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Here is why CO2 reporting is more complex than you think

24.08.2020

Here is why CO2 reporting is more complex than you think
Our founder Jakob Muus explains how emissions reporting in logistics is more complex than you might think.

When talking about CO2 emissions, there are three different dimensions to consider. In the industry, we refer to them as Scope 1, Scope 2, and Scope 3.

 

Scope 1 refers to all direct emissions a company produces when manufacturing their products: for example, the emissions of their truck fleet or all fugitive emissions such as gas emitted by pressurised machinery. Scope 1 emissions can feasibly be measured.

 

Scope 2 includes emissions that result from the generation of electricity, heat or steam needed for Scope 1 activities. The source of the electricity is measurable, which means you can measure which percentage of it was produced by wind, solar and other powers. This might take some time to set up, but once you have the calculations needed, the measuring can be straightforward.

 

Scope 3 is where it gets difficult

It is in Scope 3 that emissions management becomes tricky. Scope 3 includes all emissions generated in the supply chain – both upstream (all components of the production that lead to a product being manufactured) and downstream (where the products go once they leave the factory). This is a very difficult set of emissions to measure, namely for companies with complex supply chains, but it is incredibly important because it amounts to an average of 85% of the total CO2 emissions count of any given product.

 

To reduce emissions, it is paramount that the manufacturing companies take responsibility for the CO2 produced along their supply chain. Especially the upstream activities are crucial for measuring and evaluating CO2 savings potential, as those activities contribute a large part to any product’s carbon footprint. 

 

You have to look beyond your company

In order to really reduce your CO2 emissions as a company, it is not enough to only look at your own factory. Let’s take Snickers as an example: The mixing of the bars in their factory and transporting them to the store is only a fragment of the CO2 produced throughout the whole process. Getting the peanuts into the factory is not an emissions-free business; and this will count towards the total CO2 imprint of every single bar. 

 

But Scope 3 is more than just the transport of the manufactured goods. There are sub-suppliers and sub-sub-suppliers that also need to be taken into consideration. The chocolate of Snickers bars has ingredients from sub-suppliers, who in turn might have their own suppliers, and forth it goes along the supply chain.

 

Measuring and Disclosing the Emissions from Transport

Whereas the measurement of these steps is extremely difficult, there are methods for disclosing realistic and accurate CO2 emissions from this part of the supply chain. The real problem arises when we deal with CO2 emissions caused by transport – namely road transport.

 

Where the four other modes of transport (air, sea, rivers, and rail) are dominated by few large companies, and/or their goods are transported directly from A to B (from harbor to harbor or from airport to airport), the road transport industry is very fragmented, complex, and a majority of its actors are small companies. Reporting their CO2 emissions is a costly and difficult task for them, with next-to no reward. As they are already operating on margins around 3%, there is little incentive for them to implement accurate measuring tools and to dedicate the time, effort, and money for CO2 reporting.

 

According to a recent white paper from Smart Freight Centre and the Carbon Disclosure Project, the result of this was that in 2019 less than 1% of global road freight was captured under Scope 1 and an infinitesimal share was disclosed under Scope 3. With an industry responsible for an estimated yearly 1.8m tons of CO2, this is an extreme, and extremely dangerous, under-disclosure.

 

We will not be able to reduce the worldwide emissions if Scope 3 emissions are not properly measured and disclosed, as a report by Smart Freight Centre shows. To achieve this, we need to find and develop methods to streamline data sharing between companies in the supply chain and thereby make it easier for companies to disclose their Scope 3 emissions.

 

Since April 2020, Tracks does exactly that for transport providers in the road freight industry (‘carriers’) and transport buyers (‘shippers’). By offering an automated data sharing to its external carriers, shippers get a precise picture of the CO2 emissions from road freight in its supply chain. It is my hope that within the next couple of years, we’ll see companies that, like Tracks, are developing the different building blocks that can help each company create a full picture of their supply chain and enable a precise and automated measurement, allocation, and disclosure of its Scope 3 emissions.