Accepting the Challenge to Reduce Net CO2 Emissions (Sagawa Express Co.,Ltd.)

JFS Newsletter No.45 (May 2006)
Toward a Sustainable Japan--Corporations at Work Article Series No. 42
http://www.sagawa-exp.co.jp/english/main.html

"I wish I could send vegetables or fish that were harvested this morning to my relatives who live far away and have them arrive when they are still fresh." "This product needs to be delivered to the customer by tomorrow." What kinds of services are offered in your community to answer these kinds of demands? In the last several decades, door-to-door delivery services have greatly improved in Japan and one of the companies offering these services is Sagawa Express Co. When you send a package from the Kanto region to the Kansai region (a distance of about 500km), for example, the package will be delivered the next morning for a reasonable price.

The number of consumers using this type of package delivery service has increased every year. Sagawa Express, a comprehensive logistics company operating trucks as its main means of transportation, handled about 940 million packages in FY2004. That means every person in Japan sent about ten packages through Sagawa's services in that year. Sagawa's vision is to become the number one logistics company in Asia, and it operates a fleet of 20,000 vehicles, has 340 service offices in Japan and 20 bases in China and elsewhere overseas.

Growing Distribution Needs and the Challenge to Reduce CO2 Emissions

While the demand for quick, safe transportation is growing, there is also significant concern about environmental protection. The amount of carbon dioxide (CO2) emitted from the transportation sector in Japan is on the rise, currently accounting for 20 percent of Japan's total CO2 emissions. The responsibility for CO2 emissions from the transport sector is shared between commercial transport fleets and private cars. Although the amount emitted from the latter is increasing, emissions from the former actually remain flat.

Sagawa Express, which is headquartered in Kyoto, started a full-scale program of environmental activities when it launched the Sagawa Express Eco Project Promotion Committee comprised of the company's executives in 1997, when the third Conference of Parties to the U.N. Framework Convention on Climate Change, or COP3, was held in Kyoto. Because it is a comprehensive logistics company that provides services mainly by means of motor vehicles, it started with a campaign to encourage its drivers to stop needless idling and the introduction of a significant number of compressed natural gas (CNG) fueled vehicles to its fleet. Currently the company is promoting a modal shift from road to rail and water transport, which have less impact on the environment compared to using road transport only.

Setting a Net Reduction Target

In 2003, Sagawa became the first Japanese company and the first business in the transportation sector of the whole world to join the Climate Savers Program, developed by World Wide Fund for Nature (WWF), an international non-governmental organization (NGO). The program is designed to encourage businesses to promote progressive environmental action aimed at further reducing greenhouse gases by setting even higher reduction goals. Participating companies are required to set a net greenhouse gas reduction target greater than their current target, and to accept inspections and be certified by WWF and a third party with respect to their progress in achieving these goals.

Sagawa joined the program based on its recognition that this would benefit the company by enhancing an already strong sense of responsibility and creating a certain amount of pressure throughout the company to attain the target. After a year of various preparations, including figuring out the methods to calculate the values necessary for certification, the company released its target to reduce its total CO2 emissions by six percent from their FY2002 level by 2012. Many domestic and overseas businesses set up their target in terms of eco-efficiency or a basic energy unit. Sagawa's, target, however, aims for net reduction figures. It is this noteworthy move that has attracted a lot of attention.

Converting a Third of its Fleet to CNGs

How can delivery service companies reduce net CO2 emissions? One way is to change the type of fuel used for vehicles. Since 1997, Sagawa Express has been converting diesel vehicles fueled by light oil into CNG-burning vehicles. "CNG vehicles can reduce CO2 emissions by 20 percent, nitrogen oxide (NOx) by 90 percent and particle mass (PM) by 100 percent, compared to most diesel vehicles," said Shuichi Matsumoto, Manager of the Corporate Social Responsibility (CSR) Environmental Preservation Promotion Department. "Considering the requirements of a delivery service, for now, CNG trucks are more eco-friendly than LPG or any other type of vehicle."

As of the end of 2003, CNG vehicles accounted for almost 10 percent of all Sagawa Express vehicles (1,647 out of 20,000). However, their participation in the Climate Savers Program led the company to an even stronger recognition of the merits of CNG vehicles, and as a result it increased the number of CNG vehicles it plans to introduce by the end of FY2005 from 2,450 to 2,800. It also set a target of 7,000 to be introduced by the end of FY2012. In October 2004, it became the first Japanese company to have more than 2,000 CNG vehicles. This accounted for about 20 percent of all natural gas trucks in Japan. CO2 emissions from this company fell from 366,600 tons in FY2002 to 357,400 tons in FY2004, a reduction of 2.49 percent.

Two Problems Hamper the Introduction of CNG Vehicles

There are two major problems with using CNG vehicles; one is cost. It costs 1.1 million yen ($9,400) to convert a diesel vehicle with a load capacity of two to three tons into a CNG vehicle. Except in CNG promotion model areas designated by the Japanese government, the company has to spend at least 100,000 yen ($855) per vehicle, even though it receives a national subsidy for half the conversion cost and further aid from industry organizations and municipalities. The cost to the company would increase if theses subsidies were reduced in future.

The other problem is lack of natural gas supply infrastructure. Do you know how many natural gas (NG) stations there are in Japan? There are only about 280 (0.5 percent) out of 50,000 gas stations nationwide. This is because operating NG stations is not profitable due to the scarcity of CNG vehicles. Considering that Sagawa Express fields more CNG vehicles per service office (several dozen to a hundred vehicles) than its competitors, easy access to NG stations is a decisive factor for Sagawa.

This is why Sagawa Express started to build its own NG stations to facilitate the introduction of a large number of CNG vehicles. The first NG station was built at the Tokyo service office in April 1999, and this was also the first such station belonging to a transportation company. Since then, five stations have been built at its service offices in Tokyo, Osaka, Saitama and Nagoya. The latest one was built at the Tokyo Chiyoda service office in FY2004. The company has to bear the expense of building these NG stations. Their initial cost is about 50 to 100 million yen ($427,000 to $855,000), and total costs including operational costs are even greater. The introduction of CNG vehicles will depend on infrastructure improvement as well.

Improving Driving Habits

Another effective measure that logistics companies can take to reduce CO2 emissions is to promote improved driving habits. Sagawa Express is thus focusing on driver education that promotes "eco-safe driving," that is, safe, fuel-efficient driving. Sagawa encourages its drivers to remove their ignition keys when they stop or park their vehicles in order to avoid unnecessary engine idling, and also advises them to try to avoid abrupt steering, rapid starts and heavy braking. Moreover, Sagawa periodically monitors to what extent eco-safe driving is being practiced. In FY2004, the implementation rate reached 99.1 percent. To further promote eco-driving, the company also has introduced eco-safe driver education into its new employee training program and uses it as an indicator to evaluate drivers' driving techniques for the in-house driver contest and daily inspection competition.

Using Non- Motor Vehicle Transportation

The third way logistics companies can cut CO2 emissions is to promote a modal shift from road to rail transport. Transport by rail is free of traffic jams and has much higher fuel efficiency than transport by motor vehicles. Therefore, combining the two modes of transport helps reduce the total amount of CO2 emitted by the company. In 2001, Sagawa, jointly with Japan Railway Freight Co., launched the development of the world's first high-speed freight train, Super Rail Cargo, for the purpose of reducing cargo transport times.

In this project, the two companies have succeeded in developing a freight train with a maximum speed of 130 km/h, as opposed to previous trains with a top speed of 110 km/h. This was achieved through several improvements made to the trains, such as repositioning their motors. Sagawa also developed containers tailored to the system so that it can reduce the time needed to load and unload containers on and off the train. Its modal shift initiative was certified as a "demonstration experiment aimed at reducing environmental impacts on trunk line distribution" by the Ministry of Land, Infrastructure and Transport in FY2002, and its implementation attracted a lot of attention from concerned parties.

Operation of the Super Rail Cargo service began in March 2004, after three years of development. The 16-car long train makes a daily round trip between Tokyo and Osaka in the middle of the night. Its carrying capacity is equivalent to that of 56 ten-ton trucks, enabling Sagawa to cut about 16,000 truck trips (10,000 tons in CO2 equivalent) annually in FY2004. In addition, by using other trains and ferries, the company cut out a total of 75,000 truck trips (68,000 tons in CO2 equivalent) in the same fiscal year.

Will it be possible for Sagawa to achieve its net CO2 reduction target? "For example, insufficient infrastructure could be an obstacle to introducing 7,000 CNG vehicles by the end of FY2012. If that is the case, then we will have to be flexible in considering additional measures, such as introducing solar power generation, further promoting modal shift and educating our drivers," says Matsumoto.

One of the keys to achieving the target is "interactions" with customers and stakeholders. For instance, Sagawa recently started a new service "specified time delivery;" when placing their order, senders can request a time period when they would like their package to be delivered. This service was the result of dialogue with customers. "Thanks to this service, we were able to reduce the frequency of re-delivery. And as a result, we succeeded in reducing environmental impacts," Matsumoto explains. "I believe there are many other ways to reduce environmental impacts while also improving the quality of the services."

While we rarely consider the possible environmental impacts that result from using a courier service, Sagawa Express is striving to reduce the burden it places on the environment despite the increasing demand for its services. By choosing to use a courier company that provides environmentally friendly services and expertise, we can also contribute to reducing CO2 emissions in the transportation sector.

(Staff writer Kazunori Kobayashi)