Sustainable Procurement—A Pathway Towards Transport Decarbonization

According to the International Transport Forum, roughly 8 percent of global CO2 emissions stem from the transportation of goods, fueled by a growing economy and international trade.

In order to reduce their transport-related impacts and achieve global climate objectives, member companies of the Clean Cargo Working Group and BSR have co-developed a framework that will enable companies to effectively benchmark themselves against their peers and to evaluate their progress in supplier management, within the context of sustainability practices in logistics.

By working together with the Smart Freight Centre and the World Business Council for Sustainable Development (WBCSD), the Sustainable Freight Procurement Framework and the Smart Freight Procurement Guidelines helps shippers advance their supplier management programs by identifying key activities and best practices that they can implement to improve their own sustainability performance, and that they can implement to foster sustainability improvements among their suppliers.

Clean Cargo: A Global Standard

The Clean Cargo Methodology for CO2 emissions calculations and benchmarking has become the global standard in the ocean container shipping sector. As pressure on shippers, logistics providers, and container carriers to monitor, report, and reduce CO2 emissions continues to increase, all companies wish to show customers, investors, and other stakeholders their commitment to responsible operations and to reducing their environmental impacts. However, major brands and retailers are often unsure how best to start or to improve on their existing programs. Clean Cargo works to enable those companies to better understand their own transport performance and design robust and sustainable procurement programs aimed at reducing their impacts.

Using this Framework

The Sustainable Freight Procurement Framework for shippers is a:

  1. Self-assessment guide for shippers to evaluate their progress in supplier management, within the context of sustainability practices in logistics.

  2. Tool to help shippers advance their supplier management programs by identifying key activities and best practices that they can implement to improve their own sustainability performance, and that they can implement to foster sustainability improvements among their suppliers.

  3. Tool to help suppliers categorize maturity of their customers, providing the suppliers better visibility on their customers’ interest in sustainability and enabling the suppliers to make better decisions in supporting sustainability practices.

Once shipper’s have completed this self-assessment process, they should look to the Smart Freight Procurement Guidelines for specific action items on how to move from one stage to the next.


Stage 1: Initiating your sustainable procurement program

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At Stage 1, the shipper has acknowledged that sustainability impacts from its logistics practices and programs impact the company’s overall sustainability performance. The company is in the process of establishing a sustainability ambition level for logistics through initiating internal conversations with their various stakeholders and with their suppliers.

The shipper is exploring how to handle their most important logistics sustainability issues by communicating with their key suppliers about sustainability, and by getting involved with leading industry initiatives (e.g., Clean Cargo) to learn best practices from other peer companies who have demonstrated leadership in the space.

Taking Action

In collaboration with the Smart Freight Centre and WBCSD, here are two action items you can start on today to help build a more robust transport program:

  1. Monitor & Report (SFPG Action Card 4.1) - By monitoring your suppliers and reporting on your share of their emissions to your stakeholders, shareholders, and investors, you can establish an accurate baseline of your transport emissions from which to reduce.

  2. Collaborate (SFPG Action Card 4.3) - By working closely with your suppliers and communicating the value placed by your firm on sustainable transport options, you can begin to learn and adopt tried-and-true strategies for supplier management and identify opportunities for decarbonization.

For more details on implementing these action items, please read the Smart Freight Procurement Guidelines, available here.


Stage 2: MAnaging Risk Through sustainable procurement

At Stage 2, the shipper has established an ambition to reduce the basic risks associated with a traditional procurement approach and is exploring their next steps to drive additional sustainability performance improvements.

The company is involved with leading sustainability initiatives in logistics and is looking to learn from best practice and to explore how to drive improvements beyond its current practices. The shipper is also directly collaborating with suppliers as well as other shippers on aligning requests - such as sustainability performance and metrics - from suppliers in order to amplify the market signal of their sustainable procurement strategy. Traditionally, this type of engagement is done through the participation in convening fora such as Clean Cargo, BSR, and others.

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The shipper has also established a basic minimum level of requirements for suppliers to qualify for business. These requirements are formalized and include the assigning of all suppliers to given category (e.g., carriers, forwarders), the drafting and sharing of category-specific requirements that enables suppliers to face the same requirements for the same business.  Additional basic supplier requirements may include:

  • Sustainable procurement policy in place (Code Of Conduct).

  • Basic transparency from suppliers on relevant sustainability issues (e.g., CO2 emissions).

Finally, the shipper’s sustainability function is responsible for engaging with logistics suppliers on sustainability issues. The shipper has allocated basic resources - including staffing - to supply chain sustainability engagement programs in logistics and procurement.

taking action

In collaboration with the Smart Freight Centre and WBCSD, here are three action items you can start on today to help build a more robust transport program:

  1. Categorize the Suppliers (SFPG Action Card 2.2 - By categorizing your suppliers, you can more effectively establish category-specific emissions reduction objectives that appropriately manage the relative risks by supplier category.

  2. Engage with Suppliers (SFPG Action Card 1.4) - By establishing two-way communication with your suppliers on achieving GHG emissions reductions, you can begin to collaboratively manage potential risks to your supply chain by better -understanding your transport providers’ business, and vice versa.

  3. Define the Low Carbon-Oriented Contract (SFPG Action Card 3.1) - By ensuring that suppliers follow a behavior that supports your mission towards carbon emissions reductions, you can ensure a relatively managed level of risk to your supply chain and incentive further emissions reductions.

For more details on implementing these action items, please read the Smart Freight Procurement Guidelines, available here.


Stage 3: Integrating the Sustainable procurement ethos

At Stage 3, the shipper’s ambition goes beyond that of basic risk management towards a more general aim to drive improvements in their supply chain. At this stage, the company is actively involved with leading initiatives in the sustainable transport space (e.g., Clean Cargo) and is implementing best practice through active involvement in the development of relevant tools, guidelines and projects developed in conjunction with their peers and providers.

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The shipper has also imposed clear and concrete sustainability performance requirements on suppliers, such as emissions data disclosures through Clean Cargo membership, as being a prerequisite for bidding during the tender. The shipper also has a clear and well-defined process for using credible benchmarking performance data and information in decision making around how to award business to their suppliers.

The logistics and-or procurement functions within the shipper organization have clear ownership for driving sustainability improvements in the supply chain, and this ownership may involve a dedicated sustainability resource.

Finally, the shipper is actively exploring how to collaborate more closely with suppliers and other stakeholders to drive sustainability practice improvements beyond current levels towards innovative solutions.

taking action

In collaboration with the Smart Freight Centre and WBCSD, here are three action items you can start on today to help build a more robust transport program:

  1. Revise Qualification Procedure to Include Low Carbon Criteria (SFPG Action Card 2.1) - By including low carbon criteria as a part of your qualification procedure, you are streamlining the selection process of your suppliers and thus facilitating the deeper integration of sustainability.

  2. Award Scheme Establishment (SFPG Action Card 0.2) - By incorporating low carbon criteria into how both internal staff and supplier performances are rewarded, you boost your organizations' ability to affect real changes in behavior.

  3. Focus your Network on Low Carbon Emissions (SFPG Action Card 1.3) - By focusing your supplier and employee networks on those who have both conventional and sustainability-focused expertise, you enable the development of robust supply chain strategies for the attaining of a lower carbon footprint.

For more details on implementing these action items, please read the Smart Freight Procurement Guidelines, available here.


Stage 4: Visibly Leading in Sustainable procurement

At Stage 4, the shipper is a visible and leading driver of sustainability performance improvement among its suppliers and across the industry as a whole. The company is actively involved in leading industry groups and is open to radical innovation to drive significant sustainability improvements. The shipper also engages in innovation projects directly with suppliers and their logistics and.or procurement function is the lead for establishing sustainability requirements and analyzing supplier sustainability performance.

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In Stage 4 organizations, senior management champions the selection of, and collaboration with, suppliers based on suppliers sustainability performance. Some of the elements of this shipper’s procurement strategy might be that they:

  1. Make specific commitments on allocation of more business to leading sustainability performers, and is transparent about how sustainability leadership is rewarded among suppliers (e.g., performance on specific sustainability criteria have a defined weight in overall tender decision making).

  2. Have an established and well-designed supplier engagement program and regularly communicates directly with their contracted suppliers about their sustainability performance.

  3. Have requested that innovative service offerings be shared with them by their suppliers and acknowledge that pioneering sustainable practices require investments and have the potential to generate market differentiation and returns.

taking action

In collaboration with the Smart Freight Centre and WBCSD, here are three action items you can start on today to help build a more robust transport program:

  1. Support the Suppliers and Exert Leadership (SFPG Action Card 4.2) - By supporting the low emissions road mapping activities of your suppliers, recognizing the actions and improvements that they are already taking, and designing processes/tools to support LSPs and carriers, you can identify improvement options with your providers to advance on decarbonization even further.

  2. Share Incentives for Low Carbon Behaviors (SFPG Action Card 2.3) - By building in market-based mechanisms, such as emissions trading, into your tender process, you can actively improve your suppliers' behaviors towards carbon emissions reduction.

  3. Consider Exceptions to Allow for Innovation (SFPG Action Card 3.2) - Often, suppliers can see the buyer as a barrier to the development of green initiatives, limiting the providers’ investments into green technologies. One way of addressing this problem is to openly communicate your willingness to pay extra for innovative, low emission solutions.

For more details on implementing these action items, please read the Smart Freight Procurement Guidelines, available here.