Introductory Thoughts on Freight Transport Decarbonisation
By Marcus LeMaster
Sustainability and Environmental, Social and Governance (ESG) are topics that have been on the main stage for some time. As a framework, the UN has defined 17 sustainable development goals (SDGs) that create the blueprint for action towards “peace and prosperity, for people and planet, now and into the future.” From both personal and organisational perspectives, there are actions to take across all areas of the SDGs. However, when looking at freight and transport, the critical area of focus is usually on Climate, measured through the CO2 emissions generated from operations.
According to International Energy Agency, the global transport sector generated 7.3 billion metric tons of CO2 emissions in 2020 – approximately 17% of the 35 billion metric tons of CO2 generated in total from burning of fossils fuels and industry. If looking at the freight specific sub-sectors of transportation, they account for up to 46% of the transportation total, led by trucking, shipping, aviation, then rail. As we look towards industry decarbonisation and a net zero CO2 world, reduction of these 3.3 billion metric tons of CO2 is our challenge as shippers and carriers.
A Few Definitions
When discussing CO2 emissions, reference is made to Scope 1, Scope 2, and Scope 3 emissions. These are standard definitions defined in the Greenhouse Gas (GHG) Protocol and are important for understanding both the approach and challenges to addressing freight transport emissions. Simplified, Scope 1 emissions are from a company’s own internal operations including buildings and vehicles. Scope 2 emissions are those generated in the delivery of the energy used for Scope 1 operations – electricity, steam, etc. The last category, Scope 3, encompasses all indirect emissions generated from purchased or contracted goods and services, upstream and downstream of internal operations.
As a simple illustration, a shipper that has its own private trucking fleet would be dealing with Scope 1 emissions, whereas a shipper that outsources trucking to a third-party would treat these as Scope 3 emissions. In freight transport in general, the owner/operator of the transport asset would be measuring Scope 1 emissions – airlines, ocean carriers, railroads, and trucking companies. Scope 1 & 2 emissions are usually easier to measure and affect as they are in a company’s direct control. Scope 3 on the other hand, require collaboration with the full value chain of suppliers and customers as they are outside direct control of a company.
Before moving on there are two additional definitions important to understanding the topic of transport decarbonisation. While general reference is to CO2 (carbon dioxide), the more accurate measure is CO2e. That is, CO2-equivalent emissions, which includes other GHG emissions, such as nitrous oxide or methane, converted into CO2 equivalents for measurement purpose. Secondly, the very basic formula for calculating CO2 is a (weight * distance * CO2 emissions factor) calculation. This is important to remember as any of these three parameters can be drivers on the CO2 reduction journey.
Setting Context and Some Strategies
With the scope of the challenge and some definitions in place, what next? The goal of this article today is not on blueprints or methodologies for decarbonisation projects other than to point out at a high level, the need to assess the sources of CO2 emissions, measure or estimate them, then prioritize them into an action plan aligned to the organisation’s decarbonisation goals. There is an entire industry existing around methodologies, expertise, solutions, and technologies to support this process. Understanding the starting point is crucial in any continuous improvement project which is exactly the what the decarbonisation journey is.
In watching the news, reading press releases, or following the development of emerging technologies in the transport decarbonisation space, it would be easy to conclude that solution to the transport CO2 challenge is to just deploy Electric Vehicles, Hydrogen Vehicles, Methane Vessels, Advanced Sustainable Fuels, or [insert solution here]. In the longer term, this will be the case as there are significant ongoing advances being made. However today, there are real challenges especially in the medium-long haul transport sector where the technologies and supporting infrastructure are still in the early days. In recent discussions with top global carriers and freight forwarders, the consensus is that fossil fuels will be with us for at least the next 10 years thus we need to think beyond just technology for the journey.
There is one area of immediate opportunity that organisations can leverage for CO2 reduction – operational efficiency of transport. Operational efficiency is usually aligned to cost reduction and an ongoing activity in many companies already but adding CO2 impact to the decision-making process can identify real reduction opportunities. Three of the main areas of focus around efficiency are Mode, Fill, and Fuel.
Achieving an optimal mix of modes used is probably the largest opportunity for many shippers, especially if there is a high dependency on airfreight. There are many factors that go into determining the exact CO2 intensity of a shipment, but airfreight can easily generate 50x or more CO2 per ton shipped than ocean freight. Every opportunity should be taken to assess the optimal mode of transport required for operational or service requirements and shift to lower CO2 modes where possible, such as Air to Ocean or Road to Rail. Additionally, looking at multi-modal solutions, such as Air-Sea solutions for long-haul intercontinental shipments, can reduce CO2 and cost, with a middling of lead-time.
The second area of focus is around utilisation and fill-rates, usually more targeted at Ocean and Road freight. The goal here is to maintain high capacity-utilisation of containers and trucks and to minimize empty miles. This can have significant impact on CO2 through reduced use of assets resulting in less kilometers travelled.
The third area of efficiency focus is on fuel-efficiency and is primarily applicable to road freight. As a carrier or asset owner, the goal here is to continually improve the overall fuel efficiency of fleets, through asset renewal programs to ensure the latest emission standards are respected, route optimisation, driver education programs, or other initiatives. There are programs in place, such as the EPA SmartWay program in the US, which help carriers improve and certify freight CO2 efficiency improvements. Shippers also have a role to play in fuel efficiency, through collaboratively working with carriers on supporting improvements or through including fuel efficiency improvement expectations in the RFQ process.
A further opportunity that feeds into the operational efficiency areas above is supply chain and transport network design. There are opportunities during flow design to optimize distances travelled through sourcing decisions and route optimisation. The goal should be to shorten the end-to-end supply chain as much as possible, limiting the distances travelled or more preferably, eradicating them altogether. This can result in a significant reduction in network CO2 emission, and in many cases, can also lead to a more resilient and responsive service to the customer.
It’s a Collaborative Effort
Given the multitude of interconnects in the flow of goods, transformational change in freight decarbonisation will require extensive collaboration within the asset, infrastructure, carrier, shipper, and governmental communities. In addition to the individual opportunities pursued by companies, all parties should seek out areas where collaboration may accelerate the process. For example, as a shipper this could include collaboration with transport partners on route optimisation, load fill rates, co-load opportunities with other shippers, or supporting R&D and piloting of net zero vehicle solutions. The role of collaboration in freight decarbonisation is an important topic for a future article.
The decarbonisation of freight is a long-term, continuous improvement program where every improvement, regardless of how small or big, will aggregate into a meaningful result for the company and the planet. It doesn’t require a full company program defined to get to work on CO2 reduction. We can start by identifying the low hanging fruit, implementing some of the efficiency focus areas discussed above, and by just getting started. Even if that just means thinking about the CO2 emissions impact of your day-to-day decisions, it will at least start the dialogue and defining the path to action. Once the mindset or thinking starts, the next steps can naturally follow.
About the Author
Marcus LeMaster is Global Director of Logistics Sustainability at Schneider Electric. Based in Singapore, he is part of the global logistics transformation organisation and is accountable for the development and delivery of the company’s Logistics Sustainability strategy, including transportation partner networks covering all freight shipped globally by the company, and its global DC footprint. He brings over 30 years of global, cross-functional experience spanning both supply chain and technology and recently joined CargoNow as the Features Editor for Sustainability.