Weathering the “one-hundred year” moment in LTL trucking

The first session of SMC³’s U.S. Transportation Laws and Regulations course focused on sustainability, guided by insight from Randy Mullett of Mullett Strategies and Mike Kelley, VP of Sustainability at SMC³. Trucking finds itself at a significant inflection point and the pressure to meet sustainability targets and regulations without negatively affecting service has introduced stress.

Mullett and Kelley both emphasized that while the basics of LTL have remained constant over their decades in the industry, it has increasingly become more and more complex. And a key driver of this complexity has been sustainability concerns and regulation, with considerations such as emissions, fuel efficiency, and vehicle standards. Over time, regulation has become more intricate—affecting LTL’s operational costs as well as decision-making.

What hasn’t changed is the centrality of long-term, deep relationships that pave the way to getting things done, not only within everyday operations, but also when working with Washington. To keep up with changing regulatory frameworks, and to have a hand in shaping them, Mullett and Kelley both stressed the importance of cultivating strategic relationships with policymakers as well as peers.

A seismic shift

Trucking has made huge strides in making its practices more environmentally-friendly. For example, there has been a 98 percent reduction in tailpipe emissions over the past 30 years. It would take 60 of today’s lower-emissions trucks to match the emissions of one 1988 truck.

But increasingly, regulators at the federal and state levels are seeing electrification as a one-size-fits-all solution to the continued work needed on sustainability in trucking. Cost and capacity are just two potential problems with this approach. Electrifying American trucking overnight would cost about $1 trillion and would increase the nation’s energy demand by 40 percent. An overnight transition is therefore not very realistic. But regulators are putting pressure on trucking to move quickly.

“What we have ahead of us right now is a seismic shift in operating expenses, operating capabilities, and a number of other issues, too,” said Kelley.

While trucking is a carbon-heavy industry, Mullett and Kelley argued that this needs to be weighed against trucking’s critical role in the supply chain, with more than 70 percent of freight moving on trucks. Rather than overly simple or severe policies, new regulation should come with clear timelines and targets and ideally focus on outcomes—leaving the specifics of implementation to the trucking companies themselves.

“This is a hundred-year moment for the trucking industry,” Kelley said.

Resiliency and collaboration: strategies for regulatory  success

The watchword during this tightening regulatory environment: resiliency. Trucking companies will need to deal with an increasingly complex lattice of sustainability regulations, comprising not only federal but also state rulings from California—which is the fifth-largest economy in the world. California’s new regulations not only touch those based in California, but also anyone doing business in California. To survive these complex regulations and weather consequences such as rising fuel costs, LTL will need to develop greater resiliency. But this resiliency must include a capacity to effectively organize and influence policy at all levels.

To make their voices heard, LTL leaders need to think strategically about how they’ll reach elected officials. While federal relationships are important here, D.C. isn’t necessarily the best place to leverage those relationships. Mullett noted that the voices of constituents will always matter more to politicians than those of lobbyists.

“Employees, or presence in a member’s district or state, carries more weight than all the special interests in the world,” Mullett explained. “Politicians are really more interested in what the people back home think—because you’re the ones that actually can vote for them. So take advantage of that access. Make sure you’re staying close with the people that represent you.”

Both panelists also emphasized the importance of building coalitions to exert influence over regulatory processes. This is particularly important as 95 percent of trucking companies in the U.S. have only 10 trucks or fewer. This small size exaggerates the magnitude of regulatory hurdles, making it harder for these smaller operations to open in the first place, and stay open for any length of time.

“Amplifying your voice and getting access to more resources is always important when you’re small,” Mullett said.

“The truth is, almost nothing gets done in Washington, D.C., without a coalition,” added Kelley.

As one example of successful coordination among LTL leaders, Kelley raised SMC³’s sustainability council, which works to standardize sustainability reporting—which is becoming as prominent as conversations around fuel and emissions. California, for example, is requiring shippers to provide emissions reporting, and this is just one jurisdiction among many. The sustainability council is working with federal agencies to set industry standards in reporting to avoid a Wild West of incommensurable reporting frameworks.

Interested in joining LTL Hybrid Sessions? Register here: https://smc3.info/LTLedu