1 1 Sustainable Solutions in Transportation

Why green, why now? Companies are being evaluated on their environmental performance: - Government (laws and regulation) - Non-government organizations (NGOs) - Shareholders - Investors - Consumers Factoring environmental concerns into strategic decisions can be a source of competitive advantage.

Taking leadership with FLEEEP 3 President Obama issued an Executive Order (Order) on October 5, 2009: Federal Leadership in Environmental, Energy, and Economic Performance (FLEEEP) - “It is therefore the policy of the United States that Federal agencies shall increase energy efficiency; measure, report and reduce their greenhouse gas emissions from direct and indirect activities…” Federal agencies are now required to report, inventory and reduce their own greenhouse gas (GHG) emissions, as well as that of their contractors (scope 3 emissions) - The Order defines scope 3 as “greenhouse gas emissions from sources not owned or directly controlled by a Federal agency but related to agency activities such as vendor supply chains, delivery services…” 95% of new contract actions, including delivery services, must comply with new performance requirements “The head of each agency shall designate from among the agency’s senior management officials a Senior Sustainability Officer who shall be accountable for agency performance with the requirements of the order.”

Six Greenhouse Gases - Convert to CO 2 Equivalents Emissions 4

Assessing Federal Carbon Footprint Requires Evaluation of Scope 1, 2, and 3 Emissions Federal agencies traditionally report their energy use to determine federal Scope 1 and 2 emissions. Contracting out transfers what would be government’s scope 1 and 2 emissions to its scope 3 emissions. Now there will be transparency of government’s Scope 3 emissions. Federal procurement must provide transparency on govt.’s scope 3 emissions. In terms of Transportation - Comparison of CO 2 impact of a given shipment or a given vendor requires analyzing their scope 3 emissions. 5

Transportation Industry - Assessing Competing Carriers’ Carbon Footprints The transportation mode matters above all else – air vs. truck vs. rail vs. ship The transportation network is key -- hauling empty space is inefficient Fuel efficiency = carbon emissions, so invest in the future, especially late vintage aircraft and efficient trucks For apples to apples comparison – compare scope 1, 2, and 3 emissions of the vendors and their subcontractors. Transparency of the carbon emissions data 6

7 (Source: World Resource Institute GHG Protocol) Metric Tonne-Kilometer is equal to one (1) metric tonne of freight moving the distance of one (1) kilometer AIR 0.570* TRACTOR TRAILER 0.072* RAIL 0.020* SHIP 0.010* * kg of CO 2 per Metric Tonne-Kilometer Intermodal Strategy Benefits in Transportation

(Source: World Resource Institute GHG Protocol) Metric Tonne-Kilometer is equal to one (1) metric tonne of freight moving the distance of one (1) kilometer AIR 0.570* TRACTOR TRAILER 0.072* RAIL 0.020* SHIP 0.010* * kg of CO 2 per Metric Tonne-Kilometer One Intermodal Network 8 UPS uses rail extensively which reduces carbon emissions for long distance transportation

9 Scope 3 Vendor Example – Transportation Case Study Operate Efficiently Facility Technology Recycling Carbon Neutral Shipping

Carbon Savings at UPS Ground to rail: saved 1 million metric tons of CO 2 in 2008 Air to ground on shorter hauls saved 2 million metric tons of CO 2 in 2008 Combination (3 million metric tons) exceeds total CO 2 of all UPS package cars worldwide. From , UPS early procurement of 757s in lieu of 727 aircraft saved more than 11 million metric tons of CO 2 in total (1 billion gallons of fuel). Hardware, software and procedures in UPS Package Flow Technology: saved 100 million miles of driving from 2003 to

11 Operate Efficiently – Aircraft UPS Airline is modern, fuel-efficient and noise compliant. UPS uses 757 fleet vs. 727 –More than 30% more fuel efficient –Saved over a billion gallons of fuel and 11 million tonnes of CO 2 between 1995 & 2008 alone UPS is the only airline in its sector with zero 727s in the fleet.

12 Operate Efficiently – The Brown Truck Brown color to minimize washing Aerodynamic fiberglass full-tilt front end Lightweight aluminum body Aerodynamic custom fiberglass top On-board Telematics 17+ vehicle designs to right-size for fuel efficiency “No left turns” UPS route planning technology has eliminated over 100 million miles All operations out of one vehicle 2008 & 2009 EPA SmartWay Excellence Award Designed to facilitate all delivery and pickup services (Air, Ground, Int’l) in one vehicle

13 Operate Efficiently – The Brown Truck Largest fleet of alternative- fuel/technology vehicles - Over 2500 vehicles – more on order First in the industry –Electric vehicle (1935) –Propane vehicle (1970s) –Compressed Natural Gas (CNG) vehicle (1985) –Hybrid Electric Vehicle (HEV) (2001) –Liquefied Natural Gas (LNG) tractors (2002) –Successfully tested hydrogen vehicle (2003) –Hydraulic hybrid vehicle (2005) Support Innovation Test in the field Optimize application Continuous improvement Support economy of scale UPS takes a “Rolling Laboratory Approach”

Facility technology Beyond our delivery network, we also have put environmental programs in place at our facilities – Facility design New design parks vehicles outside so building is smaller, requiring less construction materials Reduces energy for lighting, heating and cooling – Renewable energy Anchorage, AK — Bloom energy test saved 62 metric tonnes annually of CO 2 emissions Palm Springs, CA — Solar panels reduce CO 2 emissions by 544 metric tonnes annually

Facility technology Beyond our delivery network, we also have put environmental programs in place at our facilities – Vehicle washing On as-needed basis Water conservation in buildings 100% biodegradable wash agent Many facilities now dry mop

A New Level of Recycling Managing waste recycling more effectively - Recycling of waste in 2010 totalled 91,467 U.S. tons, 182,934,000 pounds Recycled waste includes: Solid waste such as packaging, pallets, office paper Hazardous waste Non-hazardous waste such as e-waste and batteries - UPS recycled solid waste in the U.S. rose 9 percent - EPA calculations estimated UPS recycling efforts yielded a reduction of 128,319 metric tonnes of CO 2

Recycling Environmentally Preferred Packaging (EPP) 100 percent recycled fiber (80 percent post- consumer content) UPS Express ® Envelope 15 percent post- consumer content UPS Express ® Pak 90 percent post- consumer content UPS Express Box 90 percent post- consumer content UPS Express ® Tube 30 percent post- consumer content UPS 10 KG Box ® and UPS 25 KG Box ® In 1998, in partnership with the Environmental Defense Fund (EDF), UPS designed environmentally preferred packaging (EPP) to improve the environmental profile of packaging in the package industry. 100 percent recycled fiber (80 percent post- consumer content) UPS Express Envelope — Reusable

Carbon Offset First major delivery company to offer a third-party-verified carbon neutral option for shipments in the U.S. – UPS calculates carbon emissions for all carbon neutral shipments, then purchases and retires offsets equaling that amount – A nominal fee covers the offset cost plus carbon calculation – UPS purchases only certified offsets that fund projects with positive environmental impact – UPS will match offsets up to $1 million through 2011