There is a lot of focus on reducing greenhouse gas emissions in the freight and supply chain industry. But how does a company reduce its overall emissions if its freight volume increases?
Emissions intensity, or carbon intensity, is a key performance indicator (KPI) that measures the amount of GHG emissions per unit of business activity.
In the freight industry, it’s generally calculated by dividing a company’s overall emissions by the amount of goods transported and the distance they are moved. Lower emissions intensity indicates that a company runs more efficiently in terms of GHGs emitted.
Useful metric for freight buyers
Emissions intensity is one of the best KPIs companies can use to compare the emissions associated with moving the same cargo via different modes of transport or via different service providers, according to Moritz Tölke, technical manager at the Smart Freight Centre.
The Smart Freight Centre’s Global Logistics Emissions Council created the GLEC Framework for supply chains to more accurately measure and reduce emissions.
“Absolute figures are always dependent on transport activity. But if you have the emissions intensity, you as a shipper or a freight buyer can make a very educated decision,” Tölke told FreightWaves in a previous interview.
When emissions intensity numbers are calculated reliably using primary data, freight buyers can compare the environmental impacts of shipping with different providers, he said.
“It’s crucial that you know how it was derived.” Tölke said. If emissions intensity is calculated using default industry values, it generally won’t change, making it a lot harder to track progress. The more emissions numbers are derived using primary data, the more reliable they are.
“There is this business reality obviously that you can implement certain reduction measures, but if you at the same point increase transportation activity, or the amount of cargo increases that you’re moving, the effect on the overall emissions might not be as clear as you want it to be,” Tölke said.
This means that as a company transports more goods, its overall emissions increase. But emissions intensity could be improving (going down) at the same time.
J.B. Hunt and Amazon are good examples of this. Demand for consumer goods and transportation increased during the pandemic, causing their businesses and transportation needs to rise. In 2021, both companies reported that their overall emissions rose, but their carbon intensity went down.
Importance of absolute emissions
Environmentalists recognize that emissions intensity is a useful metric but stress that companies should focus mainly on reducing overall emissions to zero. The argument is that if emissions intensity gradually decreases but overall emissions continue to increase, the worst impacts of climate change won’t be avoidable.
“We have to continue to increase efficiency in all sectors. But we must accelerate this trend because current absolute emissions are a real problem — especially in freight transport, which has such fantastic growth prospects in the coming decades,” said Tyler Cole, director of carbon intelligence at FreightWaves.
“Incremental changes to fuel efficiency are not compatible with 2050 emissions-reduction targets,” Cole said. “New technologies and logistics networks have to be introduced and scale in the coming decade.”
Tölke said that carbon intensity is a “very powerful and meaningful KPI” when it’s calculated using primary fuel consumption, energy consumption and supply chain data. But it must be seen in combination with absolute emissions because “both of them are essential.”
“We obviously want to have the overall absolute figure going down, and we need to, so it’s not enough in general to just set intensity targets and say, ‘That’s going to solve it.’ But you also need to set absolute targets like science-based targets, for example,” Tölke said.
Coles said, “It’s easy to get caught up in the argument over absolute emissions versus emission intensity. The reality is that both matter.”