A simple google search delivers a lot of quotes from travel adventurers that the journey is more important than the destination. Reducing greenhouse gas emissions from freight & transport is certainly nothing less than an adventure. Yet it seems that many companies are too fixated on the destination.
This may seem an odd thing to say in a time where we are rallying as many companies as possible to commit to emission reduction and pledging to a net zero future by 2050. At this moment there are more than 4,800 companies globally that are taking action by committing themselves to a science-based target, about 2,500 of them already have defined a science-based target. It is great to see that companies acknowledge the need to act.
However, in discussions with our clients we observe too much of a fixation on the ‘near-term’ target – often a cumulative emission reduction objective for 2030 or 2035. Within the world of a large global business, it seems that this reduction target itself is the only thing that matters, rather than focusing on the journey towards that objective.
As is reflected by the name itself, a science-based target is grounded in climate science. The IPCC report of 2021 estimated that the remaining global CO2 budget to stay within the 1.5⁰C boundary is about 400 billion tonnes CO2 – roughly 8 years of emissions at the prevailing rate. The requirement to reduce emissions by a total of 50% by 2030, towards net zero by 2050, comes from the need to ensure that we do not exceed the total remaining carbon budget. It is this principle that underlies the requirements for accepted ‘science-based’ targets.
As the figure above shows, a delayed impact scenario towards the same reduction target can result in a significantly higher total carbon budget for the period, in this example almost a 20% higher carbon budget.
A company that is serious about committing itself to a science-based target should therefore ensure that its emissions reduce year-on-year, in line with the maximum allowed carbon budget. However, in many situations we see that companies are not achieving yearly reductions and assume that this is not too much of an issue because the target can still be achieved with accelerated impact in later years, hopefully when some of the solution technologies are less expensive.
We believe climate science and the requirement to keep emissions within a maximum total carbon budget. We also believe this should be the intention for companies that commit themselves to a ‘science-based’ target. Delaying reduction impact to wait (that means hoping) for a lower cost profile of solutions in order to avoid any impact on profitability is wishful thinking for many companies and only shows the major mindset shift that still needs to take place.
Realising sufficient year-on-year reduction impact is not an option, it is a requirement, and we expect will increasingly become a license-to-operate. The focus should be on how a company can get that done without too much negative impact on its total profitability and cash flows. Hiding behind the higher current costs of solutions and using that as an argument to not act enough, cannot be the chosen path. This also means that transport/logistics should not be seen as simply an outsourced cost line and only an execution area that delivers on one-sided terms determined by production planning or commercial staff.
Certain solutions will drive up the cost of transportation. Companies should focus on optimising transportation (reduce total tonne-kilometers) to mitigate some of the higher costs. Any additional coverage of higher transportation costs may have to come from productivity and efficiency gains in other business areas.
For example, any business that relies heavily on air transport and cannot significantly change this, will either have to face and absorb the structurally higher cost of Sustainable Aviation Fuel (SAF) or accept the consequences of not delivering on emission reduction. Although we think it is very likely that governments will ultimately force companies to accept the higher cost of SAF and other solutions through carbon pricing or taxes.
There is no other journey than one in which companies show reduction impact year on year, also in freight transport / logistics, make the best possible choices to limit the long-term total cash flow impact of a transition to net zero transport, and not just avoid higher transportation costs levels than what they have been accustomed to. At AllChiefs we believe this is the journey towards a net zero destination.
Inspired?
Visit our Sustainable Logistics page for more information on how we think about net zero logistics and reach out to Chief Martijn Bakker to assess how we can start your net zero journey.