Podcast: How are logistics companies helping plants calculate the carbon cost of their operations?

Companies around the globe are working hard to establish new systems for documenting and reporting their greenhouse gas footprints, and other data relating to their products and supply chains. To achieve this and stay in compliance with ESG standards, plants are leaning more than ever on their logistics partners to provide key data on supply chain-related carbon emissions.

In this bonus podcast, Plant Services chief editor Thomas Wilk continues his conversation with Jason Manganaro, VP of Commercial Technology for the Americas at SPARX Logistics, on the current capabilities of logistics to calculate and provide these carbon data.

Below is the transcript of the podcast:

TW: Are you and your team being asked by customers to help comply with certain ESG regulations, or at least calculate the carbon footprint and then the carbon cost of moving things around the globe? That's something which we're hearing more and more that plant managers are being asked to understand, which is what is the carbon cost of getting materials to the plant. So I was curious to know, is a company like SPARX being asked to help calculate that stuff to or at least keep track of it?

JM: Yeah, that's a great question and it's become a really hot topic. I would say, just to kind of level set, I feel like there's probably three categories of companies out there on this. There's a category that is and has always been concerned about environmental issues. It's either the ethos of the company itself, their customers, they know the customers that buy their product care about this and therefore they care about it, or you know they're in an industry where it's really highlighted this need to really be responsible about your impact is. It’s just part of the playing field, right? So there's definitely a set of very motivated companies that have been studying this and been looking for solutions on this, and we've had some really good conversations with companies in that category.

There's a second set that I would say is concerned about it. They want to see what's going to happen next. They're closely watching, for example, the ETS, the emissions trading system that Europe is going to be rolling out, I think it's from 2024 to 2026, to push the market to regulate itself in terms of scaling down carbon emissions, and having a cost involved for companies that are not scaling them down or not keeping them under control. And then there's of course that kind of longer term Paris agreement, reduce emissions by I think it's 45% by 2030 and then to net zero by 2050, and that's kind of a global initiative that's going on. So there's a lot of companies out there I think that are paying attention to all this. Those dates are pretty far down the line if you're a kind of quarter-to-quarter operating company, so they're not necessarily jumping in with both feet right now, but they want to know what's happening. They want to know what the potential exposure to them will be. They want to know what the penalties might be if they're slow in adhering to this.

And then there's a third set that are just blocking their ears, what our kids do when they don't want to hear bad news about something. Those companies are probably going to wait until it is absolutely the last necessity to adhere to any of this stuff, and I understand it, from a business standpoint they just see it as cost and complication and so forth.

We're really focused on that first set that already care about it and are already putting some energy into it because. One of the biggest concerns I think we hear from the industry is that they understand that this coming, they want to be responsible. They want to be able to measure what their emissions and their carbon impact is, but they don't feel like they have the tools to do it. You mentioned that there's some tools in the production side that you can apply; on the supply chain side, they're really reliant on other parties to give them those numbers. And what I hear over and over again is, “listen, I've got three carriers moving on the same lanes and I’ve got three completely different outputs of what they measure the carbon footprint as. And when I dig into it, I don't really trust any of the three of them, because I don't see the math behind it.”

This isn't to point blame or anything. I feel like carriers are being put in an unfortunate position too here where they're being asked to measure something that they've never really measured this closely before and account for. Where we're at now is the stage of, you know, an average of an approximation of a guesstimate of whatever number they can kind of come up with and say, “OK, this going to be our base, and we're just going to replicate this and see where we are.”

So a lot of what we've worked on is trying to find a way for specific companies to accurately measure their carbon footprint based on the exact movement of their goods. The way that we do this is, a lot of our tracking and visibility tools are based on the PO level, the SKU level. So if you've got that really exact tracking of when goods are being manufactured – when they're moving, when they're arriving, exactly where they are at any given time on the water, on the rail, on land so forth – you can get a pretty accurate calculation of how many miles they moved.

Then if you know things like the speed of the vessel, the engine rating for the vessel that they're moving on, the type of fuel that vessel is using, you can get a pretty good estimate of what the emissions were for that voyage. With those kind of data points, you can start to really get to, “ok, my goods on that vessel weighing this much, taking up this much space, and that vessel doing this kind of emission, you can get a pretty good number for what the carbon emission associated with that product, container, even an individual SKU, you can get it down to that level.

Being able to calculate at that level is, to me the first hurdle. You want to be able to get what you consider a very logical, accurate, dependable way to measure “what am I doing today?” And then once you've got that, you can start to pick it apart and say, “ok, this what I'm doing. Where is that carbon coming from? Where are those emissions coming from? Which lanes are the ones where I'm having the heaviest emissions, which are the lightest emissions? If I'm doing things with multiple routings or multiple carriers, which ones are doing better than others in terms of the carbon? And then is there a way to make improvements without really changing a lot? If I shift more freight to this one carrier who's performing better on a carbon emissions standpoint, can I make an improvement?”

One that we see all the time is air versus ocean. Air pollution, even if you're just moving a little bit of air freight, I've seen it be like 7 to 9 times more polluting in terms of carbon emissions than ocean. So (with air) even though shorter trips and shorter amounts and shorter quantities, the pollution output is just tremendous. If you're able to shift even some percentage of that cargo from air to ocean, you're going to improve your carbon footprint immediately. It takes more planning. A lot of times it takes maybe a recalibration of the way you think of some goods and how you plan for goods and how you adjust to your supply chains or receive those goods and so forth, but that's an obvious one that we see sometimes.

And you know, it's good business. Most companies that I've talked to in the last 10 years are all in the business of reducing their air freight if they can. Air freight is expensive, it usually comes with an emergency situation – there's been some problem, there's been a mistake, something was done that is causing the uptick in the air freight. If you can avoid that and do it by ocean, which is more cost effective, a little smoother, more predictable, you're in better shape.

The next frontier of that is now that we're collecting data from a lot of companies that are doing this and measuring this, we want to be able to create this massive index of, what is the best in class case out there? Part of this a lot of carriers are starting to bring on liquid gas fuel, biofuel, other things that are green friendly fuel sources, and they're very consciously trying to create service options that will be by their nature very, very low carbon emission or maybe no carbon emission. The question will always be, “is it worth it?” The extra cost, the changes I might have to make in my routing or my sourcing in order to utilize those services. We want to be able to provide that information: look at what you're doing today, what could be the impact if I switch to X, Y, or Z, and then is it worth it? Is it worth the extra time, the extra cost and so forth?

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About the Podcast
Great Question: A Manufacturing Podcast offers news and information for the people who make, store and move things and those who manage and maintain the facilities where that work gets done. Manufacturers from chemical producers to automakers to machine shops can listen for critical insights into the technologies, economic conditions and best practices that can influence how to best run facilities to reach operational excellence.