Some of the hottest buzzwords heard in boardrooms lately have to do with sustainability, rather than just operations and profits. Terms like “carbon footprint,” “net zero,” “green fuels,” and “environmental, social, and governance (ESG) policies” crop up in every quarterly earnings call and appear in every annual report.
Today, many companies are adopting sustainability initiatives voluntarily, usually as a way to trim costs, burnish the corporate reputation, or become better citizens of the planet. But government regulations that will come online over the next couple of years will increase the urgency by putting mandates in place. From the state of California to the European Union (EU) to the U.S. Securities and Exchange Commission (SEC), various entities will soon require companies within their purview to disclose the precise amount of greenhouse gas (GHG) emissions they create. That’s not to say all businesses will be affected, however. For example, the California law applies to corporations with more than $1 billion in gross revenue, while the EU directive covers those that meet two of three conditions: $43 million in revenue, $21 million in assets, or 250 or more employees.
The goal of the new mandates is to give investors and consumers a way to compare vendors, suppliers, and service providers based on their climate impact, not just their business performance. And part of the premise is that companies that have to quantify and disclose their carbon footprints will be better equipped to shrink them. After all, as the management consultant Peter Drucker famously said, “You can’t manage what you don’t measure.”
However, these new carbon disclosure rules could present serious challenges to shippers, fleet operators, and logistics service providers (LSPs). That’s because carbon dioxide is invisible—not just literally but also figuratively, since many sources of pollution are located far outside a company’s own walls. According to the U.S. Environmental Protection Agency (EPA), a full carbon accounting includes “Scope 1” emissions—those created directly by a company’s own facilities or vehicles; “Scope 2” emissions—those created indirectly by the electricity or other energy that powers them; and “Scope 3” emissions—those created by a company’s suppliers and contractors through activities like transportation and distribution.
THE CHALLENGE OF “COUNTING” CARBON
Each “scope” category includes a multitude of individual inputs known as “point sources,” so adding it all up may require companies to hire a trained carbon-accounting specialist or contract with an outside consulting firm. Either way, the path forward is anything but clear for both companies and regulators, says Bridget McCormick, principal consultant at Proxima, a supply chain and procurement consulting firm.
“In the U.S., there aren’t firm laws in place nationwide yet that require reporting and [establishing of] emissions targets, so organizations are able to say they are working to improve their sustainability but aren’t being held accountable,” McCormick says. Scope 3 reporting, in particular, will be no small undertaking, she adds. “Measuring Scope 3 [emissions] is challenging and time-consuming. To influence your suppliers, you need to also educate your team and adapt to current policies, processes, and ways of working with suppliers in a way that supports your carbon reduction goals. All of this requires an investment—whether that be of time, people, technology, external resources, etc.”
Fortunately for shippers and logistics service providers, the new requirements will not hit all at once, says Pat Dillon, chief financial officer at Flock Freight, a logistics tech firm that operates a “freight carpooling” platform that combines small shipments into a single, more efficient truckload. For instance, California’s version—known as SB 253—will roll out over a period of years, with mandatory Scope 1 and Scope 2 reporting beginning in 2026 and Scope 3 reporting starting in 2027.
“Scope 3 is the most relevant for Flock Freight and the role we play, because it covers emissions from each company’s entire logistics footprint, including trucks you don’t own that are carrying products and raw materials, both inbound and outbound,” Dillon says. “So the question is how to collect the data, how to standardize it, how to track different types of emissions. … And there’s a cottage industry of consultants and auditors growing up around that.”
Likewise, the EU’s version, known as the Corporate Sustainability Reporting Directive (CSRD), won’t take effect until June. And the SEC’s version is still in the draft stage, according to the consulting firm Deloitte.
NEW TOOLS TO TALLY EMISSIONS
Those government mandates are still on the horizon, but various logistics industry players are already developing tools to measure greenhouse gas emissions from every possible source. But it’s still the Wild West out there when it comes to the tools and methods used. “There are not yet codified gold standards [for this type of reporting]. There is some variability. But as they get nearer, we’ll start to see the universe start to coalesce around certain standards,” Dillon says.
For instance, Flock Freight tracks emissions today through its FlockDirect service. But that’s just one of many options. Other tracking tools on the market include Banyan Technology’s CarbonTrax & Offset feature in its Live Connect software; Pledge’s emissions measurement platform for freight forwarders; and cloud-based platforms to keep track of it all, such as tools from Amazon Web Services (AWS).
Digital freight-matching platform Uber Freight has also launched an emissions dashboard that calculates users’ carbon impact, according to Illina Frankiv, the company’s head of sustainability. “This is one centralized view; users can see their emissions across the network, so it is also a tool to reach whatever their sustainability goals might be. That means not only knowing their baseline, but how to improve,” she says. “For example, they could make efficiency improvements through continuous optimization, they could switch to intermodal, or they could look at their network and tell if it’s feasible and profitable to use electric trucks.”
Of course, many shippers today use more than one broker or carrier. To accommodate these users, Uber Freight allows companies to upload their external carbon data to its dashboard as well, Frankiv says.
“It’s very hard to find an emissions platform that would provide a truly global view, even within a single company. But we give you visibility into the Uber Freight-managed part of your network, and we give you the opportunity to upload the rest of your data, too. [Transportation] networks tend to get broken up into dedicated, owned, brokered, etc. But as a company, what you need to know is your total transportation emissions across all modes and geographies,” she says.
As companies gain the ability to track their total carbon emissions, they will also be able to compare themselves against other shippers. In fact, Uber Freight says it plans to offer an “industry peer comparison reporting” feature in a future release of its emissions dashboard. Using anonymized data, the tool will assign each user a percentile rank showing how it stacks up against other players in its sector.
“Companies are curious about how they compare,” Frankiv says. “But emissions reporting is a relatively young [science]. So there are not yet benchmarks to assess the performance of your transportation network. It depends on modes, distance, range. … Then the follow-up question is how to improve. So we’re enabling our customers to [factor] sustainability into their operating decisions, instead of just cost and service.”
As a result of pending carbon disclosure regulations, companies throughout the logistics community will soon have a much fuller picture of their operations. But how they use that data remains to be seen. While some might use it simply to satisfy regulatory requirements, others may leverage it in new and interesting ways—like advancing their efforts to protect natural resources, make their operations greener than their competitors’, and perhaps even win new customers.
