Across the globe, carbon regulations, policies and targets have been established to mitigate climate change. As the transport and logistics sector contributes over a third of global CO2 emissions, supply chain stakeholders can play a pivotal role in achieving targets by implementing carbon reduction strategies.
What are Carbon Regulations?
Carbon regulations are legal policies or measures with the purpose of reducing carbon emissions to mitigate climate change. These policies differ across the globe, however many countries including the US, UK, EU and Asia have committed to reaching net zero by 2050 as their core overarching target, and are increasingly implementing new measures to help achieve this.
The United Nations (UN) and European Union (EU) have strong sustainability and net-zero goals and green legislation is being shaped in an effort to reach goals set. With growing climate concerns, we are seeing more and more governments implement carbon reduction strategies from mandatory carbon reporting to placing a carbon tax on imports, all to lessen their overall climate impact.
What Carbon Regulations Affect the Logistics Industry?
In 2021, the European Union (EU) developed 13 policies to reduce GHG emissions by 55% by 2030 with the aim to reach carbon neutrality by 2050. One of these policies, the Carbon Border Adjustment Mechanism (CBAM), affects any shipper looking to export goods into the EU.
- Fit for 55: In 2021, the European Union (EU) developed 13 policies to reduce GHG emissions by 55% by 2030 with the aim to reach carbon neutrality by 2050. One of these policies, the Carbon Border Adjustment Mechanism (CBAM), affects any shipper looking to export goods into the EU.
- CBAM: The European Parliament and Council on the CBAM have established legislation that promotes the decarbonisation of imports into the EU. The agreement aims to minimise the risk of carbon leakage by essentially placing a ‘fee’ on carbon from imported goods moving into the EU. EU importers will be required to buy carbon certificates for their goods received from outside the EU, corresponding to the price that would’ve been paid to produce the goods under the EU’s carbon pricing rules. The first transitional phase of CBAM is set to begin in October 2023 where cement, iron and steel, aluminium, fertilisers, and electricity are in the scope of goods affected. EU importers of these materials will need to be aware of the carbon certificate they will need to successfully move goods into the EU.
Reporting requirements differ from country to country.
European Union (EU)
The Corporate Social Responsibility Directive (CSRD) is setting the standards high for green legislation as they firmly believe consumers, investors and the public have the right to know how businesses are directly contributing to climate change. The CSRD builds on the already established Non Financial Reporting Directive (NFRD), but has increased its scope of businesses included who meet at least two of the following criteria:
- €40 million in net turnover
- €20 million in assets
- 250 + employees
- Non EU companies with a turnover above €150 million in the EU
United Kingdom (UK)
The Streamlined Energy and Carbon Reporting (SECR) policy asks UK companies to disclose their energy use and carbon emissions if they are either:
- Quoted companies
- Large unquoted companies
- Large limited liability partnerships (LLPs)
Within this policy, these businesses have to report on a myriad of sustainability measures, including Scope 1 and Scope 2 GHG emissions, energy use, and actions taken amongst other reporting requirements.
United States (US)
The United Securities and Exchange Commission (SEC) requires publicly listed companies to report on their financial performance, strengths, and weaknesses. However, under a recent SEC proposal, these companies will need to share their climate impact inclusive of Scope 1 and Scope 2 emissions, as well as their sustainability governance amongst other reporting requirements. If the proposal is approved, the policy will be phased in between 2023 - 2026.
The GLEC Framework
The Global Logistics Emissions Council (GLEC) Framework is a methodology developed by the Smart Freight Centre to measure and report greenhouse gas (GHG) emissions in the logistics sector. The GLEC Framework provides a standardised and transparent way for companies and organisations to measure their logistics emissions, which is essential for setting targets, tracking progress, and making informed decisions to reduce emissions.
The GLEC Framework covers six different modes of transportation: road, rail, air, sea, inland waterways, and multi-modal (i.e., combinations of two or more transport modes). It includes guidance on how to report logistics emissions, including recommended reporting formats and best practices for data collection and verification. By following the GLEC Framework, companies and organisations can improve the accuracy and consistency of their emissions reporting and contribute to the development of a more sustainable and low-carbon logistics sector.
For the implementation of sustainability reporting, doing an initial materiality assessment is key to identify stakeholders’ views, accurately establish the business’ role in the industry and ESG baseline, and highlight any possible gaps and downfalls to subsequently develop goals around them. Getting accurate emissions data from your supply chain - in particular scope 3 emissions - is a difficult task which may require a third party, expert auditors or the use of new and complex technology that can pull accurate data to effectively report on ESG.
Under the guidance of the GLEC framework, the Woodland Group reports on scope 1, 2 and 3 emissions, and delivers carbon conscious solutions and sustainability consulting to our clients and partners.
If you would like to learn more about our carbon calculator, and carbon conscious solutions, please reach out to our sustainability management team below:
The state of being carbon neutral refers to when the amount of GHG emissions released from an activity is completely offset by the amount removed via carbon offsetting projects (e.g. peatland restoration, renewable energy investment, carbon capture and storage, etc.), meaning there will be limited effects on climate change.
Greenhouse Gases (GHG)
Greenhouse Gas emissions refer to the release of gases into the atmosphere produced from man made sources, (such as burning fossil fuels to power cars, ships, trains and planes) which trap heat, and subsequently contribute to global warming.
The Science Based Targets Initiative states that net-zero is the act of reaching a 90%+ reduction in annual carbon emissions (typically by 2050) compared to current levels, with the remaining 5-10% to be made carbon neutral to limit any remaining impacts. This is consider the only route to limit global warming to 1.5°C and prevent rapid climate change.
Scope 1 Emissions
Direct GHG emissions from company owned sources, such as emissions from owned trucks, vans, ships or emissions from equipment or warehousing.
Scope 2 Emissions
Indirect GHG emissions that your company has purchased such as electricity, heating, and cooling.
Scope 3 Emissions
Generally accounts for the biggest percentage of emissions associated with a company and includes all other indirect emissions along with the supply chain. This could be from third party freight forwarding companies used for delivery, emissions from employee commutes or from the production of packaging your products externally.
Guide to Woodland Online
Woodland Online provides full visibility and control every step of the way.
Guide to Tariff Classification and Duty Minimization in the US
What is a tariff code?