How the logistics industry can achieve ESG goals

March 26, 2024

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No matter the industry a business is in, their investors, customers, and employees alike now expect them to do something about ESG - environmental, social, and governance - issues. 

In fact, a 2021 report from consulting firm PwC found that 83% of consumers think companies should be actively shaping ESG practices, while 86% percent of employees stated that they prefer to support or work for companies that care about the same issues that they do.

Given the obvious impact it has on emissions, the logistics industry understandably has a huge role to play in achieving ESG goals, and that time to act is now: the United Nations’ (UN) Emissions Gap Report 2022 found that the world must cut emissions by 45 percent to avoid global catastrophe.

But while many may have the best of intentions, it can be difficult for businesses to figure out where to start tackling the problem. Here are the steps that you, as part of the delivery and logistics industry, can take to achieve your ESG commitments.

The most recent update for companies in Australia is the mandatory climate reporting, which will impact the logistics industry. See here to read more about this topic.

1. Define your ESG goals

Like anything else your business is trying to achieve, the first thing to do is define your goals or objectives.

A good place to start is with the United Nations’ Sustainable Development Goals (SDGs), which sit at the core of its 2030 Agenda for Sustainable Development. The UN explains that the 17 SDGs “recognize that ending poverty and other deprivations must go hand-in-hand with strategies that improve health and education, reduce inequality, and spur economic growth – all while tackling climate change and working to preserve our oceans and forests.”

Of course, your business may not be able to contribute to each of the 17 goals, but there are a few focused on sustainability and climate change that are particularly important for logistics: 

  • Goal 11 - Make cities and human settlements inclusive, safe, resilient, and sustainable
  • Goal 12 - Ensure sustainable consumption and production patterns
  • Goal 13 - Take urgent action to combat climate change and its impacts

2. Understand the different types of emissions in your supply chain

So, now you have your goals in place: they’re likely to take some form of reducing the emissions in your business and improving sustainability. Those are still big goals to tackle, so understanding the different types of emissions produced (and which are actually in your control) can help.

Greenhouse gas emissions can be divided into three categories for businesses: Scope 1, Scope 2, and Scope 3 emissions. According to the World Economic Forum (WEF), dividing emissions into three groups can help measure progress in making reductions as it can help businesses understand what is in their direct control. 

The WEF defines the different groups as follows: 

  • Scope 1 emissions: These are ‘direct’ emissions that a company causes by operating the things that it owns or controls, like driving the vehicles in your fleet.
  • Scope 2 emissions: These are ‘indirect’ emissions created by the production of the energy that an organization buys through your utilities providers.
  • Scope 3 emissions: These are also indirect emissions, however they relate to the emissions produced elsewhere along your supply chain, from the suppliers manufacturing the parts of your products to the customers using them.

Mapping your supply chain against these three scopes can give you an idea of where to start in tackling emissions in your business.

3. Identify specific areas for improvement and the tools to help

Depending on the issue, an ESG ‘practice’ or ‘working’ on ESG issues could mean actively taking steps to achieve a change or, alternatively, ensuring that your business doesn’t do a certain thing. For example, in the environmental sphere, are you working towards reducing the Scope 1 emissions caused by your business? Looking at the social space, have you ensured that modern slavery is not present across your supply chain? 

With the help of the right logistics software, here are a number of easy places to start taking action when it comes to ESG issues:

  • Decreasing fuel consumption: By using route optimization software like Adiona to power your delivery network, you can both maximize the number of deliveries per shift with better routing, and reduce the amount of time your fleet spends idling in traffic or navigating inefficient routes, reducing fuel consumption.
  • Decreasing greenhouse gas emissions: In addition to reducing fuel consumption, more efficient routing for your fleet means less time - or even less vehicles - on the road, which in turn means decreased Scope 1 emissions. Adiona can also run simulations to help your business make strategic decisions, like how to plan your path to fleet electrification or adopt other mixed-vehicle fleet arrangements including eco-friendly options like cargo bikes. 
  • Reducing congestion: Goal 11 of the UN’s SDGs reminds us that acting on ESG means making a better world for other people. Minimizing emissions and idling time in urban areas through route optimization reduces congestion, which contributes to creating more sustainable communities. Less cars on the road means both less pollution, improving the air for the wellbeing of residents, and also safer roads, helping to foster inclusive, safe, resilient, and sustainable cities.
  • Asset optimization: Shiny new things are fun, but constantly buying new is the opposite of sustainable; instead, businesses need to invest for the long term in assets that will last - and make the most of them. By providing visibility across your supply chain and running scenario simulations on the effects of new assets, Adiona can help your business plan for the long term on everything from a new, durable vehicle fleet to the surrounding infrastructure, helping your business achieve greater sustainability. 
  • Responsible production and consumption patterns: Greater visibility over your supply chain with logistics software can help your business see where both money and resources are being wasted from production to delivery, and how to reduce this wastage through more sustainable production patterns. Depending on the product, a more sustainable product may also produce fewer emissions when used by the end customer, helping your business combat its Scope 3 emissions.

4. Ensure accurate measuring and reporting

Now that you know what you can do and you’ve got the tech to help you do it, the next step is to make sure you can track it all.

Given the expectations that customers, employees, and investors have for businesses to take action on ESG, being able to promote this work can give them a significant boost. As a result, businesses have been quick to label things ‘green’ and ‘eco’ incorrectly or without adequate proof, leading to fines from regulators. For example, the Federal Trade Commission (FTC) in 2022 fined retailers Kohl’s and Walmart a combined $5.5 million for advertising products as being bamboo when they were actually made from rayon. The FTC stated that the retailers “engaged in ‘greenwashing’ by making deceptive eco-friendly claims for those products”.

With this in mind, it’s important to be able to accurately track and measure the work that your business is doing on its ESG measures.

By capturing all the data across your supply chain, providing insights to help you take action on various measures, and in turn providing fresh data to help you assess the impact, supply chain software like Adiona can help ensure accuracy in your reporting, keeping you safe from claims of greenwashing. 

This commitment to transparency and compliance also shows a commitment to proper corporate governance, which is, of course, itself another aspect of ESG.   

5. Promote your efforts

As we’ve learned, customers and employees alike both like to be associated with businesses that work on ESG, so it’s important to promote your efforts! 

By showcasing your work, you not only improve your customer satisfaction metrics, but also attract new customers who want to consume sustainable products, and attract new talent to your team who want to work for a business that cares about sustainability. By growing your business, you can in turn get better access to resources to continue your efforts. 

Test out simulation for your fleet

Adiona offers two weeks of access to our simulation tool for free. Try it out for yourself and see how much you could cut your emissions by just through optimizing your existing fleet. 

Find out more here