Interviews with industry representatives indicate that the COVID-19 pandemic restrictions introduced in 2020 have accelerated digitization, but have, at the same time, led to shifts in supply chains. With a slowdown in some industries, dynamic growth has been seen in the e-commerce industry. In terms of intercontinental transport, rail freight on the China-EU Silk Road has developed rapidly, with volumes reaching 1.14 million TEU in 2020, according to the Chinese news agency xinhuanet.com, thereby competing with air freight. By contrast, air freight in 2020 faced a shortage of cargo space due to the grounding of passenger aircraft – according to IATA, passenger aircraft cargo space supply in the first quarter of 2020 fell by as much as 40% year-on-year. The landmark year 2020 in Europe has also seen supply chain shifts closer to demand and, in part, towards economies with lower distribution costs.
The intricacy of supply chains leaves no illusions. In PwC’s consulting projects, each time we optimize the distribution networks, we reduce the number of kilometres driven, typically by 8 to 12% per year. And yet each kilometre driven involves burning a certain amount of fuel and, consequently, a certain level of emissions.
That’s why ESG-sensitive companies need to tighten control over their supply chain emissions over time to not only measure, but actively reduce emissions through improved distribution management.
However, minimizing “unnecessary mileage” translates not only into reduced environmental impact, but also into a company’s finances – savings in mileage can also be accompanied by savings in transportation costs. An additional motivator can be the environmental regulations introduced in the EU, which increasingly require companies to reduce emissions and can mean significant financial penalties if they fail to comply.
Sustainable supply chain management varies depending on the company’s operations. In general, it’s about companies examining the various stages of their supply chain and considering ways to increase efficiency that can be implemented. Unfortunately, this can be difficult for companies that outsource transportation services, especially if the transportation providers they work with are not fully transparent in their measurement and reporting. However, contractors (both carriers and suppliers) can be asked the following questions:
In what ways is your organization maximizing the space it uses in containers, transport vehicles, and packaging?
To what extent does your organization consider externalities, including environmental impact, when selecting partners for procurement, production and delivery?
To what extent are their sustainability goals and actions aligned with those of your organization?
There are many solutions to reduce CO2 emissions in transportation and manufacturing as part of the supply chain (as well as costs), and these include:
Adapting services to changing customer needs and implementing high added value solutions – tailoring services to specific requirements can increase transport efficiency;
Advanced technological solutions in the field of autonomization and alternative propulsion, which can reduce emissions if sustainably produced energy is used – alternative propulsion is currently being deployed more in urban areas because of the lack of infrastructure needed to use electricity to power long distance trucks or gas as a fuel, and the low uptake of hydrogen propulsion; however, autonomy and alternative propulsion solutions may also be too expensive for small carriers at present, given the scarcity of funding to support the deployment of such technologies on a larger scale;
Changing consumer attitudes, which also allow forward-thinking companies to develop low carbon products – looking at ways to reduce carbon emissions from production processes is often both an engineering and financial challenge;
Source: PwC Report Transport of the Future - prospects for the development of road transport in Poland in 2020-2030.
With respect to the regulations introduced, attention should be paid to the implemented and planned updates of Regulation (EC) No 715/2007 of the European Parliament and of the Council of 20 June 2007 on type approval of motor vehicles with respect to emissions from light passenger and commercial vehicles (Euro 5 and Euro 6) and on access to vehicle repair and maintenance information. The regulation, which so far covers, among other things, requirements for equipment for measuring vehicle emissions, is being examined with a view to a possible extension to the emission reduction targets for the Member States.
Direct emissions from installations ›
Indirect emissions through electricity and heat consumption ›
Other indirect emissions ›
Under global ESG data reporting standards such as the Global Reporting Initiative (GRI) and the Sustainability Accounting Standards Board (SASB), metrics for GHG emissions apply to all three GHG Protocol scopes. Growing awareness of climate impacts and market expectations increase the need to understand a company’s carbon footprint, especially for Scope 3. Furthermore, the secondary legislation of the Sustainable Finance Disclosure Regulation (SFDR) is currently still under development, while a document sent for further consultation by European financial regulators, containing a set of potential indicators to be reported by financial market participants and financial advisors, clearly sets out the requirement for carbon footprint reporting in all three scopes.
As identifying the sources of emissions as well as collecting the information necessary to calculate the carbon footprint is a complex and time-consuming process, it is worth preparing for it now. It will be necessary to accurately identify areas of impact, data sources, use data capture tools and calculate the carbon footprint, and obtain the necessary data from business partners. This will also allow you to reliably and efficiently calculate your carbon footprint, set reduction targets and earmark the necessary actions, and also communicate with market participants.
