Measuring the Carbon Footprint in a Logistics Company: a Snapshot of Basic Information

Logistics and transport are the lifeblood of the modern economy. We have clearly seen over the last few years how crucial the efficient functioning of the supply chain is. We experienced supply disruptions caused by global shocks such as the COVID-19 pandemic and Russia’s unprovoked attack on Ukraine when the most necessary goods were temporarily missing from store shelves. One of the most important global challenges that we have been struggling with as humanity for a long time, and which the logistics industry can no longer ignore, is the climate crisis.

Transport is responsible for 20% of total global carbon dioxide emissions into the atmosphere (a threefold increase since 1970) and is the second largest economic sector in the world (according to Statista data). Today, countries, international organizations and NGOs are taking a number of actions aimed at reducing CO2 emissions, because this (along with a number of other activities) will help slow down the pace of warming of our planet. An example may be the initiatives of the European Union, which aims to achieve carbon neutrality (Fit for 55) and to ban the production and registration of new combustion vehicles by 2035.

Every branch of the economy will have to introduce pro-ecological solutions that will limit the negative effects of the climate catastrophe. Logistics and transportation are no exception. However, it will take some time before trucks powered by alternative, clean engines become fully popular. Meanwhile, logistics must become sustainable as soon as possible. However, in order for companies from the logistics and transport industry to effectively implement solutions that make their everyday business activities more green-oriented (e.g. switch to refueling their fleet of diesel trucks with HVO100, which emits up to 90% less CO2 during combustion), they must first acquire knowledge based on measurable data, what is their carbon footprint and to what extent their activities impact the natural environment.

Three methods of measuring the impact of a company’s operations on the environment

There are three methods that can be used to measure how a company’s activities impact the natural environment.

• The first will be direct measurement, which involves calculating emissions from fuel consumption data using standard conversion factors.
• Environmental Life-Cycle Assessment (LCA), in turn, concerns the entire life cycle of a product and how its individual production processes (extraction of raw materials, production, distribution, waste disposal) affect the environment.
• As a third method, we can indicate the measurement and analysis of the carbon footprint, which we will focus on in this article.

What is a carbon footprint in the logistics industry?

The carbon footprint in the logistics industry refers to greenhouse gas emissions generated by all activities related to processes and operations within the supply chain, expressed in carbon dioxide equivalent. In the logistics industry, the carbon footprint is primarily influenced by:

• Transport, which includes the movement of goods by land (truck and rail), air and sea. This is the dominant component of the logistics industry’s carbon footprint due to the largest emissions of carbon dioxide and other greenhouse gasses into the atmosphere (road and air transport being the most emitting).
• Warehouse operations, as machinery and equipment used in the packaging and storage of goods (forklifts, air conditioning systems, etc.) also contribute to the carbon footprint.
• Supply chain management, because the location of warehouses and the optimization of delivery routes directly affect the size of the logistics footprint.

Why should logistics companies measure their carbon footprint?

We partially answered this question at the beginning of this article, but this topic is worth expanding. Logistics companies should measure their environmental impact for the following reasons:

Meeting legal requirements –both state governments and public international organizations can adopt and implement regulations requiring the reduction of CO2 and other greenhouse gas emissions by enterprises (examples of EU regulations: the CSRD directive and the previously mentioned Fit for 55 program). Measuring the carbon footprint will therefore be necessary so that the logistics company can first learn the scope of its environmental impact and then implement actions to reduce it in accordance with the guidelines set out in the law. Legal requirements remain the most important motivator for the logistics industry to take action to reduce its carbon footprint.
Meeting customer expectations –for shippers who want to start cooperation with a logistics company (carrier or logistics service provider), it may be important whether the potential partner operates in a sustainable manner. The shipper himself can carry out activities aimed at achieving carbon neutrality, and his end customers (consumers of the goods produced by this company) can expect him to have a pro-ecological attitude. Therefore, cooperation with logistics companies that also operate in a sustainable way or undertake activities to increase the level of sustainability may be necessary for them for image purposes. This is confirmed by the data: according to the “HFW &Pannatoni European Logistics Supply Report 2023”, as many as 72% of shipping companies require logistics companies to meet specific sustainability goals during tender processes.
Meeting investor expectations –potential investors may take into account the logistics company’s impact on the environment and its carbon footprint before deciding to start business cooperation and provide financing.
Cost reduction –measuring the carbon footprint allows the company to plan and implement actions aimed at reducing greenhouse gas emissions, which will result in a reduction in the company’s operating costs.

How to measure carbon footprint in the logistics industry?

Measuring the carbon footprint of a logistics company cannot be done without first determining the sources of CO2 and other greenhouse gas emissions. For this purpose, the Greenhouse Gas Protocol (GHG Protocol) was developed. It is an international standard that aims to provide enterprises, public authorities and other organizations with a consistent and reliable way to measure, manage and reduce their carbon footprint. The GHG Protocol is widely recognized as the basic standard for measuring and reporting greenhouse gas emissions. The second leading standard is ISO 14064-1: greenhouse gasses.

The GHG Protocol divides gas emissions into three scopes.

• The first scope is direct emissions from own sources, e.g. fuel combustion by trucks and vans that are part of a transport company’s fleet.
• The second scope includes indirect emissions, i.e. those that come from purchased electricity or heat used to power the offices or warehouses of a logistics company.
• The third scope includes indirect emissions which need to be made in order to keep their business running (e.g. those that occur during the production of products used every day in the company: office supplies or computer equipment). There are a total of 15 categories of indirect emissions included in this scope. As PwC experts point out, collecting data on GHG emissions in scope three is the most complicated part of carbon footprint management and reporting, because many companies will have to deal with this area for the first time in the coming years. Scope 3 greenhouse gas emissions reporting becomes mandatory in the European Union under the Corporate Sustainability Reporting Directive (CSRD), which entered into force on January 5, 2023. The directive introduces more detailed sustainability reporting requirements for EU companies, non-EU companies with a significant net turnover in the EU and entities whose securities are listed on a regulated EU market. The implementation of the directive will be phased over time and will cover the years 2025-2029.

Once the scope of a company’s emissions have been determined, it is possible to start measuring them. The GHG Protocol provides detailed guidance on how to measure greenhouse gas emissions in various areas of economic activity, including logistics and transport. This will need to determine carbon dioxide emission indicators, i.e. measures used to estimate the amount of CO2 dioxide and other greenhouse gasses emitted per unit of activity. These factors vary depending on the mode of transport, type of fuel, vehicle efficiency, distance traveled and type of goods transported.

In the case of the logistics industry involving the transport of goods, CO2 emission factors are usually calculated per tonne-kilometer (tkm) and depend on fuel consumption, distance traveled, load and type of fuel used. Once the gas emission rates are known, the company can proceed to the data collection process. After obtaining the appropriate data, the next step is to transform the collected data into CO2 and other greenhouse gas emissions. This is done using appropriately selected and developed emission factors. The results obtained should be audited, preferably by external and independent experts, to ensure that emissions have been calculated correctly. Once this is done, an emissions report should be prepared.

Such a report can then be the starting point for developing a plan for reducing the organization’s carbon footprint. If it is known how large the emissions are within each of the three scopes, specific actions can be designed to reduce them within the established time frame (e.g. expansion of a fleet of zero-emission vehicles or investment in renewable energy sources to provide clean electricity to company facilities). Regularly measuring carbon footprint will then allow companies to track the effectiveness of the steps taken to reduce CO2 and other greenhouse gas emissions.

How Coyote Logistics supports customers in achieving their sustainability goals

One of the green initiatives we undertake as Coyote is to inform shippers cooperating with us that their loads are transported by carriers operating in a sustainable manner. We work with one of the leading technology companies helping the logistics industry measure, report, reduce and eliminate greenhouse gas emissions. Through it, we provide our customers with extensive reports on CO2 emissions from carriers moving their goods.

Find out more about our sustainability efforts and start transporting your loads with us today!

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