Strangling the Flow: The Impacts of Overbearing Regulations on California’s Logistics Sector

A California regulation requires all newly-registered trucks be zero emissions vehicles starting in 2024. As a result, small trucking companies are left grappling with various challenges, from growing insurance costs to restrictive employment mandates, paving the way for major corporations to take the reins.  

California's approach to sustainability could set a precedent for other states to follow. As state policies ripple across inter-connected industries and supply chains, the potential consequences could affect the entire U.S. 

Crushing Regulations: The Peril for Small Trucking Businesses and the Economy 

California’s policies often target trucking companies, leaving small businesses to bear the brunt of these measures. One notable instance was the attempt to apply Uber-like regulations to the trucking industry through AB 5, creating concerns among industry insiders and independent truckers.  

High insurance costs are a hurdle small carriers face. Soaring insurance expenses make it nearly impossible for new players to enter the market, and challenging even for established companies. This is pushing small businesses to adopt alternative practices, such as classifying drivers as contractors instead of employees. 

Employee classification also compounds trucking company issues. California’s clean initiative from 2020 compelled truckers to upgrade their fleets or retrofit existing vehicles. However, the new regulations could disrupt the relationships between owner-operators and contractors. Many truckers prefer the flexibility of contracting because it allows them to work with multiple carriers. However, the new mandate to classify them as employees will increase costs and restrict their freedom to operate as they wish. 

The cumulative effects of insurance costs, employment mandates and retrofitting requirements have driven many small trucking businesses to the brink of collapse, while all companies are faced with dwindling profits and a struggle to survive.  

While those who operate in the trucking sector do want to improve its sustainability, it is still crucial to pause and examine the costs associated with these initiatives. We must ask ourselves if there are more effective approaches to achieve our goals; ones that carve out a place for small trucking businesses in the market.  

The goal is not to adopt a political position but embrace firm perspectives on the matters that impact our industry. This requires a delicate balance between green regulations and practical feasibility. 

Transportation Technology is the Key to Lowered Carbon Emissions 

The trucking industry can embrace sustainability without relying on restrictive laws that disproportionately benefit large-scale corporations and drive up prices. A "State of Supply Chain Sustainability" report from MIT found that almost half of all companies have already established sustainability goals, which shows a willingness within the industry to pursue environmentally responsible practices. 

Through real-time analytics and optimized logistics, companies can reduce their carbon emissions. Effectively tracking and managing fleets can help minimize deadhead miles, which are a significant contributor to unnecessary emissions. 

Adopting a technology-driven approach to sustainability offers more advantages than tighter regulations. Empowering companies with tools and insights is the alternative route we need to take. A transportation management system (TMS) enables entrepreneurs to proactively reduce their environmental impact without needing to compromise their economic viability. Through technological advancements, the industry can finally rest in this space between economic growth and environmental stewardship. 

Sean McGillicuddy is Vice President of Sales and Marketing for Tai Software.