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Scope 3, Sustainability and Data: Unravelling and Understanding the Retail Supply Chain

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By Published On: April 26, 20240 Comments

In this guest post, Rob Hango-Zada, Co-Founder and Co-CEO of Shippit breaks down the retail supply chain to its basics.

In 2023, Australians spent a staggering $63 billion online, with one in seven households making an online purchase every week. They’re eye-watering statistics, but we’re far from ‘peak eCommerce’ – the online shopping trend is set to surge. After all, it provides convenience, choice and unprecedented access for a contemporary consumer who craves those things from retailers. 

The unintended, but difficult-to-avoid, byproduct of this eCommerce boom is the carbon footprint it creates. Every delivery and every vehicle is responsible for an emission of carbon. As eCommerce continues to reach one lofty height after another, so too does the carbon it emits. Today, according to Shippit data, 15% of deliveries originate within 15km, from sender to recipient. However, the average parcel travels approximately 722 kms. That, to us, is unacceptable.

Creating a more transparent, accountable and sustainable supply chain that has less burden on planet earth – our biggest stakeholder – is essential. It’s for that reason that the government is introducing new mandatory reporting for Scope 3 emissions. But what are Scope 3 emissions and the new reporting legislation? And how can retailers tap into data to not only comply with the legislation, but improve the unit economics of their supply chain?

Scope 3 mandatory reporting legislation

From July, Australian companies and financial institutions must comply with mandatory climate-related reporting obligations. With a goal to increase transparency and accountability, 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. Meanwhile, Scope 3 relates to operations that touch a business like, for example, their supply chain.

Given the complex and intricate nature of retail supply chains, Scope 3 emissions are the largest and hardest to control. That, however, is what makes the new legislation so important, and so necessary. Achieving net zero by 2050 is a hugely positive step for Australia, a market that regularly ranks poorly (compared to developed economies) when it comes to sustainability and climate change. The legislation’s rollout will be staggered, so not all businesses must comply from the start of July, but all must think about it already.

At Shippit, our guiding mission is to power 200 million deliveries without waste by 2025. We support any legislation, like this, thats goal is to improve sustainability and efficiency. We work with thousands of retailers and carriers – from national chains to bespoke family-run retailers – many of whom are ahead of the curve. Industry wide, though, many more are unprepared and uncertain. They understand what they must do, they just don’t know how to do it. Their data does, though. 

Data: Turning complexity into clarity

For retailers, the key to complying with the legislation is being able to understand their emissions in the first place. Calculating a carbon footprint in the last mile is very difficult. Imagine two colleagues, both of whom receive a parcel from different retailers on the same delivery vehicle at their office. Determining who takes carriage of that carbon emission is very difficult. And that’s one capture of an emission, but  apportionment in the last mile becomes very difficult as you get more intricate into the network of last mile logistics. 

To enable retailers to gain these insights, we are developing a carbon calculator to help them calculate – then report – their emissions. For deliveries booked through Shippit, we measure how much carbon is generated by our courier partners. That begins from the moment a parcel is collected up to the moment it’s delivered. Based on this calculation, we purchase carbon offsets to support projects that prevent and reduce greenhouse gas emissions, by the same amount, to reduce emissions overall. Not only do we neutralise the carbon emitted by our courier partners, but the offset projects we invest in also deliver economic, community and social benefits. So it’s great for broader ESG, too.

Sustainable supply chains, sustainable unit economics

Sustainability is essential, but too often retailers compromise it for the sake of their budget and bottom line. Through data and algorithms we can also make fleets more efficient. Through data, insights and reporting, retailers can optimise their routes and increase their ‘drop density’ – the number of parcels they can deliver in an allotted time.

Rather than fulfilling and delivering orders at random or based on the chronological order a purchase is made, route optimisation software allows retailers and carriers to orchestrate deliveries using not guesswork but data-driven precision. This minimises waste, reduces their costs, increases their capacity, and enhances the customer experience – with a more efficient delivery – in the process. That’s better for business’ efficiency and unit economics. 

Sustainability is one of the defining issues of our generation. For too long it has been placed in the ‘too difficult’ or ‘too expensive’ to solve bucket. But with legislation fast-approaching and technology rapidly-evolving, there is no longer an excuse. The time is now, and the retailers that seize the opportunity will establish a competitive advantage that they’ll feel on multiple fronts; from legislation compliance and sustainability, to their bottom lines and customer satisfaction. 

Words by: Rob Hango-Zada, Co-Founder and Co-CEO of Shippit

About the Author: Power Retail

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