Greater Than Position Paper Meeting the CO2 Challenge in the
2012-02-21
Greater Than Position Paper Meeting the CO2 Challenge in the Haulage Sector Introduction Road transport is one of the few sectors in Europe that continues to increase its CO2 emissions. Greater Than* believes that transport buyers hold the key to addressing this priority challenge. With current business models, buyers assume responsibility for the cost of fuel, so they should also ensure that transport providers maintain a process that delivers the best in fuel efficiency. By obliging transport providers to measure their driver fuel efficiency rather than monitoring driver behaviour, this worrying trend can be curbed, making an immediate impact on the drive towards a low carbon economy.
Background The European Union 2020 Strategy sets out a plan to modernise Europe’s transport sector and decouple economic growth from CO2 emission increases. The challenge of meeting this objective in the haulage sector is particularly great, where today only 8% of the market considers fuel savings a priority. Consequently, trucks are still driven in a manner that leads to 15% higher than necessary fuel consumption and despite technological advances, CO2 emissions from the sector continue to grow. The following paper highlights some of the key challenges preventing the haulage sector from reducing its carbon footprint and proposes obvious action to meet the haulage sector’s CO2 challenge.
Meeting the Haulage CO2 Challenge 1. Fuel responsibility Prevailing business models in the haulage sector are preventing improvements in fuel efficiency, demonstrating the failure of the shared fuel responsibility that currently characterises the haulage market. The haulage sector has three key actors; transport providers (hauliers), third party logistics providers (3PLs) and transport buyers (such as retailers). a)
Transport providers pass on the cost of fuel to the buyer; hence they have limited incentive to reduce fuel consumption. The two main types of contractual agreement used between transport buyers and transport providers reflect this: Under open book contracts, transport buyers agree a fixed operational margin with transport providers, who have no incentive to reduce fuel costs as they are sheltered by the protected margin. Under fixed price contracts, both parties agree on a fixed price per unit but the price is protected with fuel escalators clauses and resulting cost increases are passed on to the transport buyer.
b) Third party logistics providers add a commission on top of the haulage cost, again resulting in limited incentive to reduce fuel consumption. As large logistics companies outsource the haulage part of the value chain and operate on a commission basis, this gives rise to the wrong incentives because the higher the overall cost to the transport buyer the higher the commission for the 3PL. The 3PL also use fuel surcharges to pass on any cost increase to the transport buyer. As a result higher fuel price is poor incentive to reduce fuel consumption. Transport buyers require driver training, however limited attention is given to actual fuel efficiency achievements beyond such training. Unfortunately, the means have become more important than the end results.
With fuel surcharges, suppliers not responsible for fuel costs, brokers that benefit from commissions and buyers addressing the means but not the end results, fuel savings are today a low priority for hauliers and 3PLs.
The LeanHaulage® IT application measures driver fuel efficiency, which is a measurement of energy efficient driving. This is a fair measurement that the driver can influence rather than the subjective monitoring of driver behaviours.
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2012-02-21
2.
Changing driving practices
Today a range of solutions exist to reduce CO2 emissions. Amongst them, the eco-driving training is widely spread and most transport providers will have eco-driving initiatives in place. However, in practice such initiatives are short term solutions due to a lack of continuous measuring of driver fuel efficiency. Monitoring of driver behaviour is another popular practice. However, a lack of progress is evident as certain driver behaviour is not the same as fuel efficient driving. Efforts are spent on driver training and behaviour monitoring but limited attention is given to the intended results - driver fuel efficiency.
Greater Than’s position The issues highlighted above demonstrate the key challenges that are currently undermining the drive towards improved fuel efficiency and CO2 emissions reductions in the haulage industry. Greater Than believes that in order to meet our CO2 challenge for road transport we need to: 1. 2. 3.
Encourage transport buyers to demand that transport providers to measure driver fuel efficiency; Encourage transport providers to measure driver fuel efficiency rather than subjective monitoring of driver behaviours; Inform freight transport providers and buyers about the differences between a training course, driver behaviour and fuel efficient driving.
Transport buyers should require transport providers to measure and report their driver fuel efficiency, resulting in fuel savings, reduced CO2 emissions, improved driver well-being and savings in transport costs. Apart from the obvious CO2 benefits, this sourcing requirement will safeguard European jobs, improve drivers’ work environments, reduce driver stress, increase road traffic safety and bolster the European economy. *Greater Than is a Belgian/Swedish based company that specialises in IT solutions to help road transport become more sustainable. The LeanHaulage® application measures driver fuel efficiency, which is a measurement of energy efficient driving. This is a fair measurement that the driver can influence rather than the subjective monitoring of certain driver behaviours. As a result, further CO2 reductions and improved driver well-being is achieved. Driver fuel efficiency is an open solution available for all users. Greater Than clients currently include Alfredsson Transport AB, Coca Cola Enterprises Benelux, Nybro Transport AB along with over three hundred other European hauliers. Greater Than is a European Road Safety Charter signatory. Greater Than endorsers include: Sveriges Åkeriföretag (Swedish Road Haulage Association), Transport Gruppen (Transport Group trade association), Q3 (Quality in Road transport procurement). For more information on Greater Than, please visit: www.greaterthan.eu
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For more information on LeanHaulage®, please visit: www.leanhaulage.com
The LeanHaulage® IT application measures driver fuel efficiency, which is a measurement of energy efficient driving. This is a fair measurement that the driver can influence rather than the subjective monitoring of driver behaviours.
Greater Than Position Paper Meeting the CO2 Challenge in the Haulage Sector Introduction Road transport is one of the few sectors in Europe that continues to increase its CO2 emissions. Greater Than* believes that transport buyers hold the key to addressing this priority challenge. With current business models, buyers assume responsibility for the cost of fuel, so they should also ensure that transport providers maintain a process that delivers the best in fuel efficiency. By obliging transport providers to measure their driver fuel efficiency rather than monitoring driver behaviour, this worrying trend can be curbed, making an immediate impact on the drive towards a low carbon economy.
Background The European Union 2020 Strategy sets out a plan to modernise Europe’s transport sector and decouple economic growth from CO2 emission increases. The challenge of meeting this objective in the haulage sector is particularly great, where today only 8% of the market considers fuel savings a priority. Consequently, trucks are still driven in a manner that leads to 15% higher than necessary fuel consumption and despite technological advances, CO2 emissions from the sector continue to grow. The following paper highlights some of the key challenges preventing the haulage sector from reducing its carbon footprint and proposes obvious action to meet the haulage sector’s CO2 challenge.
Meeting the Haulage CO2 Challenge 1. Fuel responsibility Prevailing business models in the haulage sector are preventing improvements in fuel efficiency, demonstrating the failure of the shared fuel responsibility that currently characterises the haulage market. The haulage sector has three key actors; transport providers (hauliers), third party logistics providers (3PLs) and transport buyers (such as retailers). a)
Transport providers pass on the cost of fuel to the buyer; hence they have limited incentive to reduce fuel consumption. The two main types of contractual agreement used between transport buyers and transport providers reflect this: Under open book contracts, transport buyers agree a fixed operational margin with transport providers, who have no incentive to reduce fuel costs as they are sheltered by the protected margin. Under fixed price contracts, both parties agree on a fixed price per unit but the price is protected with fuel escalators clauses and resulting cost increases are passed on to the transport buyer.
b) Third party logistics providers add a commission on top of the haulage cost, again resulting in limited incentive to reduce fuel consumption. As large logistics companies outsource the haulage part of the value chain and operate on a commission basis, this gives rise to the wrong incentives because the higher the overall cost to the transport buyer the higher the commission for the 3PL. The 3PL also use fuel surcharges to pass on any cost increase to the transport buyer. As a result higher fuel price is poor incentive to reduce fuel consumption. Transport buyers require driver training, however limited attention is given to actual fuel efficiency achievements beyond such training. Unfortunately, the means have become more important than the end results.
With fuel surcharges, suppliers not responsible for fuel costs, brokers that benefit from commissions and buyers addressing the means but not the end results, fuel savings are today a low priority for hauliers and 3PLs.
The LeanHaulage® IT application measures driver fuel efficiency, which is a measurement of energy efficient driving. This is a fair measurement that the driver can influence rather than the subjective monitoring of driver behaviours.
Page1
c)
2012-02-21
2.
Changing driving practices
Today a range of solutions exist to reduce CO2 emissions. Amongst them, the eco-driving training is widely spread and most transport providers will have eco-driving initiatives in place. However, in practice such initiatives are short term solutions due to a lack of continuous measuring of driver fuel efficiency. Monitoring of driver behaviour is another popular practice. However, a lack of progress is evident as certain driver behaviour is not the same as fuel efficient driving. Efforts are spent on driver training and behaviour monitoring but limited attention is given to the intended results - driver fuel efficiency.
Greater Than’s position The issues highlighted above demonstrate the key challenges that are currently undermining the drive towards improved fuel efficiency and CO2 emissions reductions in the haulage industry. Greater Than believes that in order to meet our CO2 challenge for road transport we need to: 1. 2. 3.
Encourage transport buyers to demand that transport providers to measure driver fuel efficiency; Encourage transport providers to measure driver fuel efficiency rather than subjective monitoring of driver behaviours; Inform freight transport providers and buyers about the differences between a training course, driver behaviour and fuel efficient driving.
Transport buyers should require transport providers to measure and report their driver fuel efficiency, resulting in fuel savings, reduced CO2 emissions, improved driver well-being and savings in transport costs. Apart from the obvious CO2 benefits, this sourcing requirement will safeguard European jobs, improve drivers’ work environments, reduce driver stress, increase road traffic safety and bolster the European economy. *Greater Than is a Belgian/Swedish based company that specialises in IT solutions to help road transport become more sustainable. The LeanHaulage® application measures driver fuel efficiency, which is a measurement of energy efficient driving. This is a fair measurement that the driver can influence rather than the subjective monitoring of certain driver behaviours. As a result, further CO2 reductions and improved driver well-being is achieved. Driver fuel efficiency is an open solution available for all users. Greater Than clients currently include Alfredsson Transport AB, Coca Cola Enterprises Benelux, Nybro Transport AB along with over three hundred other European hauliers. Greater Than is a European Road Safety Charter signatory. Greater Than endorsers include: Sveriges Åkeriföretag (Swedish Road Haulage Association), Transport Gruppen (Transport Group trade association), Q3 (Quality in Road transport procurement). For more information on Greater Than, please visit: www.greaterthan.eu
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For more information on LeanHaulage®, please visit: www.leanhaulage.com
The LeanHaulage® IT application measures driver fuel efficiency, which is a measurement of energy efficient driving. This is a fair measurement that the driver can influence rather than the subjective monitoring of driver behaviours.
