Expeditors International of Washington, Inc. ($EXPD)

Hello, everyone. So I think we are good to start. We can see, yes, people still growing, let's see while people are joining. Let me just present myself. So thank you for joining today for this webinar. This new webinar we are presenting today about Sustainability in Motion: From strategy to Supply Chain Execution. So I'm Julia Sabatery, I'm Operations and Marketing for Europe, Southwest and I'll be your facilitator today for this session. So we're really pleased to have you on this specific session, talking about stability in logistics and supply chain because we know it's been clearly reached a turning point today as an important topic for many companies. So the conversation in terms of stability has been moving beyond why decarbonization matters and even beyond reporting to a much more practical question. So how do we actually make it work day-to-day at scale and in a commercially viable way. So during Smart Freight Week, we hosted in Amsterdam last month. Early insight from the event showed a clear shift from ambition to execution and real-world impact. So that's what we will be talking today. So before we begin with the topic of the day, just some ground rule here. So we'll be having 45 minutes of content following with a Q&A session at the end. [Operator Instructions] So how you will receive this presentation? After the webinar, you will receive an e-mail with a survey link and this survey will allow you after the completion to download the presentation of today. And also how you can get more information about our future events market updates information that we are communicating. You can scan the record and also subscribe to our newsletter news flash and upcoming events. Just around that, let me go through first our speakers of today. So we have Elmar and Juan today with us. So just going through a quick introduction. So Elmar is our Director of Service Provider Management and Sustainability for Europe at Expeditors. So he leads development and execution of the company's sustainability strategy for Europe and also the development of our service provider management program. Before taking on his current role, Elmar has several senior leadership positions across program management and service provider management in Europe. So giving him a very hands-on and end-to-end view on how sustainability initiatives must integrate with daily logistics operation to be successful. And our second speaker today that will be also here to support a specific question about sustainability topic is Juan Posada with us today, our Senior Director of Sustainability at Expeditors Seattle Corporate Office, where he focuses on building new capabilities and solution across the supply chain and logistics scape with experience ranging from digital business to enterprise-level transformation, Juan brings a strong perspective on how data, technology and smarter decision-making enable sustainability to move from vision into everyday execution. So with this intro, I'll be handing over to Elmar.

Thank you very much. [indiscernible] thank you. It's my pleasure to be here and to talk with you about the Smart Freight Week, the Smart Freight Center and what we have learned from them. But let's first talk about what is actually the Smart Freight week before we go into the agenda. So it's -- this was, by the way, the fifth time that the Smart Freight Week happened. It was organized by the Smart Freight Center and association that brings together all the industry participants that are -- have an impact to decarbonizing logistics and the entire supply chain. So we see shippers, we see carriers, we see expeditors, forwarders, the transporting companies. And together, there are many discussions over the years on what would be the way forward, what could be done for insetting, what fuels would be most likely, what -- how is the calculation done in the most -- in the best way. I mean also the software providers on how to transport -- how to calculate CO3 impact and all of this, they are also there as well. And I think this year, we have about 1,000 participants there over 3 days and wholeheartedly recommend you to join one day. It's -- if you haven't been there yourself. But as part of this webinar, we're going to give you a quick recap on that. So I'm going to first deep dive a little bit into the European side of things. And so there was a lot of discussion about zero emission trucking. And then we're going to talk a little bit about HVO and diesel, and then I'm going to hand over to my colleague about marine fuel and sustainable air fuel before we close out on this. So as you can see here on the agenda, it's also a little bit of a sneak preview about some later slides. We see a lot of conversation and have seen a lot of conversation about the European key corridors going all the way from Poland, Germany, Belgium, France down to Iberia. This is but the network for Milence, but also Nordics, enabling the electric transition. And this is pretty much also this is where the trend was where in previous years, there was still a discussion about Will it be hydrogen? Will it be biofuel? But actually, in this one, actually everything zeroed in on zero emission trucking and there is a reason for that. So there was the key panel, I would think, for the entire Smart Freight Week was when actually representative of the European Union and European Commission for Transport and Energy have been in the room talking with a representative of the [ ACEA ], which are the representatives of the European equipment manufacturers about the future. So with this, I'm going to give you a little bit of a sneak peek into how this is going to develop in terms of impact to our transportation requirements. So this starts and the key factor here is with the Regulation 1610, which is also known as the EU CO2 emission standard for truck producers. And this will impact us as a transporter and you as a shipper in regards that as of 2030, Mercedes, Daimler, Benz, Chrysler, all the big stuff, all the big companies, they will have to pay a fine of EUR 4,250 per gram of CO2 that the trucks -- the diesel trucks that they produce and put out there on the road would not hit this emission target that has been set by the European Union. And so there also were talks about that how they have been improving the trucks since 2019 baseline going forward till today, and then they have forecasted it. And based on this forecast, if everything stays the same, which the European Commission has said they would do so, then by 2030, a truck -- a diesel truck that costs nowadays EUR 120,000 to buy EUR 100,000 would at that point cost EUR 200,000. So -- and this would have a massive impact on the total cost of ownership, but also be a massive enabler for zero emission trucking. And I'll show you more about this in the next 2, 3 slides. Then another regulation that is an enabler that was talked about was AFIR, the 1804 EU Regulation, which mandates that by between 2025 and 2030, there will be truck charging stations every 60 kilometer on the Trans European highway. Remember the slide that I showed already on the previous -- the map there. We need a higher density of truck chargers because they need 150 kilowatt 450 kilowatts. They can't just go with what we need for our electric cars. So this is the big challenge to get even the capacity out of the grid. Now this could be a solution enabler so that more people can even provide the zero emission trucking. Then another enabler that is happening right now. So if you have not been made aware of, maybe you will be soon, for instance, a new roads toll is starting in Europe in July in the Netherlands. But the good news there for electric trucks is that they exempt just like there is a zero emission tracking exemptions for the European -- for the European Union that they should be in every country. And -- so this is being applied in Germany as well, and this would make electric trucking much more cheaper than diesel already today. There will be also further air pollution surcharges coming in, in regards to Euro 7, ETS2 and is going to also be supportive in regards to that, which will impact the fuel price, which I'll show you a little bit later. And let's not forget, there are these enablers like cities of Paris, Amsterdam, Copenhagen that have plans to even ban diesel trucks altogether to go into the city center. So the only way to even get freight there will be electric. So it is the time. And this gives the business case. So like there were many conversations on the Smart Freight Week about how can we make a positive business case to go from all the way from Poland with companies like PragmaCharge, enabling their fast charging for trucks over Milence down to Iberia. So in the past, this was more about market analysis and then there was about the feasibility studies. But now it's about getting commitments and to actually get trucks on the road. So they're even going so far to say if service providers feel a fear of committing to buying electric truck, they even make the commitment to say, if you don't need this electric truck anymore, we promise to buy it back from you as long as you charge with our charging stations. So there are those European key corridors and they looked at the data there in terms of the total cost of ownership. And now remember this conversation about the cost of an ICE truck doubling. So we have here the cost of a diesel truck -- and right now, it costs about EUR 100,000 to EUR 120,000 if you buy them. Now if you have a battery electric truck, then this could cost around EUR 285,000, EUR 300,000 depending on how many trucks you take and how well you negotiate. But this -- if the moment you remove the toll, the road toll or there is a road toll like it will come in the Netherlands, and there's an exemption for battery trucks, then cost parity, then there's a business case, and this can help us to get our service providers, hopefully, in the next year or so to transform more and more of the diesel trucks into electric trucks and talk with them about how can we get them charged at the depot one [indiscernible]. So they made calculations that even today, thanks to certain impacts, they see that 38% of all the transport done between these key corridors, in these Western key corridor, if you look at information from Eurostat, where transport start [ over ] the end, could theoretically drive already at parity with what diesel transport cost. And so plus 16% would only be -- it's only 5% more expensive to drive green. So there's still a little bit of a surcharge to driving green. But more than half already for the first time. It's already technically possible to get there. So their forecast is that we will see almost 7,600 heavy-duty trucks to be rolled out on the road very soon. And more than half of them should operate at cost parity. And key focus of investment this year is in Germany and Belgium because the infrastructure is there. And let's talk now about infrastructure. So there were many discussions about port drayage at Smart Freight Week. And that right now is a good time to get your drayage transformed into electric if this is something that you want to think of. So because right now, there is still a bit of capacity for the grid in the ports. But they also made the case that if more and more and more trucks want to fast charge, they mostly do all want to charge at the same time. That's in the night, during the day to drive at night, they want to charge. So this could increase the electricity demand so much that then also if continuous demand from electrified vessels and all of this comes together that there might not be enough electricity anymore. So if -- we have access to electric trucks in Hamburg, Rotterdam or Long Beach, U.S., Europe, we already have secured some service providers that can work with us on that. So feel free to reach out. What I'm saying is that if you want to secure this electricity for yourself and you have warehouses in those areas, then this would be a time to secure electricity. Electricity is becoming a bit of an asset at this point. And that by 2030, it might take between 3 to 7 years lead time just to get another megawatt or 2 into your facility. So that was here a warning and forecast in regards to that. Now another Yes, please.

Sorry to interrupt you. We've got a question from Celine in the chat. He's asking whether everything you've discussed will also apply to LTL services?

You mean like in terms of...

Less than truckload.

Less than truckload, if you have part load electric trucking. I mean, right now, obviously, the easy one is, of course, dedicated. But the moment that there will be a strong enough highway network to charge on the highway at a reasonable cost, we will also see part load to become possible. Right now, the range of a truck is 500 kilometers. So you will need actually -- you will need to be able to charge this truck with at least a 450 kilowatt charger to have it back full within 45 minutes at a reasonable distance and then you can make distance. So will path load trucking with unfixed routes become feasible? I would say, yes, soon, especially if you see the range of trucks increase. I mean, like we got our first electric truck in 2021, and that had a range of 200 kilometers. Nowadays, to drive 500 to 600 kilometers. So my hope is that in a year or 2 battery technology has gone up enough to make LTL possible. And this leads also right into this slide here, where we say this is another part of the total cost of ownership. Remember those 2 bars, but diesel versus electric trucking. So highway fast charging can cost us nowadays with everybody around EUR 0.80 per kilowatt hour. This obviously drives up the total cost in order to get this run. Where we or anybody else has depot charging and we have solar roof panels on the roof, you can get those costs down to like EUR 0.39, EUR 0.30 per kilowatt hour, if not cheaper. And this is here now a chart where they have done some research together with the Smart Freight Center and Prologis, where in Europe, they see the highest density of not only highway chargers, but also chargers for trucks that are at random warehouses. So for instance, your warehouse has a truck charger, you become part of the solution and you make it easier for those truck owners to come to your warehouse because then they can get a couple of extra distance into the -- every kilometer counts. So -- and especially if you can make it cheaper for the transport, you make it cheaper for yourself as well. So there are -- also there were presentations about CapEx and OpEx options to that. So which means, hey, if you would invest a lot of money, then this is often not a feasible solution. We are talking here just upgrading to 3, 4 electro chargers, you might have to get permission. Getting a permission in Germany or Netherlands or France can sometimes take a year or 1.5 years, then the cost of the wires alone to -- for the charging equipment, but then also the cable canals and all the other wiring, the copper alone could cost you EUR 100,000 or EUR 200,000 if the transformator is at the wrong side of the warehouse. You might have to go all the way underneath. You might have to tear up roads. The fuse box needs to be upgraded. So even just for getting a 50-kilowatt charger, this could cost EUR 50,000 -- could cost EUR 10,000 to upgrade to a strong enough fuse box. So -- now there's the alternative options. Shell is one of them. There's VSB, there's Milence in the U.S., there's Terawatt, Greenlane, again, Shell, where they come and say, if there's enough -- if you as a shipper or as a forwarder commit to having enough pickup and delivery trucks or line haul trucks that run on electric, then they will make this heavy CapEx investment as long as there are enough electric trucks charging. And then it's your choice on whether you want to open this up to the road or not. Then if you open it up so that also other trucks can come and charge on your depot, then they make it cheaper. If you close it down that only trucks that load in regards to your business would be allowed to charge there. And obviously, more commitments would have to be made. So there are ways on how you can secure yourself a little bit resilience here. So Think about the current global energy crisis and how this has impacted our cost of going to the fuel stations. I have a hybrid car and I feel it myself whenever I'm running out of electricity. And so driving with a heavy-duty truck in Germany did cost in March 2026 around EUR 0.45 per kilometer with an electric truck. If you mix on highway charging and depot charging, remember, EUR 0.80, EUR 0.30, then you could have already in March been cheaper off to go electric and because of the highway toll exemptions. And also here, you can see some impact there, what the impact was on those who drove diesel versus those who drove electric. So sustainability in this regard is now not only a question of saving CO2. At this point, it can also become a topic of resilience because what if the diesel keeps on rising. And it will so by design. So we don't foresee the HVO or diesel to come back down. So let's talk about that. So first, let's talk about the positive side of things. So HVO, so sustainable trucking fuel is becoming more available. So as you can see there from 2024 to 2025 and now '26, it is now possible to safely go with electric trucks on biofuel -- sorry, to go with diesel trucks on HVO in Italy, Spain, Netherlands, Germany, Sweden, Finland, you can easily go from anywhere to anywhere and ensuring that you will always find biofuel to fuel up with. And this can reduce the impact by 90%. It costs more. So it costs are about 10% to 15% more and not foreseen to come down, even not if the scale is going to go up, which is being produced because of this effect. There is another legislation called RED III and this one demands that countries require their fuel producers to blend in more and more of this biofuel into the standard diesel. So which means that even if you own a diesel car and you go to the fuel station and you just pump up with normal diesel, you will still get 10% or 20% or 30% of biofuel into your car. You cannot claim the cost -- the CO2 reduction for it. If you want to claim it for your freight, we can get you the connection and we can get you this [indiscernible] called CO2 certificates for this fuel that has been put into this pump. But this also means in terms of price impact that we now then see things like HVO fuel price to jump up in things like that because here the blend was, for instance, mandated to be higher. So even if you say like, okay, zero-emission trucking maybe still a little bit too early but we can do something about biofuel, the answer is yes. But I would rather say it's a transition, not ongoing solution, but it's a very feasible low investment from a CapEx side solution that we can do straight out very quickly. Now there is also another thing if you still think about diesel. ETS 2 is coming. It was postponed by 1 year, but it wasn't canceled. So as per global economics, the diesel rates have gone up this year already, and should have gone up more if ETS 2 would not have been postponed but they will next year. So just think about this chart and offset it by 1 year and by definition and by design, fuel will get more and more and more expensive. Now think back at the total cost of ownership comparison that I showed you between an ICE and a battery electric truck, this is the level, this is the leverage on together with this CO2 emission standard that truck producers will have to pay. Electric trucking is the future. So without any wonder, nobody is talking hydrogen anymore. Nobody was talking CNG on the Smart Freight Week. Everybody was talking either HVO as it becomes more available and is a great solution right here right now to reduce the impact that you and me as a shipment forwarder can make together, and diesel price increases are going to come by design. This is what the Europe Commission's out to bring to the European market, not only from diesel price but also truck costs that impact us and then the future is electric. So that's my takeaway from the Smart Freight Week. And with that, I'll hand over to Juan.

Thank you, Elmar. Good evening or afternoon, everybody. A pleasure to be here. I'm in the Seattle office. So a little early for me. So I'm speaking to you from the past. You guys are in the future. I want to share the perspectives that we've learned on sustainable aviation fuel -- or on sustainable fuels in general. However, the main focus is on the aviation side because the intensity of aviation transportation is just so much higher. The truth is sustainable aviation fuel is the strongest lever we have in order to impact transportation emissions at this time, but sustainable aviation fuel alone cannot really carry our goals related to Scope 3 decarbonization in the near term. And this slide explains why. This is a practical example based on about 30 large global fashion companies. And we're using it to illustrate why what I'm sharing with you is true, that SAF on its own cannot carry our decarbonization goals. If you look across these 30 companies, their total Scope 3 emissions are estimated to be around 90 million tons of CO2e. Of that, the transportation and distribution accounts for roughly 8 million tons. That's about 9% to 10% of their Scope 3 emissions. That's probably similar to what it is for many of you and your businesses. What we find is generally category 4, so upstream transportation and distribution emissions, might account for between 9% and 12% of your overall Scope 3 footprint. And of those emissions, a large percentage are driven by aviation for air cargo. So if you assume a modest goal, let's say that you wanted to mitigate 10% of those transportation and distribution emissions using sustainable aviation fuel, that would mean that you're looking to mitigate about 800,000 tons of CO2e. To achieve that reduction, you would require about 320 million liters of jet fuel per year, assuming about an 80% lifestyle emissions reduction -- life cycle emissions reduction compared to conventional jet fuel and that's about average. But here's the quirk. The production of SAF has been doubling year-over-year for the last 3 years. It's expected to slow down a little bit in 2026. In 2025, it doubled over 2024 and reached about 1.9 million tons of fuel. And that's equivalent to about 2.4 billion liters. And remember, we're talking about it takes 320 million liters to offset 10% of the emissions by 30 companies. And the overall production of jet fuel is 2,400 million liters. There's simply not enough SAF to go around to get us to where we need to be in terms of keeping to within 1.5 degrees Celsius. As an interesting kind of factoid, the entire jet fuel -- sustainable jet fuel production for 2025 was equivalent to 0.6% of the entire jet fuel consumption for the year. So it's literally a drop in the bucket. And it's the best lever that we have at this point. Elmar, if you can move to the next slide, please. And then if you look at a sustainable trucking fuels, HVO, Elmar addressed it a little bit, sustainable marine fuels, similar situation. This slide kind of highlights the role of these other types of sustainable fuels. As part of our strategy stock to help us achieve our kind of near-term decarbonization goals, both are very, very important because asset turnover and solar electrification will take a lot more time than we can -- than we have time for, frankly. So sustainable fuels have to be a part of your decarbonization portfolio in the near term. Next slide. So let's talk about kind of book and claim. This slide explains the market conditions that make book and claim not only useful but necessary in today's decarbonization landscape. These conditions show up repeatedly across fuels, freight and heavy transport. The first one is the supply of the green commodity, whether we're talking about aviation, marine or low emissions trucking fuels, including electric, availability remains very constrained. The production capacity, the feedstocks and the infrastructure are still scaling, which means that physical matching isn't always possible even when the demand exists. In second place, there's the cost burden aspect of it. Decarbonizing heavy industry and transport requires significant upfront investments, new vessels, vehicles, new infrastructure and new fuel production facilities. What book and claim does is it allows these higher costs to be shared across the value chain because instead of forcing matching one-to-one and every participant to absorb them individually or wait for full physical availability, it can be shared. Book and claim systems decouple the actual production or consumption of a commodity from the environmental benefits of that commodity. So it enables us to trade separately on them both, which means that we can find the reductions without necessarily having to find the actual consumption of the commodity directly in our conveyances. What this means is that it results in disaggregating the demand. Early markets frequently suffer from geographic mismatch, meaning you might have aviation fuel, but not in the origins where you ship out of. Or we may have EV incentives in certain parts of the world, but not in others. So a book and claim system enables us to kind of spread out and take advantage of the demand where it is and the supply where it is and matching those 2 together, even if those 2 locations don't match. So this is critical to getting these new markets off of the ground and getting to the point where they can scale individually on a global basis. Next slide, Elmar. The last thing that I'd like to share is we recently released our 2025 sustainability report. It talks about our efforts to decarbonize our own operations, our efforts to work with customers as well as our service providers to decarbonize or reduce the emissions associated with transportation and the value chain. And it talks about the impact that we try to bring to the communities that we operate in as well as a lot of detail around our governance and ethics framework. I strongly encourage you to take a look at it. The link will be in the slides that will get distributed to you shortly after we wrap here today. And if there's any questions that can come up after you review it, you can reach out to me personally or through your account manager. Get in touch, let us know what you're thinking. Let us know what your priorities are and how we can support your own efforts on decarbonizing your supply chain. With that, I think we can open it up to Q&A.

Yes, let's open it here. I don't see a specific question in the Q&A box, but just posing here is you want to address any question in the Q&A box now, we can take a couple of minutes to enter them. Otherwise, on the survey link that you would receive just after, you will be also able to add any comments, any questions, and as also Juan mentioned, feel free to reach out to your Expeditors contact or us in the audience now. I don't know if we are getting some questions. I don't see them dropping in the chat in any case. If there is no specific question or I can see maybe people raising hands, but feel free to drop the question, if you have, in the Q&A or the chat if you are not able to do it in the Q&A, but I was seeing...

Otherwise, thank you, everybody, for joining. And it would be a pleasure to meet you in person at the next Smart Freight Week when it comes around. I wholeheartedly recommend going. This is something for everybody, for the shippers, for the transporters, for the importers and the goods receivers and then we can meet out in person there. If you have questions, feel free to reach out to also myself directly. I'm happy to help with enabling this transition.

Great. Thank you, everyone. Have a good day.