Why is capturing emissions and carbon footprint data so difficult in the transportation industry? Cam Smith and Nina Barton talk about ESG in transportation and how infrastructure, customer expectations, and lack of harmony are getting in the way of reliable data that helps shippers find ways to reduce emissions and meet their goals.
Chris Parker: Hello everyone, and welcome to the Expeditors Podcast, where we look at the logistics and freight forwarding industry through the lens of a global logistics provider. I'm your host, Chris Parker, and today we are focusing on the E in ESG, that's Environmental, Social, and Governance, which are pillars of corporate sustainability, and we're going to be talking about the importance and challenges around emissions and carbon footprint data. With me today are Cam Smith, Director of Environmental Sustainability, and Nina Barton, Manager of Environmental Sustainability and Network Solutions, in North Asia. Cam, Nina, welcome to the podcast.
Cam Smith: Thanks for having us.
Nina Barton: Morning Chris. Thanks for having us.
Chris Parker: Absolutely. It is a pleasure to have both of you here. I want to get a little bit of background on you two before we get talking about today's topic here. Nina, let's go ahead and start with you. Would you run me through your career and your history with the company or even before? How did you get involved in logistics, and what brought you to this role now as Manager of Environmental Sustainability?
Nina Barton: Oh, wow. This might take up the whole section. Like most people, I fell into logistics and started my career with Expeditors in January 2002 in our Manchester office as a District Sales Executive. I then moved into the account management program as a RAM. In 2010, I moved down to London and took on a GAM role for a couple of years. I took over the retail vertical for what was EMAIR, so Europe, the Middle East, Africa, and India. And then that brought me to Hong Kong in 2015, looking after Asia Pacific.
Over the last few years, we just started to see that in our conversations with retailers, everybody was talking about sustainability. It was the number one topic that they wanted to talk about with every meeting we went to and every customer event we had; they all wanted to understand more about sustainability. So, I started teaching myself and learning more about that. I did an external sustainability in supply chain management certification, which Cam actually did as well. We were on the same course because we both had an interest in it. We then created a unique role in North Asia where I had to focus on both environmental sustainability as well as supporting the Network Solutions group as well. Since then, a lot of that started with retail, but now it's expanding into every industry that we are involved with globally. And that's how I ended up getting involved in this particular part of the business.
Over the last few years, we just started to see that in our conversations with retailers, everybody was talking about sustainability. It was the number one topic that they wanted to talk about with every meeting we went to and every customer event we had; they all wanted to understand more about sustainability. So, I started teaching myself and learning more about that. I did an external sustainability in supply chain management certification, which Cam actually did as well. We were on the same course because we both had an interest in it. We then created a unique role in North Asia where I had to focus on both environmental sustainability as well as supporting the Network Solutions group as well. Since then, a lot of that started with retail, but now it's expanding into every industry that we are involved with globally. And that's how I ended up getting involved in this particular part of the business.
Chris Parker: Cam, let's turn it over to you. Same thing, your history, background with either Expeditors or just in logistics, how did you get to where you are now?
Cam Smith: I started with Expeditors in 1994 in Air Export Warehouse. I come from a strong operational background, worked in New York, Miami, New York again, and then shifted into the role of Transition & Implementation. Basically, we're responsible for onboarding accounts and making sure that they were brought into the fold appropriately and that we were delivering on what we were supposed to.
In doing that, sustainability was something I'd studied growing up, back in university, and decided I needed some additional education, saw the opportunities that were available and the things that were coming up in relation to sustainability, and the things where our company could have a greater impact. I took the same course as Nina. We didn't know we were each registering for it at the same time, but we did, and then followed up and took a course in leading sustainable corporations at Oxford Saïd and then interviewed for the role. And I've been the Director for Environmental Sustainability now for the last six months, shifting from London back to Seattle.
In doing that, sustainability was something I'd studied growing up, back in university, and decided I needed some additional education, saw the opportunities that were available and the things that were coming up in relation to sustainability, and the things where our company could have a greater impact. I took the same course as Nina. We didn't know we were each registering for it at the same time, but we did, and then followed up and took a course in leading sustainable corporations at Oxford Saïd and then interviewed for the role. And I've been the Director for Environmental Sustainability now for the last six months, shifting from London back to Seattle.
Chris Parker: Welcome back to the States.
Cam Smith: I'm very excited to be back.
Chris Parker: For the Environmental Sustainability team that you're on, what are some of the big focuses right now?
Cam Smith: Really looking at working with customers. We have our internal focus, which has been there with our corporate green teams for many years. So, it's helping to make sure that those are taken care of, everything internally, but externally it's reaching out. Customers are asking more and more questions. We want to be there for them, and we want to work with them on reducing their Scope 3 emissions, as well as delivering in those particular areas.
Chris Parker: All right. Let's go ahead and get started with today's topic. And the first question that I have here is, I want to establish the baseline, or at least the sustainability landscape here within the transportation industry. Would you tell me what is unique about ESG programs within transportation?
Cam Smith: Really, people just really want their stuff, and they want it now.
Chris Parker: Simple as that.
Cam Smith: The supply chain is consistent and demanding. The environmental piece is trying to figure out how to get good stuff and better stuff, to people in better ways. Companies are trying to reduce their carbon greenhouse emissions who are trying to just be more environmentally sustainable. It's our job as forwarders to step in and help them out there.
Chris Parker: What do you mean by that? Good stuff, better stuff in better ways?
Cam Smith: Good and better stuff. Basically, buying better, using better, and working on things that are within a circular economy. Anything along those lines that actually is going to bring value back in. We end up using a lot of plastics, so couldn't we do better with that?
Chris Parker: Nina?
Nina Barton: I think one of the challenges that makes it unique as well as the globalization within the industry. Everything is moving across the world by different forms of transport that are historically fossil fuel-based. The idea of being more environmentally friendly makes it a lot harder due to the complexities of global supply chains and not necessarily knowing exactly where the product is coming from and what that supplier is doing, and it's the other side of the world.
You then obviously have challenges around customer expectations as well. They need to become busy to make sales; they need to meet their targets, and they need to keep their customers happy. All of these things mix together to make it challenging to look at how they meet the expectations, how they deliver the service, deliver the product in a greener, more environmentally friendly way. Within that global supply chain complexity, there are a lot of different aspects of it, from the social side as well as governance, but for today, obviously, we're focusing on the E, and it's really about understanding the trade-offs and how they can look at the different options that are out there to be able to deliver their stuff in a better, greener way.
You then obviously have challenges around customer expectations as well. They need to become busy to make sales; they need to meet their targets, and they need to keep their customers happy. All of these things mix together to make it challenging to look at how they meet the expectations, how they deliver the service, deliver the product in a greener, more environmentally friendly way. Within that global supply chain complexity, there are a lot of different aspects of it, from the social side as well as governance, but for today, obviously, we're focusing on the E, and it's really about understanding the trade-offs and how they can look at the different options that are out there to be able to deliver their stuff in a better, greener way.
Chris Parker: This is an industry dedicated to moving things around the world and therefore requires-
Nina Barton: And it's an old industry,
Chris Parker: Right, exactly. An old industry reliant on fossil fuels for the time being. There are just a couple of things right from the get-go that set it apart from other industries in terms of trying to reach certain goals or establish various initiatives.
Cam Smith: It's very tough to have a sustainable business without any business. We have to make sure that the wheels stay on, and we continue to keep things rolling, but then it's also working to find better ways to do that.
Chris Parker: I know that we've covered a little bit already here, but what would you say are some of the conflicts or challenges that the transportation industry comes across as they're trying to improve their ESG compliance?
Nina Barton: So, I think infrastructure is certainly one of the challenges that we face within the industry. Whilst there are already a lot of good solutions out there in certain parts of the world, it's not necessarily supported in other parts as well, especially looking at Asia. Investment and costs, there are a lot of costs that are being banded around when it comes to the development of new fuels or the new technology that's out there as well to help reduce emissions. I think that one of the biggest challenges we are faced with really is the cost side of things and the infrastructure. Also, with the changes in regulations, there are constantly new changes happening, new things every day. You can pretty much guarantee you'll get something in your inbox every morning that something has changed somewhere along the lines. And there's like a lack of standard, and I think a lot of it as well comes down to that it's global.
Every country has a different path. Every country is doing things slightly differently. So then that has an impact on the private sector as well, trying to work out how do we navigate around all the different challenges that are being thrown out there because of the nature of the business. Some countries are more heavily invested in decarbonization than others. They have their own targets, and they are supporting the private sector by offering incentives and being able to develop cleaner fuel faster than others as well. I think the complexity is different, so many different countries, so many different regulations, so many different agendas, that that really adds to complexity globally.
Chris Parker: Global issues but made different by the various countries that are trying to initiate their own standards and regulations.
Nina Barton: And the investment that's being made. It varies considerably, depending upon which country in the world you're looking at.
Cam Smith: I think it's because it's a complex topic as well. There's a huge lack of knowledge, and the reason I say that is the knowledge sits in particular pockets and areas. In the logistics world, we haven't done a great job of spreading that knowledge around. There are huge opportunities for us to help our customers and help people just generally moving cargo in order to spread that knowledge more effectively. It's our job or incumbent upon us to explain that and help people out so we can work on ways in which to get people to decarbonize. That feeds an economy, and when we're feeding an economy, obviously, that is an opportunity in order to invest in that infrastructure. When people see that and the value in that and what the yield and return is, I think we'll see much, much greater changes and adjustments.
Nina Barton: A lot of the focus from customers due to regulations and requirements has been around reducing their Scope 1 and Scope 2 emissions, which is an easier task because that's something that companies have more visibility of and greater control of. When it comes to transportation, which falls under Scope 3, there are a lot of challenges around transparency. There's a challenge around getting the data to actually understand what emissions look like, and the logistics industry, just because of its nature and the fact that it is one of the highest emitters of emissions globally as an industry, means that there's going to be greater pressure for all companies to really focus on reducing their carbon emissions. And because of that lack of data and transparency, that's going to be a challenge for everybody.
Chris Parker: You've mentioned Scope 3 a couple of times here. For folks who may not be familiar with that term, could you explain what that is? Scope 3 implies that there is more than one. What are Scope 3 emissions?
Cam Smith: Scope 3 emissions are defined by the Greenhouse Gas Protocol or GHG Protocol. What that is really 15 different categories of emissions and how they're measured. It's long, and it's complex, but at the same time, in the transportation world, we focus on Category 4 and Category 9 of Scope 3 emissions, and those are basically upstream and downstream emissions. So, either getting your products or selling your products and getting them to market.
Chris Parker: There's a lack of knowledge; things are constantly changing, and new fuels, new means of sustainability, and reducing emissions are constantly being developed and innovated. Investments are hard because it's expensive to change the infrastructure. What's the relationship like with shippers, as they are aware of these kinds of things? What pressure do they feel? What are their expectations of the transportation industry?
Nina Barton: Transportation is really starting to take the forefront in this. We do see more and more customers coming to us and looking for solutions across, not just in terms of investment, but just in terms of being more efficient. So, just going back to your comment around budgets and investments and the challenges around that, that is certainly an issue that we see with customers in that they don't necessarily have a sustainability budget per se. Anything that's going potentially cost money, they need to obviously find out how they're going to pay for that and to recoup that cost within their business, which more and more companies are getting more creative around how they do that. But I think when we're talking to customers, the first thing that we always look at is really avoidance. Are they ordering the right quantities? Sometimes we see customers who are actually over-ordering to meet minimum quantity requirements from suppliers, and they're ordering products that they don't need, and they were never actually planning on selling in the first place.
So, trying to look at, trying to avoid things, how can they use technology better. So then that will also help to reduce costs as well. Then looking at the reduction of emissions. Can they look at switching mode, for example, from a higher polluting transportation mode like air freight to multimodal or ocean or rail as an alternative? Can they do better consolidation? Can they optimize their network better? So these areas also actually have the benefit of reducing costs as well. It doesn't necessarily have to be a costly thing for a company to go through. It will enable them to just follow more efficient processes in their business, which will then help to remove waste, which then also helps to reduce their emissions as well. And then, once those kinds of opportunities have been exhausted and everything is as efficient and optimized as it can be, then there's the opportunity to look at what's termed "insetting" within the industry where they are. Then looking at investing in alternative fuels, for example, which do cost significantly more than standard fuels, especially if you're talking about maritime or aviation fuel.
Cam Smith: I love what you said there, Nina. It really focuses on the three Cs. Consistency in service, Cost, and then looking at the Carbon output as well. And we are seeing that really from a lot of successful procurement approaches with companies we do work with. They tend to have a more comprehensive approach, as well as showing a lot of resilience in their supply chains and how they're approaching those activities.
Nina Barton: One thing, Cam, I was going to ask, did you want to mention anything about what's happening in terms of sustainable fuels with book and claim methodologies and things like that?
Cam Smith: Book and claim is basically when you're inputting sustainable fuels into the same value chain, but it just might not be exactly in the same value area. In other words, you're putting fuel in Chicago, and your movement is actually taking place between Shanghai and Seattle. You're claiming those credits or that fuel or that carbon offset that has taken place by insetting it in a different location.
Nina Barton: It's needed for the industry because it's the only way it's going to grow. Because then it gives flexibility. And for every shipper to invest in sustainable fuel without having to be restricted to a particular carrier or lane, or airport. If the overall sustainable fuel pop is going to grow to the point that we need it to globally, then it has to have some flexibility around that, but it also then has to be regulated so that it is managed properly, there is a full audit trail, so no one's making claims and stuff that they shouldn't be. But with the book and claim process, that hopefully alleviates some shipper's concerns about the fact that their freight is not moving on that flight; it doesn't need to. They can still claim the benefit because they're contributing to the big part because we're all under one environment. So, it's all about how we grow that together.
Cam Smith: Well, it's very similar to what takes place in the electricity market, where you have renewable energy credits that are sold in one location and then used for development in another area, and then those credits are retired against whoever has utilized those, not multiple parties utilizing those. If they're used by a single party, then that allows them to be represented, and it allows for that investment in another area. It drives that demand and that demand signal so they can build more solar wind farms or renewables. And the same is true; you can build more refineries that can actually refine sustainable aviation fuel or sustainable marine fuels, or any biofuel.
Chris Parker: That really changes things because, at least at first blush, when I think about sustainability within transportation, I do immediately think of alternative fuels or electrification, but those are the easy things to look at, but there's a lot of opportunity available for reduction of emissions, just solely by changing, even tweaking things within the supply chain. Do you find that customers approach things in that way - like they tend to think of alternative fuels in such first before they actually even consider how their supply chains are designed?
Cam Smith: Well, we tend to gravitate towards that technology piece or things that are exciting and shiny instead of looking at the things that are just tangible and easily affected. Further consolidation, the mode shifts, slowing down the supply chain or having greater visibility or planning in that supply chain as well. Obviously, if you're sourcing better, you're sourcing on time, and you're pulling in on time, and your production schedules are matching, you're going to be able to deliver on time.
Nina Barton: I do think, though, that for a lot of customers, their initial reaction is, "Well, this is going to cost money; this is going to be an investment." But actually, it can also save them significant money as well, but it all comes down to having the data and the visibility to be able to understand really what that baseline looks like, to then be able to do that analysis, to then delve into that data and understand what can be done better, what can make their business more efficient and therefore reduce their cost, improve their customer service, and also reduce their carbon emissions as well.
Chris Parker: All right, so as other industries are decarbonizing faster, there's been an increase of pressure on the transportation industry, particularly around the supply chain. What role does the forwarder play in all of this?
Cam Smith: Well, the forwarder can help not only source the right equipment or the right fuels and the things that are fancy and shiny that I spoke of already but what they can look at is those tangible things. Better planning with the customer, better visibility, providing the tools, as far as reporting. You're not only looking at historical data, but you're taking that historical data and perhaps modeling that into the future, either utilizing digital twin technology or something along those lines in order to figure out what your supply chain can look like moving forward.
Nina Barton: Having the ability to provide alternative services as well, alternative modes, offering a suite, a menu of different transportation modes that meet the requirements of different products or different business units within a company. That's a big part about it as well, as Cam said, is around the data and being able to provide real insight into what the business really looks like.
Chris Parker: Well, now that you said the magic word, which is data. How easy is it to collect this data? How easy is it to- or is that the wrong word? How is the collection of data? Can we talk a little bit more about data? Is it a challenge to report on emissions or to collect this kind of information?
Nina Barton: It's a huge challenge. Data, in general, is always difficult, especially within supply chain data. It's never clean, and it's never perfect. There are always gaps, and there are always challenges.
Chris Parker: Why is that?
Nina Barton: Just because of the complexity of the supply chains and where you're gathering that data, everybody reports slightly differently. There are always challenges around getting that base shipment data, but then you add that into the complexity of emissions as well and how they're calculated. There are different standards out there. People are using different standards to calculate emissions. Some use advanced software, while others use more traditional and what we call a top-down approach with just a distance versus an emissions factor versus a weight. Then you've got different companies are then reporting on well-to-wheel versus tank-to-wheel, the lifecycle emissions versus tailpipe emissions; it's something like an EV, for example. Tailpipe emissions are zero, so that looks fantastic, but if you look at the lifecycle emissions and you take them into account then how the lithium batteries are produced, and the cars are produced, then actually, or the trucks are produced, it takes a slightly different- the numbers don't look so great, right?
Chris Parker: Sure, sure.
Nina Barton: That's one of the other issues. You then have the fact that some companies are reporting on GHG emissions overall, so not just carbon, whereas others are just reporting on carbon. You start adding all these different things together, and there's just such a lack of consistency and a lack of standards out there that if you are bringing in data from several different providers, for example, then you don't know that that information is accurate. You can't guarantee that that is actually giving you a true understanding of your baseline unless you are already mandating to your service providers what they need to report and how they need to report. Then it's like the Wild West, as Cam would say, isn't it? That data is really not as accurate as it should be.
Chris Parker: It makes a really fuzzy picture; it sounds like.
Nina Barton: Very fuzzy picture.
Cam Smith: As an industry, we're working very hard to come up with ways to harmonize that data, though, or at least the GHG data and the outputs. Working with organizations such as a Smart Freight Centre and the likes of that, GLEC methodology has been very effective and helpful throughout our industry. Well,
Chris Parker: Actually, before you go on, could you explain what the GLEC methodology is?
Nina Barton: It's the Global Logistics Emissions Council, which is part of Smart Freight Centre, but it's designed to drive standards for reporting emissions within the transportation industry. Very clever scientist who is way, way smarter than I will ever be, has come up with all these different calculations and factors based on multiple different aspects of types of aircraft, types of roads even, load factors, types of fuel, whether it be a standard like diesel or an alternative fuel like an EV or hydrogen. They are really building that calculation method to try and make the reporting of emissions as accurate as possible within transportation.
Cam Smith: So fresh out of a meeting in Amsterdam, the information that we've been able to put together and work with governing bodies as well as with carriers and other forwarders and customers in order to figure out how that data can match up best. It's making significant progress.
Chris Parker: But still has a ways to go.
Cam Smith: There are even some ISO certifications that are coming in. ISO 14083 is on its way. We'll see some additional standardization here fairly quickly in making sure that what we are capturing does indeed reflect what is taking place as something's in the air, on the water, or of course, on wheels. It's amazing how fast it's developing. Literally, I'm relaying information that I picked up last week in meetings. So the rate of change and speed, it's no wonder you're asking significant questions; we're even learning as we go today. I'll pick up things from Nina, and Nina will pick up things from me, just because it is the pace at which things are moving.
Chris Parker: So, both of you, in your conversations with customers, what would you say are some of the common strategies or realizations as they've set their own goals for either shooting for net zero or net positive emissions? What are some of the "aha" moments that you feel they have had as they come to understand more of the challenges that the transportation industry is seeing?
Cam Smith: Well, I think as we looked at those first two pieces that Nina brought up earlier, so avoidance and reduction are definitely ways people can start pushing toward those goals. As we get into the insetting or utilizing fuel or something in the same value chain, what that does is, again, offer greater possibilities to reduce emissions. And then, what can't be reduced, or inset must be offset. And so that is providing sufficient reporting so you can offset your carbon footprint appropriately.
Nina Barton: Those are exactly what customers are doing, but it all, and I keep banging on about this, it all comes back to the data. They can't really start to reduce until they understand what the baseline is. I see a lot of the customers spending huge amounts of time really investing in getting their data as accurate as possible, from the type of vehicles that they use to pick up freight to the type of planes that are being used or the actual vessel, to just get as granular information as they really can so that then they know and they can be confident, one in their reporting of their emissions, but also in that they have a strong baseline that they can then look to follow all these sustainable logistic initiatives, like avoidance or reduction or insetting, and even offsetting is the cherry on the top, but, data, data, data, which is not particularly glamorous or sexy, unfortunately, but that's where it all starts.
Chris Parker: Absolutely.
Cam Smith: You can't improve it if you don't measure it.
Nina Barton: You can't manage what you can't measure.
Chris Parker: Nina, you said that the picture is quite murky because there's no consistency with the data as it's coming in. Do you feel like the clarity of that data is improving, or is that a little bit far off in the future?
Nina Barton: As Cam mentioned, there are new standards coming out, and people are starting to understand that more. In China, it's slightly different from the GLEC methodology that Cam talked about. That is being implemented. Everybody's calculating things in different ways. We see more and more going towards GLEC methodologies, but still, not every company out there is aligned with the GLEC methodology. There are still one or two in other places that are being used.
But even using the GLEC methodology doesn't necessarily mean that the report and the data are going to be the same because some are reporting, as Cam mentioned, about well-to-wheel versus tank-to-wheel or all emissions versus just carbon. And also, it can depend upon the data you feed into it. As with everything, what you get out depends upon what you put in. So you could well be using the same software to generate the emission, but if you are facing the pickup location or the origin as maybe incorrectly or slightly different location compared to other service providers or other companies, then you could get a completely different output as well. So, it's really about the consistency of the data management and how you input that and the types of data that you use, as well as the emissions factors that are being used in the methodology as well. And if they're not the same, then you get further and further away from the tree.
Chris Parker: All right. Last question for you two. What conversations could companies be having internally as they work towards their own sustainability goals?
Cam Smith: I think some of the keys are really planning and speed. Mature companies that we're working with that are actually controlling the velocity of their supply chain are capable of finding those reductions and avoidances in their carbon footprint, and they're doing that by having good data. In other words, not only are they communicating what they need, they're actually communicating good data and running that through their organizations.
Nina Barton: I think there's also some great technology out there, digital solutions to help them really get an understanding of the data and the impact of making any changes for their business as well. I think they need to really look at the technology that's out there. And also, it doesn't have to be a cost. I think that mindset needs to change, that it's going to just cost money. It's actually, as well as being beneficial to the environment, which is obviously what we're all aiming to achieve; it brings efficiency to their business. It can also help to reduce costs and improve customer service.
I think that thought process needs to be part of the whole discussion, and the message also needs to come from the top. For a company to really drive forward with this, the message really has to come from the senior leadership and be a part of everything that they do. It can't just be a standalone project to look at. It has to be part of a company's culture.
Chris Parker: Nina, you said that the transportation industry, with the collection of data and lack of harmony, really feels like the Wild West. Would you both say that this is an exciting time or a nerve-wracking time?
Cam Smith: Everybody loves a Western, don't they, Chris?
Nina Barton: It is an exciting time. It's a great time to be part of something that really is for everybody. It's driving for a better future for everyone, and it's just changing so quickly that it's exciting to see how the advances are being made and that everybody is really starting to get on board with this as well. And I think one of the other things that I feel about this side of sustainability is that there is a real focus on collaboration. Everybody feels that we're in this together, where we need to work together.
Sometimes we talk about working together and collaborating in other parts of the business, and there might be some challenges there, but from a sustainability standpoint, I see that collaboration is key, and everybody is on board with that. We can't do it without each other. I think that's one of the areas that I find one of the most exciting.
Sometimes we talk about working together and collaborating in other parts of the business, and there might be some challenges there, but from a sustainability standpoint, I see that collaboration is key, and everybody is on board with that. We can't do it without each other. I think that's one of the areas that I find one of the most exciting.
Cam Smith: Those collaborations lead into great partnerships. And again, partnerships then breed ideas, and they also breed capital. We all need capital in order to make sure that the infrastructure is there.
Chris Parker: Cam and Nina, thank you so much for your time talking about this. I really appreciate it, and I feel like there's a lot of reading that I want to do immediately after this conversation.
Nina Barton: I can relate to the reading, Chris.
Cam Smith: Pleasure is ours, Chris, we really enjoyed it.
Nina Barton: Thank you very much, Chris. It's been great.
Chris Parker: Thanks for listening to today's episode. If you've got questions or want to learn more about today's topic, check out the show notes for more information. And before you go, make sure you're subscribed on whatever podcast app you're using so you won't miss the next episode. To learn more about Expeditors, you can find us on LinkedIn, Facebook, Instagram, and Twitter, or simply visit us at expeditors.com. Take care, and I'll see you next time.
