In May, the Securities and Exchange Commission proposed a set of climate disclosure rules. In turn, the transportation industry reacted with concern about the potential effects of the rules.
To get other perspectives on how climate regulations could affect trucking companies and their relationships with retailers, FreightWaves interviewed Amy Haddon, vice president of global marketing and communications at Schneider Electric, and Jim Uettekamp, CEO of the software provider provision for risk management. Riskconnect.
In public comment for the SECSchneider Electric said: “While disclosure of emissions 1 and 2 is vital to investors’ understanding of climate-related risks to business operations and revenues, disclosure of emissions 3 is also important as most emissions are in this area for almost all companies.’
This Q&A interview has been edited for clarity and length.
FREIGHTWAVES: How do you think the proposed climate disclosure rules could affect the supply chain?
WETEKAMP: “The SEC’s climate rules require public entities to communicate climate risks and greenhouse gas emissions to investors and the public. Emissions disclosure requirements will include emissions 1, 2 and 3 if volume 3 emissions are ‘material’ or the company has an objective to reduce emissions throughout the supply chain’.
HADON: “Public owner-operators of freight, transportation and logistics companies are expected to disclose information about their climate risks and emissions. Because these businesses are part of other companies’ supply chains, they will likely need to be prepared to disclose the same information to their customers, as their operational emissions 1 and 2 are part of customer emissions 3.
“Recent disruptions to global supply chains caused by COVID-19 are also likely to lead to additional scrutiny of the supply chain industry and its ability to withstand climate-related impacts, making risk disclosure and resilience in the sector increasingly important.”
FREIGHTWAVES: Why does Schneider Electric think it’s important to include emissions information in the proposed climate rules 3?
HADON: “Scope 3 emissions make up the bulk of most companies’ greenhouse gas emissions. [The Carbon Disclosure Project] found that, on average, Scope 3 emissions were more than 11 times the company’s direct operational emissions. Scope 3 has also historically been the most difficult emissions category to measure and manage. We believe it is essential to encourage action in Area 3 if we are to make significant progress on reducing emissions and climate change.”
FREIGHTWAVES: What issues do you think will arise between shippers and retailers with emissions 3?
WETEKAMP: “Companies typically work with a very large number of partners across the value chain—often thousands or tens of thousands. Complicating matters is the fact that the data companies need to calculate Scope 3 emissions typically resides outside the reporting organization, with its many suppliers, vendors, distributors and other trading partners.
“Measuring emissions is a new and not yet standard practice, which makes the task difficult, especially for small businesses. It’s a big job to collect and analyze data on energy use by value chain partners.
“SEC compliance will be costly. This added pressure can strain relationships between shippers and retailers.
“To successfully submit a Tier 3 emissions report, the reporting organization must collect energy and fleet data as well as miles driven to calculate emissions. In addition, reporting organizations will be responsible for determining their share of emissions based on their share of the supplier’s total output.
“This work is manual, repetitive and time-consuming, and teams of shippers and retailers are already busy. The amount of data and work required to meet the proposed disclosure requirements is far beyond what a team of people can reasonably handle without the assistance of software.”
FREIGHTWAVES: How can transportation and logistics companies adapt to these challenges?
WETEKAMP: “The biggest thing companies can do to adapt is to implement technology that can reduce the time and resources associated with the reporting process. The right software will automate data collection and performance tracking across the entire organization and supply chain. Also consider looking for a partner with a track record in carbon accounting, financial reporting and supply chain management.
“Logistics and transportation companies can also overcome many reporting challenges by starting to get their house in order now. Preparing today and implementing the right processes and technologies will help avoid a clash in the future.”
FREIGHTWAVES: According to the latest data from Schneider Electric climate report, supply chain emissions (volume 3) account for more than 99% of a company’s carbon footprint. What is the company doing to engage with suppliers and end users to reduce these emissions?
HADON: “Like many of our industrial customers, most of our emissions are in our value chain. We developed the Zero Carbon Project, an initiative to engage our top 1,000 suppliers to reduce their own Scope 1 and Scope 2 emissions by 50% by 2025.
“Since we launched the program in 2021, we have achieved almost 100% participation and are actively and directly working with our suppliers to assess their maturity, measure their baselines, set targets and start implementing decarbonisation strategies.
“But we don’t stop at our upstream suppliers. We also employ circular business practices that address the following emissions 3. These include field services that extend the life of our products and return and remanufacturing programs, as well as implementing a growing portfolio of digital and professional services.”
FREIGHTWAVES: What advice do you have for smaller companies that have yet to start measuring their greenhouse gas emissions?
HADON: “That old saying that you can’t manage what you don’t measure really applies here. Until a company understands its baseline emissions and where they come from, it cannot take meaningful action. One easy way to get started is to use the Environmental Protection Agency’s Simplified Greenhouse Gas Emissions Calculator and Guide to Developing a Greenhouse Gas Inventory.
“We are convinced supporters that starting the path of decarbonization is better than not starting this path at all. The SEC’s proposed rule could strengthen what leaders in the trucking industry are already doing, while encouraging others in the trucking ecosystem to advance their own programs – not only to mitigate climate change, but also to improve air quality and economic development.”