International-trade-related freight transport currently accounts for around 7 percent of global carbon emissions and, if left unchecked, is projected to increase fourfold by 2050 (from a 2010 baseline). We need bold business leadership from all sectors to ensure that the impact of international trade does not seriously undermine global climate goals. But creating a climate-resilient freight sector is deadlocked, largely due to a lack of incentives for climate action on the freight transport agenda. Smart Freight Centre (SFC) are continuing our partnership to help companies unlock the potential of smart freight leadership. These commitments are linked to the Smart Freight Leadership Framework and tie into the broader policy asks and industry commitments that successfully made it into the final Paris Agreement, in part through the work of the We Mean Business coalition
The five commitments for the freight transport and logistics sector are:
- Set emissions-reduction targets
- Measure, report, and verify emissions
- Implement actions
- Collaborate with industry peers and subcontractors
- Engage proactively in policy development
However, the challenges for business leaders to successfully implement these commitments are multifaceted. As an example, let’s examine the second commitment—measurement, reporting, and verification.
To begin this commitment, shippers, carriers, and logistics service providers need universally consistent methodologies that can be applied across the transport chain. Clean Cargo Working Group created a carbon-emissions accounting methodology, as well as a data-collection and reporting process for marine container transport, which today is accepted as an industry standard. However, for other modes of freight transport, the landscape has been less clear, until now. Two years ago, SFC established the Global Logistics Emissions Council (GLEC) to fill this gap and, with its Council Members has created a framework for logistics-emissions methodologies covering all modes and trans-shipment centers, which will be launched in June 2016. We are confident this will solve the first hurdle. This shared consistency will also support more effective and clear expectations of green freight programs globally.
From there, companies should adopt and implement relevant actions across their business, as defined in the GLEC Framework. Here is where we face a fundamental barrier, namely, that purchasers of freight transport services (shippers) still have insufficient incentives to account for, and thus reduce, emissions from subcontracted services. These barriers include:
- Lack of clear accounting expectations: Most carbon-accounting initiatives prioritize emissions under direct control of companies (i.e., Scope 1 and 2), not indirect (i.e., Scope 3) emissions, unless they cover more than 40 percent of a company’s combined Scope 1, 2, and 3 emissions, a scenario which seldom applies to shippers. While this is a relevant starting point, it does not provide sufficient incentives for companies to prioritize working with their logistics partners to reduce emissions—even where there are significant opportunities to do so.
- Lack of consumer pressure: End consumers, while increasingly concerned about climate change, are not consistently considering emissions in their purchasing decisions or when they order goods online.
- Lack of political pressure: Finally, governments, while clearly behind the Paris Agreement, until now have failed to set specific standards or clear legislation for emissions reductions from the freight transport and logistics sector.
Despite these challenges, we must keep the goal in mind—to create a climate-resilient international freight sector—and the participation of all business partners is crucial to this effort. This year’s Smart Freight Leadership Roundtable aims to unlock the potential of smart freight leadership through an open and honest discussion between leading shippers, logistics service providers, and carriers. We will provide a summary of outcomes from this meeting at the International Transport Forum 2016.
We need more global shippers to take their seats at the leadership table, which will signal the importance of adopting and implementing the five industry commitments for climate action. Join us to explore how you can help drive smart freight leadership across the industry.