Beyond the Surface: The Next Level of Carbon Emission Data for Informed Procurement Decisions
Supply chains across the globe face challenges on the road to achieving sustainability and efficiency. Transportation is a significant contributor to greenhouse gas emissions and climate change, and companies must figure out the sustainability of their logistics operations to do their part in lowering carbon emissions.
Accurate carbon emission data in the ocean freight industry is critical to facilitating sustainable procurement practices. BCOs and freight forwarders must clearly understand the environmental impact of their operations to make informed decisions on reducing their carbon footprint. They should identify areas where they can improve operations, from optimizing their shipping routes to working with greener carriers. It’s through data-driven decision-making that companies can have the most significant impact on their carbon footprint by analyzing data on both their current carbon emissions and the shipping options available to them.
Carbon emission averages are one method that some companies use for these decisions. However, the challenge is that averages offer incomplete data, which can potentially mislead the BCOs and freight forwarders relying on them and affect their choices. Just like you wouldn’t use an average rate to find the best carrier, you shouldn’t use an average CO2 emission to make green procurement decisions. This article looks at the alternative—utilizing a comprehensive, granular, and accurate carbon emission data source to drive decisions and how this contrasts with carbon emissions averages.
The Growing Importance of Accurate Carbon Emission Data
The pressure on companies to operate sustainably will increase in the coming years. With the growing awareness of the impact of greenhouse gas emissions from supply chain operations, more regulatory requirements are expected, especially for Scope 3 emissions disclosure. As more regulatory bodies also take action to guard against greenwashing, it will become more critical for companies to have the data to prove their sustainability efforts, both to avoid regulatory penalties and to maintain the trust of their stakeholders.
Gathering and analyzing carbon emissions data is crucial for informed decision-making. However, companies often encounter challenges in doing so. One challenge is the sheer number of tools, dashboards, and KPIs available for tracking emissions, making it difficult to know which to use and how to compare data from different sources. Another challenge is the inability to access accurate data from every vessel, train, or truck, as the industry is not equipped with a sensor on every vehicle. However, there are alternative methods for collecting real data, such as rail networks for rail data and the Automatic Identification System (AIS) for collecting data from transceivers on ships.
Overcoming the challenges of carbon emissions reporting will require continued innovation in data collection methods and increased collaboration within the industry to ensure that emissions data is accurate, transparent, and readily available for decision-makers.
The Deficiencies of Carbon Emission Averages
Carbon emission averages, as a way to understand the greenhouse gasses released by a particular activity, have the right motivation—the goal of sustainability that starts with understanding your own position. Unfortunately, in their attempt to make the data easier to understand, they cover up valuable granular data that leads to effective action.
Using average carbon emissions for either global or trade lane carrier performance diminishes 3 important factors:
- The specific regional ports-pairs and distances overgeneralized into one average.
- The correlation of distances and liner services on a particular trade lane.
- The CO2 emissions risk distribution within a service loop (due to capacity and vessel types).
The transpacific trade lane, for example, covers a multitude of regional ports with direct and indirect services, deploying different vessel types. While the average emission performance of the “best” carrier might be 100% better than the “worst” performer, the same carrier might run a loop on a specific port-pair that produces three times more emissions compared to the average, but no one would know this by looking at the average.
Procurement professionals wouldn’t select a carrier based on the average global capacity or an average trade lane price–neither should this be the case when considering CO2 emissions.
This reliance on generalized, incomplete data can lead to a number of issues for BCOs and freight forwarders, starting with the wrong baseline and an inaccurate understanding of the impacts of their decisions. This can result in ineffective or insufficient mitigation measures being taken. Incomplete data also lacks transparency, making it difficult to track progress toward emissions reduction targets and develop future action plans. Just as with any other approach to optimizing procurement performance, such as securing capacity or getting the best price, the active management toward less CO2 emissions needs comprehensive quality data.
Understanding Different Approaches to Carbon Emissions Measurement
For a BCO or freight forwarder looking to measure, report on, and make decisions from their carbon emissions data, they have the following three options of methodologies.
Primary data is the most basic option, as data is collected directly from the source. This may include fuel consumption measurements, or miles traveled on a specific voyage. One of the biggest advantages of using primary data is its high level of precision. Since primary data is all measured, there are no estimates, which makes it highly reliable. However, presently, primary data is not widely available, making it an impractical data option for carbon emissions calculations despite its advantages.
Default data is a common alternative to primary data. Default data relies on historical averages derived from primary data to provide an approximation. This method provides a very rough replacement for measured data when collecting primary data is unavailable. Organizations like the Global Logistics Emissions Council (GLEC) and the Smart Freight Centre have created guidelines to standardize default data averages to ensure consistency across the industry. However, the downside to using default data is that it is not nearly as accurate as it needs to be, as it is often an average of an average of an average. Essentially, these numbers can serve as an approximation but do not accurately reflect the amount of carbon emissions a specific vessel emits for a particular shipment.
Modeled data is the third option for measuring fuel consumption and emissions in the shipping industry. Modeled data starts with primary data, but filling in the gaps, it incorporates data from other sources like equipment type and vessel speed to create a more accurate picture of a shipment’s carbon emissions. One example is layering AIS data (Automatic Identification System data) provided by ships with actual vessel speeds and distances to create modeled data. This method accounts for more factors and offers more opportunities for procurement professionals to identify improvements in their carbon emissions.
By systematically tailoring data to specific scenarios, modeled data is the ideal methodology to produce carbon emissions numbers that are both accurate and precise. These two qualities—accuracy and precision—are necessary for BCOs’ and freight forwarders’ data to be effective at informing decisions, and unfortunately, averages are at odds with this.
The Need for Continuous Data Improvement for Sustainable Procurement
Freight forwarders and BCOs must have accurate and complete data to drive sustainable procurement. To make informed decisions, they cannot simply rely on averages and overlook the importance of granularity. A carrier may have a comparably low carbon emissions output on a tradelane, but the average will not indicate if there is a high standard deviation depending on the different ports covered in different services. If, within the data set, there are shipment options that do not meet a company’s requirements for sustainability, there is the risk they are not making the best procurement decisions to reduce carbon emissions.
It is also essential to consider all modes of transport for end-to-end carbon emission calculations, including road, rail, and air transport, not just ocean transport. Neglecting other modes would be considering only one piece of the equation, leading to inaccurate reporting.
Where carbon emissions averages fall short, they must evolve and become more specific, focusing on individual shipments instead of averages. Decision-making power for procurement is found in detailed data. This way, companies can gain a more accurate picture of the environmental impact of each shipment and identify ways to reduce their carbon footprint further. Improving the sustainability of procurement practices is an ongoing process, and improving the collection and analysis of data is crucial in achieving long-term sustainability goals.
Future sustainability advancements will require greater collaboration between industry stakeholders to share data toward the common goal. The industry’s needs for data have quickly moved past what carbon emissions averages can provide. To better serve procurement professionals in their decision-making processes, higher granularity data in combination with shipment-based information are the necessary tools.
How Searoutes Empowers Procurement Professionals with Accurate Carbon Emission Data
Searoutes provides accurate, granular carbon emission data that empowers procurement professionals to make informed decisions. This is possible through a modeled data methodology rather than a reliance on averages, sourcing data specific to port pairs instead of generalizing and factoring in all modes of transport. Searoutes is committed to global coverage, accurate vessel-level models, and Smart Freight Centre-accredited calculations. With this level of granular data, freight forwarders, and BCOs gain a comprehensive view of the impacts of each procurement decision and their overall carbon footprint.
To learn more about Searoutes and our detail-driven approach to carbon emission data and reporting, reach out to us today to schedule a demo.