Including carbon dioxide equivalent (CO2e) values on freight invoices is an emerging practice for logistics service providers. This has a two-fold purpose: Providing customers with insights on produced transport emissions and advancing efforts to merge financial and carbon accounting.
While the intention to bring financial and carbon accounting closer together is good and in line with latest regulatory requirements (CSRD), indicating transport emissions on freight invoices comes with a number of issues that hinder companies from integrating long-term sustainable reporting practices. This article lists the most important limitations and concludes with an alternative suggestion.
1. Timing of CO2e reporting
The CO2e values of transport activities are usually added to freight invoices as soon as goods have been delivered. This timing is problematic as it makes an accurate indication of emitted emissions almost impossible. Transport-related data, which is crucial for calculating CO2e values, is often only available days after the actual activity. For example, primary data from fueling records or onboard vehicle diagnostics systems.
In some cases, real-time data from these occurrences can be acquired but this would increase the costs for reporting tremendously, while the same data can be captured in a much cheaper way with less time restrictions. Furthermore, there is no space for verifying results, as invoicing processes are mostly automated, and the incorporation of completely new data points is therefore often done by using superficial approaches. All this results in a CO2e value that may not fully represent the environmental impact of the shipment.
2. Limitations of freight invoice formats
While integrating CO2e values into financial documents is a forward-thinking idea, the format of invoices – in the freight industry often still physical paper or PDF documents – undermines their effectiveness. These formats do not seamlessly integrate into data or emissions management systems, requiring manual transcription by the recipient. This additional step not only slows down the process but also increases the likelihood of errors, which affects the reliability of the data.
3. Lack of contextual information
CO2e values on invoices usually lack any kind of contextual information about the calculation methodologies or assumptions used. This lack of transparency can lead to misunderstandings or misinterpretations of the data, especially when different carriers use varying methods for calculating emissions.
4. Departmental challenges in processing transport emissions on invoices
Invoices are normally processed by departments such as accounting, procurement and controlling. However, these departments are not necessarily inclined to assess the carbon footprint of a shipment, nor do they have the expertise and knowledge required for such an analysis. Forwarding freight invoices to sustainability experts for verification could lead to breaches in data governance within larger organizations, as invoices often contain sensitive commercial information.
5. Inconsistencies in emissions reporting
The trend of including emissions data on invoices has not (yet) been adopted across the entire freight industry, leading to a scattered landscape of information. For recipients, managing these inconsistent data sources is challenging and incurs substantial transactional costs with minimal benefits. Compared to setting up a separate, automated, and auditable process for exchanging information, the current method lacks efficiency and consistency, both crucial for effective emissions reporting.
Conclusion
While the initiative to include CO2e values on freight invoices is commendable for its intention to merge environmental consciousness with financial accountability, its practical implementation faces significant hurdles. These include timing issues, format limitations, lack of contextual information, departmental challenges, and inconsistencies in reporting.
Despite these challenges, financial and carbon accounting should indeed be brought closer together, considering the growing recognition of the interdependence between financial performance and environmental sustainability. A more effective approach would involve developing an independent, standardized, and automated system for tracking and reporting emissions. Such a system should be designed to integrate seamlessly with existing data management processes, ensuring accuracy, transparency, and consistency in sustainability reporting within the freight industry.
