4 Steps to Reduce Carbon Emissions in Transportation and Logistics
It may come as a surprise that 90% of an organization's greenhouse gas emissions come from the supply chain rather than from operational emissions. Specifically, when it comes to logistics and transportation, controlling carbon emissions is critical. In fact, the transport and logistics sector makes up nearly 25% of global carbon emissions.
That’s why supply chain sustainability efforts are a top priority for business leaders. While there are various ways to control carbon emissions, we’re sharing four key steps to reduce the carbon footprint created directly by transportation and logistics.
The Trax product suite offers leaders a sustainable transportation management system. As a leading logistics provider, Trax empowers enterprises to gain visibility and control over transportation costs.
Benefits of Sustainable Supply Chains
Before diving into specific steps to control carbon emissions, let’s review the benefits of a sustainable supply. A recent Logistics Viewpoints article highlights some of the key outcomes of optimizing a sustainable supply chain:
Reduced environmental impact - At the heart of sustainability is the reduction in negative environmental impacts. This includes reducing a company’s carbon footprint through thoughtful interventions that supply chain leaders can implement as their company matures.
Customer loyalty/satisfaction - It’s been shown that today’s consumers favor sustainable products. Because customers are concerned with their own carbon footprint, a higher percentage seek out brands that practice sustainability.
Decreased Costs - By becoming more efficient, supply chains essentially do more with less. This allows them to cut back on unnecessary or excessive costs related to inefficient operations. This relates to digitizing the supply chain through adopting transportation spend management software, like Trax’s product suite.
Increase Profitability - Similarly, the return on investment (ROI) for sustainable supply chains is significantly higher than those that aren’t actively working on reducing carbon emissions. According to Challenge Advisory, ROI is 18% higher for companies that are actively planning for climate change compared to those that don’t. Furthermore, when compared to companies that refuse to disclose their emissions, the increase in ROI jumps up to 67%.
Compliance with Scope 3 mandates - The government is demanding supply chain sustainability through laws and regulations. The Scope 3 mandates in particular require enterprises to track all carbon emissions - meaning companies are becoming more concerned with tracking carbon emissions accurately to prevent fines and contract terminations.
Driving Decarbonization: 4 Areas of Focus
So, how can companies truly focus on sustainability in transportation and logistics? It can be intimidating for business leaders to tackle all the sources of carbon emissions from transportation and logistics. Where do they start? What is the top priority?
Here’s what to focus on when tackling carbon emissions:
1. Reduce Waste
The main way to reduce waste in the supply chain is to identify inefficient processes. By implementing the right tech stack, which includes a freight audit and billing system, companies can automate manual processes. Focusing on areas like order fulfillment and cloud-based computing is helpful when moving toward more efficient processes. For instance, moving to the cloud can boost carbon efficiency by up to 90%.
Additionally, there has been a movement toward circular supply chain management, which involves achieving zero waste through reducing waste generation and value recovery from waste. According to the 2021 Circularity Gap Report, this type of model can cut global emissions by close to 40%.
2. Route Optimization
Taking things a step further, supply chain leaders can drill down to delivery routing to unlock carbon emission savings. By leveraging AI and the Internet of Things (IoT), enterprises can optimize routes to avoid delays and decrease fuel consumption. Encouraging multimodal transportation adds another layer to route optimization by removing the barriers between sea, road, and air.
At Trax, we offer a transportation optimization program that includes routing guide optimization. We’ve found that a well-managed, optimized routing guide can reduce non-compliant shipping, ultimately resulting in 2-5% cost savings within a mode of transport.
3. Measuring and Reporting
When it comes to making and achieving science-based targets for decarbonization, having tools in place to measure and report on relevant data is key. Gathering as much data as possible from reliable primary sources enables enterprises to accurately define a baseline and set reasonable goals.
Our carbon emissions manager offers supply chain leaders the chance to get real, detailed, carbon emission data from all shipments, across all modes and in all geographies. By connecting Carbon Emissions Manager with freight audit data, supply chains can meet and exceed energy efficiency regulations.
Collaborating with a trusted third-party logistics provider is essential to supply chain sustainability. Adopting transportation management systems and advanced software helps companies increase their visibility into supply chain operations as well as transparency related to potential environmental impacts.
Sharing knowledge between all parties involved in the supply chain is crucial for understanding the end-to-end environmental impact of supply chain work. To improve collaboration with logistics providers, enterprises can work to digitize as much as possible related to supply chain operations. In addition, sharing all ESG plans proactively helps to keep everyone on the same page in terms of short and long-term business goals.
Trust Trax for Supply Chain Sustainability
Finding the appropriate logistics provider is important for remaining competitive in today's market. When a company is ready to take the next step toward transportation spend management and supply chain sustainability, contact Trax. Our team of logistics experts will help with all of your transportation spend management needs.
Trax is the global leader in Transportation Spend Management solutions. We partner with the most global and complex brands to drive meaningful optimizations and savings through industry-leading technology solutions and world-class advisory services. With the largest global footprint spanning North America, Latin America, Asia, and Europe, we enable our clients to have greater control over their transportation performance and spend. Our focus is on your success.