In the rapidly evolving green-economy landscape, the significance of accurately measuring carbon emissions cannot be overstated. The transparency and accountability provided by precise emissions data have become a cornerstone for businesses striving to stay competitive in an increasingly eco-conscious marketplace. Moving forward, tracking and measuring carbon emissions won’t be an added bonus of companies, but a required mandate from the Securities and Exchange Commission (SEC) that all publicly traded companies report on their greenhouse gas (GHG) emissions starting in January of 2025. This new reporting standard underscores the growing importance of environmental responsibility in business operations.
Scope 1 and Scope 2 carbon emissions reporting is more straightforward. Scope 1 emissions result directly from your own operations. Scope 2 emissions are indirect GHG emissions associated with the purchase of electricity, steam, heat, or cooling. Both of these rely on data that every company can compile because they have to do with the company’s own activity.
Scope 3 is not direct nor simple. Per the Environmental Protection Agency (EPA), Scope 3 emissions are the “result of activities from assets not owned or controlled by the reporting organization, but that the organization indirectly affects in its value chain.” Meaning if you are a shipper, you have to start compiling activity on your partners’ carbon emissions footprint, such as your logistics service providers (LSPs) and carriers. That is much easier said than done, as you would have to go to every partner and compile emissions data for each company, each product, and each shipment - one by one. Furthermore, the methods for calculation will most likely vary between individual LSPs making reporting consistency nearly impossible.
To keep pace with these requirements, you have a second, more streamlined option. You can take advantage of innovative solutions that do the work for you and compile data pertaining to emissions of greenhouse gases in a quick and efficient manner. Companies that focus on the billing side of transportation already have the capabilities and visibility into the metadata needed to establish benchmarks, track, and measure the carbon emissions of all your vendors. Transportation spend invoices have data such as shipment mode, cost, weight, origin, and delivery locations, distance traveled, and carrier details. Adding a carbon emissions calculation based on these factors makes it easy to operationalize and normalize the data for customers across all inbound and outbound shipments in order to establish and measure their carbon emissions consistently. Shippers can leverage a comprehensive and holistic view of their cost, service, and carbon emissions activity, allowing them to make informed business decisions towards the company’s operations and sustainability objectives.
Did you know that the correlation between actions to reduce cost and actions to reduce carbon emissions overlap in roughly 80% of cases? That means if you take the specific steps to reduce operational costs, you will end up reducing your company's carbon footprint as well. For example, with load consolidation, when you consolidate two shipments into one by utilizing certain modes of transportation, instead of individual shipments, you typically reduce cost per unit weight but also reduce your carbon footprint, or overall CO2 per distance. Carbon emissions are based on weight, distance, and mode, and by consolidating shipments, you’re reducing the cost per unit weight and lowering carbon emissions at the same time.
On the other hand, network optimization tackles carbon emissions reduction from another angle. This strategy focuses on the organization's network of suppliers, distribution centers, and customers, with the aim of minimizing travel distances. By strategically placing facilities closer to customers, consolidating shipments, and choosing more efficient modes of transportation, the overall distance traveled and number of shipments can be significantly reduced. The direct outcome of this strategy is a substantial reduction in carbon emissions, contributing to a greener supply chain.
The correlation between load consolidation, network optimization, and reduced carbon emissions cannot be downplayed. Both strategies, when implemented effectively, can lead to significant carbon emissions reduction while also lowering operational costs. This dual benefit makes them integral components of any sustainability-focused logistics strategy. This is an example of “operationalizing” the information - to optimize execution and reduce carbon emissions.
Companies are able to align their operations with customer expectations, reduce costs, and contribute positively to the environment by taking these appropriate and necessary steps. Freight audit payment stands as a powerful tool in the fight against climate change. By leveraging existing data and providing extensive reporting and analysis capabilities, they aid directly in the accurate measure of carbon emissions.
The benefits extend beyond compliance and cost-saving - they enhance the company's reputation and resonate with the values of a growing number of sustainable-focused consumers. By implementing these standard operating procedures, companies add value to their sustainability practices that benefit business operations, consumers, and the climate. As the green economy continues to evolve, consumer preferences are shifting towards greener products and conscious consumption, highlighting the need to keep sustainability practices at the forefront of any business operations.
Steve Beda is the Executive Vice President for Customer Success in Global Program Management at Trax Technologies, the global leader in Transportation Spend Management (TSM) solutions. Trax elevates traditional Freight Audit and Payment (FAP) with a combination of industry-leading cloud-based technology solutions and expert services to help enterprises with the world's more complex supply chains better manage and control their global transportation costs and drive enterprise-wide efficiency and value. For more information, visit www.traxtech.com. Steve can be reached at steve.beda@traxtech.com.
This article originally appeared in the March/April, 2024 issue of PARCEL.
