Analyst Insight: A voluntary and partnership-based “green freight ecosystem” has emerged over the last two decades, driving notable progress in the growing effort to decarbonize supply chains. However, a confluence of events has been disrupting those efforts, accelerating change, and increasing mandatory requirements. Freight environmental performance benchmarking and greenhouse gas (GHG) disclosure are rapidly becoming C-suite priorities not just for compliance, but because of the strong business case driving freight sustainability.  

Diesel was cheap (about $1.50 a gallon) when the Environmental Protection Agency launched the SmartWay Partnership two decades ago. There were few incentives to reduce fuel use, market failures in how logistics fuel costs were passed on to shippers, nascent awareness of climate change, and sparse commitments to GHG reductions.  The drivers for freight environmental performance benchmarking and reporting were weak, and there were no credible means of tracking and sharing freight emission data. Freight efficiency was, understandably, a primary focus, but freight sustainability was treated as a novel, perhaps boutique, effort.

This dynamic evolved as the climate crisis, Great Recession and global pandemic disrupted not only the way supply chains are configured and managed, but also how firms incorporate sustainability practices into their logistics operations, and how they track and report GHGs.  Growing pressures from customers, shareholders and employees are now driving firms to address climate risk by reporting and reducing their carbon footprint. Supply chain and energy shocks from global disruptions have underscored the need for more resilient, efficient and sustainable supply chains.

A “green freight ecosystem” emerged as EPA’s SmartWay program and related efforts around the world were established to help firms voluntarily benchmark, report and reduce freight emissions. New tools, platforms, and key performance indicators took shape, as shippers looked increasingly to their carriers and service providers to not only report performance, but also implement technologies and practices to reduce emissions. Disruptions and stakeholder pressures helped drive accelerated action on supply chain decarbonization and voluntary performance reporting. Industry leaders embraced the business case for freight sustainability, realizing that such efforts also boosted the bottom line.

This landscape is changing further with the onset of mandatory reporting requirements like California’s new Climate Corporate Data Accountability Act, and the EU’s new Corporate Sustainability Reporting Directive. As these new mandates are phased in, firms will need to redouble their GHG benchmarking and reporting efforts. The combined effect of these rules along with the Securities and Exchange Commission’s proposed GHG disclosure rule, will cause firms to further enhance their strategies for improving freight efficiency while meeting broader environmental and corporate social responsibility reporting demands. While EPA does not implement the new GHG reporting requirements, it recognizes the need for enhanced reporting to help further drive supply chain decarbonization.  Notably, the SmartWay program provides quality primary data that can be part of a strategy for comprehensive GHG reporting.  Furthermore, as a voluntary (and no-cost) program, SmartWay can continue to be a trusted partner in this changing landscape. 

Outlook: As companies continue to enhance their sustainability strategies and capabilities, they are better positioned to meet changing GHG reporting demands. Successful strategies will likely use a combination of high-quality primary data — like that of the SmartWay program — and other global frameworks to meet freight efficiency goals and reporting requirements. Ongoing and active public-private collaboration will be critical to successfully evolve corporate, voluntary and mandatory approaches to GHG benchmarking and reporting. 

Resource Link:

www.epa.gov/smartway