As Scope 3 reporting approaches, what role does data play?
- Written by Rob Hango-Zada, Co-Founder and Co-CEO of Shippit
Australia’s love affair with online shopping is showing no signs of slowing, with Aussies spending $63 billion on ecommerce in 2023 alone. What’s more, one in seven households made an online purchase every week. These are significant figures that will rise further as consumers continue to prioritise the convenience, choice and access that online shopping provides.
However, there is an Achilles heel. As more and more parcels are delivered to more and more households nationwide, the number of vehicles required to supply the demand increases. This growth in eCommerce has resulted in a major unintended consequence: a growing carbon footprint. Every vehicle and delivery is responsible for carbon emission, and more needs to be done to ensure there is greater efficiency and transparency in the supply chain. According to data from Shippit, 15% of deliveries today originate within 15 kilometres, yet the average parcel travels approximately 722 km. This disparity is concerning and calls for action.
To exert greater transparency and accountability over carbon emissions - not just in retail but industry-wide - the government is implementing new mandatory reporting requirements for Scope 3 emissions. But what are Scope 3 emissions? What are the new reporting requirements? And what role does data play to not only comply with regulations, but also enhance the unit economics of their supply chain?
Scope 3 legislation
Starting in July, the government has mandated legislation that will require Australian companies and financial institutions to adhere to compulsory climate-related reporting requirements. The legislation, in the government's words, is intended to increase ‘transparency and accountability’. Through it, businesses must report their Scope 1, 2 and 3 emissions. Scope 1 and Scope 2 emissions are typically easier to track and understand, because they are directly related to a business’ operations. However, Scope 3 relates to operations that touch a business like, for example, their supply chain.
With $63 billion dollars worth of parcels teeming through the network - both from suppliers to retailers, and then from retailers to carriers and customers - it’s not hard to appreciate the complexity of retail supply chains. That makes understanding and controlling Scope 3 emissions particularly challenging, which underlines the significance of the legislation.
This legislation is an important and necessary step in the move towards achieving net zero emissions by 2050, which marks a significant advancement for Australia. Putting sustainability at the top of the agenda is critical, and we support the legislation and the future it’s trying to bring about. Retailers must prepare now. The legislation’s rollout will be staggered, so not all businesses must comply from the start of July, but all must think about it beforehand.
At Shippit, our North Star is to power 200 million deliveries without waste by 2025. We work with thousands of retailers and carriers, many of whom are well ahead of the curve and well-positioned to handle the legislation with minimal fuss. More broadly, though, many, many more retailers are unprepared and uncertain. They understand what the legislation entails, they just don’t know how to adhere to its requirements. The answer is in their data.
The role of data
Understanding emissions for retailers is crucial for complying with legislation, especially when it comes to calculating their carbon footprint in the last mile. Consider two neighbours who each receive a package from different retailers on the same vehicle. Determining who in that supply chain is responsible for the carbon emissions is difficult, and that’s just one straightforward example. When you think of the intricate last-mile logistics network, it’s easy to see why accurately calculating and apportioning emissions becomes complex.
To enable retailers, big and small, to better understand their supply chain and the emissions it is responsible for, Shippit is developing a carbon calculator. It allows retailers to measure how much carbon is generated by our courier partners, from the second a parcel is collected to the second it’s delivered. From that calculation, carbon offsets are purchased to support projects that prevent and reduce greenhouse gas emissions, by the same amount, to reduce total emissions. Not only does it neutralise the carbon emitted by a delivery, but the offset projects also deliver economic, community and social benefits, making it great for broader ESG.
Efficient supply chains, efficient business
Too often, businesses treat sustainability as a secondary priority to profit and unit economics. Improving sustainability can actually save costs, rather than incurring them. By leveraging data and insights, retailers can enhance the efficiency of fleets, optimise their delivery routes and boost their ‘drop density’, maximising the number of parcels they can deliver within a given timeframe. By doing so, their fleets are responsible for fewer emissions, and can deliver more parcels in less time.
Route optimisation software enables retailers to plan deliveries and routes with data-driven precision, rather than fulfilling orders at random or based on the order in which items were purchased. This minimises waste, reduces their costs, increases their capacity, and enhances the customer experience - with a more efficient, transparent and convenient delivery - in the process.
Never before has sustainability been a bigger priority than it is today. From the top tables of policy to water cooler conversations, people are placing greater emphasis on it. Businesses who stand still and do nothing, are falling behind; in the eyes of policymakers, their customers and even their profit and loss sheets. With Scope 3 emissions reporting approaching, it’s more critical than ever for retailers to get on top of their supply chain. Through data, they can meet and exceed the requirements of new legislation, and boost the efficiency and profitability of their business in the process.
