Why Freight Transportation is a Carbon Disclosure Blind Spot
Many companies are striving to improve their supply chains by making them more transparent — but not when it comes to the climate impacts of freight transportation.
Such is the lack of transparency in reporting transportation’s carbon emissions that the highest emitting mode — road — is almost entirely absent from the disclosure picture.
This is one of the main findings of a report I co-authored with Sophie Punte from Smart Freight Centre in collaboration with CDP, a global disclosure system for companies and investors. The report, titled Closing the Logistics Emissions Disclosure Gap, illuminates the paucity of emissions data from aviation, truck, train, and ship operators worldwide.
In the report, we propose ways in which freight transportation can address its lack of climate-related transparency.
Poor reporting across transportation modes
Reporting CO2 emissions levels is important primarily because such disclosures represent the first step companies should take in managing their carbon footprints. From a global perspective, companies can’t manage what they don’t measure. Consequently, carbon accounting and disclosure form the baseline for corporate climate strategies such as Science-Based Targets, net-zero climate goals, sustainable investment programs, and green procurement policies.
Our research shows that for scope 1 emissions — generated when companies burn fuel to power trains, ships, planes, and trucks — only 18% of the 525 million metric tons of CO2 emitted by the freight transportation sector each year is captured in CDP disclosures. Moreover, two-thirds of the reported emissions come from aviation companies, which only make up 6% of global freight emissions. We found that the road sector accounts for less than 1% of reported emissions, despite being the most carbon-heavy transportation mode.
One element of scope 3, well-to-tank emissions, is associated with the production and distribution of fuel. These upstream emissions are gaining in importance from a climate viewpoint, as more companies switch to alternative transportation fuels like biodiesel, hydrogen, or renewable electricity. Such alternatives have little or no emissions upon combustion, so all emissions are in the supply chain — from the extraction, processing, and transportation of the fuel. Yet of the 2,600+ companies reporting relevant data, we couldn’t find a single company that specifically referred to these emissions in their disclosures. This shortfall must be corrected as we transition to low-carbon energy sources.
Supply chain view impeded
Another way to evaluate disclosure practices is to look at how companies divulge emissions volumes reported by transportation users: shippers and logistics service providers. Consumers also are included in this count since they generate emissions when ordering packages online or driving home from stores with purchased goods.
Scope 3 disclosures reflect what companies know about transportation emissions in their supply chains. The study results show — not much. The two primary categories of scope 3 related to upstream and downstream transportation cover a meager 10% of global emissions.
While the analysis looked at up- and downstream transportation, in reality, freight transportation occurs throughout the supply chain. Hence, it is difficult to extract emissions numbers specific to freight movements from other categories of spend such as purchased goods and services.
This problem can prevent us from seeing the full impact of freight-related emissions in a supply chain. It can lead to double-counting, misalignment with global standards, or misrepresentation of emissions that might feed into climate target setting. In the report, we highlight the differences between each category and provide a framework for companies to correctly allocate their emissions to the scope 3 categories employed by CDP.
A handful of ways forward to improve CDP disclosures
As a call to action, we point to five key steps companies can take to improve CDP disclosures around freight transportation and increase emissions reporting transparency.
- Invest in disclosure by road freight companies to better capture how this sector’s impact evolves.
- Ask companies to disclose carbon intensities, such as CO2/tonne-kilometer, alongside total emissions to give a better sense of how transportation efficiency evolves, not just the ultimate emissions.
- Improve the capturing of upstream emissions from transportation fuels — key for showing the true impact of alternative fuels.
- Give guidance on how to provide meaningful comments in CDP disclosures. A CDP disclosure is more than just numbers; it’s the context behind them, such as the calculation method, that provides the insight needed to put the values into perspective.
- Encourage companies to look beyond disclosure — CDP is an important tool, but other levers are important too, such as improving data sharing between carriers and shippers.
Freight emissions in the public eye?
While the methods governing carbon accounting within the freight sector have evolved in recent years thanks to the efforts of organizations such as Smart Freight Centre and the Global Logistics Emissions Council, clearly, the practice of disclosing emissions needs improvement.
How can we make a change? The transparency shown by the aviation sector could provide us with a beacon. The pressure on aviation to disclose and reduce emissions comes from consumers concerned with the impact of business and leisure travel on climate. As end-consumers begin to interface more with freight transportation through booming online shopping channels, the same pressure to disclose and reduce freight emissions may enter public discussion.
While #flightshame was a rallying cry in 2019, could #freightshame become a prominent hashtag in the e-commerce frenzy of 2020?
For more information on the research described in this post visit www.smartfreightcentre.org.
MIT CTL’s Sustainable Supply Chains initiative and Sustainable Logistics initiative are engaged in research to make supply chains — including the movement of freight — sustainable. Please note that the Sustainable Supply Chains initiative is not affiliated with the research described above.
