Forward Air: Flowery Talk on Sustainability

Forward Air Corporation (FWRD:  Nasdaq), a freight and logistics company based in Greeneville, Tennessee, is included in the Crystal Equity Research coverage group.  The company serves customers throughout North America by providing ground transportation services as an extension of air-based logistics and shipping.  Forward Air’s portfolio includes expedited linehaul truckload services, less-than-truckload services, final mile service, pick-up and delivery, and intermodal drayage.  Leadership claims the company is “an integrated part of our customers’ critical supply chains.”

In 2020, the company created the new position to spearhead its sustainability effort.  The Head of Corporate ESG reports directly to the Board of Directors.  The appointment of a trained individual to a position with an exclusive focus likely colors the outcome.  The company’s 2021 sustainability report is a well-crafted publication that describes a methodical approach.  Apparently, the leadership identified ten topics areas in which the company has a vested interest.  Its sustainability report than discusses the impact of the ten topics on the company’s three constituencies  -  community, customer and environment.

It is not surprising then that Forward Air’s sustainability report is largely boiler plate language.  Furthermore, it is composed largely of affirmative statements.  For example, in the topic area called “roadway health and safety” it is stated that “We strive to have zero roadway accidents that result in injury.  If events do occur, we review their root cause to avoid making the same mistake in the future.”

The ‘roadway health and safety’ section continues on to describe Forward Air policies related to truck driver health and wellness, including fatigue management and healthy sleep, and other policies and practices related to truck driving.  Of course, these practices are already mandated by the Federal Motor Carrier Safety Administration within the U.S. Department of Transportation.  The next section on “workplace health and safety” runs along similar lines, describing Forward Air compliance with Occupational Health and Safety Administration (OSHA) regulations to prevent workplace accidents, handling of hazardous materials and water pollution prevention.   

What is missing from this part of Forward Air’s sustainability policy is any discussion of the impact of improved safety and reduced accidents on resource utilization and profit margins.  The discussion is largely flourishing language about the company attentiveness and diligence.  The exception is one data point on Forward Air’s workplace accident rate, which is below the industry average.  The data point even merits its own graph.

The Forward Air sustainability report does provide basic details on the composition of its workforce based on gender and race.  It is a male dominated world from the board room all the way down to the loading dock.  Just over half of employees are white (54%) and the balance is a mix of African Americans, Asian and other people of color.  Most of the people of color (60%) can be found in hourly paying jobs, most likely in the environs of the loading dock rather than upstairs where the decisions are made. 

There is no disclosure of average hourly wages, average employment tenure, gender and ethnic composition of supervisory positions, or other data points that reveal the economic power of Forward Air employees.  Thus, we can surmise decision making and economic power are reserved for the C-suite where light-colored male folks remain in control.

Forward Air’s sustainability policy final reaches environmental topics at page 20 of its 26-page sustainability report.  An entire three pages of the report are devoted exclusively to greenhouse gas emissions and air quality practices!  Most might consider the cursory discussion an embarrassment for a operation that is so heavily reliant on the use of fossil fuels.  The company sets out no goals relative to greenhouse gas emissions other than the reduction in vehicle idling by 5% in one year.

Vehicle idling is not an inconsequential topic.  The U.S. Department of Energy reports that idling from light- and heavy-duty vehicles wastes about six billion gallons of fuel annually.  The typical long-haul truck idles about 1,800 hours per year, using about 1,500 gallons of diesel fuel.  There are alternatives available to allow truck engines to be turned off while drivers are waiting for loading or unloading or are at rest.  For example, auxiliary power units provide on-board climate control and electrical power, using significantly less power than the fuel powered truck engine. 

Forward Air plans to install electronic logging devices on all company-owned trucks to gather fuel usage and efficiency data.  Once that data is available apparently there are plans for driver training and education, but it is not clear what consequences there might be for drivers who fail to reduce idling time.  Beyond that apparently, the vehicle fuel usage data will help “identify improvement opportunities.”   

There is no commitment to publishing the Forward Air’s carbon footprint, despite the fact that the electronic logging devices will reveal greenhouse gas emissions by vehicle.  That said, the carbon profile of heavy-duty trucks is not such a mystery.  Nor is there much doubt about the culpability of the transportation industry in global warming due to greenhouse gas emissions. 

FreightWaves, an industry research firm, reports that the average heavy-duty truck has an estimated carbon footprint near 223 tons of carbon dioxide per year.  This assumes 120,000 miles driven in one year.  Indeed, in the U.S. where Forward Air operates medium and heavy-duty trucks are a major contributor to greenhouse gas emissions from the transportation sector  -  25% of total in 2020.  In aggregate the transportation sector, which includes cars as well as trucks, is responsible for 27% total greenhouse gas emissions in the U.S. 

To top off its environmental policies, Forward Air magnanimously commits to “further reduce paper in our facilities.”  A corporate sustainability program has been initiated at the company’s office in Columbus, Ohio that includes recycling and composting.  The company also promises to select sustainable suppliers for corporate services.

The title page of Forward Air’s ESG report suggests “Because it matters, think forward.”  Investors may choose to think ahead to the next sustainability report update from Forward Air, giving this early and weak effort a pass out of courtesy.  The next effort will need to have more than flowery happy talk.  There must be clarity and honesty with real environmental goals by a company that is by definition a major emitter of greenhouse gas emissions.

 

Neither the author of the Small Cap Strategist web log, Crystal Equity Research nor its affiliates have a beneficial interest in the companies mentioned herein.