Logistics Industry Embraces Sustainability: Ramp Up Efforts to Address Scope 3 Emissions

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The conventional Logistics Operations are undergoing a transformation, moving towards a more sustainable business model. Regulatory changes such as the European Union’s Carbon Border Adjustment Mechanism (CBAM) and California’s At-Berth Rule along with coupled with evolving consumer preferences favoring environmentally conscious businesses, are driving this transformation.

A recent insight article by AlixPartners titled “Tackling Scope 3 emissions: How companies are adapting their supply chains,” highlights the heightened awareness among CEOs regarding the urgency of addressing sustainability issues. The 2024 AlixPartners Disruption Index reveals that 49% of surveyed CEOs feel external pressure regarding environmental concerns, and 79% feel compelled to take a stance on these issues.

Consequently, companies are intensifying efforts to reduce carbon footprints throughout their supply chains, employing innovative solutions and optimization strategies. Understanding and mitigating Scope 3 emissions, indirect emissions along the value chain, have become pivotal for corporate sustainability and effective supply chain management.

Achieving ambitious emissions reduction targets demands collaboration among various stakeholders, prompting ESG reporting to assess indirect emissions’ influence on a company, the article highlighted suggesting that this often leads to partnership-based solutions. Scope 3 emissions, stemming from activities outside direct control, are integral. These involve upstream actions like material extraction, downstream processes such as product transportation, and end-use consumption.

As per the insights, “Many companies find that Scope 3 emissions make up the majority of their carbon footprint, often surpassing the combined total of Scope 1 (direct emissions from owned or controlled sources) and Scope 2 (indirect emissions from purchased energy generation)”. Collaborative solutions have increasingly prioritized logistics.

For instance, DHL and Schneider Electric have collaborated to enhance eco-friendly logistics by integrating sustainable multimodal transport solutions. Recognizing the high carbon footprint of air freight, they’ve transitioned to sustainable aviation fuels despite their higher costs. Their strategic shipping optimizations have resulted in nearly a 20% reduction in reported carbon emissions on routes from Singapore and India to North America since March 2023.

Companies are increasingly adopting intermodal transit, combining truck convenience with rail efficiency to reduce environmental impact. This approach can cut carbon emissions by over 65% per 1,000 shipment miles.

For example, IKEA introduced a weekly rail service from Poland to Spain, potentially replacing 4,500 truck trips and saving 5,100 tons of CO2 annually. Additionally, IKEA plans to further reduce emissions by utilizing electric vehicles for last-mile deliveries.

Walmart, the largest U.S. retailer, aims to mitigate 1 billion metric tons of Scope 3 greenhouse gases through Project Gigaton. Given that nearly 90% of Walmart’s total emissions are from Scope 3, the company has partnered with JB Hunt to significantly increase intermodal transit usage and collaborate on electric vehicle utilization for transporting goods between distribution centers and rail yards.

In conclusion, AlixPartners emphasizes that for companies to make progress on emissions reductions, logistics must undergo changes both upstream and downstream.

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