Linfox - Business Case and Beyond
- Senior management at Linfox was involved in establishing targets and communicating support for energy efficiency improvement and greenhouse gas reduction before energy efficiency assessments. This helped to ensure that by the time business case proposals for energy efficiency and greenhouse gas reduction were presented to senior management they were considered an important business priorit
- Cross-functional working groups were established to develop business case proposals in key opportunity areas. This means that personnel with the appropriate expertise are involved in the development of business case proposals. It also creates shared interest in each project amongst those that need to be involved to ensure that the projects are successfully implemented.
- Business case proposals receive senior management attention and consideration in the process of being developed because working groups are required to present draft business case proposals and report on progress to a senior level project team. This team is convened by the President for Human Resources and a number of senior managers including the Chief Financial Officer, Group Manager - Organisational Development, Group Manager - Supply Chain Solutions, Manager Fleet - Special Projects, and the Group Manager - Sustainability. Existing or potential implementation barriers can also be raised at this level and strategies developed to overcome those barriers.
About the Company
Linfox is the largest privately owned supply chain solutions company in the Asia Pacific region. The company employs around 15,000 people, owns 1.8 million square metres of warehousing and operates nearly 5,000 vehicles across 11 countries.
Linfox delivers more than 4.5 billion litres of fuel and 15 million pallets. Customers include nine of the Asia Pacific region’s top ten fast moving consumer goods producers.
Energy use at Linfox
The total Australian energy use for Linfox in the 2009/2010 financial year was 3.28 PJ.
Diesel accounts for around 94% of total energy use with the remainder being electricity used in warehouses and offices.
Energy policy, targets and approach
The Linfox vision is ‘to be the supply chain solutions provider of choice across the Asia Pacific region.’ Linfox’s 2015 Business Strategy lists ‘leading the industry in caring for the environment’ as one of six competitive differentiators that are considered essential to achieving business success. Actions taken to improve energy efficiency and reduce greenhouse gas emissions are a key part of the Linfox approach to environmental leadership.
In 2007, Linfox set a target to reduce the greenhouse gas intensity of its global transport operations (measured in tonnes of CO2e-/1000km travelled) in 2010 by 15% compared to greenhouse gas emissions in 2006/07 (the base year). By 2010 the target had been exceeded with greenhouse gas intensity reduced by 28% compared to 2006/07 levels. This target was then re-evaluated and adjusted to a reduction of 50% below 2006/07 levels by 2015.
Figure 1: Greenhouse gas intensity at Linfox between 2006-07 and 2008-09 (the red line shows the 2010 target)
Linfox has implemented a highly structured approach to organisational change with the goal of meeting its targets and delivering ongoing improvements in energy efficiency and greenhouse gas reduction.
The need for this change was highlighted in 2007 when the CEO and Chairman met with key customers in Australia and overseas to discuss emerging strategic and operational issues. Although potential cost savings and other direct business risks and opportunities were identified, the senior management team and the board considered that the primary business driver for the company was to meet its social responsibilities to reduce greenhouse gas emissions. Research conducted by the Environment Manager also identified the need for greater focus on energy efficiency and greenhouse gas reduction in the business.
A change management program was developed based on the ‘8 step Process for Leading Change’ developed by Dr. John Kotter[1. Further information is available from www.kotterinternational.com] The approach emphasises the need for senior management leadership followed by initiatives that build awareness, motivation and support across the organisation and helps to create cultural change. This approach was considered to be essential since major improvements were expected through behavioural rather than technological initiatives. The advantage of creating a constructive culture for energy efficiency and greenhouse gas reduction is that when new technology does become available the organisation will be able to more quickly and efficiently identify and deploy that technology.
Key initiatives implemented by Linfox are summarised against each of Kotter’s 8 steps in Figure 2
Figure 2: 8 Steps for Leading Change at Linfox
Step 1: Establish a sense of urgency
Management briefings and interactive workshops were conducted across the business using resources such as Al Gore’s documentary ‘An Inconvenient Truth’ to encourage discussion and clarify the reasons why Linfox should act to reduce energy use and greenhouse gas emissions.
Step 2: Create the guiding coalition
A senior management group with representation across all functional areas of the business was established to lead the change management process.
Step 3: Develop a vision and a strategy
The ‘guiding coalition’ worked with an external consultant to facilitate a consultation process with managers, staff, customers and external suppliers to identify key opportunities to reduce greenhouse gas emissions and to establish a vision, greenhouse gas reduction target and strategy.
Step 4: Communicate the change vision
The greenhouse gas reduction target and strategy was communicated across the business, from the Chairman down.
Step 5: Generate short terms wins
As projects were implemented the results were communicated across the business to demonstrate the success that was being achieved.
Step 6: Empower a broad base of people to take action
Voluntary environmental training was developed and by 2011 over 500 personnel had undertaken the ‘Green Fox’ training program. Many others were involved in working groups to scope, evaluate and implement energy efficiency and greenhouse gas reduction initiatives.
Step 7: Consolidate gains and produce even more change
A monitoring and verification program helped to confirm savings and support further communication of project successes. The positive outcomes were used to create momentum by building support for further action.
Step 8: Ground the changes in the culture and make them stick
Ongoing improvement is encouraged in a number of ways. For example, eco-driving behaviours are reviewed through the annual performance management review of drivers. Once the initial greenhouse gas reduction target was achieved a new target was established to encourage further improvement. Progress against the target is communicated regularly at all levels of the business including six monthly briefings to senior management and via internal communications such as newsletters.
Getting support for energy efficiency projects
As part of the strategy development process, nine key opportunity areas that were expected to significantly improve energy efficiency were identified. These included supply chain optimisation, aerodynamic vehicle design, improved vehicle utilisation, tyre pressure monitoring and Eco-driver training.
For each of the opportunity areas a cross functional working group was established to evaluate potential projects and develop business case proposals. The working groups include a senior management sponsor and representatives from relevant functional area in the business. This means that personnel with the appropriate expertise are involved in the development of business case proposals. Careful selection of working group participants also informs and motivates personnel that may be involved in the final decision on whether a project should proceed. Many members of the working group also have a key role in the implementation projects and their involvement from the start helps to build ownership and commitment towards successful project outcomes.
Business case proposals receive senior management attention and consideration in the process of being developed because working groups are required to present draft business case proposals and report on progress to a senior level project team. This team is convened by the President for Human Resources and the Group Manager, Sustainability. Existing or potential implementation barriers can also be raised at this level and strategies developed to overcome those barriers.
Genesis of the project
Eco-Driver training was identified as one of nine key energy efficiency opportunities during an organisation-wide assessment of the key actions that Linfox could take to achieve its ambitious greenhouse gas reduction goals.
Project/ Investment challenges
Recognition of the importance of the project and support from the senior management and learning and development teams was essential because it was intended that all drivers would participate in the program - a significant time commitment on the part of the drivers. Also, since ‘off-the-shelf’ training programs were not available at the time, the costs associated with training development were difficult to determine.
A number of systems and processes that were put in place to support the evaluation of projects helped to build support for Eco-Driver training. For example:
- A cross-functional working group including representatives from operations as well as the learning and development team was formed to evaluate the business case for Eco-Driver training. This helped ensure that the business case proposal was rigorous and realistic. It also encouraged collaboration across functional areas of the business which, in turn, created a shared interest and motivation to ensure that the project was successful.
- The working group was required to present their business case to the President, Human Resources and the Group Manager, Sustainability. This ensured that the business case proposal received consideration from a strategic as well as an operational perspective. Eco-Driver training was also compared to other potential energy efficiency and greenhouse gas reduction initiatives in terms of the cost effectiveness and extent to which the project would enable Linfox to meet its greenhouse gas reduction objectives.
Linfox established a partnership with an external training provider (The Andromeda Group) in order to reduce the financial risk associated with program development and to encourage the wider application of Eco-Driver training across the industry. Linfox contributed their content knowledge to development and trialing of the training through initial face-to-face training sessions. The training contractor then applied their expertise in developing online e-learning training solutions to support further roll-out of the training.
By granting copyright for the training content to the training contractor, Linfox has been able to significantly reduce the costs for training development and roll out. The training provider has also made the training available to other companies in the industry. This is an additional benefit for Linfox because it helps demonstrate their commitment and leadership on energy efficiency across the transport and logistics industry.
A total of 826 drivers had been trained by 30 June 2010 and it is expected that a further 1000 drivers will complete the training by 30 June 2011.
The training was supported by the development of the Linfox Energy Efficiency Guidebook, coaching, monitoring and recognition programs. Eco-Driver competencies have been integrated into the organisation’s performance management system.
Trials have demonstrated energy savings of up to 14% and further implementation of the program is expected to make a further contribution as Linfox works towards its target of a 50% reduction in greenhouse gas emissions by 2015[2. tonnes of CO2e-/1000km travelled compared to the base year 2006/07.]
Refer to the section on considering a range of funding options for further information.