreed with respect to the "80/20" rule: roughly 80 percent of the
potential benefit of improving the SmartWay supply chain modeling procedure can be
accomplished for 20 percent of the overall effort, while the remaining 20 percent of the potential
refinements would take approximately 80 percent of the effort. Therefore, EPA's goal is to
identify the new data reporting requirements and calculation procedures that will result in the
greatest improvement in the quantification process, while identifying and excluding those
measures that result in too little benefit to justify their expense.
• One Partner stated that the current quantification protocol works relatively well for long-haul
trucks. The goal is now to improve evaluation for other sectors (e.g., drayage, etc.).
• Some Partners would like to see scores above the current default SIF value of 0.75 for intermodal
transport. Shipper scores can decrease if intermodal is used; one Partner commented that they
would stop using intermodal to increase the SIF score if current scores were made public. It was
noted that it is difficult to move beyond average mode values if individual rail carriers are not
differentiated.
• A concern was raised about the need to address perishable shipments differently, due to their
unique shipping requirements.
• EPA anticipates specific emission factor development at least for TL, LTL, short-haul, and long-
haul.
• A comment was made that there may not ever be a point where there will there be "enough" data;
it is much more important to establish standard reporting and calculation procedures.
• The general consensus was that carrier partners should have a more detailed model in order to
support refined decision-making among shippers. EPA plans to rely on conservative industry
average efficiency factors as defaults to encourage carriers to provide more data.
• While many shippers are actively exploring ways of reducing total trips through packaging and
other logistic improvements, there is no consensus strategy for accounting for such improvements
in SIF scores. (A similar issue was raised about how to account for the effect of overarching
business cycle changes.) There was agreement to exclude these impacts from the carrier model,
however.
• Uncertainty was expressed regarding how the quantification protocol should handle reverse
logistics and recyclers.
• Several shippers expressed concern about potential bias that can be introduced by the exclusive
use of gram per mile (or, alternatively, gram per ton-mile) performance metrics. EPA
recommends developing a sliding adjustment factor to apply to gram per mile factors to account
for tonnage variance.
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Global Supply Chain
• A general question was raised about the definition of a "global supply chain." At this time, most
companies start their international assessments at the port of exit, rather than within the country
of manufacture.
• There is a need to incorporate international priorities with domestic GHG reporting. Working
with other groups using different GHG estimation platforms is not clean or transparent. By
expanding the current protocol and integrating it with international programs, shippers can
expand their influence internationally.
• One Partner is creating a baseline GHG estimate for its global transport activities.
• Shareholders in the United States are beginning to actively encourage companies to be consistent
in their reporting practices.
• EPA noted that there is substantial international interest in replicating SmartWay. EPA is holding
a conference in December 2008 to meet with foreign officials on this topic, hopefully paving the
way for establishing consistent GHG reporting and calculation procedures for global freight
movement.
User Group/Account Management Issues
* EPA described the account management problems that have arisen due to the continued growth of
the program, coupled with the limited number of EPA staff serving as account managers. A
backlog of applications has developed.
• EPA requested input regarding alternative SmartWay account management strategies, including
possibly handing off management to a third party/industry trade association. If EPA retains
account management responsibilities, the goal would be to streamline the process, while
simultaneously implementing improved data collection procedures.
• Shipper partners were not willing to volunteer to start an independent association because of
staffing and time constraints. They would be more likely to provide money toward establishing a
third party group. Dues could be implemented on a sliding scale for smaller shippers.
• Participants discussed various industry support organizations that could serve as models for such
a group, including the Performance Track Participants Association, the Mailers' Technical
Advisory Committee, the U.S. Green Building Council, and the Air Waste Management
Association.
Miscellaneous
* Independent program evaluation. MIT is conducting a Systems Dynamics Study to quantify and
benchmark the SmartWay Partnership performance. A draft report will be available this fall.
• Data integrity. It was noted that data quality in shippers' questionnaires is not always high, and
staff is not available to review. Data integrity is key to success of the program. SmartWay
provides support to partners and helps to verify applicant data. A third-party verification system
could work—60 to 70 percent of companies doing business in the European Union already use
such systems. There was a consensus that this is quite feasible, and could be performed by an
entity like PWC. This approach could help address some of the carrier confidentiality concerns.
While some shippers might be inclined to hire auditors themselves, this practice seems to be more
common in Europe.
• Participation. A Partner expressed concern about Partners that sign up for SmartWay but don't
continue to meet program requirements. EPA has dropped 100 to 150 partners due to non-
reporting of required materials. EPA performs due diligence on all applications before admitting
carriers into the program.
• Regulatory uncertainty. EPA should consider further developing detailed GHG reporting
protocols and tools as a voluntary measure, before they are mandated. In this way, SmartWay can
bring the industry point of view to the table for integration into future protocols if mandated.
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• Alternative carrier incentives. Shippers noted differing practices in the application of fuel
surcharges. Some shippers treat fuel surcharges strictly as a pass-through cost, separate from any
other rate discussions. Others actively use surcharge programs to promote further efficiency
improvements. One Shipper described their strategy of loosening their timing requirements in
order to help carriers decrease their empty load miles.
• New testing procedure. EPA is developing a new emissions test procedure for testing Class 2-8b
trucks in order to obtain a variety of metrics. The procedure will use an on-road test cycle (as
opposed to the current engine dynamometer tests), allowing for detailed evaluation of GHG
emissions versus payload and other relevant factors.
Agreements
There was general consensus on the following regarding the upcoming Carrier FLEET and Shipper model
updates:
1. An update is needed for both models.
2. Partners want new, refined tools with greater detail.
3. Partners want additional transportation modes modeled (rail, air, commercial marine).
4. There is a need for greater transparency with respect to carrier data submissions.
5. Partners need performance-based metrics for carriers (e.g., reporting of miles traveled and gallons
consumed, rather than potentially burdensome technology descriptions).
6. Partners would prefer data at the carrier or SCAC level, ideally based on specific mass emissions
rather than performance "bins."
7. There is a need for improved transparency of shipper scoring (and what these scores actually
mean).
8. EPA should continue to act as a clearinghouse for technical information (10 mpg truck progress,
identification of non-certified "snake oil" products, etc.).
Action Items
• EPA will speak to Carrier Partners to determine where they stand, particularly in regards to
shippers' requests for more detailed data and increased transparency. EPA will arrange for a
Carrier Partners' meeting similar in scope to this meeting.
• Shippers will work together to send letters to Carrier Partners to inform them of shippers' desire
for more data. Mark Servidio, Sharp Electronics, volunteered to draft the letter and lead the effort
to determine how it will be sent. EPA asked to be copied on this letter, or sent a separate letter.
Shippers will send the letter before next meeting.
• EPA will draft a request to solicit participation in parallel modal working groups (air, rail, short
sea shipping, etc.). EPA will provide details on what participants would be asked to do.
• EPA and Shippers will consider if next meeting should be a Shipper/Carrier Partners workgroup
or a Shippers-only meeting.
Tabled
• There was a request to change intermodal scores to reflect the greater efficiency of rail transport.
Consider changing the current 0.75 value to 1.25 as a short-term measure until SmartWay 2.0.
Next Steps
• EPA will conduct a Webinar and include an announcement in eUpdate to let the entire
Partnership know about the SmartWay 2.0 vision and the Shippers meeting.
EPA will conduct a follow-up Webinar or conference call for the Shippers group in August.
• EPA will hold a face-to-face meeting with the Shippers group (or Shippers/Carriers if
appropriate) in the fall of 2008. Suggested meeting locations/times include:
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RILA Environmental Sustainability & Compliance Conference, Frisco, Texas, September
22-24, 2008.
Sharp Electronics Corporation, Mahwah, New Jersey (Sharp is flexible regarding timing).
Council of Supply Chain Management Professionals' Annual Conference, Denver,
Colorado, October 5-8, 2008.
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