Let’s start with a piece of relevant data! 

Freight transportation and logistics activities are the source of approximately 10% of global greenhouse gas (GHG) emissions. More importantly, without any reduction efforts, this is expected to increase to around 40% by 2030. The introduction of this new framework from the Smart Freight Centre (SFC) is, therefore, a very important additional tool to help decarbonise the logistics industry. We're here to explain to you how.

The SFC in collaboration with the World Economic Forum has launched the much-anticipated “Voluntary Market Based Measures Framework for Logistics Emissions Accounting and Reporting.” It is based on the “Book and Claim” approach (a versatile “chain of custody” system to support heavy transport decarbonisation through the supply chain). Plus, it supplements the fundamental transportation greenhouse gas emissions accounting principles described in SFC’s GLEC Framework.

A book and claim chain of custody model

Framework Implications and Takeaways

1. Voluntary Market Orientation

This new framework is linked to the voluntary market, hence it is non-mandatory guidance.

2. The Definition of Carbon Insetting

There are multiple definitions of a carbon inset. The original definition is "to fund an emissions reduction or removal that takes place within a company's own supply chain". This could for example be funding the adoption of sustainable agriculture practices at a food supplier or funding biofuels for the vessel that a company's cargo is shipped on. 

Nowadays, within the logistics and transport sector, a more relaxed definition is accepted, which is "to fund an emissions reduction within the same sector". For example, funding biofuels on any marine vessel, enabling companies to decarbonise their shipments, regardless of the physical location of their freight. Such concepts will be further clarified below.

3. Globally Accelerating Transport Decarbonisation

This framework is the latest in a series of SFC tools aimed at accelerating heavy transport decarbonisation. It aims to achieve this by encouraging the uptake of low-emission transportation solutions and services and scaling up decarbonisation tools such as biofuels.

One key aspect to emphasize is that the environmental benefits achieved through this framework can be easily and freely shared on a global level. By enabling the transfer of these green benefits, it becomes possible for greener transport solutions to scale up more efficiently. Consequently, this will lead to reduced costs, making it more affordable for businesses within the logistics industry to work towards meeting the 2050 Paris Agreement Net Zero goals.

4. Effective Collaboration and Partnerships

The framework outlines a way for shippers, logistics service providers, freight carriers, and freight decarbonisation solution providers to effectively partner with each other to deploy low-emission transportation services. 

Notably, this framework was developed under the leadership of Dan Smith (Program Director of the Smart Freight Centre), with the collaboration of industry players such as C.H. Robinson and Deutsche Post und DHL.

5. Carbon Footprint Reduction

Can shippers reduce their carbon footprint by purchasing carbon insets? The answer according to SFC is yes, but under some conditions specified in the framework. If a shipper purchased carbon insets (linked to a low-emission transportation service within the transportation supply chain, but potentially outside their physical supply chain) then they can report a reduction of their own GHG profile. Such reduction is possible even if their freight was not physically transported on that low-emission transportation service. 

However, the reduction of the company’s GHG footprint can only happen when linked to the same mode of transport. For example, if you purchase a marine biofuel inset, you can only use this to reduce your scope 3 sea-trade-related emissions.

This carbon footprint reduction is beneficial for both:

• The inset issuer: as it will increase sales in renewables and help recover costs arising from fleet decarbonisation.
• The inset buyer: as it gives the buyer’s clients access to a flexible low-carbon offering, helping to accelerate the buyer’s supply chain decarbonisation.

Finally, it is important to note that not all organisations accept SFC-aligned insets as Scope 3 emissions reductions. For example, the Science Based Targets Initiative only allows carbon insets that happen within a company's own supply chain to count as scope 3 reductions.

6. Additionality Concerns

First, what is additionality?

• The Greenhouse Gas Protocol defines additionality as a criterion for assessing whether a project has resulted in GHG emission reductions or removals in addition to what would have occurred in the project’s absence, in a business-as-usual scenario. Projects should be additional from a financial, technological, and policy perspective. If there is no additionality then there is no real incremental positive impact made by the project.

SFC defines “additionality” differently: If a solution or low-emissions transportation service is not mandated by law, the SFC considers the intervention additional. As such, SFC-approved insets are only additional from a policy perspective and do not require financial or technological additionality. SFC-approved carbon insets are thus not necessarily fully additional.

To align with the new guidance, a company has to disclose the level of additionality of the inset, whether it's "Additional in accordance with the Framework" or "Fully Additional", to allow the customer to make an informed decision. Today, most carbon insets in the market receive significant government subsidies. For example, the Dutch government heavily subsidises marine biofuels. These insets would not be fully additional.  At Lune, we have always had a quality approach and will focus on offering fully additional carbon insets, in order to maximise the positive climate impact and mitigate our clients' greenwashing risks.

7. No erroneous double counting

The framework also discloses how to avoid a situation where 2 or more companies erroneously take ownership of the same GHG emission profile. This means the framework guarantees that the environmental benefits can only flow through the supply chain once.

8. The Concept of "Vintage"

The framework also outlines requirements for insets durability, through a concept called "vintage". In essence, Low-emission Transportation Services (LETS) must be booked within 12 months of generation or production and this low-emission profile must be included in the inventory reporting of the claiming organisation within 24 months of the LETS being booked. 

It is relevant to take into account that SFC clarifies due to the supply chain complexity, it shall be a case-by-case analysis.

Conclusion:

Congratulations SFC, World Economic Forum, and the rest of the collaborators for such a milestone in the logistics and supply chain industry! This is a great opportunity to join forces and deliver sustainable, low-emission transportation services.

At Lune, our mission is to create a positive climate impact you can feel proud of! We help companies like Forto Logistics stand out from their competitors by embedding climate impact into their product. How? Through our API for granular emission calculations (GLEC certified by SFC) and high-quality carbon offsetting projects.

From this July, we’re happy to announce that Lune will also be offering high-quality carbon insetting projects, aligned with the SFC framework. Lune has partnered with independent carbon inset platform, 123Carbon, and its carbon inset providers to offer high quality, transparent, fully additional marine insets derived from biofuel projects. Always with the aim to guarantee the insetting project’s quality, traceability and transparency. 

Want to know more? Reach out at “[email protected]”. We’re waiting for you to join in with our enthusiasm!