Reinventing the Wheel - Co2 compensation in the transport and logistics industry

Climate protection and in particular the associated reduction and compensation of greenhouse gases (GHG) have moved to the center of the public awareness in recent years thanks to movements such as "Fridays for Future" and the Paris Climate Agreement of 2016. Thus, more and more, the entire logistics and transport industry is facing the challenge of how a sustainable reduction in GHG emissions can be achieved within current business models.

The need for acting is particularly reflected in the logistics sector, as transport is unavoidable in the highly developed global economy with its international networks. Especially international freight transport and its respective supply chains are essential for the worldwide industry, retail and food supply. The closer trade links between individual regions are, the more freight and passenger traffic takes place.

Sustainability: valuation factor for logistic services

The continuous intensification of goods exchange in the context of globalization is also reflected in the fact that, according to WEF studies, more than 5.5 percent of all CO2 emissions worldwide are currently caused by the transport industry. Consequently, logistics processes are increasingly forming part of climate protection strategies. More and more logistics companies are therefore searching for solutions to help significantly reduce GHG emissions. The goal is to both strengthen their competitive situation in the market, as well as to react effectively to potential political demands. Examples for these political requirements are the recently adopted measures of the International Maritime Organization (IMO) to reduce CO2 emissions in shipping by up to 50% from 2023 and an energy classification of ships based on their CO2 emissions. Customers, business partners and investors are asking companies to position themselves with concrete CO2 reduction targets and commitments to climate protection, as well as making clear what impact these new commitments will have on their own business model and the short and long-term value of the company. Transparent reporting of GHG emissions and credible efforts to reduce them have thus long since become an essential marketing instrument for selling logistical services and a basic component in the evaluation of logistic companies.

First step towards eco-friendly logistics: accurate calculation of emissions of greenhouse gases

In order to provide internal and external stakeholders with an overview of GHG emissions and possible savings potentials, the first step on a company level should consist in calculating these emissions while taking all relevant factors into account. In doing so, a distinction must be made between direct emissions (which are driven by means of transport, travel distance and fuel consumption) and indirect emissions (which are caused by the production of electricity, fuels or the production of the respective means of transport). The DIN EN 16258 standard was introduced by the German Committee for Standardization in order to guarantee a consistent European calculation according to comparable standards. The DIN EN standard describes procedures in detail for calculating energy consumption and greenhouse gas emissions for transport services. In order to support companies effectively in measuring their GHG emissions, DHL – for example – offers an integrated online tool for their calculation, the Carbon Calculator. Likewise, the German Federal Environment Agency (available here) – as well as various companies – offers possibilities for calculating GHG emissions, including company-specific details on its websites. However, it is of utmost important that all relevant company-specific information is provided in detail. Otherwise the result of GHG emissions calculation can vary, depending on the provider of the calculation tool.

Approaches for the development of climate-neutral logistics

Based on the determination of the GHG emitted, measures for a sustainable reduction of GHG emissions can be implemented. These measures include, above all, internal changes and restructuring. Such changes could include the predominant use of electric vehicles within the vehicle fleet, as well as the use of more efficient engines or alternative fuels. GHG emissions can be reduced through innovative approaches, particularly with regards to freight transport by road within the "last mile". As an example, DHL has started to develop its own electric vehicles for the delivery of shipments in 2016 and is working with its customers to develop innovative solutions for the sustainable reduction of GHG emissions as part of its efforts to offer all logistics-related services on a climate-neutral basis (net zero emissions) by 2050.

However, as it is hard to implement technical innovations in the aviation and maritime sectors in an easy and efficient way, voluntary compensation of GHG emissions – in addition to the development of new propulsion technologies such as hydrogen-battery hybrid solutions in shipping or the development of synthetic jet fuels in aviation – has become increasingly important in recent years. Voluntary compensation of GHG emissions is based on the principle that, on a global level, it is irrelevant where greenhouse gases are produced, as well as where and in what form they are compensated. Accordingly, emissions calculated by the company can be compensated either by implementing own climate protection projects or by acquiring emission reduction credits (usually referred to as emission certificates) from sustainable projects of partners such as climate protection organizations. Within the Lufthansa Compensaid program, for example, in cooperation with the climate protection organization myclimate, customers are offered the opportunity to compensate GHG emissions during flights by investing in reforestation programs in return for voluntary payment of a surcharge when buying a ticket. Alternatively, customers can contribute to GHG compensation by investing in the use and development of CO₂-neutral, synthetic jet fuel.

Sustainable transformation in transport & logistics

There is a broad portfolio of companies and organizations that specialize in compensating GHG emissions through the sale of emission certificates from climate protection projects, primarily in developing countries. However, a generally applicable international standard for climate protection projects is yet to be established. Furthermore, a comprehensive verification of projects by independent organizations is still limited. Although climate protection organizations contribute to the compensation of GHG emissions on a global level, individual efforts and investments of companies should primarily focus on reducing and avoiding GHG emissions through restructuring and innovating within their company specific processes. Internal measures can both identify long-term savings potential and implement measures. Only so can a credible shift to more ecological and sustainable business models be realized. A shift from which a company can profit in financial and image-relevant ways. The implementation of climate protection measures at a company level is also playing an increasingly important role from the perspective of non-financial reporting in the context of annual financial statements. With the "Sustainable Finance" action plan and the specification of non-financial corporate reporting through non-binding guidelines, the EU Commission is taking further steps towards sustainable corporate management. Correspondingly, climate-related information should include both the material risks arising from climate change for core business strategies, company results and the material risks of a negative impact on the climate triggered by the company's activities.