How logistics could help chemicals companies tackling climate change

The chemicals industry recognises the crucial role it has to play in combatting climate change. In an industry responsible for about 5% of greenhouse gas emissions globally, leading companies are exploring a broad range of strategies for reducing their impact. But a study to be published shortly suggests they could be missing an opportunity to make real progress.

FT Longitude and Maersk surveyed 500 chemicals companies worldwide, the data implied that almost two-thirds of the industry’s greenhouse gases (63%) are generated in scope 3. These are emissions not produced by companies themselves, but which they are indirectly responsible for up and down their value chains. It’s a call to action echoed by estimates from the European Chemical Industry Council that as much as 70% of the chemicals sector’s emissions are scope 3.

Nevertheless, the research suggests that only a minority of companies are focused on reducing those scope 3 emissions. Just 29% in the sample are currently making efforts in this area, the research reveals. The vast majority are putting off doing the work they need to do to bring them down.

Time to act

Action on scope 3 emissions makes sense – and not just because they make up such a large chunk of the chemicals industry’s emissions. For one thing, chemicals companies that tackle scope 3 will speed up their progress on reducing their total emissions. Many businesses have now set themselves demanding deadlines on emissions reductions, so speed is important. And then there’s regulation. The regulatory environment is shifting rapidly, and regulators are putting scope 3 emissions under a spotlight. In the European Union, for example, the Corporate Sustainability Reporting Directive, signed off last year and now being transposed into national laws of EU member states, will require 50,000 companies – including chemicals businesses – to report on their climate impacts, including their scope 3 emissions. In the US, proposals from the Securities and Exchange Commission will subject all publicly listed companies to similar rules. Many other countries and territories are following suit. 

Logistics is an important source of scope 3 emissions 

How, then, should a chemicals company tackle its scope 3 emissions? The research suggests an immediate focus should be logistics: While figures may vary considerably, 57% of chemicals companies in the survey say that logistics, transportation, and storage activity is a major contributor to their scope 3 output. But very few have prioritised this area. That means that many companies have yet to capitalise on those relatively straightforward opportunities to cut their emissions, such as shifting to more environmentally friendly means of transportation. For instance, shipping by sea has been estimated to produce up to 145 times less emissions per tonne of cargo transported one mile than air transportation. Future improvements – vessels powered by cleaner fuels including methanol produced from sustainable biomass, biodiesel and green ammonia, for instance – will reduce sea transport emissions even more. Another example is warehousing. The availability of warehouse space with a reduced greenhouse gas footprint is growing rapidly and gives chemicals companies another way to reduce their scope 3 emissions. 

Targeting logistics’s scope 3 emissions with focus

There is enormous potential to target logistics with more focus – and to have a discernible positive impact on scope 3 emissions as a result. Chemicals businesses rising to this challenge will be able to accelerate the rate at which they reduce their overall emissions.

Logistics services providers, meanwhile, can support the chemicals industry in making those climate-related improvements. It’s a win-win situation. After all, the chemical industries’ logistics-related scope 3 emissions are our industry’s direct emissions.

Chemicals companies should be ambitious and proactively target logistics. It represents a vital opportunity to reduce emissions – and one of the scope 3 areas where it is possible to get going quickly. As a first step, companies not doing so yet should invite their logistics teams to actively participate in the conversation around sustainability, giving them a chance to contribute to the debate and suggest solutions. The justification for focusing on scope 3 emissions grows stronger by the day, and logistics represents an important first step. 

Continue reading the second part of this piece on how cutting greenhouse gas emissions can be good for profit as well as the planet.

For more information on this topic:

• Listen to the latest episode of “Beyond the Box” on how to tackle supply chain emissions in the chemicals industry.
• Discover more logistics opportunity for chemical businesses

About FT Longitude

FT Longitude is a specialist thought leadership agency, owned by the Financial Times, working with a wide range of the world’s most prestigious B2B brands across Europe, the US and Asia-Pacific. FT Longitude’s 80+ clients are concentrated in the professional services, financial services, and technology sectors, but also stretch into energy, infrastructure, manufacturing and other industries. Headquartered in London, the company was founded in 2011 and was selected as one of Chief Marketer 200, Top Marketing Agencies of 2020, an Inc. 5000 Europe in 2018, an FT 1000 company in 2017, and a 2016 Leap 100 high growth UK company by City A.M. and Mishcon de Reya. It is led by founders Rob Mitchell (CEO), James Watson (COO) and Gareth Lofthouse (Chief Revenue Officer). For more information: visit longitude.ft.com.