Tips for making CO2 a KPI for freight transportation
Driven by increasing volumes of goods moving through supply chains across the globe, demand for freight transportation is expected to triple over the next few years. If we continue shipping goods as we do today, freight emissions will surpass energy as the most carbon-intensive sector by 2050, doubling carbon emissions by 2050.
Despite these grim predictions, there is a clear path forward for green freight. Using well-established efficiency techniques and existing/near-term green freight technologies, we can keep emissions at bay while still allowing businesses to grow.
A rapid and widespread change, of course, is required to achieve this mission — and that change needs to be tracked and communicated using the de facto metric of the sustainability movement and the language of the Paris Agreement: carbon emissions.
Emissions accounting framework
This challenge has been embraced by the Global Logistics Emissions Council (GLEC), a group of companies, NGOs, green freight programs and experts committed to tracking and reducing carbon emissions from freight transportation. Led by Smart Freight Centre (SFC), a group of stakeholders including me, Smart Freight Centre Technical Director Alan Lewis and GLEC partners collaboratively developed and tested a carbon accounting method that works for shippers, carriers and logistics service providers: the GLEC Framework.
Since it was released in 2016, a growing number of companies, including DHL, Maersk, Kühne + Nagel, DB Schenker, HP, PepsiCo, Dow and Syngenta have adopted the GLEC Framework to collect and share data on logistics carbon emissions.
Building on our experiences, an updated version of the GLEC Framework was released in early July. In addition to 2019 data on average fuel and transportation emissions, the framework offers a practical how-to guide to calculate and report carbon emissions from planes, trains, ships, trucks and logistics sites.
How can you use the GLEC Framework to make CO2 a KPI in your freight transport decisions? Here are some ideas:
Calculate scope 1, 2, and 3 emissions: A common starting point for the GLEC Framework is to calculate annual emissions, typically clustered based on the Greenhouse Gas Protocol tripartition: direct operations (scope 1); electricity (scope 2); and the supply chain (scope 3). Many companies report annual emissions to CDP or within corporate sustainability reports; repeating the calculation each year provides a benchmark to track your progress over time. However, what if your business is growing? This is where emissions intensity can be a better metric for a climate KPI.
Calculate emissions intensity: While annual emissions give a sense of your company’s total climate impact, emissions intensity allows you to understand the efficiency of your operations. Total emissions may rise one year, but emissions intensity could fall. The metrics for intensity can vary depending on what you want to measure and track. For freight, emissions intensity is often measured by tonne-kilometer, where efficiency is based on the weight of a shipment and the distance it travels. Intensity also can be useful to calculate for a particular product, region, trade lane or other useful metrics.
Set a Science-Based Target: Once you have your annual emissions and emissions intensity, consider setting a Science-Based Target. Science-Based Targets are based on decarbonization pathways for the sector as a whole, using your emissions footprint to see which part of the reduction puzzle is "yours." Basing a target on emissions intensity gives your business room to grow, efficiently. To date, 575 companies have set a Science-Based Target.
Look for hotspots: Where in your supply chain are freight emissions at their highest level? Which emissions can you most effectively influence? Finding annual emission and emissions intensity for a particular supply chain, region, product, transportation provider, or mode of transport can help inform emissions reductions strategies, and reveal where more detailed data collection might be useful.
Use CO2 as a KPI for supply chain planning: Planning a supply chain involves many considerations such as cost and product quality demands — but does your company have CO2 in the matrix? The GLEC Framework allows companies to estimate the CO2 for transportation decisions within the supply chain, providing a metric to judge efficiency within the network and optimize for climate.
Consider CO2 as a KPI for procurement: Embedding CO2 as a metric in procurement decisions is a major lever for emissions reduction. Requesting that current or potential transportation providers disclose emissions data following the GLEC Framework gives you information to benchmark one carrier against another. You also can use this information to refine emissions estimates with actual data, helping you to track your progress towards your Science-Based Target.
Embrace CO2 as a KPI for sales: Does your sales team know how to sell a sustainable transportation solution? Sales teams play a crucial role in educating customers about the emissions associated with the transport services they buy directly or indirectly. While customers ultimately might select an option based on a low price or short shipment time, putting CO2 on the table as part of a decision-making process allows the sales team to showcase the company’s commitment to sustainability, and enables buyers to make an informed decision.
Companies have the power to prevent freight transportation’s carbon emissions from skyrocketing over the next few decades. Adopting the GLEC Framework is an important starting place, allowing companies to communicate information on carbon emissions to other companies as well as their customers, using the same language. While the GLEC Framework enables us to compare apples to apples, achieving emissions reductions rests on companies — from supply chain planning to sales and procurement — to adopt CO2 as a KPI in their decision-making.
What are your ideas for controlling emissions from freight transportation? Have you adopted the GLEC Framework? We are researching how companies calculate carbon emissions and create strategies for emissions reduction. Whether you are just starting your journey or are an advanced climate crusader, we invite you to contact us to share your experiences and ask our experts questions. Learn more about our work at sustainable.mit.edu, follow us @MITSustainChain, and email [email protected]. You can download the 2019 GLEC Framework here.
This article originally appeared on MIT's supply chain blog on Medium.