When looking at sustainability within the logistics industry, there seems to be a substantial shift pushed by customers requiring more ambitious ESG (Environmental, Social and Governance) initiatives from businesses across the globe. This has led to a substantial shift within the logistics industry, with increased focus on emissions reduction and tracking.
But how can companies make the shift from ambitious sustainability annual reports to tangible actions?
According to a study published in December 2021 by Andrew Winston of the Harvard Business Review, “virtually all the world’s largest companies now issue a sustainability report and set goals; more than 2,000 companies have set a science-based carbon target; and about one-third of Europe’s largest public companies have pledged to reach net zero by 2050. On the social side of the agenda, companies have been expanding diversity and inclusion efforts, committing funds to fight racial inequity, and speaking out on societal issues they used to avoid.”
These goals are clearly becoming an essential part of companies' communicated brand DNA in written form, although their struggle still seems to be in transforming them into clear strategy and actions - actions that are rooted in sustainable operations, production, and procurement.
When looking at their entire supply chain, decarbonisation is critical to lower environmental impact, which is why we see more businesses setting and committing to various decarbonisation targets to move towards a more sustainable supply chain. But for companies to strategically reduce the C02 impact of their business, there needs to be a solid knowledge of one’s emissions, as this is the starting point for an effective decarbonisation plan.
The complex task for businesses is then to get a good overview of their baseline emissions and establish a data foundation that aggregates all the insights on their emissions. This will allow customers to make strategic decisions on where optimisations and investments could lead to biggest environmental impacts, particularly on scope 3 (see below).
The path to supply chain sustainability: current emissions
As specified by Climate Partner, “a carbon footprint for a company means the total amount of all the greenhouse gases (GHG) emitted directly or indirectly through its activities.” Another written piece from Climate Partner also helps identify emissions, specifying how the Greenhouse Gas Protocol (GHGP) has created a global, standardised framework on the following three scopes. “Scope 1: includes all emissions released directly from your company such as your company’s vehicles and facilities. Scope 2: includes indirect emissions that your company produces such as your building’s electricity usage. Scope 3: includes all other emissions generated along your entire value chain, including raw materials, logistics, business travel by the team and how your employees commute to work. The challenge here is to account for your entire value chain, much of which is outside your control, which makes Scope 3 emissions challenging. That is why using an experienced partner can help you assess and get started in better understanding your carbon footprint.”
What are then the emissions from cargo container transportation? A 2021 report by the International Transport Forum states that the GHG emissions contribution of global freight transport is around 1/3 of the whole transport sector, and 8-11% of energy related GHG emissions. The report writes moreover that “current transport decarbonisation policies are insufficient to pivot passenger and freight transport onto a sustainable path” calling for “more ambitious transport decarbonisation policies” to be put in place. In this regard, we now see regulation coming to play from entities such as the European Union (ETS - Emissions Trading System) and The International Maritime Organization (IMO 2023), enforcing limitations on Greenhouse Gases and industry standards. Proper visibility and targeted investments can therefore help companies to reduce their scope 3 emissions, save on penalties and/or emission taxes, as well as contribute to transforming the logistics industry into a more sustainable one.
Given all these elements, how can businesses then be more strategic when planning their scope 3 emission cuts? How can companies “decarbonise themselves” in a tangible way? What concrete actions can they take to move closer to a green supply chain?
Make data a strategic base for sustainable supply chain management
An exciting (and pivotal) change is taking place, where companies are shifting from stating decarbonisation intentions to defining tangible strategies to track their progress on scope 3 emissions, and then reduce them.
Let us take as an example a mid-size company starting on their journey towards a sustainable supply chain or even adjusting an old one. Such a company might gather all ambitions from their end-customers, strategy department, stakeholders, partners, salespeople on the frontline, etc. to define their sustainability strategy - typically communicated through an official Sustainability Report. But what is next? How can all these different requests and ambitions be put into action? What is already in place in terms of sustainability?
Any business needs to be able to see the environmental impact of its logistics. This is where supply chain visibility and emission optimisation come into play – that is, looking at their supply chain from end to end and trying to understand how many GHG emissions are produced at each step. So, here is an effective way to proceed:
- Gain visibility and awareness on scope 3 emissions
- Identify hot spots in the supply chain
- Simulate routing optimisation and mode shifts
- Calculate resulting emissions savings
- Define an attainable decarbonisation strategy
- Define attainable decarbonisation targets
- Track your advancement year by year and communicate the progress
The first four points on the list above are crucial and often the biggest struggle. Indeed, knowledge is power, but how can a business quickly gain visibility on scope 3 emissions and effectively optimise? An intelligent tool for end-to-end supply chain visibility is what is needed.
How to identify concrete steps for a more sustainable supply chain
What specific part of your supply chain is contributing the most greenhouse gases? Shipping? Trucking? According to a publication released by the European Environment Agency in September 2022, “while the efficiency of heavy-duty vehicle transport (vehicles and logistics) has improved, it has not reduced total greenhouse gas emissions. This is because increases in demand for freight transport have outpaced efficiency gains.” Having complete visibility of this data means that businesses have more knowledge to inform their purchasing choices for assets like electric trucks, and thus, better opportunities to optimise. Analytics and insights on emissions are a real opportunity for businesses, but they need to be personalised. A smart GHG emission tracker gives you the scope 3 visibility required for your end-to-end strategy and provides a chance for optimisation. Such optimisation tools can help businesses structure the data needed to calculate emissions, track their progress on scope 3 emissions, and identify the next most ingenious action required in optimal supply chain planning and management for sustainability.
The proper emissions tracking tool should cover the supply chain end-to-end - all the way from the factory to the store, meeting the end-customer. This overview is needed to look at specific emissions because they will be a natural element in return on carbon investment.
Show what your brand stand for
Not only can emission reductions benefit a company’s overall communication and positioning efforts, but it can also strengthen company’s own products and services, which can again lead to new revenue streams. Customers want to know where a business stands when it comes to sustainability, and what their impact is. Thus, customers look for likeminded and credible partners, to achieve their own sustainability targets, and avoid any reputational risks.
These efforts can help businesses show their customers that their actions are tangible and not just a PowerPoint presentation full of intentions that may or may not come to fruition. Tracking and communicating emissions would establish an environmental strategy based on data-driven initiatives that are possible to monitor and prove. Moreover, these businesses’ customers could have access to this data as well, allowing transparency to strengthen their branding.
Sustainable supply chain trends: What’s in store for the near future?
Technology can be businesses’ biggest ally to realise their goal of a sustainable supply chain. “In the near future, better refined scope 3 emissions tracking tools will enable businesses to look at scope 3 emissions alongside cost and speed. For optimal supply chain management, these three dimensions will need to be interconnected with performance for better visibility, predictability, and optimisation,” said Lars Fabricius Kierkegaard, Senior Business Product Manager at Maersk.
Customers will increasingly make buying decisions based on each sustainability program contributing to a sustainable future and a better world. Therefore, businesses should acquire the ability to prove to their customers that they are committed to sustainability and that they can back their claims with real data. For this to be possible, more integrated logistics providers will be offering tracking services and tools to help the data mapping and support businesses with their environmental strategies, prompting an increase in demand for such scope 3 emissions visibility and optimisation tools worldwide.
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