Deutsche Post DHL Goes Green

Deutsche Post DHL’s GOGREEN program is en route to cut emissions by 30% by 2020

How DHL Operations Affect Climate Change

As a world leading mail and logistics providers, DHL ships millions of goods by air, ocean, rail, and road every day, contributing to a significant amount of the world’s carbon emissions. With transport at the core of its business, DHL contributed over 30 million tons of CO2, the main cause of climate change, in 2007 alone (1). This is largely due to its dependence on fuel and high degree of energy utilization to deliver a wide range of customer packages on a daily basis.

 

While DHL’s operations largely impact climate change, climate change can also adversely affect DHL’s operations and thus its profitability. For example, mail and delivery services are highly impacted by weather. Climate change will bring about rising temperatures, increased weather extremes, and more intense and longer duration of flood/storm events, which add variability to DHL’s process of delivering shipments to customers. Disruptions to air and ground transportation routes, reduced ocean port availability, damage to infrastructure and facilities, and electricity outages impacting distribution networks caused by climate change can adversely affect the performance of one of the world’s leading mail service providers. But how does DHL maintain the performance of its operations and combat climate change in a world where customers are continuously demanding higher quality products/services at lower costs and with faster delivery?

 

How DHL has Tackled its Contribution to the Causes of Climate Change

In 2008, DHL launched the GoGreen Environmental Protection Program, which aims to achieve 30% carbon efficiency by 2020 through a combination of operational efficiencies and innovative services (2). As the first global logistics company to set a target like the GoGreen program, DHL strove to develop services and innovations that demonstrated how successful delivery performance can be interlinked to deliver sustainable value to society and communities through environmental protection. For example, DHL optimized transportation routes (air, ocean, and ground), invested in hybrid vehicles, improved the energy efficiency of its warehouses, enhanced employee incentives to reduce waste, encouraged subcontractors and customers, and developed innovative technologies to drive reduced CO2 emissions and other environmental impacts in the delivery and storage of mail (2).

 

Optimizing Transportation Routes

Due to the GoGreen program, DHL optimized its transportation routes to develop “intermodal transport solutions,” which is an innovative system that combines multiple methods of transporting goods to optimize for efficiency and speed, cost-effectiveness, and an environmentally friendly process of goods (3). Instead of asking customers shipping overseas to choose between slower ocean routes (more carbon efficient) or the faster air route (more emissions, expensive), the intermodal solution enables DHL to design an optimal combination of both routes to reduces carbon emissions by half in some examples (3).

dhl

Investment in Hybrid Vehicles

To increase fuel efficiency, DHL has also invested in efficient logistics technologies and hybrid vehicles—even promising to replace 90% of 2007’s company owned air fleet by 2020 to meet its GoGreen carbon emissions improvement goal (4). Since launching the GoGreen program, DHL replaced eight of its DHL Express aircrafts with Boeing 777F’s, which emit 20% less CO2. However, replacing these aircrafts required DHL to restructure cargo loading operations given differing size/capacity of the new fleet.

 

In addition, DHL has heavily invested in hybrid and alternative ground transportation vehicles to cut down on fossil fuel use and reduce carbon emissions by 50% each year. In 2011, DHL launched its “Green-Fleet” of battery powered electrical vans and hybrid trucks in New York, and was the first to trial hybrid trucks in its operations in London (2). Currently, DHL is investing in its GoGreen innovation center where they are working to combine optimization solutions like intermodal transport with new transportation systems like driverless vehicles to “process dynamic route planning and live traffic data to improve pick-up and delivery efficiencies in terms of time, cost, and emissions (2).”

 

DHL’s GoGreen program also offers B2B logistic consulting services to help businesses reduce their supply chain emissions from actions such as transportation, packaging, and processing, which often surpasses those arising from the operations of a business itself (5).

 

Additional Steps for DHL to Consider Implementing

 

Despite the success of DHL’s GoGreen program, there are some greenhouse gas emissions that cannot be avoided through the measures described above. However, DHL is not the only delivery company working to reduce its carbon footprint. UPS and other competitive companies have made the switch to using lower emission natural gas in its operations (6). In an environment where differentiation is fundamental to market growth, how sustainable is DHL’s goal to improve sustainability beyond 2020?

 

 

  1. Greenhouse Gases; DHL Introduces All ‘Green’ Fleet in Manhattan http://search.proquest.com.ezp-prod1.hul.harvard.edu/abicomplete/docview/860239582/5982D5F41BF349BDPQ/9?accountid=11311
  2. DHL GoGreen Fact Sheet https://www.dpdhl.com/content/dam/dpdhl/presse/specials/gogreen_5_years/factsheet-gogreen-success-story-en.pdf
  3. DHL Green Optimization http://www.dhl.com/en/about_us/green_solutions/green_optimization.html#express_shipments
  4. DHL GoGreen Solutions http://www.dhl-usa.com/en/about_us/green_solutions.html
  5. DHL Climate Neutral http://www.dhl.com/en/about_us/green_solutions/climate_neutral.html
  6. UPS Switches Trucks From Diesel To Liquefied Natural Gas http://inhabitat.com/ups-switches-trucks-from-diesel-to-liquefied-natural-gas/

Chart: http://www.dhl.co.uk/content/dam/downloads/gb/express/services/gogreen/gogreen_service_sheet_gb_en.pdf

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Student comments on Deutsche Post DHL Goes Green

  1. Thank you for your post – really interesting! A few thoughts as I read:

    1) I like the way you posed a question at the end of the introduction to frame your post. In thinking about an answer, a question I had was: when DHL does “intermodal transport solutions” and optimizes routes, how do they come out on cost and speed? At the end of the day, does it matter? In other words, is DHL’s value proposition that it provides the fastest (or cheapest) service?

    2) Ann wrote in her post on JetBlue (https://digital.hbs.edu/platform-rctom/submission/jetblue-clearing-the-air/) that JetBlue invests in carbon offsetting programs. I thought it could be something DHL can take on as well.

    3) For DHL, the good news is that it seems like the manufacturers of aircrafts are pressured to create products that emit less carbon (https://digital.hbs.edu/platform-rctom/submission/airbus-more-value-less-impact/), and DHL can benefit from their gains.

    4) Finally, I’m left wondering: what is DHL doing to mitigate the effects of less predictable weather?

  2. Great post – thanks a lot for sharing. I had no idea that DHL were being so impacted by climate change, nor the extent to which the company has been acting to respond in recent years.

    A few thoughts:
    This question was also raised by me in the context of other companies, where the company is not simply a victim but an arguable cause of the problem: how has the dialogue shifted overtime with regards to DHL? Do you think the public view of them has evolved, given the work they have been doing? It’s extraordinary to think that in one year alone DHL contributed over 30 million tons of CO2.

    In terms of the GoGreen Environmental Protection Program, and their specific operational efficiencies and innovative services put in place, have the goals of the program shifted overtime, or largely stayed the same? For a company with such a global reach, I’d love to know how differently they are implementing logistics in different parts of the world (I realise a lot of this is driven by the air vs. sea option that you discuss). I imagine that local law and business practices may impact these operations: are there any huge differences between for example their US roll-out and their international roll-out?

    A similar question for their investing in hybrid vehicles: is this the case globally, or only in certain markets? It’s impressive to think they have promised to replace 90% of their 2007 owned air fleet by 2020 to meet its carbon emissions improvement goal – again, is this on a market-neutral basis? You mention that they have so far replaced eight aircrafts with Boeing 777F’s, which emit 20% less CO2: how are they doing on road vehicles? Is this information that they provide?

    Lastly – you mention UPS; did you look at other specific competitors also? Such as FedEx? I came across this article http://www.environmentalleader.com/2016/04/28/how-ups-dhl-drive-emissions-cuts-efficiency-improvements-in-transportation-and-logistics/ which talks about some of the topics you raise: other than the longevity of these sorts of programs, what do you think are the biggest challenges for the industry as a whole to overcome? Do you think the DHL B2B consulting path will develop into a bigger operation? It sounds like something a lot of businesses would be interested in.

    Thanks again for sharing!

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