Logistics Service Providers must increasingly reduce scope 3 and report precise CO2e emissions, while being hampered by diverse IT landscapes and often lacking access to primary data from carriers. Read this article to learn how they deal with it.
Decarbonizing supply chains has taken center stage for large Logistics Service Providers (LSPs) because of various reasons: Mandatory regulatory requirements like the Corporate Sustainability Reporting Directive (CSRD) affect more and more companies. Emission trading systems as the EU ETS imply rising CO2 prices. An increasing number of customers in industries such as fashion, automotive, FMCG, pharma and chemicals demand it.
Public awareness, stakeholders’ and shareholders’ attention and corporate responsibility for its own sustainable action are growing. Pioneers gain a competitive edge and become more attractive for future employees.
Not least of all companies’ sustainability efforts unlock commercial opportunities: transport and logistics firms can deal with rising and volatile fossil energy prices in a more relaxed manner. They are put in the position to offer their clients sustainable products and services, provided they rely on a clear and transparent database. Because only those who measure with realistic data can derive action steps from it and verifiably reduce CO2e emissions.
The problem: LSPs face insufficient IT infrastructure from their carriers and limited internal sustainability resources
LSPs mostly command order or consignment data as well as transport data and usually know how shipments are carried out. They generally have multiple transport management systems in place, often separated by mode and countries, requiring the consolidation of data from different carriers. A historically grown diversity in multi modal supply chains and increasing merger and acquisitions in the logistics industry make the IT landscape more complicated.
Even if their carriers are obliged to report emissions, they often have not adjusted their own internal processes and resources to that requirement. Carriers frequently deal with insufficient IT infrastructure, and they usually do not have the capacity for regularly providing information to a variety of their customers. Error-prone manual import into source systems by various transport planners will almost inevitably result in incorrectness of data, often without awareness for the value of correct data.
Although LSPs have started to establish sustainability knowledge in-house, they tie these scarce resources away from their core business operations. The responsible employees might struggle to keep up with evolving regulatory requirements and most likely cannot comprehend their carriers’ methods of emission calculation. No wonder, doing it is a painful process for many transport and logistics companies: without the right tool and (semi-)automatic data integration, the calculations can be time-consuming, and the emission factors are usually not backed up by international standards and frameworks.
The consequences: Inaccurate data impedes farsighted business decisions
In-house solutions are usually not scalable, hard to maintain and in many cases only work on-demand without continuous automatic data exchange. Not leveraging all relevant existing data assets leads to inconsistent results which prevent insight gains. Data needs to be curated to each requesting party before sharing.
LSPs should consider that in-house solutions for emissions calculation or generic CSRD tools based on default data with simple statistical conversion factors will probably result in sunk costs. Simulating decarbonization potential on flawed data structure reduces their options for farsighted business decisions.
If they are not able to report their scope 3 up- and downstream emissions to shippers on a precise database, logistics service providers risk losing business with them because of unvalidated solutions. They could be perceived as unreliable in the market, which might entail potential reputation damage and eventually loss of revenue.
The goal: analytics of integrated primary data allows transport buyers to act
A precise modeling of shipment-specific emissions broken down per transport segment will already unfold much more insights and strengthen the LSPs’ position in business negotiations with shippers. But to go the one decisive step further and set the course towards more differentiated emissions data and thus enable better business decisions, logistics service providers are well advised to integrate real energy-based primary data from their contracted carriers.
Primary data’s role in emissions accounting is fundamental. They provide the most accurate measurements of transport emissions as they are based on actual fuel usage. Only the individual tour consumption level allows precise analysis of measures that transport buyers can act on. The use of primary data in comparison with modeled data can show significant deviation to the average calculation on both actual distance and total emissions outlining the importance to rely on tracking data for optimization purposes.
Deviations indicate high impact of actual reduction measures like scheduling, dispatchment and fleet equipment. The use of modeled or let alone default data based on assumptions will never reveal to the same extent real CO2e emission reduction and cost savings potentials for logistics service providers.
For more information, please read our blog article “Why primary data is crucial for measuring CO2 emissions in transport and logistics”.
The solution: a reliable and standardized data management system with automated workflows and compliant emission calculation
The main challenge to overcome is the exchange of emissions data which is being calculated based on primary data throughout multi-staged transport networks on a reliable basis. This implies that transport operators who conduct the shipping offer services that provide ex-post emissions data on individual shipment and client level to their direct customers. These are oftentimes forwarders who themselves need to process the records, combine the emissions data input in a multimodal transport to a door-to-door supply chain, and then forward them as well to their customers.
To achieve this level of transparency, each stakeholder needs to have a reliable and standardized data management system in place. They should communicate the data without significant human involvement through APIs and a consistent protocol that can be used also by the variety of different software vendors for planning, dispatchment, and freight booking in the logistics industry.
Logistics service providers benefit from an end-to-end service from raw data sources to insight generation without data transfer through carrier IT or manual effort on a regular basis. Data transfer via an independent service provider ensures that carriers maintain ownership of their data, and just the calculated emissions data will be transferred. A transparent solution with an accredited methodology, automated workflows and emission calculation compliant to international standards and frameworks like ISO 14083 and GLEC 3.1 ensures highest reliability through consistent quality assurance.
To learn how your company can benefit from the integration of primary data, please get in touch with one of our industry experts.
