The next step for Scope 3 Category 4! Data strategy to simultaneously comply with the Logistics Efficiency Act and the Energy Conservation Act

The three looming laws and regulations are coming. Is your Company responding in a disjointed manner?

In today's world, where sustainability management determines corporate value, many companies"SSBJ Disclosure Standards," "Amended Logistics Efficiency Act," and "Amended Energy Conservation Act"Companies are being forced to comply with these three important laws and regulations in the logistics and environmental fields. However, on the ground, the sustainability department is responsible for calculating GHG emission amount in accordance with the SSBJ, while the logistics department is responsible for improving transport efficiency based on the Logistics Efficiency Act and the Energy Conservation Act, so isn't it possible that each response is being handled separately?

Such vertical responses not only result in duplicate data collection and reporting, but also carry the risk of implementing contradictory measures between departments. In fact, there is a "common key" to these three regulatory responses that promotes cooperation across organizational boundaries. This key is the "common key" that shows the emission amount from transportation and delivery in the supply chain."Scope 3 Category 4"is.

This article focuses on Scope 3 Category 4 and explains how to break down silos between departments and integrate compliance with the three legal and regulatory requirements into a single data strategy. This is not just about complying with regulations; it is a roadmap for transforming defensive compliance activity into an "offensive business strategy" that leads to cost reductions and increased corporate value.

Three important laws and regulations related to Scope 3 Category 4: Overview of the SSBJ Disclosure Standards, the Logistics Efficiency Act, and the Energy Conservation Act

First, let's get a concrete overview of what each law and regulation requires of companies. Although these may seem independent, they are actually closely related, centering on logistics data.

Faced with complying with these laws and regulations, many companies are stuck at the initial stage of their sustainability initiatives.

• Sustaina 1.0: Regulatory disclosure response 

  • This is the compliance stage, where companies simply comply with the minimum requirements for the above-mentioned regulations. Many companies remain stuck at this stage.

• Sustainer 2.0: Improvement and Reduction 

  • Based on the calculated and visualized data, we now involve relevant departments and business partners in taking concrete activity to reduce GHG emission amount and improve operations.

• Sustaina 3.0: Implementing Sustainable Management 

  • This is the stage where sustainability initiatives are implemented as a management strategy to enhance the competitiveness of products and Service and increase corporate value.

The root cause of many companies being unable to overcome the barriers to "Sustainability 1.0" lies in problems with organizational structure. We will delve into this issue in the next chapter.

Why progress is slow in addressing Scope 3 Category 4: Silos between the Sustainability and Logistics departments

The root cause of the inefficiency of regulatory compliance in many companies isThe "siloing" of sustainability and logistics departmentsAlthough both departments are looking at the same logistics activity, their objectives and perspectives are completely different.

• Sustainability Categorywill focus on comprehensively understanding the GHG emission amount of the entire company in order to comply with the SSBJ disclosure standards.Calculating accurate figures to meet disclosure requirements"is.

• on the other hand,Logistics departmentIn order to comply with the revised Logistics Efficiency Law and the revised Energy Conservation Law, the company is implementing measures such as reducing transportation costs, improving loading rates, and improving the working environment for drivers.Operational efficiency" is our top Issue.

The essence of the problem is that whether the data in both sectors are secondary data (estimated values) or primary data (measured values),In the end, they use the same logistics data infrastructureThe problem is that, because they are chasing different KPIs, each department conducts its own analysis of the same data source and comes up with different measures. This division not only creates duplicate data collection efforts, but also becomes a serious cause of inconsistency and stagnation in measures, such as when the sustainability department calls for a change in transportation modes to reduce CO2 emissions, but the logistics department opposes it on the grounds that it will increase costs.

The next step for Scope 3 Category 4 is "primary data" - Shifting from estimated values ​​to a logistics reality-based approach

The key to overcoming this division between departments and moving towards "Sustain 2.0: Improvement and Reduction" is the logistics"Primary Data"This is a unification of approaches based on this.

Scope 3 Category 4 is the "common language" that connects all departments

Scope 3 Category 4 (Transportation and Distribution) is a core element common to all three regulations.

• SSBJ compatibleTherefore, Scope 3 emission amount must be calculated precisely.

• Logistics efficiencyIdentify inefficient transport routes and low load factors and implement improvements.

• Energy savingTherefore, it is necessary to understand the amount of Energy used in transportation and make efforts to reduce it.

All of this, in the end"What cargo was transported, by which vehicle (mode), and how far?"This data is based on physical transportation data, and it can become a "common language" that connects departments with different objectives and allows them to develop a common strategy.

From estimates to reality: The value of converting secondary to primary data

Until now, calculations of Scope 3 emissions have mainly been based on estimates based on "secondary data" such as transportation contract fees. However, in order to achieve both stronger regulations and improved management efficiency, it is essential to switch to "primary data" based on transportation performance.

Of course, collecting primary data involves many practical difficulties. It is not easy to obtain data from outsourced businesses, and there are various "complexities" such as inconsistent data formats and missing data. However, investing in primary data is not simply a cost to fulfill reporting obligations. It corrects inefficiencies in logistics,Financial return in terms of reduced costsand,Strategic return on effectively complying with regulationsIt is the most justifiable allocation of management resources that brings about both.

Three benefits of departmental collaboration centered on Scope 3 Category 4: A perspective for simultaneously reducing logistics costs and CO2 emissions

By having the sustainability and logistics departments share primary data and work together, win-win measures that embody "Sustainability 2.0" can be created.

1. Promoting joint deliveries This initiative promotes joint deliveries between suppliers and significantly improves loading efficiency, thereby reducing the number of trucks used and simultaneously reducing both logistics costs and CO2 emission amount.

2. Implementing modal shift This is a measure to switch long-distance transportation from trucks to rail and ships, which have lower Emission factor. This will enable a significant reduction in Scope 3 Category 4 emission amount while avoiding the risk of rising fuel costs.

3. Optimizing the ordering and shipping process This is a measure to optimize transport frequency by enlarging order lots to an appropriate transport unit based on demand forecasts. It eliminates unnecessary emergency transport and reduces both delivery costs and emission amount. This is not just about improving logistics efficiency,An important gateway to optimizing the entire supply chainIt will be.

Practical steps to address Scope 3 Category 4
- Two phases to achieve data integration and departmental collaboration

It is difficult to aim for total optimization all at once. The key to success is to start by accurately understanding the current situation and then implementing a step-by-step improvement cycle.

Phase 1: Understanding the current situation and building a data infrastructure

The first step is to build a reliable data foundation on which to base the discussion.

• Thorough visualization: We collect and analyze current logistics data, such as transportation and delivery routes, loading rates, truck waiting and loading times, and CO2 emission amount, to identify bottlenecks and inefficient areas. It's like conducting a "health check" of your company's logistics activity.

• Data imputation and standardization: We standardize the granularity and definition of data (e.g., weight in kg or tons) that varies between departments and outsourced transport companies. In many cases, data is insufficient or requires processing, so we supplement these and create a data infrastructure that can be compared and analyzed across the entire company.

What is extremely important here is cooperation with the transport company. If you demand perfectly formatted data from the beginning, you will put too much strain on the other party and they will not cooperate. As an experienced consultant, my advice is:"First, we need to get the data they can provide in the format they can provide it."This practical step is essential to building trust and creating a sustainable data collection system.

Phase 2: Planning and implementing overall optimization and measuring results

The data infrastructure established in Phase 1 will be used to develop concrete improvement actions.

• Efficiency planning: Based on standardized data, we plan measures that lead to overall optimization, such as modal shifts and joint deliveries, that would not have been possible from the perspective of a single department.

• Execution and Measurement: We will implement the plan and quantitatively measure its effectiveness based on primary data (CO2 emission amount, transportation costs, etc.). By utilizing these results in the next round of improvements, we will implement a continuous PDCA cycle and fully implement our "Sustainability 2.0" initiatives.

Summary: Scope 3 Category 4 is the starting point for changing regulatory compliance into increased corporate value – a turning point from compliance to sustainability management

Compliance with SSBJ, the Logistics Efficiency Act, and the Energy Conservation Act is by no means simply a cost or obligation.
These are also important opportunities to transcend departmental barriers and promote data-based management reforms.

While many companies are limited to complying with regulations under "Sustainability 1.0," the true value lies in the improvements and reductions that come with "Sustainability 2.0," and in implementing sustainability management as part of "Sustainability 3.0." Rather than simply conducting calculations aimed at complying with regulations, the future requires a perspective that links data to improving corporate value.

What is important in responding to Scope 3 Category 4 is not the calculation method itself, but rather the multiple system requirements such as the Logistics Efficiency Act, the Energy Conservation Act, and SSBJ.Overall design, including which data to use as a starting point and which departments to work together onis.

If you are already working on Scope 3 calculations and collecting logistics data, but are facing Issue such as "responses differ depending on the system" or "you are unsure how to utilize primary data and promote departmental collaboration," organizing your data in accordance with your company's situation will make it easier to see your next steps.

Regarding calculation of Scope 3 Category 4, compliance with regulations, data preparation and system creation,If you would like to exchange information based on the current situation and Issue, please feel free to Contact us.

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