Numerous corporations worldwide, spanning shippers and logistics firms, have pledged to attain carbon neutrality by 2050 or earlier. To accomplish this objective it means deploying strategies for reducing scope 3 CO2e emissions.
Reducing Scope 3 CO2e Emissions
Remarkably, one out of every five of the world’s largest publicly traded companies has committed to achieving net-zero emissions targets. Achieving these ambitious targets may seem like a daunting task, but new logistics technologies put success within reach.
However, reducing scope 3 CO2e emissions is a real challenge because it is outside the direct control of the company. As they say, “If it was easy, everyone would do it.” In this article, we will take a look at how companies can reduce emissions in the supply chain.
The Scope System: Classifying Greenhouse Gas Emissions
The World Resources Institute developed the Scope System to classify the different kinds of greenhouse gas (GHG) emissions. Scope 1 emissions are direct GHG emissions from sources that are owned or controlled by the organization. Scope 2 emissions are indirect GHG emissions associated with the purchase of energy, such as electricity, steam, heat, or cooling. Scope 3 emissions result from activities related to assets neither owned nor controlled by the organization, including transportation.
The collective transportation sectors, encompassing both freight and passenger transport, contribute 27% of global GHG emissions, underscoring the critical importance of addressing emissions within this industry. Within the United States, the trucking sector serves as the linchpin of the economy, facilitating the movement of over 70% of transported goods nationwide. However, this extensive freight activity carries a significant environmental footprint, with medium and heavy-duty trucks standing out as prominent sources of greenhouse gas emissions.
Regulatory Pressures on Scope 3 GHG Emission Reporting
Pressure is mounting on shippers to report and reduce their Scope 3 GHG emissions. In 2022, the United States Securities and Exchange Commission (SEC) proposed a new rule that would require companies registered with the SEC to disclose Scopes 1, 2, and 3 emissions. Governor Gavin Newsom of California recently signed a law requiring companies larger than $1B in annual revenues that operate in California to report both direct and indirect GHG emissions.
Despite the mounting regulatory hurdles, many companies cannot accurately measure and report GHG emissions. This is due in part to the complexity of capturing Scope 3 emissions.
The Challenge of Measuring Scope 3 Emissions
Scope 3 GHG emissions are notoriously hard to measure due to their very nature as emissions that are related to activities that are neither owned nor controlled by the organization. The fragmentation of the trucking industry only complicates this challenge further. In April 2023 there were more than 750,000 active trucking companies in the US, however, nearly 96% operate 10 or fewer trucks. A large shipper may utilize dozens of different trucking companies to transport its goods.
For shippers looking to capture and report Scope 3 GHG emissions, integration middleware is the solution. Integration middleware, sometimes referred to as Integration Platform as a Service (IPaaS) is often leveraged as part of a 4PL managed transportation partnership and can play a valuable role in sustainability efforts as well, by capturing, cleansing, and normalizing data from disparate systems and sources.
Through an integration with the GLEC Framework, developed by the Smart Freight Centre, or the new ISO 14083 standard, shippers can translate fragmented shipment data into Scope 3 GHG emissions data and make it available for analysis and reporting. With a unified data set in hand, shippers can analyze their transportation-related emissions at the facility, mode, or even SKU level.
Business leaders often evaluate profitability using a “cost to serve” calculation. Analyzing Scope 3 GHG emissions at the customer or SKU level empowers shippers to develop “emissions to serve” metrics that can be monitored and managed over time. It’s been said that you can’t lose weight unless you know what you weigh in the first place. Leveraging integration middleware to capture Scope 3 GHG emissions data is a critical first step in the sustainability journey.
Leveraging Integration Middleware for Sustainability
Capturing and reporting on Scope 3 emissions data is just the first step in the net zero carbon journey. This data can then be leveraged as part of a net zero carbon initiative by informing the strategic purchase of carbon credits. Carbon credits are financial instruments, like shares of stock, that can be bought, sold, and traded in carbon markets.
Underlying the carbon credits are projects that have been certified to either reduce or remove carbon from the environment, such as direct air capture, reforestation, biochar (charcoal produced from plant matter and stored in the soil as a means of removing carbon dioxide from the atmosphere), or other methods.
Once a carbon credit has been used to compensate for GHG emissions, it becomes a carbon offset and is retired from future sales. One word of caution: to avoid the risk of “greenwashing,” shippers must ensure they are working with established carbon market partners and that the underlying projects have been assessed for quality and efficacy by an independent carbon rating agency.
Optimizing Routes and Loads for Sustainability
Purchasing carbon credits is just one way that shippers can progress in their net zero carbon journey. Other methods focus on attacking emissions at the source before they have been emitted. Route optimization, load optimization, mode optimization, and consolidation have been used in logistics and transportation for decades to reduce costs, improve service, drive efficiency, and increase end-customer satisfaction. These same techniques can be viewed through a sustainability lens as well, as they often result in “right-sizing” the vehicle to the shipment and reduced fuel consumption.
The global commitment to carbon neutrality by 2050 or earlier, especially within the shipping and logistics industry, signifies a significant step towards a more sustainable global supply chain. Tried and true optimization techniques, sophisticated integration middleware, and solid partnerships with 3PL and 4PL providers can make the difference in advancing the net zero journey for companies of all sizes.
This article was written by Rob Cook, Chief Technology Officer at Sheer Logistics
