Greener, Cheaper

Companies can get there from here, and use a lot less energy than they do now
By SUSAN L. GOLICIC, COURTNEY N. BOERSTLER and LISA M. ELLRAM
In the growing effort to confront global warming, many companies profess their determination to cut their greenhouse-gas emissions. But most draw the line where some of the biggest gains could be made: shipping.
The reluctance is, in some ways, understandable. Companies need smooth-running supply chains, which often leave little room for flexibility in transportation. Growth of overseas manufacturing, meanwhile, coupled with demand for fast deliveries, has led to increasing reliance on the kinds of shipping that create the most carbon emissions: jets and trucks.
But transportation-related emissions can be cut without hurting a company's efficiency. In fact, done intelligently, the changes can make supply chains—and their companies—more efficient and profitable.
What follows is a four-stage process for cutting shipping emissions in a way that helps both the environment and the company.
Laying Foundations
The process begins by setting goals, developing metrics and getting assistance from third-party experts.
Activities at this stage are mostly about raising awareness in the company and deciding where to focus attention—on using less energy, fitting more boxes onto each pallet, improving fleet fuel efficiency, requiring carriers to operate more efficiently, or all of the above. Several Fortune 500 companies, including DuPont Co., have begun to report such goals in social-responsibility and sustainability progress reports.
How progress will be measured and reported is important. Don't just record how many gallons of fuel were conserved; show how much money was saved. This will help build support throughout the company. And when setting goals, get the input and support of managers directly involved: This leads to better cooperation and more realistic goals.
Consultants, government and non-government organizations help find ways to save on energy and emissions. The Environmental Protection Agency's SmartWay program helps companies identify products and services that reduce fleet emissions.
Internal Practices
Before asking supply-chain partners to change their ways, a company has to change its own.
Train employees to shut off lights and computers, and encourage them to carpool or take public transportation to work. Buy energy-saving equipment that cuts costs and enhances employee commitment. Johnson & Johnson, FedEx Corp. and others have invested in hybrid or biofuel company cars and other vehicles.
Some companies also have installed—and are using—video-conferencing equipment to reduce business travel.
The savings in energy costs that start to result at this stage will help pay for these and bigger technology investments that follow.
Supply Chain
Once a company has its own house in order, it can start talking to suppliers and customers about making cuts together in shipping emissions.
Adjustments usually need to be negotiated at both ends, whether the company plans to change the shipping method, say, from road to rail, or redraw its delivery routes. By working with its customers to schedule preferred delivery times, Dell Inc., for one, says it increased its first-attempt deliveries 80%.
New technology like route-planning software, automatic shutoffs on idling engines, and more fuel-efficient trucks come into play at this stage, too. Office Depot Inc. says that routing software it purchased helped the company consolidate deliveries and reduce local shipments by as much as 50%.
Strategic Partners
The ultimate goal is for companies and their supply-chain partners to form networks that plan shipping strategies together in ways that minimize emissions. Basing supply and manufacturing facilities nearby, for starters.
Companies that operate at this level—and none that we know of do—must agree on a firm commitment to energy conservation, and employ shipping managers who are experts in both logistics and environmental sustainability.
These are goals good for the planet and the bottom line. They cut shipping costs by increasing efficiency, and they reduce a company's vulnerability to rising fuel prices.— Dr. Golicic is an assistant professor of management at Colorado State University's College of Business in Fort Collins, Co. Ms. Boerstler is a Ph.D. candidate at the University of Oregon's Lundquist College of Business in Eugene, Ore. Dr. Ellram is the Rees distinguished professor of distribution at Miami University's Farmer School of Business in Oxford, Ohio. They can be reached at reports@wsj.com .