Mobility and Eco-Metrics to Reduce of

Carbon Footprint

20/02/2014

2

Seock-Jin HONG Ph.d. in Economics

Professor at Kedge Business School

in Bordeaux

Executive Summary

• Mobility and sustainability initiative have a relationship

tradeoff.

• Sustainability ratings risk seriously misleading consumers and

shareholders.

• Corporate activism should be considered in a much broader

set of environmental ratings including employees and

customers engagements.

3

Content

• Mobility focus on Air Transport

• What are logistics concern on?

• Sustainability initiatives

• Major environmental measures and legistration

• Supply chain strategies to reduce carbon footprint

• Conclusion

4

Mobility

5

Mobility

• Mobility is one of the most fundamental and important

characteristics of economic activity as it satisfies the basic

need of going from one location to the other, a need shared

by passengers, freight and information.

• Economies that possess greater mobility are often those with

better opportunities to develop than those suffering from

scarce mobility.

• Reduced mobility impedes development while greater mobility

is a catalyst for development. Mobility is thus a reliable

indicator of development.

6

Air Mobility

7

y = -0.0033x6 + 0.1633x5 - 3.3372x4 + 36.599x3 - 227.71x2 + 763.91x - 1076.5

R2 = 0.8612

1.00

2.00

3.00

4.00

5.00

6.00

7.00

8.00

9.00

5.00 6.00 7.00 8.00 9.00 10.00 11.00

Ln(GDP/Capita)

Ln

(RP

K/C

ap

ita)

Germany

France Vietnam

China

Korea

Japan

United States

Thailand

Mexico

Phillippines

United Kingdom

Number of Air Passengers Carried,

2010 (per 1000 Inhabitants)

page 8

0

500

1000

1500

2000

2500

Number of Air Passengers Carried and

GDP per capita 2010 (per 1000 Inhabitants)

page 9

USA

Australia

Canada

Europe

Korea Japan Turkey

Saudi Arabia

China

0

500

1000

1500

2000

2500

3000

3 3,2 3,4 3,6 3,8 4 4,2 4,4 4,6 4,8 5

India Indonesia

South Africa

Mexico Argentina

Russia Brazil

Air Freight Traffic

2012 2032 CAGR GDP

North America 30% 24% 3.9% 2.5%

Europe & CIS 21% 21% 4.8% 1.8% (3.3%)

China 15% 22% 6.6%

4.5% Asia-Pacific 18% 16% 4.1%

India 3% 4% 6.3%

Africa & Middle East 6% 6% 5.0% (4.4%) 3.7%

Latin America 7% 7% 5.1% 4.0%

World 4.8%

• In 2012, the average value for each kilogram transported by air was

$127, while for ships it is approximately $1.10.

• Air transportation will continue to be hugely important to world trade,

carrying over 30% of all world trade by value.

Air Traffic

2012 2032 CAGR GDP

North America 25% 18% 3.0% 2.5%

Europe 26% 22% 3.8% 1.8%

CIS 4% 4% 5.8% 3.3%

Asia-Pacific 29% 34% 5.5% 4.5%

Africa 3% 3% 5.1% 4.4%

Middle East 8% 12% 7.1% 3.7%

Latin America 5% 7% 6.0% 4.0%

World 4.7%

Market Outlook

World Asia-

Pacific

China NE

Asia

North

America

EUR Middle

East

Latin

America

CIS Africa

Economy

(GDP)

3.2% 4.6% 6.5% 1.3% 2.6% 1.9% 3.9% 4.1% 3.4% 4.4%

Traffic

(RPK)

5.0% 6.4% 7.0% 3.7% 2.8% 4.1% 6.4% 6.6% 4.7% 5.6%

Cargo

(RTK)

5.2% 5.9% 6.2% 5.8% 4.5% 4.6% 5.7% 5.9% 5.0% 5.8%

Airplane 3.5% 5.5% 5.9% 3.3% 1.4% 3.2% 4.8% 5.1% 1.7% 3.4%

• Boeing forecast each year for 20 years

2000 2002 2004 2006 2008 2010 2012

GDP 3.0% 2.9% 3.0% 3.1% 3.2% 3.2% 3.2%

Traffic ((RPK) 4.8% 4.9% 5.2% 4.9% 5.0% 5.3% 5.0%

Cargo (RTK) 6.4% 6.4% 6.2% 6.1% 5.8% 5.9% 5.2%

• Boeing forecast 20 years from 2012 to 2031.

page 12

Which Factors Impacts on Mobility?

• The world globalization lies with capital flows: Emerging

countries, which represented 12% of the world Foreign

Direct Investment (FDI) in the early 2000s, currently

represent more than one third (38%) of world-wide FDI flows.

• The air ticket price stimulation with an average yearly

decrease of 3% per unit of passenger traffic over the last 30

years (in real terms, inflation removed).

• The air transport productivity improvements from both

airline operations (aircraft utilization, fleet maintenance,

improved passenger load factors, etc.) and more efficient and

capable aircraft. oil price volatility.

13

Which Factors Impacts on Mobility?

• Air transport liberalization and emergence of low cost

carriers have also played a decisive role in this productivity

improvement and price stimulation.

• It is well known that economic growth is a key factor when

explaining air traffic growth.

• Increasing connectivity between people, between regions with

the multiplication of new routes and the increasing capacity in

airports.

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• Demographic trends also play a major role in air traffic evolution:

population growth, urbanization and new middle-class emergence.

• In 2032, 61% of the world population will live in a city compared to 52%

in 2012. This will represent an increase of 1.5 billion urban dwellers.

15

Which Factors Impacts on Mobility?

What are Logistics concern on?

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Widening The Scope of Outsourcing

• Outsourcing strategies typically just transfer work to lower-

cost providers.

• Connect and develop, by contrast, is about finding good

ideas and bringing them into enhance and capitalize on

internal capabilities.

• To do this, company collaborate with organizations and

individuals around the world.

Split of Logistics Cost in 2003 and

2012

• Carrying Costs (32.1%)

- 1,493 trillion all biz inv.

Interest $17

Taxes, Obsolescence, Depreciation,

Insurance $205

Warehousing $78

Subtotal $300

• Transportation Costs (63.4%)

Motor Carriers(51.5%)

Truck-Intercity $315

Truck-Local $167

Subtotal $482

• Carrying Cost(32.6%) (4.0% inc

than 2011)

- 2,269 trillion all biz inv. (9.9%)

Interest $3

Taxes, Obsolescence, Depreciation,

Insurance $302

Warehousing $130

Subtotal $434

• Transportation Costs(62.8%) (3.0% inc than 2011)

Motor Carriers(48.6%)

Truck-Intercity $445

Truck-Local $202

Subtotal $647

Unit: Billion dollars

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Split of Logistics Cost in 2003 and

2012 (Continued)

Other Carriers(12.5%)

Railroads 74% inc $42

Water(Int’l 22, Dom 6) $28

Oil Pipeline $9

Air(Int’l 9, Dom 22) $31

Forwarders(1.8%) 106% inc $18

Subtotal $127

• Shipper Related Costs(0.8%)

$8

• Logistics Administration(3.8%)

$39

• Total Logistics Cost $1,015

Other Carriers(14.2%)

Railroads $72

Water(Int’l 27, Dom 7) $35

Oil Pipeline $13

Air(Int’l 17, Dom 16) $33

Forwarders(2.6%) $37

Subtotal $189

• Shipper Related Costs(0.76%)

$10

• Logistics Administration(3.9%)

$51

• Total Logistics Cost $1,311

(3.4% inc than 2011)

Unit: Billion dollars

19

The Concept of “Soft $3”

$1 $4

Product

design Sourcing Logistics

Wholesale

retail Information Management

The cost that is spread throughout the distribution

channels – the “Soft $3”

20

Sustainability Initiatives

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How Urgent Are Climate Change

Issues to Your Company?

• Few companies view climate change as very (5%) or quite

urgent (15%). Source, MIT Sloan Management Review, Fall 2013

8%

15%

Fairly urgent; 21%

Slightly urgent; 26%

Not at all urgent; 28%

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How Are Managers Thinking about

Climate Change?

• The less urgent climate change is for a company, the less

prepared the organization is likely to be for its effects.

• There is a link between business model change and views on

climate change.

0%

10%

20%

30%

Agreestrongly

Agreesomewhat

Neither agreenor disagree

Disagreesomewhat

Disagreestrongly

I believe my company is prepared for climate change risks.

How to Become a Sustainable

Company?

• Sustainable organizations are effective at engaging with

external stakeholders and employees.

• They have cultures based on innovation and trust.

• They have a track record of implementing large-scale change.

(Source, Eccles, Perkins and Serafeim, 2012)

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25

High Sustainability Companies

• High sustainability companies significantly outperformed their

counterparts over an 18-year period in terms of both stock

market and accounting criteria, such as ROA and ROE.

• Sustainable companies learn from the outside.

• They are more likely to encourage their employees to

assimilate knowledge from sources external to their company

than are traditional companies (70% vs. 20% at traditional

companies). (Source, Eccles, Ioannis and Serafeim, 2011)

26

CEO Message, SNCF GEODIS

• “Through heightened environmental awareness, a

commitment to the community, open-mindedness, and

innovation, we intend to fully embrace our role as a

responsible company.”

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GEODIS, Metrics of Sustainability

Sector Classification Metrics Reporting

Profile ISO 9001, 14001, TS;

OHSAS 18001; TAPA

Number of Certification

Region,

Division

Env.

Fuel Consumption

Vehicle

Total Vehicle Size, Modernization Vehicle

(Euro 0, 1, 2, 3, 4 and 5), Clean Vehicle

(Electric Car)

Building Electricity, Gas, Water Consumption and Waste

from activity (hazardous and non-hazardous)

CO2 Emission Emissions linked to the consumption of

electricity and gas (ton)

Social

Employee Abseentism, Men and Women share, White and

Blue Collar

Training Training hour per employee

Personnel Safety Frequency and severity of Occupational

Accident

Rate of Traffic Accident Accidents per 100km

CEO Message, Schiphol Airport

• “We conduct our business with respect for people and the

environment and assume responsibility for five key focus

areas in particular:

• sustainable employment,

• accessibility and air quality,

• climate-friendly aviation, (electric busses for transportation

between the terminal and the aircraft)

• commodity shortages and

• noise and local community.

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Key Performance Indicators

• Net Co2 emission own activities (tonnes at Schiphol)

- 2011 6,482 tonnes

- 2012 0 tonnes

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Strategic Objectives

• Top connectivity

• Excellent Visit Value

• Competitive Market place

• Sustainable Performance

- Ensuring a proper balance in the relationship between

people, planet and profit.

31

CEO Message, ADP

• “Our environmental performance targets are clear, our

investment programmes are geared towards energy

diversification requirements, …”

• “.. No longer use an annual rating of non-financial aspects…

will encourage us to make continual progress, improving our

weak points and consolidating our strength.”

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Key Figures, ADP

• Water Consumption

• Internal energy consumption

• Greenhouse gas emission

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Scorecard of Environment, ADP

• Energy efficiency

• Carbon footprint

• Renewable energy

• Transportation

• Waste

• Water

• Biodiversity

34

Major Environmental Measures and Legistration

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DOW JONES SUSTAINABILITY INDEX

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Economic Dimension

Corporate governance 6.0 %

Risk and crisis management 6.0 %

Codes of conduct/compliance/anti-corruption and bribery 6.0 %

Industry-specific criteria A

Environmental Dimension

Environmental reporting 3.0 %

Industry-specific criteria B

Social Dimension

Human-capital development 5.5 %

Talent attraction and retention 5.5 %

Labor practice indicators 5.0 %

Corporate citizenship/philantropy 3.0 %

Social reporting 3.0 %

Industry-specific criteria C

* A+B+C=57%

LEED; Leadership in Energy and

Environmental Design

• LEED uses five different categories to judge a building's sustainability;

• 1) site location,

• 2) water conservation,

• 3) energy efficiency,

• 4) materials,

• 5) indoor air quality, and a bonus category for innovation and design

37

CO2 Information on Transport

Service

• Just like passenger transport firms,

• Freight carriers entering and leaving France are required from Oct

2013 to inform their customers of the CO2 emissions produced by

shipment of their freight.

• The program is designed to promote transparency. It provides a basis

on which to measure and subsequently reduce emissions.

(Source, Article 228 of the Grenelle II act)

38

Airport Carbon Accreditation

• Airport Carbon Accreditation is carbon management certification

standard for airports since June 2009.

• The program independently assesses and recognizes the efforts of

airports to manage and reduce their carbon emissions with four levels

of award: 'Mapping', 'Reduction', 'Optimization' & 'Neutrality'.

- Mapping: footprint measurement

- Reduction: Carbon management towards a reduced carbon footprint

- Optimization: Third party engagement in carbon footprint reduction

- Neutrality: Carbon neutrality for direct emissions by offsetting

(Source, http://www.airportcarbonaccreditation.org/)

39

EUETS

• Launched in 2005, the EU ETS is now in its third phase, running from

2013 to 2020.

• A single, EU-wide cap on emissions applies in place of the previous

system of national caps;

• Auctioning is now the default method for allocating allowances. In 2013

more than 40% of allowances will be auctioned, and this share will rise

progressively each year.

• The EU ETS works on the 'cap and trade' principle. The cap is reduced

over time so that total emissions fall.

(Source, http://ec.europa.eu/clima/policies/ets/index_en.htm)

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Supply Chain Strategies to Reduce Carbon Footprint

41

Cargoshell, a Composite Folding

Container

• more environmentally friendly (the CO2 reduction in particular is

significant) and lowers the costs pertaining to business

economics.

- The volume of a folded Cargoshell is 1/4th of that of a traditional steel

container. This allows to save as much as 75% of precious storage

space.

42

Directional Imbalance

• Euro 80 x 120 cm

• USA and UK 40 x 48 inches (101.6 x 121.9)

• ISO 100 x 120 cm

• Korea and Japan 110 x 110 cm

2.5 m 2.43 m

13.4 m

Available Height 2.15 m ~ 2.4 m 33 Pallets (not possible double stack )

43

Beaujolais Nouveau

• Japanese consumed 8,3 million bottles in 2008 against 11,5

million in 2007 (-28 %).

• As for the Americans, they consumed 2,5 million in 2008 (-10

% comparing to previous year).

• Lyon-Saint Exupéry airport: BA operated 3 cargo flights with

B747-400 (compared to 17 flights in 2008) to Tokyo, AF 10

flight to Osaka in 2004

• AF-KLM 1,400 ton handled in 2011 (69% in CDG, 31% in

Amsterdam). JL 1,400 ton directly from CDG to Japan.

44

Foil & Flavor Lock

• Once roasted, coffee begins to lose its

flavor.

• FlavorLock™ bag will stay fresh for

several months (38 weeks).

• FlavorLock™ technology utilizes a

special one-way valve that allows the

carbon dioxide out without allowing

flavor-robbing oxygen to get in

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Last Mile Problem

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Last Mile Problem

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HECORE Collaborations: How to

Deliver Faster & More Often?

• Key criteria :

- Find synergies to maintain full truck costs even if avg order < 30 pal

- Store closer to demand to reduce lead-time and transportation costs

- Increase delivery frequency to reduce time to market

• Opportunity : Pooling in warehousing and transport

A real win-win solution to meet customers’ demands

A competitive advantage vs bigger suppliers

49

HECORE Collaborations:

Environment Changing

Conclusion

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Scorecard for Green

• Ceaser Entertainment Corp., the world’s most gaming company.

• The creation of a personal CodeGreen scorecard encourage

broad participation in activities that reduce the company’s

footprint.

• The scorecard should serve mostly as a tool for promoting

employee and customer engagement concentrated on the

issues.

• The scorecard summarize sustainability performance both

company wide and individual level.

51

Implications

• Educating employees about environmental impacts and

encouraging cultural and behavior changes to reduce.

• How to balance grassroots activity at the individual level with

top-down management?

• How to encourage the creativity and passion under a lack of

structure and coordination?

• How to increase customer’s awareness?

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Many Thanks for Your

Attention!!!