Controlling Environmental Impact at UPS

Written by: Abib Ajibola, Spencer Bryant, Rob Haney, Chasten McCrary

Impact of Climate Change on UPS’s Business Model

Climate change has affected UPS in a number of ways. Increases in severe weather events cause disruptions in supply chains and affect UPS’ ability to deliver on time to its customers. This in turn impacts their revenue and reputation. Another way that UPS has been impacted by climate change is the increasing number of regulatory requirements that they are facing, particularly outside of the United States. Many governments are beginning to implement climate change related regulations that UPS will have to abide by. This can increase costs for UPS because they’re going to have to change their fuel types, use different sources of transportation, or find other ways to increase efficiencies without impacting their customers. If UPS is unable to meet regulatory requirements, they may be subject to fines or lawsuits. An interesting impact of climate change on UPS was the recent driver strike. UPS trucks were not air-conditioned and due to global warming drivers have begun to complain about how hot it was driving around the trucks in hotter climates. Due to this, the unionized drivers voted to go on strike. The trucks had not been air-conditioned for many years, and it had not been a problem, but because of the increase in temperature many drivers decided that it was time for a change. It’s easy to think about regulations, as being the immediate impact of climate change on companies, but when climate change begins to impact people, and therefore employees of these companies, the impact on those employees then flows into the company itself. Finally, and perhaps most importantly, is customer pressure to act on climate change. UPS is not the only international logistics and shipping company and consumers are beginning to demand more from organizations in terms of sustainability. If UPS doesn’t stay ahead of the curve, they risk losing their reputation, and in turn , market share.

UPS’s Strategies to Seize Opportunities and Mitigate Climate Change Risks

From their sustainability report from 2022 UPS are taking several steps to limit their negative effects on climate change and leverage opportunities. With their decarbonization efforts, UPS achieved a 6.9% year-over-year decrease in their Scope 1, 2 and 3 CO2e emissions, demonstrating progress in decarbonizing their global supply chain. One of their most effective ways of reducing carbon output was using alternative fuel vehicles. UPS has been investing in alternative fuel vehicles for over 20 years. In 2022, they had over 15,600 alternative fuel and advanced technology vehicles in their global fleet, including over 1,000 electric and plug-in hybrid electric vehicles. Their goal is 40% alternative fuel utilization in ground operations by 2025. They also use renewable energy for facilities which they aim to power 25% of their facilities with renewable energy by 2025 and 100% by 2035. In 2022, 8% of their electricity came from renewable sources like rooftop solar. Not only are they reducing their own emissions , but they are invested in making a greener world. By participating in reforestation they have planted 28 million trees since 2012 toward their 2030 goal of 50 million trees to help create a greener world. UPS also expanded their Sustainability Trailblazers program globally to engage employees in developing sustainable innovations. Overall, UPS is taking a multi-pronged approach involving alternative fuels, renewable energy, reforestation, and employee engagement to reduce their environmental impact and drive sustainable practices.

Assessment of UPS’s Carbon Performance

UPS employs several key indicators to measure, report, and rate its carbon performance. One primary metric is the CO2 equivalent (CO2e) per package delivered, which includes Scope 1 and 2 emissions from its global operations. Rather than solely focusing on CO2 emissions, UPS incorporates greenhouse gasses like CH4 and N2O into its calculations. The company adheres to the Global Reporting Initiative (GRI) Standards, issuing annual sustainability reports detailing its carbon reduction efforts. Despite aiming for carbon neutrality by 2050, UPS’s target lacks verification as science-based according to the Science Based Targets initiative (SBTi). UPS opted for carbon neutrality over net zero since net zero requires aligning with SBTi’s criteria. Additionally, UPS voluntarily participates in the Carbon Disclosure Project (CDP), an assessment evaluating companies’ climate change management.

UPS evaluates its yearly performance against a baseline year, set at 2020 for its carbon neutrality goals, to gauge progress or lack thereof. The company only reports GHG emissions from entities under its operational control. UPS calculates Scope 1 and 2 emissions using internal processes and data systems. For Scope 3 emissions, UPS relies on secondary data due to the unavailability of primary data. Despite efforts to quantify emissions accurately, UPS acknowledges uncertainties in its reports stemming from data limitations and potential inaccuracies. Throughout its assessment, UPS measures carbon intensity in ‘000 tonnes, utilizing its own sustainability performance management system to quantify associated emissions.

Future Outlook and Recommendations for UPS’s Climate Change Initiatives

UPS has made strides in measuring, reporting and reducing their carbon emissions. However, as a logistics leader, they have a responsibility to go further. Here are several actions UPS should consider taking:

1. Expand scope of emissions tracking: Currently UPS focuses on Scope 1, 2 and limited Scope 3 emissions. To fully understand their carbon impact, they need to account for additional Scope 3 sources like upstream supply chain, employee commuting and business travel. This will identify higher-impact areas for reduction.
2. Get external verification: Having their emissions inventory and performance data externally audited by independent experts will ensure accuracy and enhance credibility. This verification should be made public.
3. Set science-based targets: UPS should move from self-defined goals to science-based targets aligned with 1.5C pathways. This will ensure their strategy matches climate science.
4. Link executive pay to sustainability: Tying executive compensation to carbon reductions will incentivize leadership to make this a priority. Goals need to have consequences.
5. Offset remaining emissions: While reduction should be the priority, offsetting unavoidable emissions through certified carbon removal projects is an option for neutralizing impact today.