Scope 3 emissions – that arise from a company’s supply chain – can be difficult for brands to calculate and monitor, but the time to take action is now.
According to a 2023 report from Roland Berger, Scope 3 emissions can account for ”well over 90% of the total emissions generated in a given value chain”, and managing these emissions can often pose a major challenge, particularly in the e-commerce sector.
While Scope 1 refers to a company’s direct emissions from owned and controlled sources, and Scope 2 are indirect emissions from the purchase of energy, Scope 3 emissions fall outside of a company’s control, occurring both upstream and downstream through the supply chain.
Last-mile delivery alone is responsible for up to half of all transport emissions in the global e-commerce sector, with a report from the Clean Mobility Collective estimating that, each year, the last-mile carrier industry emits approximately 3 million tonnes of carbon dioxide in Europe.
To put that figure into context and demonstrate the scale of the challenge ahead, 3 million tonnes of carbon dioxide is the total average annual emissions of the country of Madagascar.
Maersk wants to accelerate the transition to decarbonise global supply chains, and this article, produced with the support of Roland Berger, offers insight and practical guidance specifically on Scope 3 emissions. From choosing the right partners to finding data-led solutions to monitor and reduce emissions, now is the time for brands to seek out new ways of building greater visibility and transparency in their logistics.
A glance at current guidance
One of the key challenges associated with combating Scope 3 emissions is that, at present, there is no globally aligned reporting standard. With different regions proceeding in different ways, it can be a difficult arena to navigate as a global brand.
In Europe, legislation is currently being rolled out, and the EU requires companies to report on corporate sustainability through avenues such as the Non-Financial Reporting Directive and the Sustainable Finance Disclosure Regulation.
But this currently only applies to companies which meet a certain revenue threshold.
However, sustainability reporting and auditing will soon become mandatory in Europe, and it is anticipated that other regions will follow that example. Therefore, there has never been a better time for brands to get ahead and build a competitive advantage in doing business sustainably.
It was only two or three years ago that sustainability in e-commerce was considered something that was rather ‘nice to have’. Now, that has fundamentally changed. It’s a ‘must have’ if brands want to survive – and not doing so will result in certain brands falling out of the game, sooner or later.’
Key areas of impact
One of the most carbon-emitting elements of the logistics journey is packaging, and in recent years, many brands have begun to move towards more sustainable packaging, investing in recycled or biodegradable materials and multi-use packaging.
Puma’s award-winning Clever Little Bag is a good example of this, with the brand pledging to reduce water, energy and diesel consumption on the manufacturing level alone by more than 60% annually. But there is still a long way to go in encouraging a strong uptake of these initiatives among brands in the global retail and lifestyle sectors.
As with packaging, last-mile delivery is a key carbon contributor, accounting for up to 50% of all delivery-related carbon emissions globally. What’s more, last-mile deliveries are estimated to increase by 78% by 2030, which could equate to a 32% jump in carbon emissions.
Within last-mile delivery, returns are also a critical emission driver. In the 2010s, leading online marketplaces originated the consumer expectation of free delivery and returns, and now some brands are seeing return rates as high as 50% and beyond.
In terms of consumer needs, we're starting to see a shift in focus from same- and next-day delivery to more sustainable methods like scheduled or out-of-home delivery. Checkout data and surveys from 2023 tell us that European consumers are increasingly happy to wait longer for their goods to arrive, knowing that the environmental impact is lessened.’
Meeting needs and exceeding expectations
Consumers have higher expectations than ever before – particularly younger shoppers who are likely to demand greater accountability from brands.
E-commerce players now have an opportunity to reimagine their value proposition, building sustainability into the very core of the customer experience.
By charging more for same-day or next-day delivery, putting a price tag on customer returns, and offering out-of-home delivery or scheduled delivery as standard, brands can meet the expectations of their environmentally savvy customers.
The value in doing so is twofold: introducing sustainable delivery options will support brands to reduce their Scope 3 emissions, but it will also place social responsibility at the heart of their brand promise. How a product arrives can be as important as the product itself – and to stand out within an increasingly competitive market, taking action on Scope 3 emissions is paramount.
Measuring, monitoring, continually improving
Reducing Scope 3 emissions is not going to be an overnight task, particularly given the scale of the challenge brands face in gathering data from partners. With multiple stakeholders involved in their supply chains, data transparency can be difficult for brands to achieve – but doing so will be crucial to this mission.
Maersk’s Emissions Dashboard integrates all data across last-mile carriers and transport modes to provide retailers with improved visibility and detailed reporting, implementing a calculation methodology in line with the Global Logistics Emissions Council (GLEC) framework.
Taking a data-driven approach to mitigating Scope 3 emissions is an important part of rising to the challenge that the global logistics industry faces. Progress will, of course, be different for different brands – and will be relevant to an individual company’s baseline emissions. Through its own emissions reporting, for example, Nike has committed to reducing its Scope 1 and 2 emissions by 65% and its Scope 3 emissions by 30% by 2030.
By harnessing the power of the Emissions Dashboard, brands can follow this lead, identifying the biggest carbon emitters, implementing practices to reduce those emissions, and continually benchmarking progress.
It is now crucial that brands take steps to address the data gap in supplier-emissions tracking, collaborating with partners to integrate accurate data from across the supply chain, benchmark performance, make continual improvements, and achieve full visibility.’
Choosing the right partners
The challenge in managing Scope 3 emissions is that often multiple partners or stakeholders are involved, taking control out of the brand's hands. But by seeking out suppliers whose values are aligned with their own, brands can rise to this challenge.
It's vital that procurement teams evaluate the ESG credentials of suppliers they intend to work with, understanding the impact of different supply chain options, the potential risks and the opportunities for value creation. This can be a complex arena to navigate, but it is crucial if brands want to embed sustainability within their operations.
Retailers need to be clear on the demands they place on potential partners. When they’re choosing who to work with, they need to be transparent about KPIs, reporting and monitoring, and carbon emission thresholds. Choose the right partner that can meet those expectations to bring visibility and transparency into the value chain.
Obtaining the necessary data from partners helps brands to make better, more informed decisions about how their goods are produced, packaged and delivered to consumers. This data can be especially difficult to acquire from last-mile partners, many of whom use gig workers to drive down costs. But setting clear KPIs and demanding transparency is critical to maintaining visibility over Scope 3 emissions.
Leaders within retail e-commerce are now rightly turning their focus to building partnerships that prioritise sustainability at every level, thinking critically about what needs to be done to effect positive and lasting change – because then, and only then, will it be possible for brands to achieve success and maintain relevance in a rapidly changing consumer landscape.
At Maersk, our integrated logistics offerings and carrier-agnostic logistics capabilities are already set up and ready to use, which makes the transition smoother and more manageable. To learn more, visit E-Commerce Logistics in Europe.
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