One of the bright spots of this year’s COP26 climate change conference was the commitments from the business sector to reducing their impact on climate change. In fact, according to Greenbiz, a US-based sustainable business outlet, the Glasgow event could be termed ‘Business COP’ for the efforts put in by the corporate world to be part of the solution.
Leading this charge was the Race to Net Zero coalition. Although including local governments and universities, the big names in this grouping were global retailers Ikea, H&M and Walmart, and Australian retailers such as Officeworks, Kmart and Target also joined the push. The commitment from these consumer retail businesses was that they would halve emissions by 2030 and reach net zero by 2050, to keep global warming to 1.5oC, in line with the Paris Agreement.
As of July 2021, only 5 per cent of retail businesses – by total global industry revenues – had committed to taking action to limit global warming in accordance with the Paris Agreement goals. The challenge for these businesses is not so much reducing climate impacts from their operations, but reducing their Scope 3 emissions which the Paris Agreement holds them accountable for. That is, retailers are responsible for emissions from their supply chain, which can account for up to 80 per cent of a typical consumer company’s greenhouse gas emissions, according to McKinsey.
These are the emissions that will make or break a retailer’s commitment to net zero.
While the retailers will be the face that consumers see in the push to net zero, it will be the logistics and transport businesses that will have to change the way they operate to meet these targets. With many retail businesses setting targets for 2025 and 2030, and sourcing vendors to match, supply chain businesses will have to act now to be part of this sustainability push.
There is no doubt that meeting these goals is possible, but so far, the ambition from the sector is lacking. Prological recently conducted a tender for a large whitegoods and electronics business in Australia. The client company has aggressive CO2 reduction targets, yet none of the responses to the tender from Australian transport companies were able to match these goals, and only a few have made any progress in moving in this direction, and this is a problem.
It is well past time that the Australian transport and logistics sector took this challenge seriously. Leading businesses are already placing conditions on their suppliers. CRM software developer Salesforce, for example, is fining those suppliers who cannot comply with its climate requirements, according to the Financial Times.
So, what can transport and logistics companies do to comply with their customer’s requirements and even get ahead of the field? The first step is transparency and reporting. Providing clear, verifiable data about emissions will enable businesses to target areas where investment in sustainability will reap the greatest rewards.
The next step is targeting the low hanging fruit. Already, electric vehicles are suited to certain freight tasks, particularly those that require the movement of light-weight goods over a short distance, intra-metropolitan for example. Proven technology is already on the market, however seeing the take up of technology is limited and results are even more scarce.
The third step is to start decarbonising entire supply chains. This is where things start to get more complex, due to the interaction of a number of parties, but by no means impossible. Continuing with the electric vehicle example, to extend the range of these vans and trucks, in-transit charging will need to be rolled out at distribution centres and other key nodes. Of course, this requires coordination between the delivery provider, infrastructure builders and in some cases utilities, but it has the potential to make a significant impact in transport emissions.
While the challenge of tackling climate change has long occupied the political agenda, it is clear that now there is no time to lose, with the most recent IPCC report referred to as the ‘code red for humanity’. With transport emissions the third largest source of greenhouse gas emissions and accounting for 17 per cent of Australia’s total, the logistics sector has an important part to play. Increasingly, it makes good business sense too.
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By Peter Jones, managing director and founder at Prological Consulting.