TSL industry: zero-emission transport an integral part of ESG strategy
In the face of climate and social change, companies increasingly need to apply the principles of sustainability, or ESG (Environmental, Social and Corporate Governance). In the TSL industry, zero-emission transportation is an integral part of the ESG strategy.
Sustainable and responsible development should become an indispensable part of companies’ strategies. Due to the fight against climate change, the European Union is introducing new regulations and requirements. A new CSRD (Corporate Sustainability Reporting Directive) on sustainability reporting went into effect in January this year. It requires companies to report annually.
Transportation and CO2 emissions
According to the European Environment Agency, about 25 percent of the European Union’s total CO2 emissions come from the transport sector (2019 figures), 71.7 percent of which come from road transport. Transportation is the only sector where greenhouse gas emissions have increased over the past three decades – by 33.5 percent between 1990 and 2019. The European Union stresses that there are two ways to reduce CO2 emissions from cars: increasing vehicle efficiency or changing the fuel used. Currently, most road transportation in Europe uses diesel and gasoline.
– Of course, organizations are undertaking various ESG activities. A great example is Eurotunnel’s Le Shuttle Freight truck crossing. This is one of the least carbon-intensive modes of transportation, especially now that Eurotunnel has introduced, in both the UK and France, electric trains with 100 percent low-carbon electricity- says Joanna Porath, president of customs agency AC Porath.
In addition, Eurotunnel has launched an online CO2 emissions calculator. It allows logistics companies to calculate the carbon dioxide emissions generated by trucks for a specific trip. This gives them a documented commitment to climate protection.
– This means greater competitiveness for them in the market when bidding for new contracts or renewing old ones, since the criteria for selecting a subcontractor are also based on the company’s environmental responsibility- Joanna Porath adds.
Another notable example is the work of energy group Eni, which has signed a two-year contract with Italian company Spinelli to supply diesel fuel for trucks. The biofuel is produced from 100 percent renewable raw materials. These are waste raw materials, plant residues and oils processed at Eni’s biorefineries in the Sicilian city of Gela and in Venice.
ESG implementation is a must
Beginning in 2024, ESG reporting will apply to the largest companies and will be expanded subjectively in each subsequent year. Directly obligated entities will report on sustainability issues across their entire supply and value chain.
– It is within the entire supply and value chain, not just the company’s own plant, company, employees, that the company will have to identify ESG risks. Sustainability principles will therefore apply to almost all companies, not just financial institutions or listed companies, as those directly required to report on these issues will require relevant data from their counterparties, customers and portfolio companies for their own disclosures. Ignoring ESG factors could mean not getting a loan or worse financing terms, or losing a contract- says Aleksandra Polak of the law firm B2RLaw Jankowski, Stroinski, Zięba and Partners.
Many organizations are still unaware of how necessary it is to implement ESG principles. Often, they only learn about it in the course of a bidding process or in their efforts to obtain debt or equity financing.
– Also complicating matters is the fact that the carbon footprint in Polish regulations is not specifically regulated. Such a concept is found neither in environmental law nor in building regulations- adds Aleksandra Polak of the law firm B2RLaw Jankowski, Stroinski, Zięba and Partners.
Growing awareness among transportation companies
From a business perspective, entrepreneurs need to ensure ESG compliance if they don’t want to close themselves off to wider financing opportunities. According to the PwC report, as many as 79 percent of investors consider ESG implementation to be a critical factor in investment decisions, and 49 percent of them would refrain from investing in a company that operates in this area inadequately.
– The transportation companies we work with are increasingly realizing that if they plan to grow and expand, they need to think about sustainability. Implementing ESG into a company’s strategy is a must- says Joanna Porath, president of customs agency AC Porath.
Currently, Greenhouse Gas Protocol (GHG Protocol) standards are most commonly used to calculate greenhouse gas emissions. The Greenhouse Gas Protocol is the result of a collaboration between the World Resources Institute and the World Business Council for Sustainable Development. The standard by which organizations calculate their carbon footprint divides emissions into three ranges.
– Until now, GHG reporting entities have primarily accounted for Scope 1 emissions, or direct emissions from sources that a company owns or controls, and Scope 2, or indirect emissions from the generation of purchased electricity consumed by the company. Scope 3, or other indirect emissions, is not yet mandatory, but this is expected to change soon- explains Dorota Gajuk of the law firm B2RLaw.
Changes in Poland
Poland is a signatory to the Paris Agreement, according to which global net greenhouse gas emissions are to reach zero in 2050, while the European Union, as part of the European Green Deal, aims to reduce greenhouse gas emissions by 55 percent by 2030. – is the so-called Fit for 55 package.
How to achieve this? One of the most important solutions would be to replace internal combustion vehicles, with vehicles powered by alternative fuels. However, current data does not inspire optimism, as according to the Polish Alternative Fuels Association, only about 1,800 electric trucks will be on Polish roads in 2021. The EU wants hydrogen or electric cars to be able to transport goods throughout Europe. To that end, Fit for 55 requires countries to increase the availability and interoperability of charging infrastructure for each mode of transportation.
– Faster and easier to adapt to the new EU standards will be rail transport, which, according to data from the European Environment Agency, generates about 9 times less greenhouse gases per ton-kilometer compared to road transport. Hence the growing popularity of intermodal transport, i.e., using more than one transport mode to carry cargo- explains Joanna Porath of AC Porath.
ESG and competitive advantage
As part of the Fit for 55 package, the European Union also plans to establish a separate market for emissions trading (ETS). This means that owners of various modes of transportation will be forced to pay for the emissions they produce.
– The green transition is becoming a reality and will force changes on the TSL industry. Therefore, the necessary steps must be taken as soon as possible. ESG is often mistakenly associated as only reporting obligations, distracting from strategic business issues. And it is ESG factors that are now beginning to be strategic for the business, and can determine whether a market position is lost or strengthened, at the expense of those entities that neglect ESG issues or approach them only as an onerous regulatory obligation. ESG is not about mass-produced policies and procedures. If ESG factors are well integrated into the business model, they become part of the company’s development strategy and help minimize internal and external risks, build lasting relationships with employees and suppliers, reduce costs, secure liquidity, increase valuation and gain competitive advantage- says Aleksandra Polak of law firm B2RLaw.
