The Challenges of Decarbonising the Supply Chain

Pledge, the emissions measurement and reporting platform provider for freight forwarders, hosted a roundtable in collaboration with Smart Freight Centre (SFC) during COP28. The roundtable brought together carriers, freight forwarders, and shippers to share best practices and exchange ideas that can help the decarbonisation of the supply chain and logistics industry. Pledge CEO and Co-Founder, David de Picciotto, provides key insights from the discussion. 

This year’s COP28 was wrought with deep divisions on how to mitigate the growing climate emergency, so much so that, for the very first time, delegates needed an extra day to reach a consensus.

It is becoming even more pressing for us to come together for meaningful, collaborative climate action if we’re to meet the targets set out in the 2015 Paris Agreement. As a major contributor to climate change — up to 11% of global emissions — the logistics and transport industry needs to step up and play its part.

Here are some of the things that need to happen to kick-start the decarbonisation of the logistics and supply chain industry. 

1. Scope 3 emissions measurement needs to become a standard part of freight forwarders’ service offering

Scope 3 emissions are emissions stemming from a business’s supply chain. As governments and international bodies look to measure the impact businesses are having on the environment, new standards for measuring and reporting scope 3 emissions are being set. The International Sustainability Standards Board’s (ISSB) recommendation that scope 3 emissions reporting should form a part of governments’ sustainability reporting standards has created a clearer pathway for nations to set reporting legislation. It’s expected that governments around the world — including the UK and the US — will announce standards in 2024 similar to the EU’s Corporate Sustainability Disclosure Directive (CSRD), requiring businesses to report their scope 1, 2, and 3 emissions.  

This means shippers will increasingly demand supply chain emissions measurements from their forwarders, including them as a standard part of the tender process. In the logistics industry, the standard for measuring and reporting emissions has been set by the SFC with their Global Logistics Emissions Council (GLEC) Framework, which, up until now, has facilitated voluntary reporting and reduction initiatives in the industry.

The GLEC framework also forms the basis for the recently (2023) published ISO14083 standard, demonstrating its widespread adoption within logistics and the industry’s transition to further formalising its way of measuring the impact it has on the planet.

2. Good for the planet needs to be good for business

Despite the impact regulation will have on levelling the playing field, businesses will still need a robust business case to ensure the uptake of decarbonisation initiatives is viable. Emissions reduction needs to be framed in terms of both monetary value and environmental impact.

Being able to demonstrate a financial return on investment is key. For this, measuring the total cost of operation (TCO), return on investment (ROI), and emissions reductions per dollar invested should all be considered KPIs alongside initial investment costs. This would allow businesses to find which emissions reduction pathways are the most financially viable for now, and which they can potentially plan for in the future. 

To partly bridge the gap between financial incentives and emissions reduction opportunities, businesses should integrate climate considerations into their procurement teams’ objectives. 

For example, embedding sustainability metrics into the procurement process and making emissions data sharing and reduction targets a standard part of every supplier contract would incentivise a procurement team to find new, long-term approaches to integrating emissions reduction into a business’s everyday operations.

3. Don’t wait around for perfection – start now 

Another major challenge is striking the right balance between having the correct data for emissions measurement and getting started with calculating emissions now. For freight forwarders, collecting emissions data from carriers can be a difficult task — especially as this might be a new type of data sharing that’s not been planned for. The worry many forwarders have is that this can lead to incomplete or varied data quality. 

The good news is that the GLEC Framework is designed to provide accredited emissions measurements using any level of data quality, enabling forwarders to begin measuring their emissions with the data they have available now. By utilising tools like Pledge’s recently released Accuracy™ feature, forwarders can track the quality of their emissions measurements using a data quality indicator (DQI) and progressively implement processes for more comprehensive and accurate calculations over time.

4. Collaboration is key 

For these approaches to work, however, collaboration across the logistics supply chain is essential. 

Systemic change in our sector will require collaboration among multiple shippers to signal demand, co-invest in decarbonisation solutions, and enable data sharing across freight suppliers to optimise logistics supply chains for decarbonisation. 

Internal collaboration within businesses is equally vital, requiring the integration of decarbonisation into various functions, from accounting and communication to legal compliance, staff training, procurement, and logistics operations.

Increasing the visibility of scope 3 emissions through calculation tools and data exchange platforms will be a catalyst for this transformation, helping to provide more transparency throughout the supply chain.

To read more insights from Pledge’s COP28 roundtable with SFC, visit pledge.io.