The Grawe Gazette – General Counsel
ESG and Trucking
By The Grawe Group, April 2022
We are fully in bid season for a lot of shippers, and you may be noticing a few more questions in the process about what your business is doing to help the environment, or to be a good corporate citizen in the community. That is because more and more companies have ESG initiatives – initiatives to improve their environmental impact, their social impact, and their governance over their operations. Before you start to think you need to come up with some huge ESG program to meet these shipper requirements, keep in mind you are likely actually already doing a lot of good ESG work.
ESG: Environmental, Social, and Governance
ESG means a lot, and in some ways ESG means very little. It means a lot because a lot of stuff falls into the environmental, social, or governance buckets in businesses. It means a lot because they are buzz words getting more attention in the financial news, and good ESG programs can help you improve your performance. It means a lot because more employees want to know what your business is doing to be a better corporate citizen. It means a lot in transportation because more and more shippers are taking your ESG activities into account when awarding business.
It means little because even though more RFPs are asking ESG questions of carriers and brokers, rates are still king. It means little because your business health is still dictated by your performance fundamentals much more than your ESG. It means little because the cynical view is they are just buzz words.
The truth is if you focus on the things good trucking and brokerage companies have been doing for decades you will be very good at ESG. You do not need to change the focus of your business to be good at ESG, or to do better on ESG scorecards. You can make your business more attractive to shippers, employees, and investors if you tell your ESG story effectively.
ESG Example #1: Fuel
Environment – the E in ESG. Stakeholders invested in the E in your business want to see slick, impressive reports on all the work you are doing to lower your carbon footprint. Trucking may not have a reputation for being environmentally friendly, but the reality is to be successful in trucking you must be focused on the efficient use of equipment. Empty miles are bad for your bottom line, bad for your drivers’ bottom lines, and bad for the environment. Poor fuel mileage is the same.
If you keep focusing on utilizing your equipment and your drivers, eliminating empty miles, detention, layovers, and other time and equipment wastes, and if you slow your equipment down and improve your mpg, you will improve your financials and your ESG. Turn your mpg improvement story, turn your equipment investment story, turn your utilization improvement story into a compelling example of your business is in fact working very hard to lower your carbon footprint. Because that’s the truth.
ESG Example #2: Safety
Social Responsibility – the S in ESG. Large companies may have paid volunteering days or may be able to write headline grabbing checks to big charities. That’s great stuff. But you can excel at social responsibility without it, and chances are you already do. When your Operations team drives good safety habits in the fleet every day you are socially responsible. When you keep your equipment well maintained, and you empower your drivers to choose safety over service, you are socially responsible. When you use your safety data to coach up safety performance, you are socially responsible.
When your business focuses on its people and the people your drivers interact with out on the road every day, driving home the importance of safe, ethical driving, your business is socially responsible. Live that story and tell it early and often so shippers, employees (and recruits), and investors know just how socially responsible you are every day.
ESG Example #3: Compliance
Governance – the G in ESG. This may seem the most daunting of the three. What the heck does “governance” even mean? In this context it essentially means having good policies and practices that will keep your business out of trouble. In trucking it can seem like trouble is always lurking. There are risks of motor vehicle accidents, DOT audits, background check missteps, wage and hour violations, cyber security events, independent contractor misclassification, and so on. No one can say they are buttoned up on every possible risk at all times. And it can be tempting to think good governance means having a policy for everything.
That is not necessarily true. Your business probably has good governance muscles developed over years of DOT compliance. Your team has honed its driver qualification skills, its HOS monitoring skills, its drug and alcohol compliance skills and more. Tell that story, and even more, use those strong governance muscles to improve your compliance in other parts of your business.
Tell Your ESG Story
The competition for people is fierce, and the competition for freight may be picking back up a bit. Your performance fundamentals will always be king, but you can find competitive edges building, and telling, a better ESG story. Before you worry about trying to build a fancy ESG program because a shipper RFP called for one, stop and identify all the good work your business is already doing to excel at ESG. You are probably doing more than you think, and you have a better story than you think to attract and retain people and freight.
Independent contractor test reinstated
A federal district court in Texas reinstated the Trump era Department of Labor independent contractor interpretation under the economic realities test in March. The Trump era interpretation of the economic realities test emphasized two primary factors, control and opportunity for profit or loss. The Biden administration attempted to remove the Trump interpretation, however, the court threw out the Biden action on procedural grounds. For now the Trump era interpretation is back in place for Fair Labor Standard Practices Act claims. It is possible, if not likely, the Biden administration will either appeal the decision or attempt a new rule making altogether. Keep in mind, while this is good news, this does not impact any misclassification claims under the IRS, state work comp claims, state unemployment claims, etc.
Cyber security podcast
Our latest podcast episode is out. The latest episode welcomes Nate Johnson from GLCS to talk cyber security. It’s a good discussion both on preventing cyber security events, but also on keeping your operation running if an event does occur.
The Grawe Group, LLC is here to bring peace of mind to you and your business. We are a professional services firm focused on the transportation industry. With a team of experienced executives, we provide general counsel, executive leadership, and people development services for trucking and logistics companies. From legal and risk management matters, to operational, financial, and leadership challenges, the Grawe Group has the practical expertise in trucking and logistics to help you build sustainable success. www.thegrawegroup.com.
Check out the Grawe Pod, transportation’s general counsel podcast, for discussions on challenges industry leaders face in their business and how to address them. Now available on iTunes, Spotify, and other major podcast outlets!