A new report from the United Nations Intergovernmental Panel on Climate Change (IPCC) warns that the planet will exceed the dangerous threshold of 1.5°C of global warming within the next decade unless action is taken fast to transition to renewable energy to avoid climate catastrophe. The report calls for countries to phase out coal, oil, and gas and eliminate carbon emissions by 2040. The IPCC notes that the world will likely miss its climate targets of the early 2030s unless emissions are reduced at a faster rate.
Reducing supply chain emissions is a crucial part of combating climate change. Targeting the transportation sector is particularly important, given that it accounted for the largest share of energy-related emissions in the U.S. in 2021, at 38%. As companies aim to reduce their carbon footprint, they must look beyond their own operations and take into account the emissions generated by their suppliers and the transportation of goods. With strategies like sustainable sourcing and transportation efficiency, these Scope 3 emissions make up a significant opportunity for reducing supply chain carbon emissions.
What are Scope 3 Emissions?
Scope 1, Scope 2, and Scope 3 emissions are part of the Greenhouse Gas (GHG) Protocol developed by the World Resources Institute (WRI) and the World Business Council for Sustainable Development (WBCSD) to provide a standardized framework for companies to measure and report their GHG emissions.
Scope 1 emissions are direct emissions from sources that are owned or controlled by the company, such as emissions from company-owned facilities and vehicles.
Scope 2 emissions are indirect emissions from the generation of purchased energy, such as electricity, steam, heating, and cooling purchased from a utility provider.
Scope 3 emissions are all other indirect emissions that occur in a company’s value chain, including the emissions attributed to purchased materials, transportation of goods and services, use of sold products, and end-of-life treatment of sold products.
In other words, Scope 3 emissions are the emissions that occur as a result of a company’s activities but fall outside its direct control. These emissions can comprise a significant portion of a company’s total GHG emissions, particularly for companies with complex and extensive supply chains.
Assessing and reporting Scope 3 emissions can help companies identify areas where they can reduce their environmental impact and work with their supply chain partners and carriers for better sustainability.
Scope 3 Emissions and Freight Transportation
If a company owns and operates its transportation fleet, then the emissions from that fleet would be considered Scope 1 emissions. However, if a company outsources its transportation to a third-party provider, which is most often the case, then the emissions from that transportation would be considered Scope 3 emissions. This category includes emissions from the transportation of raw materials used in a company’s production process and the emissions from the transportation of goods from manufacturing facilities to distribution centers, warehouses, or retail stores, as well as the transportation of goods to customers.
Freight transportation is one of the main contributors to overall Scope 3 emissions for many companies, particularly those with global supply chains. For both consumer staples and consumer discretionary GICS sectors, Scope 3 emissions make up 92% of their total emissions. Financial research platform Sentieo reported the frequency of mentions of Scope 3 emissions in quarterly earnings calls has surged by over 1,300% between 2019 and 2021.
Reducing carbon emissions from freight transportation can have several benefits for companies, including:
Cost savings – Implementing more sustainable transportation practices, from optimizing shipment routes to using more fuel-efficient vehicles, can have the side effect of cost savings through reduced fuel consumption, optimized shipping strategies, and reduced transportation costs.
Competitive advantage – Companies prioritizing sustainability and reducing their carbon footprint can gain a competitive advantage by demonstrating their commitment to sustainability for environmentally conscious consumers and investors. They improve their brand reputation while accessing a new market.
Compliance with regulations – In some cases, companies may be subject to regulations related to carbon emissions. Reducing carbon emissions within the supply chain can help them comply with these regulations.
Consumers Demand Sustainable Shipping
Consumer demand for sustainable shipping is growing as people become more aware of the environmental impact of shipping and transportation. Many consumers are concerned about the carbon footprint of their purchases and are seeking eco-friendly options, a widespread trend gaining momentum across different demographics. Companies are responding to this demand by bringing more sustainable alternatives to the consumer, like making it easier to combine multiple orders into one shipment and using sustainable packaging materials.
According to GlobalTrade Magazine, 20% of consumers said they would pay more for sustainable shipping options, and 54% said they would even accept longer lead times for this service.
Consumer awareness is driving these trends, compounding as the availability of sustainable shipping options continues to expand. If companies continue to invest in sustainable shipping, they can do their part for the environment while knowing they are meeting this demand from consumers and tapping into a growing market.
5 Strategies to Lower Scope 3 Emissions
Reducing Scope 3 emissions in freight transportation is a matter of access to data and analytics as well as collaboration, with companies working together with different partners to identify and implement more sustainable solutions. Here are five strategies companies should consider when getting started.
1. Increase Visibility into Emissions
To reduce Scope 3 freight transportation emissions, a company must first gain visibility into its emissions with accurate and precise data. This requires visibility into all transportation activities across every mode of transportation used. However, Scope 3 emissions are inherently challenging since they are from sources of indirect control.
Fortunately, improved reporting and analytics can help shed light on indirect emissions. There are a few types of measurement and calculation methodologies that shippers can use. Primary data is the most accurate because the data comes directly from a specific source. Unfortunately, it is not widely available, so despite its being the ideal methodology, it is not practical at this point. Default data uses averages for estimates, but the difficulty with this is its imprecision. Modeled data, however, addresses the limitations of primary data by using calculations derived from primary data to yield highly accurate and precise data. This method holds up for reporting and when detecting small changes in carbon emissions.
By gathering emissions data, companies can identify areas where emissions can be reduced, such as by optimizing routes or switching to more sustainable modes of transportation. Many of these decisions are within their scope of control, but for those areas that are up to their suppliers and transportation providers, they should have conversations to learn what action they are taking to reduce emissions. In valuing these conversations and investing in quality data and visibility, companies demonstrate their commitment to sustainability and reducing their Scope 3 environmental impact.
2. Mitigate Emissions with Expert Advice
Based on the knowledge and experience of industry experts, companies can better understand the factors that contribute to emissions and identify areas where they can make meaningful reductions. They can receive guidance on the latest technologies, best practices, and strategies for improving supply chain sustainability by developing more effective plans to reduce Scope 3 emissions.
The topic of sustainability is becoming increasingly complex, not only due to the nature of the task at hand but also because of reporting and sustainability requirements from regulatory bodies such as the International Maritime Organization (IMO), Europe Emissions Trading System (ETS), and the Securities and Exchange Commission (SEC). Experts can help companies navigate the complex regulatory landscape, set goals for reducing emissions, and remain compliant with evolving sustainability standards.
3. Choose Like-Minded Transportation Providers
Companies should work with transportation providers that share their commitment to sustainability to ensure their emissions reduction goals are supported throughout the supply chain. Environmentally conscious providers are more likely to use low-emission vehicles, implement fuel-efficient practices for drivers, and prioritize sustainability in their operations. This strategic partnering and collaboration help companies meet their sustainability targets while enhancing their reputation as socially responsible organizations.
In recent years, carriers have come under increased pressure to adopt sustainable practices and reduce their carbon footprint—pressure from various stakeholders, including customers, governing bodies, and investors. The Inflation Reduction Act has been a significant driver of sustainability in fleets, particularly in adopting electric vehicles (EVs). This legislation provides incentives for carriers to invest in more fuel-efficient vehicles, leading to the potential for significant reductions in emissions.
There are also advancements underway in ship technology. Digital technologies are being used to optimize vessel routes and reduce fuel consumption. Alternative fuels, such as liquefied natural gas (LNG), are being developed to emit fewer greenhouse gasses than traditional fuels like heavy fuel oil. The industry is also exploring renewable energy sources like wind and solar power to reduce carbon emissions, plus the use of more efficient engines and hull designs, which can improve fuel efficiency and reduce emissions.
4. Use Carbon Credits to Ensure Sustainability for the Long Haul
Companies can use carbon credits as a tool to support their sustainability efforts and reduce their Scope 3 emissions from freight transportation. Carbon credits represent reducing or removing greenhouse gas emissions from the atmosphere through projects promoting renewable energy, energy efficiency, or forest conservation. By purchasing carbon credits, companies can offset their unavoidable emissions from freight transportation and support projects with a positive environmental impact. Carbon credits help companies meet their sustainability goals and demonstrate their commitment to reducing their carbon footprint, serving as an important investment while other sustainability solutions are still being developed for widespread use. Until then, carbon credits are a critical part of the sustainability equation.
5. Optimize Efficiency Through a Single Source
Utilizing a single source provider of sustainable transportation solutions can be an essential step for companies to reduce their Scope 3 freight transportation emissions. Companies can use strategies like consolidating shipments to reduce the number of trips required to move their goods, which can provide significant emissions savings. Fewer trips also mean less fuel consumption and lower costs, which can increase the company’s profitability.
With a single provider, companies can also gain better control over their transportation operations, enabling them to track and monitor their shipments more effectively. This increased visibility can help companies identify areas for improvement and further optimize their transportation operations.
Sustainability platforms integrating procurement, transportation, consulting, and data into a single platform help companies oversee their environmental impact. This simplifies the complex task of reducing Scope 3 emissions, as these platforms streamline the process by providing a centralized system for companies to track their emissions from procurement to transportation. When consulting is also offered with this type of platform, companies get expert advice and insights into their sustainability performance so they can make more informed decisions for the future.
Reduce Scope 3 Emissions with Greenabl Today
We’ve seen the urgent need for action to reduce emissions and improve sustainability, particularly within the supply chain. The transportation sector and supply chains play a crucial role in reducing emissions, and companies are starting to respond to growing consumer demand for sustainable shipping options. By investing in sustainable shipping and reducing supply chain carbon emissions, companies help combat climate change and tap into a growing market of environmentally conscious consumers.
Greenabl offers a platform and consulting to help shippers mitigate their carbon footprint. With best-in-class research, shippers can access real-time analytics to monitor their decarbonization efforts over time. Greenabl provides a proven framework to measure greenhouse gas emissions and offers certified carbon credits vetted using Gold Standard and VERRA ratings.
For carriers, Greenabl provides a place to measure and offset carbon emissions. Carriers can access fleet planning services and collaborate with shippers committed to supply chain decarbonization.
If you’re interested in learning more about Greenabl and taking the first steps toward achieving greater sustainability, reach out to us today.
