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FedEx's carbon-neutral pledge puts long-standing ESG efforts to the test

FedEx Corporation announced an ambitious goal in March 2021: to achieve carbon-neutral operations globally by 2040.

FedEx has joined a small but growing group of companies that have made similar commitments. The Net Zero Tracker is a collaboration between four organizations that collects data on countries, cities, regions, and companies' pledged net zero emissions targets. As of May 9, the tracker had identified 699 companies around the world that had pledged to be carbon neutral, net zero, or produce zero emissions by a specific date.

According to the tracker, companies like Walmart, Royal Dutch Shell, Saudi Aramco, Amazon, BP, Apple, CVS Health, ExxonMobil, Daimler, AT&T, Alphabet (Google), Ford Motor Co., Cigna, Mitsubishi, JPMorgan Chase, Honda Motor Co., Chevron, and Verizon are making carbon-neutral/net-zero pledges similar to FedEx.

How did FedEx come up with its carbon-free pledge? How will it keep track of its progress and hold itself to intermediate objectives?

Environmental, social, and governance (ESG) goals begin with sustainability impact teams within each of FedEx's operating companies, according to Mitch Jackson, FedEx's staff vice president, environmental affairs and chief sustainability officer. Jackson chairs FedEx's Enterprise Sustainability Council, which receives ESG initiatives, ideas, and proposals. The council then submits the selected ESG initiatives to FedEx's Governance, Safety, and Public Policy Committee for approval.

"Our philosophy with respect to sustainability and corporate social responsibility is what we call practical sustainability—that being strategic and transformational stewardship adds value to all the stakeholders in our efforts to be more responsible," Jackson said. "The building blocks of that are performance, transparency, innovation, and leadership."

Jackson and FedEx's Chief Compliance Officer Justin Ross are both involved in the company's ESG initiatives. Both men work in the legal department of the company.

The goal of becoming carbon-neutral by 2040, according to Jackson, is an extension of a long-standing ESG goal for FedEx: "becoming carbon neutral everywhere we can in our operation."

Like any corporate goal, the carbon-neutral pledge had to be in line with FedEx's governance principles of ethics, integrity, and reputation. FedEx's compliance team must make sure that the goal is met while adhering to all applicable international, federal, state, and regional rules and laws. According to the company's 2021 ESG Report, the pledge must also comply with the FedEx code of conduct, which "provides guidance and helps team members understand how to adhere to relevant laws, ethical standards, and FedEx values."

It is impossible to do the right thing—achieving carbon-neutral operations—in the wrong way.

The Governance, Safety, and Public Policy Committee, according to Ross, is in charge of overseeing any sustainability goal. "Our ESG-related goals are aligned with our corporate culture, values, and principles," he said, adding that executive management and the board "are involved in developing these goals."

GHG emissions data must be collected, vetted, and reported in order to track the company's carbon-neutral pledge's success. FedEx used CVenture, an outside verifier, to audit its GHG emissions in 2021. In March, the Securities and Exchange Commission proposed a rule that would require public companies to make climate-related disclosures and have certain emissions metrics verified by an independent consultant.

FedEx has pledged to invest $2 billion in three key areas to help meet its goal: vehicle electrification, sustainable energy, and carbon sequestration, which is the process of removing carbon dioxide from the atmosphere and storing it in solid or liquid form. According to Jackson, the first two areas are natural extensions of what FedEx has been doing with its ESG strategy; funding carbon sequestration research is a significant new investment.

The fleet of alternative fuel vehicles in the company has steadily grown, from 606 in fiscal year 2013 to 4,156 in fiscal year 2021. While these are significant increases year after year, they are a drop in the ocean. FedEx claims to have over 200,000 motorized vehicles operating across its FedEx Express, FedEx Ground, and FedEx Freight divisions, according to its website. That does not include the vehicles used by independent third-party delivery services.

One of FedEx Express's goals, according to the 2022 ESG Report, is to have 50% of new vehicle purchases in its pickup and delivery fleet be zero-emission vehicles by 2025. The company received the first of 500 Zevo 600 electric delivery trucks manufactured by BrightDrop, General Motors' electric delivery and logistics business, in late 2021. FedEx plans to order 22,000 more vehicles, subject to further negotiations and the execution of a definitive purchase agreement, according to its 2022 report. However, delivery of those vehicles may be delayed due to the combined issues of demand, supply chain problems, and too little manufacturing capacity in the electric vehicle industry, as noted in a recent New York Times report.

Meanwhile, the company has focused on improving the fuel efficiency of its existing fleet of trucks, which has increased by more than 40% since 2008 as a result of several initiatives, according to Jackson. This includes rearranging routes to be more efficient, using hybrid and higher gas mileage vehicles, and using biofuel blends in diesel fuel to reduce emissions. He believes that pursuing multiple strategies to achieve an ESG goal is critical.

Another focus area for achieving carbon-neutral operations by 2040 is fuel consumption, particularly within FedEx's 680 jet fleet. The company has reduced its aircraft emissions intensity through fuel-saving projects, replaced planes with more efficient models, and increased the use of sustainable aviation fuels, such as low-carbon renewable jet fuel converted from logging waste, as part of its ongoing ESG strategy.

Facilities and energy are two other areas where carbon-neutral strategies could work. FedEx had 39 LEED-certified buildings in FY2021, according to its 2022 ESG Report, with 26 on-site solar energy systems companywide. The goal is to increase the efficiency and self-sufficiency of the company's 5,000 facilities around the world.

Finally, carbon sequestration is the third pillar of the company's carbon-neutral strategy. FedEx has pledged a $100 million donation to help fund the Yale Center for Natural Carbon Capture. Forests, geological sequestration, and "synthetic processes to convert carbon dioxide into fuels or materials" are all being investigated by the center.

FedEx's carbon-neutral pledge differs from other companies' plans in that it pursues new carbon sequestration methods rather than relying on market-based carbon offsets. According to South Pole, an emissions reduction consultant, carbon offsets, or carbon credits is the process of "buying carbon credits from certified activities that support community development, protect ecosystems, or install efficient technology to reduce or remove emissions from the atmosphere."

All of these carbon-reduction ideas come from FedEx's ESG work, which it has been implementing, tracking, and monitoring for years, according to Jackson.

"As a company that helps move global commerce, (we wanted) to be able to provide some of the answers and some of the solutions," he said, "rather than to continue doing the same old thing we and others have been doing in the past."

FedEx will use carbon offsets to supplement its other carbon reduction strategies, according to Jackson.

"We’re still nearly two decades from the goal here," Jackson said. "We have to remember this is a marathon, not a sprint."



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