In this guest post, Stephan Sieber, CEO of management platform Transporeon, discusses the future of green supply chains and what logistics providers need to consider.
The EU is in full ‘green mode’. In recent months, it has published a raft of sustainability regulations and guidance. Some elements, like the Corporate Sustainability Reporting Directive, will apply to most companies over time. Others, like the Greening Freight Package launching in June 2023, are aimed specifically at the logistics and transportation sectors. The Package contains a raft of measures – including the CountEmissions EU chapter, which creates a common methodology for measuring door-to-door greenhouse gas emissions.
What do these initiatives have in common? An enhanced focus on sustainability reporting. For shippers, carriers and logistics service providers, compliance requires three things – data, data and yet more data.
With the new requirements, the EU is aiming to enhance supply chain transparency and equip all stakeholders with sustainability data to factor into their decision-making processes.
When it comes to sustainability, being data-driven is crucial. For instance, hydrogen, autonomous vehicles and exhaust heat recovery are just three decarbonisation measures that we see touted as ‘innovative’ and ‘industry-leading’. But these have limited tangible impact on lowering emissions – at least in the short term.
When it comes to sustainability, it’s crucial to look below the surface. Headline-grabbing decarbonisation measures aren’t always the most effective. And the only way to sort the wheat from the chaff is through accurate, in-depth data and reporting.
Scope 1, 2and 3 emissions reporting
The Greenhouse Gas Protocol (a global, standardised framework) stipulates that emissions fall into three categories – scope 1, 2 and 3.
Scope 1 emissions originate from a company’s owned assets, like the fossil fuels burned by their own fleet of trucks. Scope 2 includes indirect emissions from purchased energy generated off-site, like the electricity used to charge electric vehicles. Lastly, scope 3 includes all other indirect emissions from a company’s upstream and downstream value chain. It’s by far the largest source of emissions for most organisations – more than 70% of their entire footprint on average. For instance, the services of a carrier or logistics service provider would fall under their clients’ scope 3 emissions.
Until now, most EU companies have only reported on scope 1 and 2 – just a third measure their scope 3 emissions. But, due to the Corporate Sustainability Reporting Directive, this is about to change. Under the proposed value chain sustainability reporting, companies will also be required to report on scope 3, as well as their reduction targets and progress.
What does this mean for shippers, carriers and logistics service providers?
As scope 3 reporting becomes the norm, we’ll likely see end-user customers pressuring shippers to decarbonise. The reasons for this are twofold. Customers will want to reduce their own scope 3 emissions, while preserving their reputations among increasingly environmentally savvy consumers.
Similarly, the services of carriers and logistics service providers are often a considerable source of scope 3 emissions for shippers. Since they’ll also be under more pressure to account for and reduce their emissions, they too will prioritise sustainability by voting with their wallets. This could mean contracting carriers based on their sustainability practices, offering longer freight contracts to carriers with lower carbon emissions or even paying a premium for lower carbon transport.
All this demonstrates that implementing a robust decarbonisation plan and accurate process for reporting emissions isn’t just the ecologically sound path. It makes smart business sense.
Reducing emissions – two parallel paths
In Europe, the vast majority of freight is still transported by road. When it comes to road freight, there are several routes to decarbonisation. One route is to improve the efficiency of vehicles, and another is to boost the efficiency of transport logistics operations.
Obviously, a combination of both is needed for successful long-term decarbonisation. But EV and hydrogen technologies are still relatively immature, and require substantial infrastructure investment. Meanwhile, digital solutions to drive efficiency can be implemented now at marginal cost and with hardly any upfront investment.
So, it makes sense for shippers and carriers to first ensure their operations are as efficient as possible. This means reducing empty mileage, tackling unnecessary dwell times and optimising operations in the yard – that integral inflexion point between the road and the warehouse. And of course, shippers and carriers should look at how to combine multiple transport modes intelligently to minimise carbon emissions.
How can companies ensure they’re making the right decisions?
To ensure they’re making smart decisions on decarbonisation – and to level up their reporting capabilities – shippers, carriers and logistics service providers will need to rely on technology.
Data quality is crucial here. To ensure accuracy, companies will need to rely on sensor-based (mostly telematics) data – also known as primary data. Currently, the industry precisely measures 20% of its emissions – scope 1 and 2 – using this kind of sensor data. But it falls short on calculating scope 3 – the remaining 80% – with the same level of precision. With the automation and data analytics capabilities of a smart transportation management platform, companies should be able to solve this problem.
Given the abundance of data points involved in sustainability reporting, companies can further enhance accuracy and minimise employee workload by automating workflows. Similarly, sophisticated data analytics capabilities enable companies to capture real-time insights and make informed decisions throughout the process of managing transportation logistics.
But the road to decarbonisation is a long one, and there’s only so far that companies can travel alone. Adopting a ‘network’ approach is key, as it enables connected information flow between otherwise disparate companies and ensures that emissions aren’t measured in isolation from other factors. It also enables shippers, carriers and logistics service providers to work together to reduce unnecessary driving time by streamlining processes like freight sourcing, transport execution, dock scheduling, and freight matching. As the saying goes, if you want to go far, go together.
Since 12 November 2019, Stephan has been CEO of Transporeon. His professional focus has always been to use his wealth of experience to help organisations grow. Stephan spent 13 years working for SAP in several leadership functions. After his time at SAP, Stephan successfully shaped the development of ERP provider Unit4 over a period of five years, three of which as CEO.
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