The Argument for Supply Chain Sustainability in 2025
As climate change continues to be a priority and concern for regulators, investors, and consumers, the idea that companies need to be responsible for reducing greenhouse gas (GHG) emissions along their supply chain is becoming more and more a standard practice than an option for businesses worldwide.
Sustainability, which Vanderbilt University defines as an organization’s efforts to conduct operations and make decisions based on environmental, social, and governance (ESG) principles, is increasingly becoming a priority for businesses. Companies are seeing how developing and implementing sustainability initiatives gives them a competitive advantage. A robust sustainability regimen enables a company to fulfill regulatory mandates with relative ease, and it demonstrates to investors and customers a commitment to making the world a better place for future generations.
This blog post will explore some of the critical reasons why organizations should make supply chain sustainability one of their top priorities for 2025. As the number of regulations increases worldwide to curb GHG emissions and as practices to track emission reductions, such as carbon accounting, become more sophisticated, companies need to be informed so that they can develop and execute ESG goals smartly.
The Logistics Sector Remains a Major Source of GHG Emissions
The freight transportation sector and other supply chain stakeholders have a great responsibility to reduce GHG emissions. That’s because logistics accounts for 8% of global GHG emissions. Whether the transportation mode is by sea, air, road, or rail, regulators worldwide are keen to find ways to cut emissions from the sector.
Amid regulatory pressure to cut transportation emissions, beneficial cargo owners (BCOs) — the importers and buyers who purchase the goods — have stepped up to the plate by setting up ambitious sustainability goals. They’ve done this because they’re aware of their influence on the entire supply chain to reduce emissions. BCOs also see how establishing emission reduction goals wins over investors and customers.
Through the hard work of BCOs to track, monitor, and reduce emissions, others in the supply chain are getting behind the idea of using carbon accounting to reduce supply chain emissions, also known as Scope 3 emissions. They realize that if BCOs can commit to reducing GHG emissions, the freight transportation sector can also do likewise.
As Regulators Work to Mitigate Emissions, Shippers Work to Mitigate Costs
In addition to concerns about the health of the climate and Earth’s environment, shippers and BCOs are under pressure to keep operational costs low. Regulatory pressures have now made carbon emissions a financial concern not only because of the costs associated with lowering emissions but also because of potential penalties if regulated emission reduction targets can’t be met.
For instance, the European Union’s Emissions Trading System (EU ETS) has been extended to cover the maritime sector. This means that the maritime shipping sector within Europe has been joined to the goal of slashing Europe’s GHG emissions by 55% by 2030 and becoming climate neutral by 2050. As we’ve explored previously, shippers should now expect to see freight spend increase by an anticipated 3-5% due to compliance costs.
With freight costs anticipated to rise, it’s become all the more important for shippers and BCOs to be proactive in their emission-reduction efforts so that they can attempt to offset regulatory costs. Indeed, shippers have already begun to mitigate costs by adopting energy-efficient technologies and using alternative fuels throughout their operations.
On top of passed-along regulatory costs, shippers and BCOs have to grapple with unexpected regulatory shifts that come through the election of new national leaders, and they must respond nimbly to black swan events, such as the COVID-19 pandemic and extreme weather events like last year’s drought in the Panama Canal. These unknowns put even more pressure on the bottom line.
Effective Decarbonization Relies Upon Accurate Carbon Accounting
In light of these increasing GHG regulations and operational cost pressures, it’s important for companies to have access to good data. Having a robust data collection process serves as a hedge against legislation or unforeseen events that might otherwise throw costs out of whack. It also allows companies to be more proactive in their emission reductions instead of relying on less effective tools like carbon offsetting.
Good data on the emissions levels occurring across the supply chain provide organizations with a type of granular accuracy that average data can’t provide. And as we’ve discussed, granular accuracy is important because that’s where companies are given visibility into where they might be able to cut costs further within their operations. Good data derived from accurate carbon accounting enables the identification of high-impact reduction opportunities, and it leads companies to consider strategies such as fuel switching, mode switching, and carrier switching.
To have good data, it requires several elements. First, the adoption of a carbon accounting scheme internally enables companies to track and monitor emissions, as well as report them to regulators and other interested parties. A second element is the standardization of GHG reporting measurements so that parties are speaking the same language when it comes to emissions reductions. For instance, companies can consider using ISO 14083, which is a guideline for the quantification and reporting of GHG emissions arising from transport chain operations.
For organizations to acquire good data, having the right technology and partnerships are invaluable. Advanced tools enable precise emissions tracking while collaborating with experts enhances carbon accounting practices.
This is where Searoutes comes in. Our API tools — our CO2 API, which tracks carbon emissions, our Routing API, which compares different routes’ emissions output, and our Vessel API, which offers visibility into the global fleet — provide companies with that data granularity that allows them to see where they can reduce emissions — and operational costs as a result — all along the supply chain.
Take Charge of Your Emissions Reductions Through Good Data
As environmental concerns reshape global business practices, supply chain sustainability has become a strategic priority for companies seeking a competitive edge. This article explores the critical reasons for emphasizing supply chain sustainability in 2025, focusing on how accurate carbon accounting and regulatory changes are driving this shift. With logistics accounting for 8% of GHG emissions and most BCOs setting ambitious emission targets, the sector’s environmental impact is significant. As regulators implement measures to mitigate emissions — such as the EU ETS potentially increasing freight costs by 3-5% — shippers must adapt to mitigate these expenses. Effective decarbonization hinges on precise carbon accounting, moving beyond averages to granular data for impactful action.
Searoutes’ solutions can offer you data-driven approaches to reduce Scope 3 emissions, enabling you to advance your company’s sustainability efforts. Contact us today to learn how to get started.