Smart Freight Conversations
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Smart Freight Conversations
Episode 36 | The Catalyst Series: The Three-Legged Stool: Pegasus Logistics on Decarbonization Without Owning a Fleet
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How does a logistics provider cut emissions when it doesn't own a single vehicle?
Phil Clawson, Global Head of Sustainability at Pegasus Logistics Group, joins Andy Golding, Director of Strategic Services at Smart Freight Centre, on Smart Freight Conversations to share his three-legged stool approach:
- High quality, credible data
- Efficiency through load and route optimization
- Cleaner propulsion fuels
Phil explains how looking at all three together shows where one can help address another.
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Hello and welcome to another episode of Smart Freight Conversations, where we share interesting and important insights on freight decarbonization and the drive towards a zero emissions logistics industry. My name is Andy Golding. I'm Director of Strategic Services here at Smart Freight Center, or SFC, as you'll hear us call it, and I'll be your host for today. In this episode, we're exploring how logistics providers are translating decarbonization ambitions into real-world action across global supply chains, customer solutions, and day-to-day operations. Whether you work in sustainability, are new to logistics, or you're in freight and are navigating emissions reporting and calculations for the first time, this conversation will help connect a bunch of different worlds. Joining me for this conversation is Phil Clausen. Phil is the global head of sustainability and VP of Pegasus Logistics Group. And with that, let's drive into today's episode. Phil, it is really cool to have you on the couch with me. To start us off, maybe you could just tell us a little bit about Pegasus Logistics Group, your core activities, and your role in the organization.
SPEAKER_00Brilliant. Well, Andy, it's so good to be here with you and Smart Freight Center. So a little bit about Pegasus. So we're an asset-light freight forwarding company or logistics services provider. We're global and we're all modes, but we're headquartered in Capel, Texas, which is Metro Dallas. We've got uh a lot of business domestically in the US and in North America. And then globally we focus on uh imports into North America and LATAM for the most part. So we're split between road, ocean, and air, but we own none of the vehicles. So it's all management through influence.
SPEAKER_01Okay, so all modes don't own it. I I also see that a lot of Pegasus's focus is on orchestrating decisions across the supply chains. And we know that logistics is complex. Uh, things need to move, the way they move, how they move, the speed at which they need to move, where they need to go, all of that is constantly changing and looks different for every customer. So, what has been some of your company's most meaningful achievements in not only helping to remove unnecessary supply chain complexity, but helping companies reduce and you're helping your clients reduce emissions meaningfully.
SPEAKER_00Yes, great question. So I think of it as being a three-legged stool. So the first leg is high quality, credible data. If we don't know what the impact is of what we're doing, it's hard to communicate it and it's hard to address it, right? The second is looking for all of the different ways to make things more efficient, which is something that supply chains do brilliantly. And, you know, before I joined Pegasus, we were working on load optimization and route optimization and uh, you know, modes and all of that, because it makes good business sense for our clients, for the shippers, and for us as a company. It also happens to have a very strong sustainability impact. And then the third is how you're moving things, what the propulsion fuel is. Uh, and so we try to look at all three of those in concert and look for ways where we can leverage one to address another. So when we have high quality data, we can see where the leverage points might be, either in terms of driving more efficiency, or looking for opportunities to mode shift or look at different opportunities to try new propulsion like battery electric trucks or HVO, uh, which is renewable diesel, or you know, addressing some of the air emissions with sustainable aviation fuel or marine with sustainable marine fuel. Uh, and so really those are the three things that we're focused on. And the last year or so has been uh a lot of trying to get our head around all of that and look for those opportunities to have high-leverage impact in ways that are going to be appealing to the shippers who are often motivated by the typical constraints of cost, time, and quality, right? They needed to get where they needed to get, when they need it to get there, in the shape they need it to get there in, right? And so those are the baseline and the given. Uh, and then the more strategic ones are also looking at risk and resilience and sustainability as additional considerations in that in that equation. But even for the ones who aren't quite there yet, we can apply that lens because the way we're thinking about it accomplishes all of that, right? It helps make it cheaper in some ways, it helps improve the quality, and it uh, you know, doesn't impact negatively the time.
SPEAKER_01There's so much in that, and I love the three-legged stool analogy. I also think that you've hit on a really important point that at the end of the day, customers have a business case, they have a business to run, there has to be a profitability imperative in addition to making the right decisions for the future. So balancing that cash flow and prop uh profitability now with what are we doing and planning for and making sure we're set up for a sustainable future? Yeah. From a Pegasus perspective, beyond regulation, beyond compliance, what motivates Pegasus Logistics Group to lead in freight decarbonization? You've already said it's complex. You've already said you're focusing on data efficiency leverage. There's a lot of pressure coming from customers, but why does it matter to you as an organization? And how are you translating that ambition into day-to-day operational and procurement decisions?
SPEAKER_00So we love complex, hard-to-solve challenges, right? That's sort of that's sort of our bread and butter is you can't figure it out, we'll help you figure it out. And this is another one of those, right? So we have a chance to exercise our our muscles, our brain in trying to help solve for really complicated challenges that have trade-offs and that have different aspects and different timelines and and different key success factors. So, one, we love a complex challenge. Uh two, we're really committed to transforming the industry and making an impact. So the biggest driver for us is leaving the world in better shape than we found it and helping to have a planet that we can all continue to be successful on for the next 100, 200, 300, 500 years, which on the path we're on right now is not assured, right? So, number one, it's the impact. And number two, it's the our main drivers are customers, right? Our shippers, our clients are the ones who have the strong regulatory pressure and have the strong investor pressure. We're a private company, we're small enough that we don't have uh significant regulatory pressures, but our clients do, you know, big tech hyperscalers, big biotech companies, uh, you know, financial service institutions, uh, automotive, all of our clients in in multiple, multiple sectors, they're getting pressure from their customers, from investors, from regulators, from their team members and employees, uh, and from governments and and NGOs around the world. And so they can't they can't make the changes that they need to make as a company on their own because their supply chain and their value chain is in most cases 80 to 95 percent of their impact. So they depend on us to help them solve those challenges. So they push us to help them solve those challenges. Uh and and we on the on the same front, we don't own any assets. So I would love to electrify our fleet. We don't have any uh I could buy one electric truck and say 100% of our trucks are electric, but you know, uh that might be a little disingenuous. So uh so we then depend on our supplier partners, uh, you know, the trucking carriers, the ocean liners, the uh freight airline companies, uh the rail companies, etc. And so we get to play a quarterback role and we get to, you know, take in the signals from the coach, let's say, uh, which would be the client in this case, and then uh try to get the whole team, everybody, uh, all of our suppliers, all of our internal folks aligned and and rowing in the same direction to mix metaphors. Uh, and and that's the only way we can succeed.
SPEAKER_01Well, I'm really glad that you love solving complex problems because as you've just demonstrated, this is not an easy thing to resolve. There's so many moving paths. Um, given that you love solving complex problems, but you also don't own the assets yourself. Yeah. How do you leverage procurement and specifically sustainable procurement as a lever for driving making good decisions for a good future, but also getting the job that needs to be done done?
SPEAKER_00Yeah. So I've found that you need to have clear expectations. Uh, part of our sustainable uh sustainability journey has been driven by our customers leveraging their procurement departments to drive their suppliers to improve sustainability performance. And we get to cascade that down. So when we're looking for carrier partners or when we're partnering with our existing carrier partners, because we have a really strong network, we lay out expectations around transparency and sharing of data. We lay out expectations around uh, you know, rules of the road and a code of conduct to make sure that they're not adding risk to our supply chain and therefore to our shippers' supply chain. So around labor and safety and uh and other aspects like that, in addition to sustainability, environmental sustainability. And then once we've got those baselines set, like we need you to do the right thing and not, you know, not do things that are going to create serious risk for us and for our clients, uh, and then also get us actual credible data so that we can report on this. We then also work with them on okay, well, how can we do some fuel shift? How can we do some uh route uh optimization? How can we help you think about your fleet and whether you could improve the efficiency of it by inflating your tires to a to a better consistent pressure or uh, you know, refreshing your fleet and getting more efficient vehicles in the in the case of road freight. Um, and so it's really a partnership and it's really about, you know, it's less, here's your list of things you need to do. If you do these, great. If you don't, we're not gonna work with you. And more of a, here's what we need to do, here's what we need to do to achieve the goals that our shippers have and that we have. Um, and let's do it together and figure out how to do it together.
SPEAKER_01And I love that attitude because we know that collaboration is the only thing that is going to get us to a decarbonized future. It's the thing that I believe Smart Freight Center does magnificently is bring all of these parties who would otherwise be quite disconnected and disparate, shippers, carriers, uh, logistic service providers, policy makers, tool providers, governments, financial institutions, all of these parties that would otherwise never necessarily get around the table and have the conversation and move the thing forward. But also that collaboration within the supply chain that you're speaking of, that partnership is the word that you use that I think is so important. And you've also mentioned a few times that there are a lot of the efficiency measures that we can take, you know, like new vehicles, vehicle maintenance, load optimization, the things that we would classify generally as efficiency often give us a lot of the sustainability benefits as well.
SPEAKER_00Yes.
SPEAKER_01And I think that that's a kind of hidden superpower in these conversations. It's also a different, different but as meaningful way to have the decarbonization conversation with people.
SPEAKER_00Yeah. No, 100%. And you know, to to look at the go back to the three-legged stool analogy. Um some things cost money and some things save money, right? Efficiencies save money for everybody. And at least in the current state, in certain parts of the world, some of the different propulsion techniques cost more money. So sustainable aviation fuel, adding that to inset your your air freight emissions can't cost less because it's a net additional thing, right? Uh battery electric trucks, we're getting close to TCO parity, but we're not there yet. And there's upfront uh CapEx investment required. So the way we think about that, and uh we were inspired on this train by some of our uh by some of our clients, uh, you know, clients like Microsoft, for example, is how can we partner these together to make sure that we're accelerating our impact, but not accelerating our costs? So we look for efficiencies, we look for mode shift opportunities, we look for route and load optimization and and other factors that we can do to drive down emissions and drive down costs. And then we take some of those savings and we leverage that to invest in some of the solutions that currently require additional investment so that net overall, costs go down and carbon goes way down. So that's the that's the way to get internal advocates who are just focused on cost, quality, and time on board with this is to package it in a way where you're really driving business value and you're also driving long-term value creation and success.
SPEAKER_01I love that. Costs go down, carbon goes way down. And I think what you've also hit on is such an important theme that we're seeing as well in the market is sustainability has been a very high-profile conversation for a long time. The narrative is shifting a little bit now, and now businesses are saying, show me the business case. You know, I want to see what is the business case behind these initiatives. And from what you've just shared, the business case exists, it does require some smart thinking. But if you look at all of the opportunities and all of the solutions that exist, it's the business case really does exist, and we just need to choose to take action. But if we're taking action, we need to be able to prove impact. Yeah. And how are you able to do that? So, how are you tracking and verifying the real-world impact of your decarbonization efforts and initiatives across a global complex logistics operation?
SPEAKER_00It's super easy. You're just just kidding. Uh I wish. Oh my. So, you know, having good quality data as as a foundation is critical. Uh, and you know, when I joined, we we had good data, but we hadn't really applied the critical lens of uh, you know, carbon accounting to it in a, you know, aligned with standards, aligned with the Smart Freight Center's uh Gleck framework and you know, GLEC 3.1 and then GLEC 3.2, and then whatever's coming next, right? And uh ISO 14083. And so we added that lens to the mix uh and have our carbon accounting platform making sure that they're using the uh you know the emissions factors and the different ingredients that help create high-quality auditable accounting for carbon uh so that we can apply that to all of the loads. Um, but part of it is we depend on inputs from our carriers because we know where it went and you know how far it went and from where to where and what mode it was on and how much it weighed. And that's great for getting initial, uh, you know, initial baselines of what the emissions are. But if we want to improve and drive down carbon, there's a number of levers that we can use that don't get captured by mode weight and distance, right? Fuel shift. If you go from conventional diesel to uh renewable diesel, but you don't capture what fuel is being used to drive the freight, then you don't capture those emissions reductions. And those can be 60 to 80 percent emissions reductions, which is significant, right? Uh, and if you don't capture that you're insetting via sustainable aviation fuel or you know, booking claim for uh battery electric road freight or uh sustainable marine fuel, then again, you're not gonna be able to track those reductions. So it's also partnering with our carriers to make sure that they can, you know, in the in North America report to SmartWay so that they are sharing their data so that we know things like average age of their fleet and uh other efficiency metrics that help drive an emissions profile for for that particular carrier. Uh, and then also looking to try to get more nuanced data where where we're doing things that are really trying to drive decarbonization and not just, you know, inching along trying to decarbonize and capture that impact, but you know, concerted efforts to shift fuel to renewable diesel in a part of the United States uh and Mexico where does access doesn't currently exist. Well, there we have to capture the nuanced data uh of what fuel is being used and what the what the uh efficiency and the fuel mileage of the of the different vehicles are, because that's the only way we can really track the impact, which is critical. It's part of making the value proposition.
SPEAKER_01Absolutely. It's it's all good and well to take action and do the thing, but if you can't accurately and effectively prove the value of a thing, it's very hard to sustain a business case.
SPEAKER_00100%. Yeah. And and in terms of value, I think there's two sides to the value coin. One is the impact we're making on the on the world, on people on the planet. And that we measure by decarbonization, and we measure by workplace health and safety, and we measure by uh, you know, uh, you know, making sure that there's there's no forced labor in our in our uh supply chain and all the typical things that we do to try to drive human and planetary impact or minimize the negative and maximize the positive impact. Um, but then there's also the business impact. And we talked about that a little bit in terms of driving efficiencies, and that saves money. But the ROI conversation, that's not all of it, right? Yeah. There's a lot of submerged value in sustainability excellence. It drives innovation, it drives access to new markets, it drives growth in in revenue and growth in in clients. It can't it can drive all these things, right? It drives team member engagement, which then drives profitability, uh, and it de-risks. And all of those have an economic value to us and to the shippers and to our carriers. And when you do sustainability in a strategic way that's looking to maximize both sides of the impact coin, you end up creating a virtuous cycle and you end up creating more impact and more ROI and more impact and more ROI. And that's that's really the sweet spot. I I've uh a good friend who's the CSO of a large uh company, uh GM, uh Cassandra, and I'll I'll steal a turn of phrase of hers, which is that you know, people call us tree huggers, and that's true, but we're also money tree huggers.
SPEAKER_01Yeah. I love that. I love that. I also you've just mentioned the submerged value, and I think that's an important focus that we don't talk about a lot. I, you know, solving the logistics decarbonization is complex. Yeah, managing supply chains is complex, and it's very easy to just focus on the what are the problems here and now that we're trying to solve. But that submerged value in what all is being created, the expanded value of when we dive into decarbonization, the innovations that are coming out, the new ways working, the collaborations, the partnerships, there's so much opportunity that exists there. But to go back a step, it's we're talking from the position of people already taking action.
SPEAKER_00Yeah.
SPEAKER_01A lot of the time, before people can take action, they need education. Yeah. And it's very hard to expect people to just jump in or hit the ground running, rather, let me say, when they don't know what they're doing. So, what role does training and internal capacity building play in your organizational decarbonization journey?
SPEAKER_00It's critical. And it's critical internally and externally, honestly. We need to make sure that our folks across the enterprise understand how we can drive impact and value and are motivated to engage with that. So if our sales team is understands the different levers we have to pull and uh the different ways we can drive impact, they can engage the clients and shippers that they're trying to, you know, gain more, more business or retain business from and offer new opportunities, right? If our if our operations team is well versed in sustainable logistics and optimization and efficiency and also fuel shift opportunities, then they're the ones who are actually making the day to day decisions on how to route something and how to how to consolidate loads and how to optimize. Uh, and in some cases, what mode to use and what uh what fuels to use. And so their engagement. And understanding and buy-in is critical. And then even other parts of the organization, if finance and Marcoms and HR, when everybody understands what we're trying to accomplish and understands where they can make a difference, where their role and what they're doing to help the organization and to help our customers, our suppliers, others in our network succeed, then they can drive that forward. And that's way more powerful than what I can do and what my team can do. We're, you know, we're limited. We don't have a 700-person sustainability team, right? Uh, so so we really do need everybody internally aligned, and and that is a learning journey, right? And then it's also a positive reinforcement and ongoing engagement journey. And so the way we've handled that thus far is a combination of engagement sessions, trainings. We had a uh, I've done a couple of trainings for our sales force and operations teams on the different levers for decarbonization and waste reduction, and and how we can help apply pressure on those levers. Uh, and then also we've had clients like uh like Microsoft uh come and do sessions for our entire company on why this is important to them, how they achieve their goals, what their goals are, and how we can partner with them to help achieve that. And that contextualizes it then. It's not just Phil saying, hey, we should do things more efficiently and drive decarbonization for our clients abstractly. It's one of our clients saying, we need you to do this, right? And here's how. Uh so that's been key. And the next phase of our journey really is to go deeper. And that's where the Smart Freight Center and the Smart Freight Center Academy is such an invaluable resource. Uh, you know, we're we're proud to be all in members, and that part of the business case for that is it unlocks extra seats for the trainings, which we can share with folks in finance and folks in operations and folks who don't have sustainability in their title, but do have sustainability in their purview.
SPEAKER_01Yeah. And I would say that what you've said, it's about making sustainability not just a department, but part of the nuts and bolts of the organization. And, you know, the SFC Academy does offer training for sales, finance, and procurement professionals. We're stoked to have you on board as an all-in member. And this is exactly why we've expanded the access to the Smart Freight Center Academy. Yep. Phil, to wrap up this episode, I would like to ask you for a one-sentence sum-up of if somebody is just if they're listening to this episode and just getting started on their decarbonization journey or just dipping their toe, where to from here, what's the first step?
SPEAKER_00Well, I'd say my biggest piece of advice is nobody can do this alone. Yeah. So if you're sitting in a room trying to figure out what your next step is, you're not you're not leveraging the expertise and the resources that exist. So actually come to a Smart Freight Center convening or do a course on sustainable logistics or engage with your customers or your partners and figure out what their goals are and how you can do things together. Because if we all stay sit in our little rowboats trying to do things on our own, we go nowhere. Uh, we go around in circles. So figuring out what you need to know and who you can do things with is really the first step in the journey.
SPEAKER_01Phil said it best. Phil, thank you so much for joining me for this conversation. We've spoken about a lot, about the importance of partnership, about understanding the submerged value in sustainability and in decarbonization, and also about making this a part of the nuts and bolts of the business. So thank you so much for joining me on this episode.
SPEAKER_00It's been absolutely my pleasure, Andy.
SPEAKER_01If you'd like to learn more about the topic of decarbonization, if you are a finance, sales, or procurement professional and you're looking to understand more, there are lots of resources available on the Smart Freight Center Academy site. And we have courses, we have free educational resources, head over to academy.smartfreightcenter.org and check out what is available. Thank you for listening to this episode of Smart Freight Conversations. If you found it helpful, if you think any of your colleagues, partners, or suppliers might benefit, please consider sharing it. And join us next time as we continue driving the conversation that drives decarbonization forward.