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green@work : Magazine : Back Issues : Jan/Feb 2002 : Beyond Compliance

Beyond Compliance
Environmental responsibility as competitive advantage.

by Mike Eskew

One million people in Mexico City suffer from chronic breathing difficulties, many of which are fatal. In Beijing, Jakarta, Manila and other urban areas of the Pacific Basin, degraded air quality is responsible for the loss of 50,000 lives each year.

Atlanta, GA—UPS’s corporate hometown—must endure a designated “smog season,” and the air there is among the worst in the United States. But when you deliver 13.6 million packages a day in more than 200 countries and territories across the world, nearly every town is your hometown. We see the promise and the peril of communities in virtually every nation of the world, quite literally from the front doorsteps and the lobbies of the homes and businesses we serve. We see the problems, and we want to be part of the solution.

When you operate the world’s largest private transportation network, with a fleet of more than 88,000 vehicles and 500 aircraft, you recognize that you have an imprint on the environment and a responsibility to it. UPS feels strongly about corporate citizenship and social responsibility. But we also feel strongly that good business practices and sound business strategies can—and indeed must—lead to a stronger, healthier environment.

It’s a philosophy we refer to as enlightened commitment: doing good for the environment by doing good for our business.

It’s also a philosophy we believe has significant bottom-line impacts. In fact, if executed properly, it can help build three of the most important competitive advantages any company could ask for: innovation as a core competency, increased efficiency and an enhanced public reputation.

INNOVATION AND EFFICIENCY
A few words on each, starting with innovation and efficiency, because I believe they go hand-in-hand.

At UPS, we tend to think of innovation not just as a breakthrough product or service, but as a cultural attitude, one handed down nearly 95 years ago by our founder, Jim Casey. Casey constantly spoke of the need to be “constructively dissatisfied.” He believed no matter how good we got at anything, there was always room for improvement.

Casey was a stickler for streamlining operations and refining processes. For instance, in the early days, he questioned sending a Macy’s delivery truck and a Sears delivery truck to the same residence on the same day. If UPS could consolidate the deliveries, the customer would get better service and the stores would save money while conserving valuable resources.

Although it wasn’t recognized as “environmental awareness” back then, the result was the same, and UPS created a new business model that forms its core business today. One driver assigned to one vehicle and to one neighborhood to increase efficiency and reduce fuel consumption. Not surprisingly, consolidation caught on in a big way and has led to a revolutionary distribution model known as the hub-and-spoke system.

UPS’s quest for innovation has led to a number of significant environmental initiatives over the years, from developing vehicle routing technologies that allow us to cover maximum areas while traveling fewer miles to creating our industry’s first reusable overnight envelope to being the first major North American airline to comply with Stage 3 noise regulations.

We’ve also been very aggressive in our efforts to minimize vehicle emissions, beginning with our first experiment with electric-powered delivery trucks in New York City back in the 1930s. Since then we’ve introduced propane- and methanol-powered vehicles and liquefied and compressed natural gas (CNG) vehicles. In fact, our CNG fleet of nearly 1,000 trucks now operates in 18 urban areas in the U.S. (see map on page 40) and abroad, and is the largest private CNG fleet in North America. In addition, we operate large propane fleets totaling 832 vehicles in Canada and Mexico City.

Three years ago, we began researching and testing hybrid-electric technology. The goal, like previous efforts, was to use technology to increase fuel economy, reduce emissions and lessen our imprint on the environment. We recently announced that these three years of research and design have culminated in the package delivery industry’s first road test of a hybrid electric vehicle (HEV). The test vehicle is currently being used to pick up and deliver packages at 158 locations on a 31-mile route in Huntsville, AL.

UPS isn’t alone in this kind of thinking, which is prompting more and more leading-edge companies to migrate toward clean-air technologies for competitive advantage. For example, at one of its factory complexes in Flint, MI, General Motors is using technology to reduce carbon dioxide emissions by more than 60 percent. At that site alone, the annual savings is $4 million.

In Australia, BP has trimmed its carbon dioxide emissions at one refinery by nearly one-fifth since 1995 through efficiency and co-generation. It hopes to reach a nearly 50 percent reduction in the next few years. And Atlanta-based Georgia Pacific reduced overall fuel costs by one-third at one plant by merely insulating steam lines. The project is saving about 20 tons of fuel a day, reducing emissions and improving efficiency.

ENHANCED PUBLIC REPUTATION
The final point, the corporate branding and reputation implications of running an environmentally sound business, must not be underestimated. Increasingly, the lines are blurring between consumer activism and social activism. We see it every day, and the message is loud and clear: You can’t be a customer-centric organization without being an environmentally-progressive organization.

Serving customers’ needs extends beyond the direct business need. We ignore this trend at our own risk. And it’s not just consumers who demand activism and accountability. There is a growing movement among investors for greater disclosure of social and environmental responsibility along with financial performance.

Already, we’re seeing a growing movement toward the creation of “green” supply chains. Companies like Nike, Saturn, the Gap and United Technologies, among others, are taking the lead in doing business with environmentally progressive suppliers.

UPS is working to be part of the “green” supply chain. Companies such as Interface and Patagonia specifically cite our transportation and environmental efficiencies as reasons for doing business with us. Multimillion-dollar contracts like these certainly affect our bottom line.

At the end of the day, our brand, like thousands of others, comes down to trust. Aside from trusting us with their most critical deliveries and supply chain needs, customers—in Mexico City, Beijing, Jakarta, Manila and our hometown of Atlanta—must trust us to do the right things for the environment and the communities in which we operate.


Mike Eskew is the new chairman and CEO of United Parcel Service, effective January 2002.

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