Transportation and warehousing carbon accounting methods

As global supply chains are becoming more complex, we realize that they are responsible for a large portion of GreenHouse Gas emissions (approximately 15% of overall GHG emissions (International Transport Forum, 2010)). GreenHouse Gases represent a category of gaseous constituents of the atmosphere mostly constituted of Water vapor (H2O), carbon dioxide (CO2), nitrous oxide (N2O), methane (CH4), and ozone (O3). Pressure is now building on multinational companies to lead society towards a more sustainable future and they will be required to report for their direct and indirect emissions. 

With the development of new environmental regulations and taxes, the total amount of carbon emissions of companies are multiplied by a carbon price resulting in carbon emissions costs for companies which must be offset if they exceed a certain amount. Those costs are beginning to be included in the optimization processes of multinational companies but for supply chains, it can be more tricky than it could seem as explained in our article on carbon emissions.

To associate emission measures and their costs with supply chain processes, one resorts to a process called carbon accounting (CA). Organizations like the WRI (World Resources Institute) and the WBCSD (World Business Council for Sustainable Development) have detailed in the GHG protocol methods to account for most types of supply chain carbon emissions. 

This article aims at explaining the basics of carbon accounting for the supply chain and illustrates how it could be applied. 

We will see how it is applied for transportation and warehousing, which are the two main factors where GenLots can make an impact on costs in the context of carbon emission accounting. 

1. Transportation

Transportation emissions are responsible for a large portion of supply chain carbon emissions. Air conditioning and fuel consumption are large contributors. 

It is important to understand that there are different scopes of transportation emissions that are taken into account by companies:

• Emissions resulting from the direct consumption of energy in the transport operation are referred to as the Tank-to-Wheel (TTW) emissions
• Emissions from the extraction (generation), refinement (power plant operation), and distribution of fuel (electricity), are generated in the process of getting the fuel (electricity) into the vehicle’s tank (battery); these emissions must also be accounted for and are referred to as Well-to-Tank (WTT) emissions.
• The complete chain of activities can then be referred to as Well-to-Wheel or as Cradle-to-Gate emissions. 

Emissions resulting from the construction of infrastructure and the vehicles themselves could be considered, but estimating them is nearly impossible, hence they are usually ignored. In contrast, is important to consider emissions occurring during the period after which delivery has been completed, where a vehicle might return or continue its journey empty or partially empty; this is referred to as the “empty trip factor”. 

For the following methods, we will focus on the “Tank-to-wheel” emissions. By selecting an emission factor according to transport mode, accounting can be simplified.

One thing of note is that some digital tools like LogEC and EcoTransIT, have been developed to calculate emissions from specific transport modes and/or specific countries. They integrate all the complexity that lies behind carbon accounting and provide even APIs (application programming interfaces). Both comply with the European Committee for Standardization’s GHG emissions calculations and the declaration standard, EN 16258. EcoTransIT’s calculation method is based on the “Fuel based method” that we describe below. We used their calculator to perform calculations on emissions resulting from transportation in our experiment aiming to integrate carbon emissions costs in our algorithm.”

• Fuel-based method

The fuel-based method utilizes the amount of fuel used to determine the amount of CO2e emitted. This method should be used when companies can obtain data for fuel use from transport providers (and, if applicable, refrigerant leakage due to refrigeration of products).

If possible, we should account for any additional energy used like fugitive emissions (e.g., refrigerant loss or air-conditioning) and optionally calculate any emissions for the “empty trip factor”. 

CO2e emissions from transportation = 

sum across fuel types: 

∑ (quantity of fuel consumed (liters) × emission factor for the fuel (e.g., kg CO2 e/liter)) 

+ 

sum across grid regions: 

∑ (quantity of electricity consumed (kWh) × emission factor for electricity grid (e.g., kg CO2 e/kWh)) 

+

sum across refrigerant and air-conditioning types: 

∑ (quantity of refrigerant leakage × global warming potential for the refrigerant (e.g., kg CO2e))

If goods are transported with another company’s goods, the allocation should be taken into account. 

Example

• Company A is a Swiss producer of chocolate 
• Suppliers B, C, and D supply respectively sugar, cacao and refrigerated milk for company A’s operations
• All trucks transport goods exclusively for Company A

Let’s imagine company A has access to the amount of fuel used, refrigerant leakage and electricity incurred by the transport of raw materials to Company A’s facility. We also assume that company A collects emission factors for the fuel type used by suppliers and for refrigerant leakage.

Electricity consumed by each supplier amounts to: 500’000 kWh per supplier

CO2e emissions from diesel is calculated as: ∑ (quantity of fuel consumed (liters) × emission factor for the fuel (kg CO2 e/liter)) = ((4’000 + 7’000 + 8’000) × 3.165) = 60’135 kg 

CO2e emissions from electricity consumption is calculated as: 

∑ (quantity of electricity consumed (kWh) × emission factor for electricity grid (e.g., kg CO2 e/kWh)) = 3 x 500’000 x 0.0140 = 21’000 kg

CO2e emissions from refrigerant leakage is calculated as: ∑ (quantity of refrigerant leakage (kg) × emission factor for refrigerant (kg CO2 e/kg)) = 50 × 86 = 4’300 kg 

CO2e total emissions is calculated as follows: emissions from fuels + emissions from electricity consumption + emissions from refrigerant leakage = 60’135 + 21’000 + 4’300 = 85’435 kg CO2

Emission factors source: 

Refrigerents: carbonfootprint.com 2019 Grid Electricity Emissions Factors v1.0 – June 2019

Diesel: CO2 Emission Factors by Fuel – ghgprotocol.org 

Eletricity: Technical Paper | Electricity-specific emission factors for grid electricity August 2011

• Distance-based method

If data on fuel use is unavailable, companies may use the distance-based method. The distance-based method involves multiplying vehicle kilometer data by emission factors (typically default national emission factors by vehicle type). Vehicle types include all categories of aircraft, rail, subway, bus, automobile, etc.  

CO2e emissions from transportation =  

sum across transport modes and/or vehicle types: 

∑ (mass of goods purchased × distance traveled in transport leg (km) × emission factor of transport mode or vehicle type (kg CO2 e/tonne/km)) 

Example

Let’s now imagine that company A only has access to the mass of goods purchased and the distance traveled by the goods

Emission factor source: 

Transport: Source: CEN/TC 320/ WG 10 Methodology for calculation and declaration of energy consumptions and GHG emissions in transport services 

CO2e emissions from transportation =  

sum across transport modes and/or vehicle types: 

∑ (mass of goods purchased × distance traveled in transport leg (km) × emission factor of transport mode or vehicle type (kg CO2 e/tonne/km))  = 2500 x 1000 x 0,008 + 3000 x 161 x 0,062 + 50 x 1400 x 0,602 = 20’000 + 29’946 + 42’140 = 92’086 kg CO2 

• Spend-based method

If none of the above-mentioned methods is possible to apply, then companies may use the spend-based method which involves determining the amount of money spent on each mode of business travel transport and applying secondary (EEIO) emission factors.

CO2e emissions from transportation =  

sum across transport modes and/or vehicle types: 

∑ (amount spent on transportation ($) × relevant EEIO emission factors per unit of economic value (kg CO2 e/$))

Example

Let’s now imagine that company A only has access to the amount spent on transportation of goods purchased 

CO2e emissions from transportation =  

sum across transport modes and/or vehicle types: 

∑ (amount spent on transportation ($) × relevant EEIO emission factors per unit of economic value (kg CO2 e/$)) = 35’500 x 0,2 + 20’000 x 0,1 + 70’000 x 1,2 = 93’100 kg CO2

Conclusions regarding transportation-related emissions

All in all, the different methods presented here enable companies to account for most carbon emissions depending on the level of available data. There is no unified database for emissions factors related to each situation and companies have to invest time defining what is the adapted emission factor to consider Well-To-Wheel emissions. Working with transparent suppliers is critical as their data are extremely important to account for all scope 3 emissions. Tools such as EcoTransIT can simplify a concrete application and can integrate with existing IT infrastructure or applications such as GenLots.

2. Warehousing

Depending on the industry, emissions resulting from warehousing activities such as electricity for heating or refrigerating products can be high. A lot of secondary energy-consuming activities are also generating carbon emissions like lightning, materials handling, lifts, offices… 

The GHG protocol identifies two methods for measuring carbon emissions related to warehousing: 

• Site-specific method: 

The site-specific method estimates the carbon emissions resulting from electricity and fuel consumption from buildings and vehicles used in warehousing activities. The data is extracted by looking at utility bills, purchase records and meter readings. Emissions are then allocated to the related product based on the volume, mass, storage types and the amount of time they spent in storage. 

Although it is the most accurate method, data might not always be available and the process is very time and resource-consuming. 

Example

• Company A Swiss Chocolate producer.

To simplify the example, we assume we have only one material per storage type and we have access to the energy and heat consumption of each storage type. 

Total emissions = 500’000 * 0,3 + 200’000 * 0,4 + 10’000 * 0,8 = 310’000 kg CO2e

• The average-data method

In this method we use the average days spent in the warehouse to calculate the carbon emissions. By multiplying this number by the volume (in square meters, cubic meters…) and an emission factor linked to the type of storage we obtain the mass of carbon emissions produced by materials in the warehouse. 

tCO2e = Volume*Average days stored*Emissions Factor

Example

• Let’s now imagine, we only have access to the volume and inventory record. 

Total emissions = 80’000 * 10 * 0,6 + 40’000 * 5 * 0,72 = 240’000 + 144’000 = 384’000 kg CO2e

Conclusion regarding warehousing-related emissions

For warehousing, we chose to illustrate a relatively easy example to make it simple to understand and fast to read. If companies start accounting for warehousing emissions, it is important to spend time investigating what activities related to warehousing must be accounted for. Emission factors must be well defined to reflect the specific level of carbon emissions released. In our example we found that warehousing emissions are small compared to transportation, so there is an open question on whether accounting them in detail is worth the effort. 

Conclusion and thoughts

Carbon accounting today largely depends on the correct emission factor estimation. It is difficult to account for all emissions that are related to a specific company. In theory, paper used to print bills for warehousing activities could also be considered but is not really significant. The company must decide what activities to include or ignore in its carbon accounting. 

These two arguments both depend on one condition: data collection. If data is analyzed correctly, emission factors will be computed accordingly to compensate for the company’s emissions and all activities will be considered when assessing the organization’s environmental impact. 

Even though it seems like a hefty process, the companies that will provide clean and transparent carbon accounting will benefit from this in the long run, by working on this type of data to save on environmental costs, optimizing their supply chain and selecting the most relevant suppliers. For them, carbon accounting might become a competitive advantage as most of carbon emissions come from scope 3 emissions and corporations will gain time working with carbon transparent suppliers. Carbon accounting Carbon accounting