Category 9 Downstream Transportation and Distribution

Category description – Category 9 Downstream Transportation and Distribution includes emissions that occur in the reporting year from transportation and distribution of sold products in vehicles and facilities not owned or controlled by the reporting company.

Overview – Category 9 Downstream Transportation and Distribution

Reporting on Category 9 Downstream Transportation and Distribution involves a comprehensive analysis of the logistical processes and operations involved in transporting goods from production facilities to end consumers. Here’s an executive overview:

Scope and Definition: Category 9 Downstream Transportation and Distribution encompasses the movement of goods from manufacturing plants or warehouses to various distribution centers, retailers, or directly to customers. It involves multiple modes of transportation such as road, rail, sea, and air, as well as associated warehousing and distribution activities.
Key Components:
- Transportation Modes: Assess the utilization of different transportation modes and their efficiency in terms of cost, speed, and reliability.
- Distribution Network: Evaluate the design and optimization of distribution networks to ensure timely delivery and minimize costs.
- Warehousing: Analyze the efficiency of warehousing operations in terms of inventory management, storage capacity, and order fulfillment.
- Last-Mile Delivery: Focus on the final stage of delivery to customers, addressing challenges and strategies for improving efficiency and customer satisfaction.
Performance Metrics:
- On-Time Delivery: Measure the percentage of deliveries made according to schedule to assess reliability.
- Transit Time: Evaluate the average time taken for goods to move through the transportation and distribution network.
- Cost per Unit: Analyze the cost incurred per unit of goods transported, considering transportation, warehousing, and handling expenses.
- Inventory Turnover: Assess the rate at which inventory is sold and replaced, indicating efficiency in managing stock levels.
Challenges and Opportunities:
- Infrastructure: Address challenges related to transportation infrastructure, such as road congestion, port capacity, and airport efficiency.
- Sustainability: Explore opportunities for reducing the environmental impact of transportation and distribution operations through alternative fuels, route optimization, and packaging innovations.
- Technology Integration: Highlight the role of technology in optimizing logistics processes, including the use of IoT devices, predictive analytics, and automation to improve efficiency and visibility across the supply chain.
Regulatory and Compliance:
- Compliance with Regulations: Ensure adherence to regulations governing transportation safety, labor practices, environmental standards, and customs procedures.
- Trade Policies: Monitor changes in trade policies and tariffs that may impact transportation costs, lead times, and supply chain resilience.
Strategic Recommendations:
- Network Optimization: Identify opportunities to streamline the transportation and distribution network to reduce costs and improve service levels.
- Technology Investment: Recommend investments in transportation management systems (TMS), warehouse management systems (WMS), and tracking technologies to enhance visibility and control.
- Collaboration: Encourage collaboration with transportation partners and suppliers to leverage economies of scale, share resources, and mitigate risks.
Future Outlook:
- Market Trends: Anticipate emerging trends such as e-commerce growth, omnichannel distribution, and the adoption of electric and autonomous vehicles.
- Resilience Planning: Prepare for disruptions such as natural disasters, geopolitical tensions, and pandemics by enhancing supply chain resilience and flexibility.

In summary, reporting on Category 9 Downstream Transportation and Distribution involves assessing the efficiency, reliability, and sustainability of logistics operations while identifying opportunities for improvement and strategic investment to meet evolving market demands and challenges.

A worked example – EcoFoods Inc.

For this example, let’s consider a fictional company, “EcoFoods Inc.,” which produces organic food products and distributes them to retailers and customers across the country.

1. Scope and Definition:

EcoFoods Inc. operates a complex downstream transportation and distribution network, involving the movement of perishable organic food products from its manufacturing plants to various distribution centers and ultimately to retail outlets and consumers.

2. Key Components:

a. Transportation Modes:

EcoFoods utilizes a combination of refrigerated trucks for land transportation, as well as partnerships with shipping companies for sea transportation of bulk goods. Additionally, it employs air freight for urgent deliveries of high-value or time-sensitive products.

b. Distribution Network:

The company operates multiple distribution centers strategically located across the country to ensure efficient coverage and timely delivery. These distribution centers are equipped with temperature-controlled storage facilities to maintain the freshness and quality of the organic products.

c. Warehousing:

EcoFoods’ warehousing operations focus on efficient inventory management to minimize storage costs and ensure optimal stock levels. It employs barcode scanning and RFID technology for accurate tracking of inventory movement within its warehouses.

d. Last-Mile Delivery:

The company collaborates with local courier services and offers direct-to-customer delivery options, especially for online orders. It leverages route optimization software to ensure cost-effective and timely last-mile deliveries.

3. Performance Metrics:

a. On-Time Delivery:

EcoFoods consistently achieves an on-time delivery rate of over 95%, ensuring reliability for its retail partners and customers.

b. Transit Time:

The average transit time for products from manufacturing to retail shelves is maintained within industry standards, with continuous efforts to optimize routes and minimize lead times.

c. Cost per Unit:

The company closely monitors the cost per unit transported, including transportation, warehousing, and handling expenses, to ensure competitiveness while maintaining profitability.

d. Inventory Turnover:

EcoFoods maintains a healthy inventory turnover ratio by closely managing stock levels and implementing just-in-time inventory practices to minimize carrying costs.

4. Challenges and Opportunities:

a. Infrastructure:

EcoFoods faces challenges related to infrastructure constraints, particularly road congestion during peak hours and limited capacity at certain ports. The company explores alternative transportation routes and invests in infrastructure improvements where feasible.

b. Sustainability:

Recognizing the importance of sustainability, EcoFoods invests in hybrid and electric vehicles for its transportation fleet and implements packaging innovations to reduce environmental impact.

c. Technology Integration:

The company continuously invests in transportation management systems (TMS) and warehouse management systems (WMS) to optimize logistics operations and enhance visibility across the supply chain.

5. Regulatory and Compliance:

EcoFoods ensures compliance with food safety regulations, transportation safety standards, and environmental regulations governing its operations. It maintains robust procedures for quality control and traceability throughout the supply chain.

6. Strategic Recommendations:

a. Network Optimization:

Continuously assess and optimize the distribution network to minimize transportation costs and improve delivery efficiency, considering factors such as customer demand patterns and geographic distribution.

b. Technology Investment:

Further invest in advanced tracking and monitoring technologies to enhance real-time visibility into the supply chain, enabling proactive management of logistics operations and quicker response to disruptions.

c. Collaboration:

Strengthen partnerships with transportation providers, suppliers, and retailers to foster collaboration and streamline end-to-end supply chain processes.

7. Future Outlook:

a. Market Trends:

Anticipate and adapt to emerging market trends such as increasing demand for organic products, growth in e-commerce sales, and advancements in sustainable transportation technologies.

b. Resilience Planning:

Develop robust contingency plans to mitigate risks posed by potential disruptions, including natural disasters, geopolitical tensions, and supply chain disruptions.

By conducting comprehensive reporting and analysis across these key components, EcoFoods Inc. can effectively manage its downstream transportation and distribution operations, ensuring reliable and sustainable delivery of organic food products to its customers nationwide.

Topics hide

Category 9 Downstream Transportation and Distribution

Overview – Category 9 Downstream Transportation and Distribution

1. Scope and Definition:

2. Key Components:

a. Transportation Modes:

b. Distribution Network:

c. Warehousing:

d. Last-Mile Delivery:

3. Performance Metrics:

a. On-Time Delivery:

b. Transit Time:

c. Cost per Unit:

d. Inventory Turnover:

4. Challenges and Opportunities:

a. Infrastructure:

b. Sustainability:

c. Technology Integration:

5. Regulatory and Compliance:

6. Strategic Recommendations:

a. Network Optimization:

b. Technology Investment:

c. Collaboration:

7. Future Outlook:

a. Market Trends:

b. Resilience Planning:

Category 9 Downstream Transportation and Distribution – Calculating emissions from transportation (downstream)

Category 9 Downstream Transportation and Distribution – Calculating emissions from transportation

Activity data needed

Emission factors needed

Data collection guidance

Distance-based method (transportation)

Activity data needed

Emission factors needed

Data collection guidance

Spend-based method

Activity data needed

Emission factors needed

Data collection guidance

Activity data needed

Emission factors needed

Data collection guidance

Calculating emissions from distribution (downstream)

Calculating emissions from distribution (downstream) (from category 4)

Site-specific method

Activity data needed

Emission factors needed

Data collection guidance

Average-data method

Activity data needed

Emission factors needed

Data collection guidance

This category also includes emissions from retail and storage. Outbound transportation and distribution services that are purchased by the reporting company are excluded from category 9 and included in category 4 (Upstream transportation and distribution) because the reporting company purchases the service. Category 9 includes only emissions from transportation and distribution of products after the point of sale. See table 5.7 in the Scope 3 Standard for guidance in accounting for emissions from transportation and distribution in the value chain.

Emissions from downstream transportation and distribution can arise from transportation/storage of sold products in vehicles/facilities not owned by the reporting company. For example:

Warehouses and distribution centers
Retail facilities
Air transport
Rail transport
Road transport
Marine transport.

In this category, companies may include emissions from customers traveling to and from retail stores, which can be significant for companies that own or operate retail facilities. See chapter 5.6 of the Scope 3 Standard for guidance on the applicability of category 9 to final products and intermediate products sold by the reporting company. A reporting company’s scope 3 emissions from downstream transportation and distribution include the scope 1 and scope 2 emissions of transportation companies, distribution companies, retailers, and (optionally) customers.

If the reporting company sells an intermediate product, the company should report emissions from transportation and distribution of this intermediate product between the point of sale by the reporting company and either (1) the end consumer (if the eventual end use of the intermediate product is known) or (2) business customers (if the eventual end use of the intermediate product is unknown).

Category 9 Downstream Transportation and Distribution – Calculating emissions from transportation (downstream)

The emissions from downstream transportation should follow the calculation methods described in category 4 (Upstream transportation and distribution), that are copied here.

From category 4 – Table 4.1 shows the scope and category of emissions where each type of transportation and distribution activity should be accounted for.

A reporting company’s scope 3 emissions from downstream transportation and distribution include the scope 1 and scope 2 emissions of third-party transportation companies (allocated to the reporting company).

Something else - Double Materiality Assessment under CSRD – 1 Best Guidance on Implementation

Table [4.1] Accounting for emissions from transportation and distribution activities in the value chain
Transportation and distribution activity in the value chain	Scope and category of emissions
Transportation and distribution in vehicles and facilities owned or controlled by the reporting company	Scope 1 (for fuel use) or Scope 2 (for electricity use)
Transportation and distribution in vehicles and facilities leased by and operated by the reporting company (and not already included in scope 1 or scope 2)	Scope 3, category 8 (downstream leased assets)
Transportation and distribution of purchased products, downstream of the reporting company’s tier 1 suppliers (e.g., transportation between a company’s tier 2 and tier 1 suppliers)	Scope 3, category 1 (Purchased goods and services), since emissions from transportation are already included in the cradle-to-gate emissions of purchased products. These emissions are not required to be reported separately from category 1.
Production of vehicles (e.g., ships, trucks, planes) purchased or acquired by the reporting company	Account for the downstream (i.e., cradle-to-gate) emissions associated with manufacturing vehicles in Scope 3, category 2 (Capital goods)
Transportation of fuels and energy consumed by the reporting company	Scope 3, category 3 (Fuel- and energy-related emissions not included in scope 1 or scope 2)
Transportation and distribution of products purchased by the reporting company, between a company’s tier 1 suppliers and its own operations (in vehicles and facilities not owned or controlled by the reporting company)	Scope 3, category 4 (downstream transportation and distribution)
Transportation and distribution services purchased by the reporting company in the reporting year (either directly or through an intermediary), including inbound logistics, outbound logistics (e.g., of sold products), and transportation and distribution between a company’s own facilities (in vehicles and facilities not owned or controlled by the reporting company)	Scope 3, category 4 (downstream transportation and distribution)
Transportation and distribution of products sold by the reporting company between the reporting company’s operations and the end consumer (if not paid for by the reporting company), including retail and storage (in vehicles and facilities not owned or controlled by the reporting company)	Scope 3, category 9 (Downstream transportation and distribution)
Source: Table 5.7 from the Scope 3 Standard.

This section provides calculation guidance first from transportation and then from distribution (e.g., warehouses, distribution centers).

Category 9 Downstream Transportation and Distribution – Calculating emissions from transportation

Companies may use the following methods to calculate scope 3 emissions from transportation:

Fuel-based method, which involves determining the amount of fuel consumed (i.e., scope 1 and scope 2 emissions of transport providers) and applying the appropriate emission factor for that fuel
Distance-based method, which involves determining the mass, distance, and mode of each shipment, then applying the appropriate mass-distance emission factor for the vehicle used
Spend-based method, which involves determining the amount of money spent on each mode of business travel transport and applying secondary (EEIO) emission factors.

The GHG Protocol has a calculation tool for transportation that uses a combination of the fuel-based and distance-based methods. This combination is used because CO2 is better estimated from fuel use, and CH4 and N2O are better estimated from distance travelled. The tool uses fuel-efficiency ratios to convert either type of activity data (fuel or distance) supplied by the user into either fuel or distance depending on the GHG being calculated. The calculation tool (“GHG emissions from transport or mobile sources”) is available at the GHG Protocol website: http://www.ghgprotocol.org/calculation-tools/all-tools).

It is important to note that the calculation tool was originally developed to calculate an organization’s scope 1 emissions (i.e., emissions from vehicles that the organization owns and operates). Therefore, the emission factors that pre-populate the calculation tool are combustion emission factors. When calculating emissions from transportation in scope 3, companies should use life cycle emission factors (see “Energy emission factors in scope 3 accounting” in the Introduction for more information on which emission factors to use). If using the GHG Protocol transport calculation tool to calculate scope 3 emissions, companies should customize the tool by entering life cycle emission factors.

Category 9 Downstream Transportation and Distribution Fuel-based method (transportation)

The fuel-based 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) from vehicle fleets (e.g., trucks, trains, planes, vessels).

Companies should also take into account any additional energy used and account for fugitive emissions (e.g., refrigerant loss or air-conditioning). Companies may optionally calculate any emissions from unladen backhaul (i.e., the return journey of the empty vehicle).

Where fuel use data is unavailable, the company may derive fuel use by using the:

Amount spent on fuels and the average price of fuels
Distance travelled and the vehicle’s fuel efficiency
Amount spent on transportation services, fuel cost share (as percent of total cost of transportation services) and the average price of fuels.

For calculating CO2, the fuel-based method is more accurate than the distance-based method because fuel consumption is directly related to emissions.

The fuel-based method is best applied if the vehicle exclusively ships the reporting company’s purchased goods (i.e., exclusive use or truckload shipping, rather than less-than-truckload (LTL) shipping). Otherwise, emissions should be allocated between goods shipped for the reporting company and goods shipped for other companies. See chapter 8 of the Scope 3 Standard for further guidance on allocating emissions.

Companies should allocate emissions based on the following default limiting factors for each transportation mode, unless more accurate data is available to show that another factor is the limiting factor:

Road transport: Truck capacity is typically limited by mass, so mass-based allocation should be used
Marine transport: Vessel capacity is typically limited by volume, so volume-based allocation should be used
Air transport: Aircraft capacity is typically limited by mass, so mass-based allocation should be used
Rail transport: Rail capacity is typically limited by mass, so mass-based allocation should be used.

If there are multiple shipments on a transport leg, distance should also be used as a means for allocation. (For more information, see the Deutsche Post DHL example in this section.)

If data required for allocation is not available or reliable due to the variety of goods transported in one vehicle at the same time, the distance-based method should be used to calculate scope 3 emissions.

Activity data needed

Companies should collect data on:

Quantities of fuel (e.g., diesel, gasoline, jet fuel, biofuels) consumed
Amount spent on fuels
Quantities of fugitive emissions (e.g., from air conditioning and refrigeration).

If applicable:

Distance travelled
Average fuel efficiency of the vehicle, expressed in units of liters of fuel consumed per tonne per kilometer transported
Cost of fuels
Volume and/or mass of purchased goods in the vehicle
Information on whether the products are refrigerated in transport.

Emission factors needed

Companies should collect:

Fuel emission factors, expressed in units of emissions per unit of energy consumed (e.g., kg CO2e/liters, CO2e/Btu)
For electric vehicles (if applicable), electricity emission factors, expressed in units of emissions per unit of electricity consumed (e.g., kg CO2e/kWh)
Fugitive emission factors, expressed in units of emissions per unit (e.g., kg CO2e/kg refrigerant leakage)

Emission factors should at a minimum include emissions from fuel combustion, and should, where possible, include cradle-to-gate emissions of the fuel (i.e., from extraction, processing, and transportation to the point of use).

Note: For air travel emission factors, multipliers or other corrections to account for radiative forcing may be applied to the GWP of emissions arising from aircraft transport. If applied, companies should disclose the specific factor used.

Data collection guidance

Data sources for activity data include:

Aggregated fuel receipts
Purchase records (provided by transportation providers)
Internal transport management systems.

Data sources for emission factors include:

Transportation carriers
Government agencies (e.g., Defra provides emission factors for the United Kingdom)
The GHG Protocol website (http://www.ghgprotocol.org/calculation-tools/all-tools and http://www.ghgprotocol.org/standards/scope-3-standard)
Industry associations
Additional sources in table 4.2 Data collection guidance for the distance-based method.

Category 9 Downstream Transportation and Distribution

Transportation emissions are calculated by multiplying each fuel/refrigerant type used by a corresponding emission factor and summing the results as shown in the formula below:

Calculation formula [4.1] Fuel-based method (transportation)

CO2e emissions from transportation =

sum across fuel types:

Σ (quantity of fuel consumed (liters) × emission factor for the fuel (e.g., kg CO2e/liter))

sum across grid regions:

Σ (quantity of electricity consumed (kWh) × emission factor for electricity grid (e.g., kg CO2e/kWh))

sum across refrigerant and air-conditioning types:

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

If fuel consumption data is unavailable, companies may use formula 4.2 and/or formula 4.3 to calculate quantities of fuel consumed.

Calculation formula [4.2] Calculating fuel use from fuel spend

Quantities of fuel consumed (liters) =

sum across fuel types:

Category 9 Downstream Transportation and Distribution

Companies should first apportion annual amount spent on fuel to each relevant fuel type. Where the mix of fuels is unknown, companies may refer to average fuel mix statistics from industry bodies and/or government statistical publications.

Calculation formula [4.3] Calculating fuel use from distance travelled

Quantities of fuel consumed (liters) =

sum across transport steps:

Σ (total distance travelled (e.g., km) × fuel efficiency of vehicle (e.g., liters/km))

If allocation is needed, companies should calculate the allocated fuel use (for the goods shipped by the reporting company) using the formula below, then apply formula 4.1 above.

Calculation formula [4.4] Allocating fuel use

Allocated fuel use =

Companies may optionally substitute mass of goods by volume with dimensional mass or chargeable mass where data is available to prove that the alternative method is more suitable.

Dimensional mass is a calculated mass that takes into account packaging volume as well as the actual mass of the goods.

Chargeable mass is the higher value of either the actual or the dimensional mass of the goods.

Companies may optionally calculate emissions from unladen backhaul (i.e., the return journey of the empty vehicle) using the following formula:

Calculation formula [4.5] Calculating emissions from unladen backhaul

CO2e emissions from unladen backhaul =

for each fuel type:

Σ (quantity of fuel consumed from backhaul × emission factor for the fuel (e.g., kg CO2e/liter))

where:

quantity of fuel consumed from backhaul

= average efficiency of vehicles unladed (l/km) × total distance travelled unladen.

Something else - 2 Navigate the value chain under CSRD and ESRS - Complete comprehensive read

…

Example [4.1] Calculating emissions from downstream transportation using the fuel-based method

Company A makes bread in Italy. Suppliers B, C, and D supply refrigerated raw materials for Company A’s operations.

Company A collects activity data from its suppliers on the amount of fuel used and refrigerant leakage incurred by the transport of raw materials to Company A’s facility. All trucks transport goods exclusively for Company A. Company A collects emission factors for the fuel type used by suppliers and for refrigerant leakage.

The situation is summarized in the table below:

Category 9 Downstream Transportation and Distribution

emissions from diesel is calculated as:

Σ (quantity of fuel consumed (liters) × emission factor for the fuel (kg CO2e/liter))

= (50,000 × 3) + (80,000 × 3) + (90,000 × 3) = 660,000 kg CO2e

emissions from refrigerant leakage is calculated as:

Σ (quantity of refrigerant leakage (kg) × emission factor for refrigerant (kg CO2e/kg))

= 50 × 2,000 = 100,000 kg CO2e

total emissions is calculated as follows:

emissions from fuels + emissions from refrigerant leakage

= 660,000 + 100,000 = 760,000 kg CO2e

Distance-based method (transportation)

In this method, distance is multiplied by mass or volume of goods transported and relevant emission factors that incorporate average fuel consumption, average utilization, average size and mass or volume of the goods and the vehicles, and their associated GHG emissions.

Emission factors for this method are typically represented in grams or kilograms of carbon dioxide equivalent per tonne-kilometer or TEU-kilometer. Tonne-kilometer is a unit of measure representing one tonne of goods transported over 1 kilometer. TEU-kilometer is a unit of measure representing one twenty-foot container equivalent of goods transported over 1 kilometer.

The distance-based method is especially useful for an organization that does not have access to fuel or mileage records from the transport vehicles, or has shipments smaller than those that would consume an entire vehicle or vessel.

If sub-contractor fuel data cannot be easily obtained in order to use the fuel-based method, then the distance-based method should be used. Distance can be tracked using internal management systems or, if these are unavailable, online maps. However, accuracy is generally lower than the fuel-based method as assumptions are made about the average fuel consumption, mass or volume of goods, and loading of vehicles.