GM and UPS: Green Initiatives

08/25/2016 9:00 am EST

Focus: STOCKS

Sustainability is a hot topic in the corporate world. It is also an important focus in the broad transportation industry, asserts S&P Global Market Intelligence Equity Analyst Efraim Levy in S&P The Outlook.

Trying to protect the environment in manufacturing operations is not just politically correct because it is important to some consumers and governments/regulators. It also can benefit corporate profitability.

Though hard to quantify on an industry level, green initiatives can benefit companies both environmentally and via cost savings.

Efforts to reduce waste or water or energy and carbon and other input use rates can reduce environmental impact and lower production expenses.

We see upside potential for automotive and transportation companies from sustainability initiatives and see positive implications for two buy-rated stocks in our coverage.

General Motors (GM) is the largest US based vehicle manufacturer. GM believes connectivity, car-sharing, alternative propulsion and autonomous vehicles are key elements toward a future of safer, cleaner and more efficient mobility options for customers.

GM is addressing climate change, in part, by continuing to provide customers with fuel-efficient models across each vehicle segment given that 77 percent of the company's carbon footprint comes from driving.

Nine models in 2015 get an EPA-estimated 40 mpg on the highway or better, up from six in 2014. During 2015, GM's electrified vehicles on the road increased 9 percent to 196,861 vehicles.

United Parcel Service (UPS) is a leading supporter of sustainability efforts in the logistics arena. The company utilizes electric, hybrid and natural gas powered vehicles, looks to optimize driver routes and match the most efficient vehicle to the task at hand.

The company has also invested in natural gas refueling infrastructure, and is a leader in the use of technology to optimize efficiency, in terms of miles driven, package sorting and loading, and in matching the time sensitive needs of a package to the most fuel efficient way to get it to its destination.

These sustainability efforts also provide real world cost benefits. One example is the ongoing deployment of a new network optimization technology that the company expects to reduce fuel consumption by 10 million gallons a year.

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By Efraim Levy, Analyst in S&P The Outlook

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