Some of the world’s largest freight shippers have set ambitious public goals for carbon reduction by 2030. Environmental and social governance (ESG) initiatives have increasingly become core to these companies’ missions and values, and they’ve gone so far as to declare that they’re accounting for carbon output as well as financial metrics.
Research by the Environmental Protection Agency shows that about 29% of all U.S. greenhouse gas emissions are attributable to transportation, with an estimated 12% directly from freight activity. Therefore, it’s not surprising to see prominent Fortune 50 companies placing a heavy emphasis on cleaning up their supply chain processes and associated transportation emissions. It’s a savvy tactical move, in addition to a socially responsible one. After all, today’s consumers use their wallets more than ever to align themselves with companies that share their values of sustainability and social responsibility.
Unfortunately, not every company can take on the same ambitious targets as a Fortune 50 company, or even a Fortune 1,000. While most businesses have embarked on a sustainable journey, many have yet to reach the point where they can begin to act on attainable climate-related goals.
That doesn’t mean sustainability isn’t a priority for freight shippers. According to a survey conducted by Redwood Logistics in conjunction with FreightWaves in the fall of 2021, 90% of a diverse set of shippers said sustainability goals have in some way driven decision-making. Whether in corporate strategy decisions, redesigning supply chains, requesting sustainability data from vendors, or sourcing materials from new vendors, shippers are taking action in some shape or form. By and large, sustainability is becoming a focus for freight shippers, and that focus is driving decision-making at the corporate governance level.
However, many of those same shippers feel stuck, particularly those in the mid-sized market and smaller, according to the survey. They know they must prioritize sustainability to remain competitive long-term and stay aligned with consumer demands. They also know that, increasingly, carbon accounting and sustainability metrics will be rooted in legal requirements, as is already the trend in Europe.
Regarding buyer preferences, the trend is already pronounced: Nearly 80% of consumers surveyed by BBC ahead of the United Nations’ COP26 international climate change summit last fall said sellers’ environmental and sustainability practices play a role in purchasing decisions.
But shippers feeling stuck might already be operating on razor-thin margins, or be in a highly competitive market where raising prices could severely harm their business. There’s currently no playbook on how to get started with carbon accounting or reduction strategies. It’s hard enough to comply with standard GAAP reporting, let alone the nebulous world of reporting carbon emissions.
Additionally, demand for goods has ramped up, and that’s expected to continue over the next decade. This means companies will need to squeeze even more out of their supply chain and transportation network to keep goods moving — while trying to mitigate their emissions footprint at the same time.
For many shippers, knowing what the right first step or next step is can be a challenge. With the right partners, however, lean and green don’t have to be mutually exclusive.
Logistics providers, sustainability leaders and the C-suite have a unique opportunity to reimagine how to cut costs and curb environmental harm at the same time. They can develop a strategic and tactical plan for implementing carbon reduction that creates a more functional, leaner and efficient supply chain that, simultaneously, is good for shippers’ bottom lines. This is where the circular economics of sustainability can benefit both the environment and corporations who take initiative.
Shippers can reach their sustainable goals by partnering with an eco-friendly third-party logistics company. Innovative 3PLs have a unique opportunity to address carbon emissions factors for their customers.
Shippers should look for programs that include:
Ultimately, there has to be an intersection where shippers and their logistics providers can work toward — where cutting transportation costs and reducing waste meet the mission of environmental sustainability while creating circular economies. What the road to that intersection looks like at each organization will be unique, depending on a company’s size, freight emissions footprint and current place in their ESG journey. Some will hire new personnel, even C-suite level officers, or create new corporate governance protocols dictating carbon accounting and offsetting. Others might simply bake sustainability into existing roles with ongoing employee retraining.
Implementing these types of deep-seated changes within any organization might seem daunting. But shippers who don’t begin acting now will miss out on gains from sustainable branding, and will simply be absent from the mission of working toward global emissions reduction simply because it’s the right thing to do. The journey begins with leadership at the highest levels of every organization, to start down the path with a commitment to continue. Companies need to create the right partnerships with logistics providers, suppliers, and technology vendors that align with that path.
One thing is clear: sustainability isn’t a trend that will fade out over time. Rather, it’s the only path in the long run to preserving business and the planet.
Jeanette Shutay is vice president of data sciences at Redwood Logistics.
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