Shippers in the Driver's seat
Shippers in the Driver's seat
In the four years since I joined Smart Freight Centre, I’ve seen corporate attitudes to freight emissions calculations and reductions change a lot. When I started, only a few companies really got it. They were the leaders of the pack, who understood that what you do not measure you cannot manage; that everybody would benefit from aligned guidelines and from collaboration.
Recently, the number of companies that ‘get’ the need for measurement and action has been increasing a lot. But we are still not quite there yet. There is still one area in which the industry needs more commitment and engagement — and that’s from the shippers (transport buyers) who can vote with their procurement power for a greener freight sector in collaboration with carriers (transport suppliers).
The number of multinationals joining sustainability initiatives is skyrocketing, almost every day you can read about new climate commitments of multinationals. The leaders among them are setting science-based targets, reporting their emissions in the global disclosure platform CDP, and collaborating with others through sectoral initiatives (for instance, the UNFCCC Fashion Charter). But even with this increased engagement, most shippers still do not want to take responsibility on their freight emissions. All too often multinational shippers tell me that they do not have a direct influence on their logistics emissions, as they do not own fleets or logistic assets, as an excuse for not including freight emissions in their sustainability reports, plans and targets.
The good news is that many logistics service providers and carriers are getting ready for a greener freight sector. They are starting to employ or at least pilot technological improvements, alternative fuels and further innovations. (See leadership stories: DP DHL, GEODIS, DB Schenker, Hapag-Lloyd) But they cannot move to green solutions, without knowing that their investments are valued and supported by their clients as well. They need to hear from the shippers that they are open to collaboration and ready to change their approach and conditions of freight procurement. Yet there are some leading multinationals, like Unilever, that can make a real change, if it comes to that very much needed push from the clients.
So, what is holding back most of the shippers from taking responsibility for their freight emissions? Here are some of the factors:
- The task seems too great: most multinational shippers have a huge list of logistics service providers and carriers. It is not easy to reach out to all of them. The answer is to start small, discuss issues and possibilities with some of your leading providers. Hear them out. Start with one region or a country where there is more experience or openness for collaboration.
- Old-fashioned buyer-supplier relations: restrictive business relationships often means that contract negotiations are grueling and in which sustainability will be a tick-list item rather than a genuine selling point or area of substantive change. Shippers hesitate to expand this relationship to a more collaborative one. But there are some great examples on what can happen when companies try. (BDP International - FMC collaboration, Maersk - H&M collaboration) Here you can even find a list for how to become a preferred shipper.
- Fear of collaboration with other shippers: shippers worry that their products will end up on the same truck as those of their competitors. But this should not be a problem. Compete on the shelves, collaborate on the trucks! Luckily, I see that companies are becoming more open minded here. Recently we got confirmation from some competing multinationals that they do not mind launching joint logistics projects, which would have been unimaginable four years ago.
- It is probably expensive: I often hear from carriers that green is not always more expensive. Many solutions that improve fleet efficiency, such as better tires, driver training and improved truck loading, save money eventually. We see that companies are moving from air freight to sea freight, which is not only greener but also cheaper. There’s no doubt that the more innovative sustainable solutions come with a bigger price tag, but a potential future carbon tax bill will be also bigger for companies that do not reduce their freight emissions. We see an increasing number of companies using internal carbon fee or shadow carbon price to ensure budget from management for greener freight solutions.
What is currently definitely pushing shippers towards better visibility in their supply chain is the COVID-19 crisis. More than ever, companies want to make their supply chains more transparent and agile. And while they are doing that, they also want to make their supply chains greener. The momentum is there, make sure that you make good use of it! Here are some tips for those shippers who are ready to drive down their freight emissions:
1. Understand your freight emissions. I could have written calculate, but often the responsibility for doing the calculation really does lie with the logistics service provider or with an accredited green freight program or calculation tool provider. What the shipper has to ensure is that the numbers it receives are based on the GLEC Framework. The only globally recognized freight emissions calculation guideline, the GLEC Framework enables you to compare emissions of alternative supply chain options in an ‘apples to apples’ fashion. The GLEC Framework has earned the Built on Greenhouse Gas Protocol mark and is recommend by CDP, but it’s also a base input for a new ISO standard. And more importantly many multinationals are already using it, so the chances are high that your logistics service providers are also familiar with it. Multinationals need to understand where their freight emissions hotspots are in order to efficiently launch emissions reduction projects or set targets. Follow SFCs’ GLEC Framework e-learning course to understand the basics of the GLEC Framework.
2. Set targets: without targets there is no mandate. We recommend setting science-based targets (SBT) for your logistics emissions as well. As soon as there are targets set publicly — and ideally are also linked to the performance targets for senior management — it becomes much easier to initiate freight emissions-reduction projects, given that the direction is clear.
3. Engage your suppliers. Forget about extensive supplier assessments. These just result in long lists of reports, which take a lot of time to generate but don’t lead to any action. Initiate collaboration with your logistics suppliers. Use an aligned set of questions that other customers of your suppliers use, this way you reduce the time spent on reporting, giving more time for actual emissions-reduction activities. SFC has developed the Smart Freight Procurement Guidelines and recently an accompanying Procurement Questionnaire with the valuable input of GLEC partners. The Guidelines provide you with many tips and examples - from engaging your management, to supplier award examples. The Questionnaire gives a list of recommended questions that you can build into your tender process including suggestions on how to evaluate and follow up on the replies of your logistics providers.
4. Build a sustainable logistics roadmap: we see two different approaches here. Some multinationals are setting global plans which they then adapt for each local market. Or we see that companies pick some regions to test their plan, and then duplicate the successful practices to other regions. Based on years of experience and with the support of our expert network, SFC has developed the Sustainable Logistics Roadmap webinar training course. Especially designed for shippers, it provides you with a great knowledge-base and confidence in how to build your company specific roadmap.
5. Take action by collaborating with others. Besides understanding the opportunities your logistics service providers can offer to you, look around in your sector and the regions in which you operate to understand further possibilities for freight emissions reductions. I am very happy to see that more and more sectoral initiatives are including freight emissions in their activities (for instance CEFIC, CEPI, BRC, AIM) The Global Logistics Emissions Council (GLEC) is currently initiating many collaborative project. Join the GLEC if you see any interesting GLEC projects or if you have a project idea that could be supported by SFC and GLEC partners. Alone you may be faster, but together we get further.
It’s also essential to share your roadmap and action plan externally, with key collaborators. That way your partners and peers will know the direction you are going in and will understand better how they can potentially collaborate with you. At SFC we aim to provide a growing platform for success stories to inspire others, so please tell us if you have a good story that you want us to publicise.
I trust by now you understand that shippers can and should take action, instead of expecting logistics service providers and carriers to act alone. Only when shippers lead the way can the industry hope to deliver net-zero emissions freight by 2050. The time is ticking, make changes, not excuses.