Trafigura Locations
Trafigura logo

Smart Freight Centre

Smart Freight Centre (SFC) is a global non-profit organisation with a vision of an efficient and zero-emissions global freight. 

Leading multinational corporations recognise that climate change and air pollution are among the greatest threats to the world today. They also know that mitigating for and adapting to the effects of climate change should be part of their corporate strategy. But why then has one of the largest contributors to climate change gone largely under the radar?

I’m talking about freight and logistics– meaning the transport, storage and delivery of goods often conducted by specialist commercial carriers. Generated as a direct result of production and consumption patterns, freight transport forms the backbone of today’s global economy. It is estimated that 16 trillion dollars’ worth of merchandise is exported every year, and this figure is growing. As a result the sector faces five major challenges: explosive growth, inefficiency, rising costs, high fuel use and environmental impact.

Transportation as a sector is considered a growing contributor to global climate change and within this, freight transport is accountable for almost half of transport emissions and around 7-8 percent of total carbon dioxide emissions worldwide. As it stands, the total emissions from freight need to reduce by almost 65 percent by 2050 compared to 2015 levels if we are to meet the ambitions set out in the Paris Climate Agreement, which came into force in 2016. However, the real challenge facing us it that demand for freight transport is predicted to triple over the same period according to the International Transport Forum[1]. This means that nothing short of a transformational shift towards decarbonizing the global freight sector is necessary in order meet our shared global climate targets.

 

Commodity transport emissions

Around a dozen commodity trading companies control the majority of commodities worldwide, each with significant greenhouse gas (GHG) emissions in their value chain. Commodities often have complex value chains, from extraction, manufacturing and use, to recycling of the finished product. Transport of these provides an irreplaceable link between each phase, with emissions as an inevitable consequence.

Traditionally, commodity trading companies focus on their roles as producers and marketers of commodities. In recent years society’s expectations have increased for certain high sustainability profile commodities – for example wood, cocoa or palm oil – where much of the focus from NGOs and consumers is on the sourcing conditions. In these areas, sustainability requirements are growing, alongside a growing market for responsibly sourced products.

However, although commodities travel long distances, many companies are not yet recognising that logistics emissions can account for a significant portion of their climate impact. Nor are they calculating or reporting transport related emissions - or taking systematic action to reduce them. One of the reasons for this has been a lack of interest, awareness or ownership for third party (Scope 3) emissions – which is how subcontracted transport is classified, even though it is an essential corporate activity. Another factor is that due to the complexity and fragmented nature of the logistics industry, there has been relatively little industry synergy across the sector on reporting and reducing logistics emissions at a global scale. As such, with neither drive nor adequate insight of the impact, it is understandable that companies have not prioritized beyond pure economic efficiency.

But this is changing - as pressure increases on consumer facing multinationals to disclose GHG emissions from their full supply chain, commodity trading companies, their logistics partners and specialist suppliers, can expect an increase in requests from their customers for credible GHG data. The corporate emissions disclosure scheme CDP and sustainability indices such as the Dow Jones Sustainability Index are expanding to incorporate supply chain impacts.

At the start of our journey at SFC, we quickly recognized that one of the first barriers to reducing emissions from freight was that there was no global standardized approach for multinational companies to robustly, reliably understand and compare the emissions impact of their logistics supply chain. Different approaches to calculation and reporting existed in parallel, whilst accessing data from suppliers was complicated. This meant there was limited data to inform business decisions and efforts to reduce emissions.

Together with leading companies, associations, industry programs and experts, SFC formed the Global Logistics Emissions Council or GLEC. In June 2016 two years of consultative work came to fruition with the launch of the GLEC Framework: the only globally recognized, harmonized method for calculating and reporting emissions across the multi-modal logistics supply chain. It is consistent with the higher-level GHG Protocol that most companies already follow, and it is included in the reporting guidance of CDP and several industry associations, as well as the UN-led Global Green Freight Action Plan. Many companies have already adopted the GLEC Framework and are aligning their carbon accounting process to this global approach.

Whilst applicable to any business with a logistics chain or operating in freight transport, those with a responsibility for the transport of commodities are well placed to drive considerable positive impact in their supply chain through adoption of the GLEC Framework. These organisations often have a strong commercial interest to invest in transportation assets and the reach and efficiency of their supply chains. Therefore, they also have the potential to access data from their logistic providers which, at present, are often not included in GHG reports. This information is in turn of interest to other multinational companies further upstream who have interest and responsibility in reporting to their customers and end consumers on their full value chain. It is also of relevance to global and regional policy makers whose attention is now turning to the challenge of increasing logistics emissions as the problem becomes more apparent.

Whilst the launch of the GLEC Framework is recognised as a critical step towards reducing emissions from freight transport, it is only one part of the puzzle needed to help address the scale of the challenge. And whilst many leading multinationals and their logistics partners have adopted the GLEC Framework, more need to follow. We were pleased to see Trafigura adopting the GLEC framework in 2018.

The GLEC Framework is part of a bigger picture. Since the beginning of SFC’s journey, we have focused on bringing the logistics community together and evolving a common approach for companies that want to be Smart Freight Leaders. Smart Freight Leaders are organisations that want to drive systematic change in their logistics chains and achieve improved efficiency and reduced emissions, contributing to the targets set out in the Paris Climate Agreement. We are confident that if large multinational companies adopt the Smart Freight Leadership approaches, this will not only help them to reduce emissions and improve freight efficiency, it will drive positive change through their supply chains and inspire others to do the same. Multinational companies proactively engaging with civil society and policy makers also leads to the best chance of practical solutions to emission reduction, in contrast to poorly informed external regulation. It’s the smart thing to do.

 

What can companies do to become Smart Freight Leaders?

  • Calculate and report credible emissions
  • Set ambitious emission-reduction targets and KPIs
  • Take business decisions and actions to improve performance
  • Collaborate with logistics partners and leaders across the logistics supply chain
  • Advocate for a long-term strategy and public policy towards decarbonization 

 

About Smart Freight Centre

Smart Freight Centre is a global mission-driven organisation dedicated to a more efficient and low-emissions global freight sector. We bring together the global logistics community to drive transparency and mobilize multinational companies and their logistics partners to take action. This is done through global industry guidelines and solutions for emissions calculation, reporting and reduction, the first of which is the GLEC Framework, and by recognizing Smart Freight Leaders. To scale our impact we are present in Europe, the Americas and Asia and collaborate with existing initiatives, partner organizations and experts worldwide.

 

Sophie Punte
Executive Director, Smart Freight Centre

 

[1] https://www.oecd.org/about/publishing/itf-transport-outlook-2017-9789282108000-en.htm