The urgency of addressing climate change has never been more apparent, with businesses in China and across the globe feeling the need to align with sustainable practices. One area where this is especially applicable is transportation and logistics.
Transportation is the lifeblood of the global economy, connecting people, goods, and services across vast distances. But the environmental cost of this connectivity is steep, with traditional modes of transportation relying heavily on fossil fuels.
While businesses in China are aware of the importance of reducing the emissions in their networks, many struggle to meet emission reduction targets effectively. And studies reveal the stark reality that while a strong majority of business leaders see value in embracing sustainable practices, only some enforce sustainability criteria within their supply or value chain partnerships.
This dissonance underscores the imperative for decisive action. Businesses require strategies to drive sustainable growth – with a focus on reduced GHG (greenhouse gas) emissions in their supply chains.
Transportation's role in emissions
To embark on a journey toward sustainability, business leaders must first understand their organization's carbon footprint, and how different types of emissions are categorized.
The GHG Protocol (Greenhouse Gas Protocol) divides greenhouse gases into categories based on their type. Scope 1 emissions cover direct emissions arising from sources that are controlled or owned by an organization directly. Scope 2 emissions are indirect emissions from an organization’s use of energy such as its purchase of electricity or heating. Scope 3 emissions address indirect emissions that occur up- and downstream in the value chain.
In the transportation industry, approximately 55% of emissions are associated with scope 3. Notably, this category includes the activities of third-party suppliers and partners – underlining the need for businesses to consider their supply chains from end-to-end when addressing transportation-related emissions.
Four key measures to reduce GHG emissions
In looking to reduce GHG emissions in their transportation networks, businesses can adopt key measures. In accordance with the IEMA’s GHG Management Hierarchy, which is focused on eliminating, reducing, substituting and compensating carbon emissions, we recommend the 4 following measures:
Prevent: increase shipment efficiency
Ask yourself: Is there a way to avoid an unnecessary shipment?
Preventing unnecessary shipments can be part of a frontline strategy. Businesses can focus on improving shipment efficiency by allocating products based on actual demand or by implementing pooling solutions for empties to minimize unnecessary transportation and emissions. By optimizing flows, utilizing hubs and milk runs or adjusting frequencies, unnecessary shipments can be prevented and GHG emissions can be significantly reduced.
Shift: change transportation modes
Ask yourself: Is there a better alternative to the existing transportation setup?
Shifting transportation modes is another powerful lever to reduce emissions, with modes differing significantly in emission levels. A shift can offer possibilities to reduce GHG dramatically when, for example, we compare the difference in emissions between air and sea freight over the same distance. Similarly, short sea and river lanes for domestic shipping can offer an emission- and cost advantage over transportation with trucks.
Improve: enhance execution
Ask yourself: How can an existing transportation concept be improved?
To improve the execution of shipments, it is important to adopt innovative equipment and IT solutions. This can include, for example, the use of commercial electric vehicles (EV) or sustainable aviation fuels (SAF). This is currently an area of intense focus and development in China, with government and cost-driven incentives to support the growing number of EVs used for last mile deliveries. Furthermore, transportation concepts can be improved through routing features. The use of real-time track-and-trace systems, for example, enable visualization and monitoring on the status of shipments as they happen.
Compensate: offset emissions
Ask yourself: How can remaining GHG emissions be offset?
While compensation is a possibility, it should ideally be considered a last resort for unavoidable emissions. Rather than a primary focus, it represents an alternative approach where compensation parties including shippers, receivers and logistics service providers can all play key roles in balancing residual emissions.
Offsetting carbon emissions is a practice aimed at compensating for the release of GHG into the atmosphere by investing in projects that reduce or remove equivalent emissions elsewhere. For example, GHG can be offset by focusing on the investment in future-oriented projects such as renewable energy parks and new technology. And while they are no substitute for reducing carbon emissions, there are strategies to actively remove GHG from the atmosphere through engaging in afforestation, reforestation, carbon capture, and storage.
4flow’s best practice approach to reduce GHG emissions
4flow consulting currently works together with businesses in China to implement successful GHG optimization projects. To do this, we use an end-to-end approach that begins with establishing strategic targets and ends with operation and implementation.
Our approach starts with conducting a global baseline analysis and identifying significant GHG reduction targets in the entire transportation network, while taking all relevant stakeholders and partners into consideration. From this, a sustainability strategy can be tailored to the end-to-end transportation processes; detailed roadmaps for operation and implementation are also developed on the way.
Key elements to the work we do with our customers include assessing individual overall impact and creating specific measures to tackle emissions. We focus on proven measures such as reducing transportation distances, changing transportation modes, increasing shipment utilization and employing EVs. 4flow also offers an accurate and customizable service for emission tracking in transportation networks.
The way forward
As the business world grapples with the challenge of meeting sustainability targets, the transportation sector can play a pivotal role in achieving carbon neutrality. By following concrete measures that combine prevention, mode shifting, improvement and compensation, businesses can contribute to a more sustainable economy.
At 4flow consulting, we work with businesses to help create new sustainability baselines, set ambitious targets and identify initiatives to make improvements in their organizations. Find out how we can help with sustainable supply chain management solutions.
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Authors
Phil Xu
Vice president
4flow consulting
Oliver Scheel
Principal
4flow consulting