Regulators Aren't the Only Factor Driving Decarbonization

Beth Davis-Sramek wants to be clear: She is not a “tree-hugger.” She’s a business professor — one who focuses on supply chain management. Her insights into how the global business atmosphere has changed show how important it is for trucking operations to pay attention to ESG.

ESG (environmental, social, and [corporate] governance) is a term for evaluating how a company performs on environmental issues, social issues and corporate governance. HDT first reported on ESG and trucking in 2021, when I wrote an editorial, “What is ESG and Why Should You Care?”

Speaking at the McLeod Software User Conference in September, Davis-Sramek outlined how the definition of a business’s purpose has changed. The chair of the Department of Supply Chain Management in the Harbert College of Business at Auburn University in Alabama, she pointed to what American economist Milton Friedman famously wrote in 1970:

“There is one and only one social responsibility of business — to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud.”

But the business norms and ethical standards that are part of “the rules of the game” have evolved, she said. The business climate has changed along with the planet’s climate.

As Davis-Sramek said, “We have to be profitable, but we also have to care about people and the planet.”

As a result, more and more companies are embracing ESG and setting ambitious decarbonization goals.

Guess where a lot of those corporations’ carbon footprint comes from? The supply chain.

What does this mean to you?

If it hasn’t happened already, your parent company or your customers are likely to start asking about your fleet’s ESG performance or carbon footprint.

Alabama-based Buddy Moore Trucking has a large shipper customer that's very environmentally conscious. When this customer needed information about the carrier’s greenhouse gas emissions, Buddy Moore Trucking worked with Davis-Sramek and her students to crunch the numbers it needed.

This shift also offers carriers an opportunity to appeal to shippers that want to green their supply chain. For instance, Pennsylvania-based flatbed carrier PGT Trucking this year started running a battery-electric Nikola Tre on a short-haul dedicated route for one of its steel producer customers that has public-facing sustainability goals.

Why has the focus on ESG accelerated so fast in the last few years?

Larry Fink of BlackRock, the world’s largest investor with $7 trillion in assets under management, “threw down the gauntlet,” as Davis said, in 2020. In his annual letter to CEOs, Fink announced that long-term sustainability would be a key factor in determining which companies to invest in.

“Climate change has become a defining factor in companies’ long-term prospects,” he wrote.

“Because capital markets pull future risk forward, we will see changes in capital allocation more quickly than we see changes to the climate itself. In the near future — and sooner than most anticipate — there will be a significant reallocation of capital.”

Or, as Davis-Sramek explained it, “The guy with the money said, ‘This is where the capital’s going.’”

There’s a lot of concern in the trucking industry about GHG emissions regulations coming from federal and state governments, and not without some valid reasons. But leading the way in environmental stewardship is not only the right thing to do for the planet and our future — it also can be a competitive advantage.