7 Simple Ways Logistics Companies Can Lower Emissions Today
A commonly referenced figure is that 71% of greenhouse gas emissions can be attributed to just 100 companies, a somewhat misleading figure. Even though large companies can be the biggest major carbon emitters, the vast majority of businesses worldwide are mid-sized or smaller enterprises (SMEs), and large companies often depend on the operations of these companies for anything from raw materials to logistics. All of these operations have a carbon footprint. Since emissions from a SME’s direct activities are included in the larger company’s indirect emissions, sustainability efforts by any sized business can have an impact.
This is also true for logistics companies, being responsible for the logistics of a wide range of businesses. To make the most of their position, we outline seven ways logistics companies can reduce supply chain emissions through their clients and positively impact the environment.
The Magnified Impact of Logistics Companies’ Decisions
Logistics companies have a central role in supply chains, covering transportation, warehousing, distribution, or other areas of the chain. Transportation alone typically involves significant carbon emissions, with long distances and different modes of transportation involved. Every improvement a logistics company makes in its operations, such as fuel efficiency or optimized routes, has the potential to benefit all businesses it serves. If a logistics company reduces its direct emissions, it indirectly reduces the emissions associated with the transportation of products for numerous other companies. In this way, logistics companies are in a unique position where their operational choices can have magnified impacts.
Breaking Down Supply Chain Emissions: What are Scope 3 Emissions?
The Greenhouse Gas Protocol, an international accounting tool helping companies understand, quantify, and manage greenhouse gas emissions, has created a way to differentiate between direct and indirect emissions, categorizing emissions into three Scopes.
Scope 1 (Direct emissions) – Emissions from sources that are owned or controlled by the company. For logistics companies, this includes emissions from any company-owned services, for example, any direct production or operational facilities they own. If they are an asset-based 3PL, this would encompass the emissions their fleet produces.
Scope 2 (Indirect emissions) – Emissions from generating electricity, heating, cooling, and steam purchased by the company, which might power warehouses, offices, or other facilities.
Scope 3 (Other indirect emissions) – Emissions that result from the company’s activities but are produced from sources not owned or controlled by the company. This can be a broad category for any company, including all areas where they rely on other companies like ocean carriers for ocean freight transport.
As mentioned, the activities of the logistics company are counted in the Scope 3 emissions of the logistics company’s clients. Both companies can account for and take responsibility for the emissions within the context of their own operations. This framework fosters transparency and motivates companies to reduce supply chain emissions by working with partners, like logistics providers, that use sustainable practices. In addressing their emissions output, they are also better positioned to meet current and future sustainability regulation requirements.
Taking Action: 7 Ways for Logistics Companies to Reduce Their Emissions
There is a wide variety of possible approaches logistics companies can take to reduce supply chain emissions. Here are seven ideas for logistics companies to explore.
1: Optimize Route Planning
Logistics companies can optimize routes based on factors like distance, speed, or carbon emissions. Often, distance optimization and carbon emission optimization yield the same route options, but in some cases, the fastest or even the cheapest routes may also produce lower carbon emissions due to less wasted resources for the carrier.
Logistics companies need both technology and accurate data to implement this sustainability strategy, which we will discuss later. When considering different trade lane options with different ocean carriers, for example, logistics companies must have a full scope of data to understand each option’s potential range of carbon emissions. It would be more beneficial to select a route with a consistently low and narrow range of emissions rather than one with a broader, more unpredictable range.
2: Be Data-Diligent
As mentioned, data quality is essential for informing decisions, especially with sustainability and carbon emissions being an area of operational decision-making that is still growing with respect to access to data. Logistics companies need quality data, which means both accuracy and precision. If a set of carbon emission measurements is not precise, any minor, strategic changes where the company is attempting to reduce supply chain emissions could go undetected by the method of emission calculation. If a set of carbon emission measurements is inaccurate, it defeats the purpose of measuring emissions. Companies can only set goals and achieve results if they are working with accurate information.
There are different frameworks for measuring carbon emissions, the most widely known likely being the GLEC framework. There are also different methodologies, for example, using primary data (which is not always available), default data (rarely accurate or precise), and modeled data. Between these three methodologies, only a modeled data methodology, tailored at the granular level, can produce accurate and precise data points on which companies can reliably base their decisions.
3: Embrace Vessel-Level Initiatives
Logistics companies should research initiatives at the vessel level that might make one carrier a better option than another. They can find which ones stand out with fuel-efficient vessel designs or incorporate fuel-efficient practices in their operations. For example, some carriers might have ships with streamlined hull designs that reduce drag and, consequently, fuel consumption. Others might deploy energy-saving practices like slow steaming, where ships travel at slower speeds to save fuel, or retrofitting vessels with newer, more efficient propellers. These designs and practices can drastically cut down on emissions and make one carrier a better place to start when looking at freight procurement options.
4: Utilize Alternative Fuels
Another example of vessel-level initiatives is the use of eco-friendly fuel options. Some carriers have already begun using biofuels derived from renewable resources, which can significantly decrease the carbon footprint of a vessel. LNG (liquefied natural gas) is another alternative that, while not entirely carbon-neutral, emits less carbon dioxide than conventional fuels.
Taking a broader approach, this concept of utilizing cleaner fuels is not limited to ocean transportation. Electric vehicles (EVs) are leading the way in emission reduction on the road. EVs release zero tailpipe emissions, and even when considering the emissions from electricity generation, they typically emit far less than their gasoline counterparts. Asset- and non-asset-based logistics companies can leverage these advancements by directly investing in upgrading their fleets or collaborating with specialized trucking companies that prioritize fuel-efficient transportation.
5: Promote Intermodal Transportation
According to the U.S. Environmental Protection Agency (EPA), carbon emissions can be reduced by as much as 65% for shipments traveling over 1,000 miles when intermodal transport is used. One reason behind this significant reduction is the efficiency of rail transport, which is more fuel-efficient than trucks when covering the same distance.
Companies may need to adjust some aspects of their distribution network to leverage intermodal transportation. This could include strategically locating distribution centers closer to intermodal hubs, optimizing the last miles of delivery to minimize truck travel, and using technology to efficiently manage the transitions between different modes of transportation.
6: Invest in Collaborative Strategies
The interaction of various efforts in going green can have a greater impact than the sum of the pieces alone. This is synergy. Organizations can attack a problem from different angles together and discover a better way that benefits everyone involved. This approach will look different depending on the specific situation, but it includes communicating needs transparently and offering up ideas and resources collaboratively. A simple example of this is freight consolidation, where multiple shippers share truck space, but there could also be ways for companies to gain access to data, technology, or resources for greener freight procurement options.
7: Leverage Technology for Efficiency
The integration of technology solutions, as from Searoutes, a leading emissions visibility provider, can help logistics companies improve operational efficiency for their clients. With Searoutes’ CO2 API, logistics companies can analyze various carbon emission sources and leverage this data for better planning. They can evaluate the impact of their choices for greater awareness of their business’s and clients’ carbon footprint. Another API by Searoutes provides accurate routes and sea distances. Logistics providers can see the shortest routes and get detailed information for transit times, vessel speeds, and distances, allowing them to make decisions that increase efficiency for reduced supply chain emissions.