While our progress continues to be strong, meeting our 2020 commitment remains tough. For that reason, we are pursuing opportunities to work in partnership to drive improvements at an industry level.
The scope of our target includes transportation of products from our factories and warehousing dedicated to Unilever products alone. We do not currently include the raw materials coming into our factories, multi-user warehousing or air freight in our metrics for the Sustainable Living Plan.
Efficient transport management
Back in April 2008, we launched our own internal transport management organisation, UltraLogistik, which manages our transport movements across Europe. UltraLogistik finds the most efficient ways to move raw materials and packaging to our factories and then transport finished goods to around 300 warehouses in Europe. From this original initiative came the idea to establish global and regional control hubs. These enable us to co-ordinate our transport activities efficiently and ensure that trucks are as full as possible.
In total, the hub system, promises to reduce total distance travelled by 175 million km in Europe alone from 2013 to 2015 (compared to 2010 levels). These hubs are part-funded by the EU’s programme for logistics operators who are committed to the sustainable transport of goods across Europe. We will have 12 hubs in Europe by 2014. This will equate to a total reduction of annual CO2 emissions of around 16,000 tonnes of CO2 over 2010-2014.
Another successful strategy that we are continuing to roll out is our implementation of the Ultralogistik control tower network. We invested in the first control tower in Poland in 2007. These are designed to give visibility and management control for our multiple transport movements across Europe. The tower in Poland has enabled us to deliver cost savings of €50 million over 2008-2012. We now have towers in place in Panama, east coast USA and São Paolo, Brazil. More control towers will be established in the near future.
We are delivering CO2 savings in a number of ways. For example, by improving the ‘loadfill’ of vehicles, we can maximise how much product we load onto our trucks. Our UK business identified inefficiencies in trucking laundry products across Europe. By double stacking products, we achieved a 60% reduction in vehicle kilometres and a 38% reduction in CO2 emissions.
Switching transport modes also delivers efficiencies. In Germany, we are one of the first fast-moving consumer goods (FMCG) companies to deliver our products to the retail market using rail wagons. Instead of using two trucks to transport our goods over 600km, we now use rail wagons which provide improved flexibility to reach the required destinations.
Working with others
We cannot achieve our target by working alone; we need to work in partnership with our suppliers and others. This is particularly the case in logistics as, in general, we do not own any of the vehicles, trains and vessels used to transport our raw materials and finished goods. For this reason, we are making sustainability part of our working agreements with infrastructure providers and operators.
Transport by road
An illustrative example of our collaborative approach is our work with Indian integrated logistics firm Varuna. With our encouragement, Varuna invested in trucks that are ideally sized for the efficient delivery of our products. This is helping us avoid around 2,000 truck trips per year and has achieved significant savings. It is also significantly increasing Varuna’s revenue, profile and market share as a transporter in the Indian transport market.
Varuna won Unilever’s ‘Partner to Win’ award under the ‘Winning through Capacity and Capability Pillar’ in our 2012 PtW summit in Mumbai. ‘Partner to Win’ is a programme that enables Unilever to create long-term partnerships with its suppliers in order to achieve mutual growth for both. We realise that reducing the carbon footprint of our distribution activities requires us to rethink traditional ways of working. Backhauling is a great case in point. The term describes the use of another company’s trucks during their return leg, when they are generally empty.
In Hungary, we have this arrangement with retailer Tesco, our biggest customer. After Tesco’s trucks have delivered to the store, they are loaded with our goods for their return trip. This reduces our costs as well as the CO2 emissions between our businesses. In China, we have had a similar system in place with Walmart. Running since 2009, this backhaul approach has so far reduced vehicle distances by 50,000 km. It has also shaved 10% off our distribution costs.
Unilever supports a range of cross-sector sustainability initiatives at a national level. For example, we are a key player in the haulage element of a UK industry efficiency initiative to reduce transport impacts – the Sustainable Distribution Group of the Efficient Consumer Response (ECR). In France, on the other hand, we are collaborating with three companies (our logistics provider STEF, food and beverage company PepsiCo and cheese manufacturer Bel) to share deliveries of our chilled products from our north Paris distribution centre. This delivered a net saving of over €600,000 in 2012, while at the same time reducing CO2 emissions by 40%.
Re-designing pallets, products and trucks
We estimate that we use over 30 million pallets to store and transport our products. We are trialling new designs that will have both cost and environmental benefits. In France, for instance, we recently ran a successful pilot using cardboard and wooden pallets. This combination provides both efficiency and handling benefits. Meanwhile, in Turkey, our R&D team has re-designed our packs and pallets to allow us to fill trucks more efficiently. This led to a net saving of over €200,000 and a reduction of 277 tonnes in transport-related CO2 emissions.
We are also looking to introduce new technologies where appropriate. Battery-powered vehicles provide an interesting example. In Rome, we recently trialled a hybrid electric van for our ice cream deliveries. The test demonstrated potential CO2 emissions savings of up to 70% a year compared to a diesel van. In Spain, meanwhile, we are piloting a technology that allows double temperature truck deliveries by isolating our chilled products from the ambient ones in cross-category deliveries. The technology enables us to combine deliveries of chilled and ambient products without wasting energy to cool the ambient products.
Transport by sea
Shipping is an important part of the Unilever supply chain. We use ships to transport our raw materials and packaging to our factories and finished goods to markets. Unilever became a member of the Sustainable Shipping Initiative (SSI) in July 2011 and sits on the steering committee. A coalition led by Forum for the Future and WWF, the SSI aims to define what sustainability looks like for the industry in 2040.
It seeks to address the three main challenges facing the industry: rising oil prices; structural changes in world trade; and increasing scrutiny of the industry’s social and environmental impacts. The SSI aims to lead the industry to promote understanding of sustainability and best practice. Other members include Cargill, Maersk Line, RSA and ABN AMRO.
Transport by rail
Transporting our goods to markets by rail is an effective way for us to grow our business sustainably. However, in many markets, lack of adequate rail infrastructure represents a major constraint. Where this is not the case, we look for every opportunity to shift from road to rail.
Take India, for example. Here, we are delivering over 100,000 tonnes of our products by rail from two of our large factories in the north of the country. This will reduce CO2 emissions by 7,000 tonnes. At the same time, switching from road to rail is saving us over €500,000 in road transport costs.
This is not affecting customer service, thanks to the faster speed of trains (60-70km/hr versus road average 30km/hr) and good management of the ‘first and last mile’ challenges. Because the rail terminals are not next door to our factories or our customers, we need to handle the product more times during the ‘first and last mile’ of distribution.
Our increase in rail use in India is facilitated by close co-operation with the Container Corporation of India Ltd of Indian Railways.
Our performance to date is winning plaudits externally. For example, in 2011, Unilever received the Contribution to Environmental Improvement award at the annual European Supply Chain Excellence Awards.
The awards recognise organisations that demonstrate excellence in their supply chain operations. The judges commended our achievements in reducing the carbon footprint of our logistics operations through more efficient use of vehicles, using an optimal vehicle load fill solution, and energy-saving initiatives in our warehouse network (delivering a 33% improvement in absolute CO2 emissions from 2008 to 2010). In 2012, Unilever won Logistics and Distribution Operations award for our work with DHL at the European Supply Chain Excellence Awards.