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9. Transportation and Sustainability

Sustainability is often thought of as a negative concept forced upon busi-

nesses that increases their overall costs without any consideration to the

survival of the business. Sustainability has also been wrongly associated

with environmental protection. In reality, sustainability seeks to find the

balance among three seemingly disparate aspects of every business: 1) se-

curing economic value for shareholders, 2) protecting the environment in

which the business operates, and 3) expressing concern for the commu-

nity and other stakeholders of the business. These three aspects are

rightly called the Triple Bottom Line (TBL)—economic, environment, and

societal dimensions. Sustainability as an idea was enunciated most fa-

mously in the United Nation’s Brundtland Commission report, where it

was defined as the ability “to meet the needs of the present without com-

promising the ability of future generations to meet their own needs.”

Agenda 21 of the United Nations, a follow-up to the Brundtland

Commission, mandated that business and industry reduce their impact

on the environment “through more efficient production processes, pre-

ventive strategies, cleaner production technologies and procedures

throughout the product life cycle, hence minimizing or avoiding wastes.”

Businesses conventionally are run using a “cradle-to-grave” strategy. A

firm normally offers a product and ensures that its supply chain has the

capability to deliver the product to the end consumer. The firm does not

monitor or have a stake in following up with the consumers on where,

how, and why they dispose of the product after they stop using it. In most

cases, the product ends up in a landfill, which has huge environmental

costs in the long term. In today’s environment, pressure from the govern-

ment, consumers, and society is forcing firms to rethink the way business

needs to be conducted. Firms are looking at reintroducing raw materials

into the supply chain and using innovative methods to design, manufac-

ture, and deliver products to the consumers. This is leading firms to adopt

the “cradle-to-cradle” strategy. As Samuel DiPiazza, Global CEO for

PricewaterhouseCoopers, puts it, “[L]eading global companies of 2020

will be those that provide goods and services and reach new customers in

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ways that help to address the world’s major challenges—including

poverty, climate change, resource depletion, globalization, and demo-

graphic shifts. This is not just about social responsibility, but about devel-

oping a core business operation that can thrive in a different global eco-

nomic environment.” Organizations that are resistant to change will find

themselves forced to change due to legislative action such as the End-of-

Life Vehicles (ELVs) Directive, the Restriction of Hazardous Substances

(RoHS) Directive, and the Energy using Product (EuP) Directive.

Therefore, to embrace the concept of sustainability, firms must view the

world through the lens of the TBL. Transportation is one enabler of mov-

ing products from the source of raw materials to the final consumer and

back from the consumer either to a landfill or to the supply chain. In ad-

dition, transportation is a derived demand and, hence, uses inputs such

as services and products from other industries whose output is normally

a service. The different modes of transportation can be broadly divided as

personal cars, trucks, rail, air, sea/inland waterways, and pipelines. These

modes sometimes are in competition with one another and sometimes

complement each other. Hence, to analyze sustainability in transporta-

tion, the individual modes must be studied within the context of the sup-

ply chains in which they operate.

Transportation’s Role in Sustainable Supply Chain Management

A supply chain is a complex web of organizations trying to match the end

demand of consumers with all the supply constraints of these organiza-

tions. A focal manufacturing company could have multiple-tier suppliers

and customers, each of which needs to be connected to the others to en-

sure a smooth flow of products. The role of transportation is to connect

all the suppliers with all the customers. In addition, with the recent focus

on cradle-to-cradle strategy, the role of transportation has only increased

in the area of reverse logistics. Whether the end products are landfilled

or reintroduced back into the same supply chain or a different supply

chain, transportation enables these functions.

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Two dominant views of supply chain management exist: the functional

viewpoint and the process viewpoint. The functional viewpoint as popu-

larized by the Supply-Chain Council’s Supply-Chain Operations Reference

(SCOR) has the elements of plan, source, make, deliver, and return. In

Figure 9-1, transportation plays a big part in sourcing, in delivering, and

in the returns of the product.

Figure 9-1 Supply chain operations reference model.

In the process view of supply chain management, transportation plays a

big part in some key processes: a) managing demand by techniques such

as just-in-time (JIT) and lean logistics, b) fulfilling orders in the frequency

and priority that a firm desires, c) enabling the flow of materials in the

manufacturing process that is normally spread out across the globe, and

d) making sure that the returns process occurs efficiently and effectively.

Hence, whether firms view supply chain management as a function or a

process, transportation offers the physical connectivity among members

of the supply chain.

The Need for Sustainability in Transportation

Transportation accounts for approximately 19 percent of global energy

use and emits about 23 percent of the energy-related carbon dioxide

(CO ). In addition, the transport sector is responsible for 60 percent of the

world’s oil demand, with road transport accounting for 80 percent of the

oil demand of transportation. Because transportation—and, hence, CO

emissions—are strongly correlated with population and incomes, the

trend is for increased use of fossil fuels and greater emissions, which

leads to an unsustainable mix. This is because the least developing and

developing countries are moving toward a higher standard of living

while the developed countries are in the process of maintaining, if not

improving, their current levels of prosperity. Since 1971, the transporta-

tion sector has more than doubled the amount of energy it uses. The top

users of energy are road (passenger), road (freight), world marine

bunkers, domestic aviation, international aviation, pipeline transport, rail

transport, inland and coastal navigation, and other miscellaneous modes.

Within the different kinds of fuels used worldwide, North America, the

Middle East, Australia, and Japan primarily use gasoline, followed by

diesel, jet fuels, compressed/liquefied natural gas (CNG/LNG), electricity,

biofuels, and coal. In the rest of the world (other than Russia and its

neighbors), diesel dominates the fuel mix, followed by gasoline and jet

fuel. Only in Russia and its neighboring countries do gasoline and

CNG/LNG have an equal share and represent the majority of the fuel mix.

The road (passenger) segment is often called the light duty vehicles

(LDVs) by the International Energy Agency (IEA). The IEA estimates that,

except for Asia (excluding Russia and Japan), most of the LDVs are domi-

nated by cars and sports utility vehicles (SUVs). Asia (excluding Russia

and Japan) is dominated by two/three-wheelers. However, the growth of

cars in Asia is now the highest compared to other parts of the world, espe-

cially in developed economies where their share is actually falling.

The average vehicle efficiencies as expressed by CO equivalent per ton-

kilometers (freight) indicates that shipping is the least polluter of green-

house gases (GHG), followed by freight rail, road freight, and air. In the

passenger segment as measured by CO equivalent per passenger-kilome-

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ter, rail releases the least amount of GHG, followed by bus, two-wheelers,

passenger LDVs, and air.

Table 9-1 shows the energy consumption by different modes of trans-

portation in the United States. The most energy used (in petajoules) is by

LDVs that use gasoline and diesel as the primary fuels. This accurately

mirrors the trend happening in the world. LDVs are followed by freight

by road (combination truck), passenger and freight airlines, water-/sea-

borne trade, and rail. The only anomaly in the United States when com-

pared to the global trend is that rail transport uses less energy compared

to sea/inland waterways, possibly because of the prevalence of lengthier

freight trains compared to the rest of the world.

Source: U.S. Department of Transportation (DOT).

Table 9-1 Energy Consumption by Mode of Transportation

(Petajoules) for Select Years

As far as GHG emissions are concerned in the United States, Table 9-2 il-

lustrates the respective emissions among CO , methane, and nitrous oxide

by different transportation modes. As expected, the amount of GHG emit-

ted shows a strong correlation with the amount of energy consumed by

each mode of transportation. LDVs, followed by trucks and buses, air, wa-

ter, rail, and pipeline, are the big emitters of GHG.

Source: U.S. DOT.

Table 9-2 Greenhouse Gas Emissions by Transportation Modes, 1990

and 2011 (Million Metric Tons of Carbon Dioxide Equivalent)

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Congestion has always been a problem in all modes of transportation, es-

pecially in urban areas. The Texas Transportation Institute (TTI) reported

in 2005, “Traffic congestion continues to worsen in American cities of all

sizes, creating a $78 billion annual drain on the U.S. economy in the form

of 4.2 billion lost hours and 2.9 billion gallons of wasted fuel.” The

Federal Highway Administration (FHWA) of the U.S. Department of

Transportation (DOT) estimates that the exceeded capacity of the National

Highway System (NHS) will rise from 3.35% in 2002 to 25.6% in 2035.

Figure 9-2 shows the severity of the problem in all the metropolitan areas

of the United States. This would lead to increased consumption of fuel

and higher emissions of GHG, in addition to lost hours of work and siz-

able opportunity costs. More congestion also points to higher rates of ac-

cidents and potential for injury.

Figure 9-2 NHS highway congestion for the year 2035.

One of the problems leading to highway and roadway congestion is the

way the Highway Trust Fund is funded. The current model pays a fixed

amount per gallon of gas used into the fund. However, due to more effi-

cient vehicles and the fact that people are driving shorter distances than

they used to, there is real concern regarding the monies available to

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maintain the current road network. Future expansion of the highway and

road system needs considerably higher funding than what the fund cur-

rently holds.

In the United States, the railroads are privatized, except in the case of

Amtrak, which has the mandate of moving only passengers. As previously

noted, the miles of tracks drastically reduced by 50 percent from 1960 on-

ward, to around 140,000 miles. The rail industry saw steady consolidation

after the Staggers Act in 1980, when the industry was deregulated. As of

today, only seven Class I operators exist, severely limiting competition.

The railroads are showing signs of investing for the future. But the

Federal Highway Administration is predicting a 30 percent rise in conges-

tion from 2002 to 2035. Figure 9-3 essentially points to a rail network that

exceeds its capacity in most of the main routes connecting the West Coast

to the East Coast.

Figure 9-3 Train volumes in 2035, compared to capacity in 2002.

As far as the congestion in airports is concerned, the U.S. Government

Accountability Office (GAO) states in its report that, by 2025, 14 airports

would be severely congested even if additional funding were made avail-

able to them because of location issues. Table 9-3 lists the 14 airports and

their respective metropolitan areas. Even though the number of airports

is small, the cascading effect of delayed flights, missed connections, and

higher penalties on airlines throughout the system will be felt widely.

Source: Government Accountability Office (GAO), U.S. Department of

Transportation.

Table 9-3 Airports Forecast as Being Significantly Capacity-

Constrained by 2025 (Even If Planned Improvements Occur) and

Their Corresponding Metropolitan Regions

Triple Bottom Line (TBL)

The notion of the TBL is attributed to John Elkington. The TBL consists of

three dimensions of business performance: profit (economic), planet (en-

vironmental), and people (societal) bottom lines. It is often represented as

shown in Figure 9-4, with sustainability being the intersection of the TBL.

The motivation of coming up with the three bottom lines was that im-

provements could be made only when they were measured accurately.

Among the criticisms of TBL is that it is hard to measure. Most times, the

economic bottom line can be expressed in a common denominator, such

as money/currency as, say, dollars ($). But expressing environmental and

societal measures for a diverse range of industries with the same units is

difficult. Also, the question of allocating weights to each of the bottom

lines can vary dramatically, depending on the firm and the context in

which it operates.

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Figure 9-4 Representation of the Triple Bottom Line.

One organization that has tried to measure TBL across different organiza-

tions is the Global Reporting Initiative (GRI), based in Amsterdam, The

Netherlands. This organization has strategic associations with the United

Nations Global Compact, United Nations Environmental Programme,

Organization for Economic Cooperation and Development, and

International Organization for Standardization. In addition, the organiza-

tion has synergies with The Earth Charter Initiative, UNCTAD, and

International Finance Corporation. GRI encourages firms to voluntarily

report the measures based on TBL and is currently in the G3.1 version of

its reporting metrics. The firm then grades organizations based on the

amount of disclosure on their sustainability metrics as given in their G3.1

guidelines. Approximately 5,604 organizations have started voluntarily

reporting their sustainability measures to this organization (see

http://database.globalreporting.org/).

The TBL was designed to be used at the firm level. Each of the bottom

lines can be further broken down into different categories, but for the

sake of simplicity, the following classifications are used.

Economic Bottom Line: This bottom line can be further broken down as

per the various business dimensions:

Cash flow and growth-management measures

Balance sheet (asset utilization) measures

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Productivity and efficiency measures

Demand management measures

Capitalization measures

Environmental Bottom Line: This bottom line can be further broken

down, based on the environmental impact areas:

Material use measures

Energy use measures

Solid residue measures

Liquid residue measures

Gaseous residue measures

Societal Bottom Line: This bottom line can be further broken down,

based on the stakeholders the firm impacts:

Suppliers

Financial institutions

Customers

Employees

Local community

Non-government organizations (NGOs)/media

Government

One big debate centers on the drivers of change in TBL. The consensus so

far is that if an organization or country sees benefits (economic) or if soci-

ety demands a change (societal), only then will the environment change

for the better. By itself, environmental concern will not force govern-

ments or organizations to reduce or eliminate GHG, emissions, or any

other pollutants.

The GRI reporting guidelines mentioned earlier normally apply at the or-

ganizational level. Measuring the TBL of the entire transportation indus-

try is difficult for these reasons:

Lack of common standards—Every mode of transportation has its own

set of metrics and performance standards. Often they do not complement

each other. Also, the goods and passengers in certain modes of trans-

portation cannot be easily switched to another mode of transportation.

Limitation of the data collected—Multitudes of agencies are collecting

different datasets that are not easily comparable. In some countries, due

to war, strife, or natural disasters, data collection might be thoroughly ab-

sent. In collecting data for the entire world, a lag of a couple years often

passes before good data are made available. In the meantime, the data

might not accurately reflect the ground realities.

Different objectives—Different governments and agencies have differ-

ent objectives while running their transportation systems. Some concen-

trate on profitability, some on accessibility in terms of reach, and others

on subsidizing the network to enable low cost access. Each of these objec-

tives leads to different metrics being developed and emphasized.

Potential Solutions to Make Transportation More Sustainable

Every product that is manufactured has four different stages in its lifecy-

cle: premanufacturing, manufacturing and distribution, use, and post-

use. Most concepts that deal with the idea of sustainability think of it as

prolonging the use stage of a product’s lifecycle. Extending the use stage

of a product’s lifecycle only increases the sustainment of the product, not

its sustainability. To increase the sustainability of the product, all four

stages of the lifecycle need to be considered holistically. In addition, at

the premanufacturing stage, products need to be designed while keeping

in mind that the raw materials to be used in the goods need to be disas-

sembled and processed in the post-use phase of the product, to be reintro-

duced as raw materials in the second lifecycle of the raw material. Hence,

every raw material that goes into a product needs to be looked at as hav-

ing applications beyond one lifecycle of the product, into multiple lifecy-

cles of the product. As an example, car engines are being built with alu-

minum even though it is more expensive than steel because aluminum

can be melted and reused several times, unlike steel, which tends to

break down after three or four cycles of remelting.

To be truly sustainable, the virgin raw materials introduced into the

product for the first time should have the capacity of being fully or par-

tially reintroduced into the supply chain at the end of their current lifecy-

cle. This requires innovative design capabilities at the premanufacturing

stage of the product lifecycle. It has been shown that such innovation has

led to increased profitability for firms.

The end-of-life directive in Europe came into force on September 18,

2000. The directive stated that car manufacturers were responsible for

the final disposal of cars after the use phase of their lifecycle. The direc-

tive mandated that at least 85 percent of the car be recycled. This led to a

change in the composition of cars at the premanufacturing stage to en-

able the car manufacturers to meet the directive. Specifically, the use of

plastics has increased by 50 percent to 133 kg. Thus, use of aluminum has

increased dramatically, to 210 kg per car, a 120 percent increase from

2003, because that material is easily recyclable. Materials made of natural

fibers are being tested to replace polymers, to increase recyclability and

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decrease the overall weight of the vehicle to increase fuel efficiency. Car

manufacturers are increasingly using lifecycle assessment tools at the de-

sign (premanufacturing) phase to make sure that they comply with more

stringent regulations.

The IEA estimates that GHG emissions will be reduced in the future

through these means:

Modal shift—People preferring high-speed trains for short- and long-

distance traveling. Because of the high price of fossil fuels, people tend to

stay closer to their workplace and might choose other forms of trans-

portation, such as walking or biking within the downtown areas of the

city.

Efficiency—Better ways of managing transportation networks and

fleets, and newer, faster routes found over sea, air, and land to reach des-

tinations quicker while emitting lower GHG.

Alternative fuels—Electric vehicles, hybrid vehicles, and hydrogen fuel

cells becoming cheaper over the years, driving up efficiency while reduc-

ing GHG.

On the policy-making front, several laws are forcing the transportation

industry to be more sustainable. In the United States, the Energy Policy

and Conservation Act started the Corporate Average Fuel Economy (CAFÉ)

regulations to improve the fuel efficiency of cars and trucks. In 2011,

President Obama signed an agreement with 13 car manufacturers to in-

crease fuel efficiency to 54.5 miles per gallon in models starting in 2025.

The EU has a nonbinding goal of cutting the average CO from passenger

vehicles to 95 grams per kilometer in 2020 (from 159 grams in 2007). The

industry has taken the lead on reducing its carbon footprint and emis-

sions by switching shipments to alternate modes of transport and improv-

ing tire and aerodynamic technologies in its fleet.

Transport-related CO emissions are expected to rise by 57 percent world-

wide from 2005 to 2030. China and India will contribute about half this

rise, as their economies grow. Figure 9-5 gives the amount of CO being

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emitted by various modes of transportation per ton of freight carried per

kilometer. Air transport emits the maximum GHG per this measure, fol-

lowed by road transportation and then the shipping industry. The Kyoto

Protocol excludes international aviation and maritime transport from the

GHG emission targets of signatory countries and lets the International

Civil Aviation Organization (ICAO) and the International Maritime

Organization (IMO) come up with their own guidelines. According to the

IMO, the shipping industry contributed around 3.3 percent of all global

emissions in 2007, with international shipping contributing 2.3 percent of

all CO emissions. However, no laws mandate emission cuts in the ship-

ping industry because member states of IMO have no consensus among

themselves. Currently, bigger ships that can handle 18,000 to 20,000 20-

foot equivalent units (TEUs) are being built to run at slower speeds to in-

crease fuel efficiency and reduce emissions.

Figure 9-5 Comparison of CO emissions in freight transport by mode

of transport (grams carbon per ton freight carried per kilometer).

In addition, port operations are seeking to become more environmentally

responsible. The Port of Gothenburg in Sweden provides a good example.

The port is fitted to equip ships with shore-connected electricity gener-

ated by wind power just off the coast. This allows ships to run on cleaner

power. The port is also developing liquefied natural gas (LNG) as a

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cleaner alternative source than fossil fuels. Finally, the port is establish-

ing more connections with Scandinavian cities by rail, as opposed to

trucks. In 2012, the port reduced CO emissions by 50,000 tons. These

developments are representative of the actions taken by the most pro-

gressive shipping ports around the world.

In the air transport business, ICAO has set up a committee to look at re-

ducing GHG and other pollutants, but most of the initiative comes from

the local community or the industry. Many countries have stopped air-

craft operations at night, to reduce noise pollution. The European Union

and the United States have banned certain airlines and planes for not ad-

hering to safety standards and preventive maintenance. The industry is

looking at consolidating freight and shipping in full container loads, or

bypassing air transport altogether, if receipt of the product is not time-

critical.

To tackle road congestion, especially in the United States, a proposal in-

vites the private sector under the public–private partnership (PPP) model

to finance new roads. This would lead to a greater number of toll roads

for a pay-as-you-go model. The critique of this model is that citizens might

be unwilling to pay for roads that they had not previously paid for and

might adopt a “not in my backyard” (NIMBY) attitude to prevent land

from being taken away to build highways.

In the air transportation business, the focus is on building or expanding

regional airports in cities where the main airports cannot be expanded.

Also, the focus is on integrating different modes of transport to give con-

sumers more choice. For example, the State of California is building a

high-speed train system to compete with the airlines on the San Diego-to-

San Francisco corridor. Similar rail initiatives are being planned in the

states of Washington, Wisconsin, Indiana, and Illinois, as well as in the

Northeast Corridor. After years of reducing capacity on the rail network,

the private Class I railroad operators are expanding their capacities as

they sense an opportunity in the congestion that plagues the highway sys-

tem. But NIMBY is preventing the railroads from expanding aggressively

in dense metropolitan areas where most of the profitability lies.

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Summary

By its very nature, the transportation industry impacts the living condi-

tions on our planet. Transportation is the biggest contributor to GHG

emissions and consumes enormous sums of energy. Much of the initiative

to reduce emissions and improve fuel efficiency comes from citizens who

are demanding safer, cleaner, and more efficient transportation.

Government legislation is among the most impactful influences on sus-

tainability in transportation, yet some carriers are leveraging sustainabil-

ity as a basis of competition by actively measuring and reporting emis-

sions and energy usage. Railroads, in particular, are speaking of their im-

mensely more efficient means of moving large volumes over long dis-

tances than truck transportation. In turn, rail carriers in North America

are placing more emphasis on intermodal transportation and investing

tens of billions of dollars in expanded capacity. Many large trucking com-

panies are allying with the railroads to leverage these environmental

benefits and to offset the driver shortage problem faced in trucking.

Unfortunately, these initiatives are currently primarily limited to the

most advanced markets of North America and Europe. Developing coun-

tries remain focused on simply moving goods at the lowest cost through

conventional means. However, many companies have realized that em-

ploying higher orders of concern for the environment and society also fa-

vorably impacts the economic bottom line. In other words, it makes sense

to be lean, green, and sustainable for a healthier business and society.

Perhaps this belief can gain greater acceptance around the world in the

coming years.

Key takeaways from this chapter include:

Transportation is essential to business and personal mobility, yet its

larger impacts must be considered in business and policy decisions.

The Triple Bottom Line (TBL) concept provides a means to measure and

assess impact across three dimensions of sustainability performance: 1)

economic, 2) environmental, and 3) societal performance.

Lifecycle assessment helps to evaluate the environmental impact of

business decisions throughout the lifecycle of a product, including the

premanufacturing, manufacturing and distribution, use, and post-use

stages. The number of expected lifecycles in which materials will be used

and reused is also important to consider.

Concerns for sustainability can influence the choice of transportation

mode and the selection of carriers operating within a mode.

Industry and governments must work together to devise transportation

policies that ensure sustainable outcomes.

Endnotes

1. United Nations, “Report of the World Commission on Environment and

Development,” General Assembly Resolution 42/187, 11 December 1987.

2. United Nations Conference on Environment and Development

(UNCED), 1992.

3. T. Engen and S. DiPiazza, A Broader Approach to Accountability, World

Business Council for Sustainable Development, 2005.

4. World Energy Outlook 2008, International Energy Agency,

www.iea.org/media/weowebsite/2008-1994/WEO2008.pdf.

5. David L. Schrank and Timothy J. Lomax. The 2007 Urban Mobility

Report. Texas Transportation Institute, Texas A&M University, 2007.

6. John Elkington, Cannibals with Forks: The Triple Bottom Line of the 21st

Century Business (Oxford: New Society Publishers, 1998).

7. The GRI separates out governance structure from societal measures.

8. F. Badurdeen, D. Iyengar, T.J. Goldsby, J. Metta, S. Gupta, and I.S.

Jawahir, “Extending Total Life-cycle Thinking to Sustainable Supply Chain

Design,” International Journal Product Lifecycle Management 2009;4(1-

3):49–67.

9. Jason Gerrard and Milind Kandlikar, “Is European End-of-life Vehicle

Legislation Living up to Expectations? Assessing the Impact of the ELV

Directive on ‘Green’ Innovation and Vehicle Recovery,” Journal of Cleaner

Production 2007;15(1):17–27.

10. Port of Gothenburg, www.portofgothenburg.com/About-the-

port/Sustainable-port/.