Category 9 Downstream Transportation and Distribution – The best read

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:

  1. 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.
  2. 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.
  3. 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.Category 9 Downstream Transportation and Distribution
    • Inventory Turnover: Assess the rate at which inventory is sold and replaced, indicating efficiency in managing stock levels.
  4. 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.
  5. 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.
  6. 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.
  7. 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.

 

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Category 9 Downstream Transportation and Distribution

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).

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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 DistributionFuel-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:

Category 9 Downstream Transportation and DistributionCategory 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 =

Category 9 Downstream Transportation and Distribution

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.

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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.

Activity data needed

Companies should collect data on the distance travelled by transportation suppliers. This data may be obtained by:

  • Mass or volume of the products sold
  • Actual distances provided by transportation supplier (if actual distance is unavailable, companies may use the shortest theoretical distance)
  • Online maps or calculators
  • Published port-to-port travel distances.

The actual distances should be used when available, and each leg of the transportation supply chain should be collected separately.

Emission factors needed

Companies should collect:

  • Emission factor by mode of transport (e.g., rail, air, road) or vehicle types (e.g., articulated lorry, container vessel), expressed in units of greenhouse gas (CO2, CH4, N2O, or CO2e) per unit of mass (e.g., tonne) or volume (e.g., TEU) travelled (e.g., kilometer).

Common forms of emission factors are kg CO2e/tonne/km for road transport or kg CO2e/TEU/km for sea transport.

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

Companies may obtain activity data from:

  • Purchase orders
  • Specific carrier or mode operator
  • Internal management systems
  • Industry associations
  • Online maps and calculators.

Companies may obtain emission factors from:

include Table [4.2] Data collection guidance for the distance-based method plaajes 2

When collecting emission factors, it is important to note that they may be vehicle, regional, or country specific.

Calculation resources include:

To calculate emissions, companies should multiply the quantity of goods purchased in mass (including packaging and pallets) or volume by the distance travelled in the transport leg and then multiply that by an emission factor specific to the transport leg (usually a transport mode- or vehicle type-specific emission factor).

Because each transport mode or vehicle type has a different emission factor, the transport legs should be calculated separately and total emissions aggregated.

The following formula can be applied to all modes of transport and/or vehicle types to calculate emissions from transportation:

Category 9 Downstream Transportation and Distribution

 

Example [4.2] Calculating emissions from upstream transportation using the distance-based method

Company A makes chairs and sources basic materials from Suppliers B, C, and D. Company A calculates total distance from the transport of the basic goods and obtains information from suppliers on vehicle type used for transport. Company A obtains relevant emission factors from lifecycle databases. The information is summarized below:

Category 9 Downstream Transportation and Distribution

Emissions from road transport:
= ∑ (mass of goods purchased (tonnes) × distance travelled in transport leg
× emission factor of transport mode or vehicle type (kg CO2e/tonne-km))
= 2 × 2,000 × 0.2
= 800 kg CO2e

emissions from air transport:
= ∑ (quantity of goods purchased (tonnes) x distance travelled in transport leg
x emission factor of transport mode or vehicle type (kg CO2e/tonne-km))
= 1 × 3,000 × 1
= 3,000 kg CO2e

emissions from sea transport:
= ∑ (quantity of goods purchased (tonnes) x distance travelled in transport leg
x emission factor of transport mode or vehicle type (kg CO2e/tonne-km))
= 6 × 4,000 × 0.05
= 1,200 kg CO2e

total emissions form transport (upstream) is calculated as:
= emissions from road transport + emissions from air transport + emissions from sea transport
= 800 + 3,000 + 1,200
= 5,000 kg CO2e

..

Example [4.3] Allocating emissions from transportation (Deutsche Post DHL)

Category 9 Downstream Transportation and Distribution

Deutsche Post DHL, a global mail and logistics company, set a CO2 efficiency target. The choice of appropriate allocation factors is a critical decision point to ensure fair allocation of emissions. The following example demonstrates a typical situation, in which different allocation factors may lead to completely different results.

This example is about a typical delivery run where a truck needs to stop at different locations to pick up or drop off shipments. In this example, 24-tonne shipment 1 needs to be transported from a home station (A) to a customer (B). At customer (B), shipment 1 is unloaded and shipments 2 and 3 are picked up. Shipment 2 is addressed to customer (C) and shipment 3 needs to be transported back to the home station (A).

Data were not available on the type and quantity of fuel consumed during transportation, but data on the mass, distance, and mode of shipment was available. Therefore the distance-based method was used. It was calculated that 31.5 kg CO2 was emitted during this delivery run. How can we allocate these emissions to the shipments?

I. Allocation using driven-tonne kilometers

One option for allocation is to use driven-tonne kilometers (tkm) as an allocation factor. For calculating the tonne kilometers, the weight of each shipment is multiplied by the distance driven. Then the total amount of CO2 emissions is allocated to the shipments on the basis of their share in the driven tonne kilometers.

Category 9 Downstream Transportation and Distribution

Surprisingly, shipment 2, which causes the longest transportation leg (15 km), receives minimum emissions and shipment 3 is “punished” for being transported jointly with shipment 2 via customer (C). The next option shows how such downsides can be mitigated.

II. Allocation using shortest theoretical distance

The second option aims at allocating CO2 emissions using the shortest theoretical distance between the origin and destination of each shipment (also known as the Great Circle Distance) as an allocation factor. The shipments’ CO2 allocation is independent from the actual driven distance because that is of no relevance to the customer. As in the example above, tonne-kilometers are calculated – this time using the shortest theoretical distance between a shipment’s origin and destination – before performing the allocation.

Category 9 Downstream Transportation and Distribution

Because the allocation of emissions for individual items is based only on the characteristics of the individual shipments, this option provides a fair allocation method.

Although there are many more options to perform the allocation to shipments in freight transport, this example illustrates pitfalls a user can encounter by picking an allocation factor.

Spend-based method

If the fuel-based method and distance method cannot be applied (e.g., due to data limitations), companies should apply the spend-based method to calculate the emissions from transportation. In this method, the amount spent on transportation by type is multiplied by the relevant EEIO emission factors. Refer to “Environmentally-extended input output (EEIO) data” in the Introduction for guidance on EEIO data. Companies may determine the amount spent on transportation through bills, invoice payments, or financial accounting systems. The spend-based method is effective for screening purposes; however it has high levels of uncertainty and the fuel-based and distance-based methods are recommended for accounting for transportation emissions.

Activity data needed

  • Amount spent on transportation by type (e.g. road, rail, air, barge), using market values (e.g., dollars).

Emission factors needed

  • Cradle-to-gate emission factors of the transportation type per unit of economic value (e.g., kg CO2e/$)
  • Where applicable, inflation data to convert market values between the year of the EEIO emissions factors and the year of the activity data.

Data collection guidance

Data sources for activity data include:

  • Internal data systems (e.g., financial accounting systems)
  • Bills
  • Invoices.

Data sources for emission factors include:

  • Environmentally-extended input-output (EEIO) databases. A list of EEIO databases is provided on the GHG Protocol website (http://www.ghgprotocol.org/Third-Party-Databases). Additional databases may be added periodically, so continue to check the website.
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Category 9 Downstream Transportation and Distribution

Example [4.4] Calculating emissions from transportation by using the spend-based method

Company A makes televisions and sources basic materials from suppliers B, C, and D. Company A calculates total amount spent from the transport of the basic goods and obtains information from suppliers on vehicle type used for transport.

Company A obtains relevant emission factors from EEIO databases. The information is summarized in the table below:

Category 9 Downstream Transportation and Distribution

emissions from road transport:

= Σ (amount spent on transportation leg × EEIO emission factor of transport mode or vehicle type (kg CO2e/$))

= 20,000 × 0.04 = 800 kg CO2e/$

emissions from air transport:

= Σ (amount spent on transportation leg × EEIO emission factor of transport mode or vehicle type (kg CO2e/$))

= 30,000 × 0.15 = 4,500 kg CO2e/$

emissions from sea transport:

= Σ (amount spent on transport leg × EEIO emission factor of transport mode or vehicle type (kg CO2e/$))

= 40,000 × 0.05 = 2,000 kg CO2e/$

total emissions from transport (downstream) is calculated as:

= emissions from road transport + emissions from air transport + emissions from sea transport

= 800 + 4,500 + 2,000 = 7,300 kg CO2e/$

Figure 9.1 shows how to determine how to account for emissions from transportation and distribution of sold products. Companies may use either the fuel-based, distance-based or spend#based method.

Category 9 Downstream Transportation and Distribution

Activity data needed

The major difference between calculating downstream and downstream emissions of transportation is likely to be the availability and quality of activity data. Transportation data may be easier to obtain from downstream suppliers than from downstream customers and transportation companies. Therefore, companies may need to use the distance-based method to calculate downstream transportation emissions.

If the actual transportation distances are not known, the reporting company may estimate downstream distances by using a combination of:

  • Government, academic, or industry publications
  • Online maps and calculators
  • Published port-to-port travel distances.

Emission factors needed

Data collection guidance

The UK government produces average freight distances for the economy’s main categories of goods (see http://www.dft.gov.uk/pgr/statistics/datatablespublications/freight/). This database may be used in the absence of purchaser#specific or region-specific data.

A list of life cycle databases is provided on the GHG Protocol website (http://www.ghgprotocol.org/Third-Party#Databases). Additional databases may be added periodically, so continue to check the website.

Calculating emissions from distribution (downstream)

The emissions from downstream distribution should follow the calculation methods described in category 4 (downstream transportation and distribution), that are copied below. Companies may use either the site-specific method or the average-data method. For the reasons outlined above, companies are more likely to apply the average-data method.

Example [9.1] Calculating emissions from downstream transportation

Company A sells timber to furniture Company B, which manufactures the timber into furniture, which it sells retail. Company A collects information on the mass of timber sold to Company B and estimates the downstream transport distances of the following:

  • From point of sale to Company B (if not paid for by Company A)
  • From Company B’s manufacturing facility to retail distribution centers
  • From retail distribution centers to retail outlets.

The data is summarized in the table below:

Category 9 Downstream Transportation and Distribution

emissions from downstream transport:

(quantity of goods sold (tonnes) × distance travelled in transport legs (km) × emission factor of transport mode or vehicle type (kg CO2e/tonne-km))

= 4 × 2,000 × 0.2 = 1,600 kg CO2e

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

Companies may use either of two methods to calculate scope 3 emissions from downstream distribution (e.g. storage facilities):

  • Site-specific method, which involves site-specific fuel, electricity, and fugitive emissions data and applying the appropriate emission factors
  • Average-data method, which involves estimating emissions for each distribution activity, based on average data (such as average emissions per pallet or cubic meter stored per day).

Figure 4.2 gives a decision tree for selecting a calculation method for emissions from downstream distribution.

Figure [4.2] Decision tree for selecting a calculation method for emissions from downstream distribution

Site-specific method

This method involves collecting site-specific fuel and energy data from the storage facility (e.g., warehouses, distribution centres) of individual distribution activities, and multiplying them by appropriate emission factors.

If the storage facility stores goods for companies other than the reporting company, emissions should be allocated to the reporting company. For more information on allocation, see chapter 8 of the Scope 3 Standard.

Activity data needed

Companies should collect data on:

  • Site-specific fuel and electricity use
  • Site-specific fugitive emissions (e.g., air conditioning or refrigerant leakage)
  • The average occupancy rate of the storage facility (i.e., average total volume of goods stored).

Emission factors needed

Companies should collect:

  • Site or regionally specific emission factors for energy sources (e.g., electricity and fuels) per unit of consumption (e.g., kg CO2e/kWh for electricity, kg CO2e/liter for diesel)
  • Emission factors of fugitive and process emissions (kg CO2e/kg).

Data collection guidance

Data sources for activity data include:

  • Utility bills
  • Purchase records
  • Meter readings
  • Internal IT systems.

Data sources for emission factors include:

  • Life cycle databases
  • Company-developed emission factors
  • Industry associations.

Calculation formula [4.8] Site-specific method (distribution)

CO2e emissions from distribution =

for each storage facility:

emissions of storage facility (kg CO2e)

= (fuel consumed (kWh) × fuel emission factor (kg CO2e/kWh)) + (electricity consumed (kWh) × electricity emission factor (kg CO2e)/kWh) + (refrigerant leakage (kg) × refrigerant emission factor (kg CO2e)/kg))

then, allocate emissions based on volume that company’s products take within storage facility:

Category 9 Downstream Transportation and Distribution

finally, sum across all storage facilities:

Σ allocated emissions of storage facility

If data are available, companies may optionally allocate emissions based on different storage methods (e.g., temperature-controlled storage and ambient storage). This allocation step can be significant within shared storage. Companies may optionally allocate emissions based on length of time goods spend in storage.

If a company has a large number of distribution channels, sampling may be appropriate (see Appendix A for more information).

Example [4.5] Calculating emissions from downstream distribution using the site-specific method

Company A’s products are stored at two facilities throughout the reporting year. No chilling or freezing is needed during storage. Company A collects the data from operators on the amount of fuel and electricity consumed for the reporting year, as well as the volume of company A’s purchased goods compared to total volume of goods. Company A collects corresponding emission factors from life cycle databases.

The information is summarized in the table below:

Category 9 Downstream Transportation and Distribution

emissions from storage facility 1 are calculated as:

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emissions from storage facility 2 are calculated as:

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total emissions from distribution (downstream) is calculated as follows:

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Average-data method

Companies should use the average-data method where supply-chain specific data is unavailable. Companies should collect average emission factors for distribution activities.

Activity data needed

Companies should collect data based on throughput:

  • Volume of purchased goods that are stored (e.g., square meters, cubic meters, pallet, TEU) or number of pallets needed to store purchased goods
  • Average number of days that goods are stored.

Emission factors needed

Companies should collect data that allows the calculation of emissions per unit, per time period stored. This can be expressed in several different ways, including:

Data collection guidance

Data sources for activity data include:

  • Supplier records
  • Internal management systems.

Data sources for emission factors include:

Category 9 Downstream Transportation and Distribution

Example [4.6] Calculating emissions from downstream distribution using the average-data method

Company A is a producer of pasta. Its products are stored at distribution centers and then sent for retail sale in supermarkets. Company A collects data on the total volume needed to store its goods at storage facilities and the average number of days its goods are stored. Emission factors are collected from an academic publication. The information is summarized in the table:

Category 9 Downstream Transportation and Distribution

the emissions can be calculated as follows:

Σ (volume stored goods (m3) × number of days stored (days) × emission factor for storage facility (kg CO2e/m3/day))

= (4,000 × 2 × 0.01) + (4,000 × 2 × 0.02) = 80 + 160 = 240 kg CO2e

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