Decarbonization strategies: From DIY to Do It Together

Imagine a world ‘fueled’ by renewable energy – endless electricity driving everything from cars and cranes to buses and buildings. Many experts say the idea is optimistic but feasible.

But how do we get there? The overall trend is clear and encouraging: the world is striving to become greener, and companies are increasingly developing decarbonization strategies. Yet how much can one company do on its own?

Global organizations like ours can make strides independently, but much depends on factors beyond our direct control, such as public infrastructure, the ramp-up of renewable energy, and new technology. And the cost of do-it-yourself decarbonization projects can be high. Since 2021, we have invested nearly €900 million in technologies, processes, and solutions to decarbonize our business.

Case in point: As we build our sustainable fleet, our electricity demand will triple or quadruple the amount we need today. That’s one of the reasons we recently signed a ten-year contract with RWE Supply & Trading to purchase around 104 gigawatt-hours of electricity and launched a partnership with E.ON to equip our distribution centers in Germany with fast-charging infrastructure.

The RWE deal covers about 19% of our current annual electricity needs in Germany, which is substantial but not a silver bullet. Still, partnering with RWE represents a step forward in our decarbonization strategy that hopefully helps drive the general transition to renewable energy.

The RWE deal, a so-called power purchase agreement (PPA), is part of a noticeable trend. PPAs currently account for 35% of the total procured renewable power among companies surveyed by S&P Global. According to Oxford University’s Net Zero Tracker (NZT), half of the world’s largest companies are committed to net zero.

However, the reality is a bit like driving through heavy traffic on a rainy day – slow progress, frustrating delays, and constant uncertainty, which make the journey far more challenging than anticipated. The NZT reports that only 4% of global corporate net-zero commitments fulfill the ‘starting line’ criteria set by the United Nations Race to Zero campaign, a collection of non-state actors committed to a standard set of actions aimed at halving global emissions by 2030. We joined the Race to Zero in 2021.

The stark contrast between stated and achieved decarbonization goals might seem like failure or insincerity. But the real hurdles to progress are the complex political, economic, technological, and societal challenges. The biggest challenge is that sustainable infrastructure lags behind ambition: the power cord doesn’t reach the outlet.

Extending that cord comes with a hefty price tag: McKinsey estimates that a net zero world will require $275 trillion in cumulative spending on physical assets, including the successful deployment of emerging and untested technologies. Companies, communities, governments, and individuals are stuck in the middle, grappling with tough decisions on investment timings, options, and methods to decarbonize.

A decarbonization strategy has to start somewhere. And like most DIY projects, it begins at home.

At DHL, we have created a Carbon Neutral Building (CNB) Framework to guide the process of decarbonizing our facilities. It includes 20 standard and 15 advanced efficiency and decarbonization ‘levers’ for CNB design identified by our Corporate Real Estate team.

The DHL Express offices at our Leipzig Hub are a real-life example of CNB in action: Five office buildings and a multi-story car park with an on-site solar installation generating some 75% of its energy needs. Even the DHL logo is a solar panel.

Solar power is arguably the most straightforward solution for DIY decarbonization. It immediately lowers external electricity demand and can reduce heating emissions. Unfortunately, it doesn’t work on every roof, the initial costs remain high, and storing solar energy for later use is still quite expensive.

For many companies, real estate accounts for only a tiny portion of total emissions. But buildings are highly visible to employees, customers and other external groups – from policymakers to the press. So, while even a complete portfolio of CNBs can only do so much to support our decarbonization goals, they pave the way for tackling one of the trickiest infrastructure problems logistics companies face: decarbonizing road transport.

An electric world fueled by renewable energy really isn’t so far-fetched. For example, we plan to electrify 60% of our last-mile pick-up and delivery (PuD) vehicles by 2030. Combine that with carbon-neutral buildings powered by green electricity, and you see just what that world could look like.

But here again, this realistic and feasible blueprint on paper can prove to be extremely complex and difficult to build in the face of insufficient infrastructure.

Electrification is undoubtedly one of the most essential parts of the decarbonization process. While we are on track to meet our last-mile goal, we’re also working to increase the use of sustainable fuels, such as biofuels and hydrogen, and electric vehicles for heavy-duty transport to 30% by 2030. The first step in achieving these goals is aligning the electricity supply at DHL facilities with on-site EV charging infrastructure.

Most of our EVs are PuDs – smaller vehicles and vans charged overnight at DHL facilities. Although we can manage the overall increase in electricity consumption and peak power demand for these vehicles, things get more complicated when we introduce trucks because they need more power. Due to the higher mileage and average electric consumption, it takes the same amount of electricity required for 60 PuD vans to charge one electric linehaul truck.

Although decarbonization solutions like these can help a facility reduce electricity consumption and increase on-site renewable energy supply, building the necessary charging capacity is a long-term project. For example, if we electrify 80-100% of all our vehicles in Germany, our electricity demand would increase sevenfold. This power must come from renewable sources to achieve our decarbonization goals.

This is where DIY decarbonization strategies hit a roadblock. And why we need other solutions to bridge the gap, including collaboration with like-minded companies.

Unconventional partnerships like these also show how early adopters from the private sector can influence long-term infrastructure development. The deeper the transformation goes, the more we need to cooperate to drive demand and mitigate risk.

The scaling up of SAF production in recent years is evidence of this trend. In 2023, global production of SAF reached over 600 million liters, up from 8 million in 2016. This is a direct result of committed partners collaborating to drive demand. Over the past few years, we have worked with partners to purchase millions of liters of SAF, which, together with several multi-year agreements, currently represent roughly 14% of the global market. SAF made up 3.2% of our annual aviation fuel consumption in 2023, making DHL the only company above 3% in the airline industry. Overall, SAF use is still low but rapidly accelerating as more companies join together to create the demand needed to boost supply.

A decade ago, the idea of a logistics company working with wind farms and grid operators would have seemed far-fetched. Today, such collaborations have become commonplace to ensure all stakeholders can scale their contribution to decarbonizing the sector.

Our collaborations with RWE and E.ON are perfect examples of how fostering proactive supplier relationships can contribute to a more sustainable ecosystem.

Like in a demanding race, each stride toward decarbonization requires endurance and determination. After all, it’s a marathon, not a sprint. And companies can only do so much on their own.

The bottom line is that companies like DHL Group should do what they can to decarbonize while also proactively closing the gap in areas outside their direct control. Despite the distance yet to cover, the progress achieved so far is a testament to the collective effort of all stakeholders, each playing their part in this enduring race towards sustainability.