The Digital Supply Chain podcast

Transportation CO2 Measurement In A Sustainable Supply Chain - A Chat With Tracks And Novigo

October 08, 2021 Tom Raftery / Thorsten Schmidt / Jakob Muus Season 1 Episode 167
The Digital Supply Chain podcast
Transportation CO2 Measurement In A Sustainable Supply Chain - A Chat With Tracks And Novigo
Show Notes Transcript

There is an increasing requirement to measure and report on your carbon emissions. This is particularly difficult in complex ecosystems such as supply chains.

Two companies working to make this simpler are Novigo and Tracks. To find out more I invited Novigo VP Thorsten Schmidt, and Tracks founder and CEO Jakob Muus to  join me on the podcast to learn all about it.

We had a great conversation about measuring shipments' CO2 footprint, down to the individual package level, the value of certified CO2 data, and the increasing desire for this data from the market. I learned loads, I hope you do too...

If you have any comments/suggestions or questions for the podcast - feel free to leave me a voice message over on my SpeakPipe page or just send it to me as a direct message on Twitter/LinkedIn. Audio messages will get played (unless you specifically ask me not to).

If you want to learn more about how to juggle sustainability and efficiency mandates while recovering from pandemic-induced disruptions, meeting growth targets, and preparing for an uncertain future, check out our Oxford Economics research report here.

And if you want to know more about any of SAP's Digital Supply Chain solutions, head on over to www.sap.com/digitalsupplychain, and if you liked this show, please don't forget to rate and/or review it. It makes a big difference to help new people discover it. Thanks.

And remember, stay healthy, stay safe, stay sane! 

Thorsten Schmidt:

Companies seeing more at the end customer is getting more and more aware of this sustainability factor. I think the media and the politics are doing necessary awareness. But definitely we can we can we can see that the company's seed also as a differentiator against other competitors and in the shelf they want to show how good they are right.

Tom Raftery:

Good morning, good afternoon or good evening wherever you are in the world. This is the digital supply chain podcast, the number one podcast focusing on the digitization of supply chain. And I'm your host, global vice president of SAP. Tom Raftery. Hi, everyone. Welcome to the digital supply chain podcast. My name is Tom Raftery with SAP and with me on the show today I have my two special guests, Torsten and Jakob. Thorsten and Jakob, would you like to introduce yourselves?

Thorsten Schmidt:

Yeah, thanks a lot, Tom for having us on his podcast. My name is Thorsten Schmidt. Managing the EMEA team for navico. rovigo is a global company focusing on transportation management implementations.

Jakob Muus:

And I'm Jakob Muus. I'm the founder and CEO of Tracks. We're a company that offers shippers, an automated and precise measurement of co2 in their supply chain and allocate it down to the shipment.

Tom Raftery:

Fantastic. And before we get into that, can you just explain what the relationship is between tracks and novago? Well, our

Thorsten Schmidt:

relationship started approximately one and a half years ago and Yakama we met on a on a conference you know where we talked about transportation, transportation management and how the new generation you know can influence the trend in the logistics more digitalization. More go green, more sustainability. And this is how we both kind of found the same common interest not to as we implement transportation management solutions for big and global customers, and your copy some measuring co2 and sustainability consumptions. We thought it's a good, you know, combination of both of the of the of the teams. And we started with doing proof of concepts, having customers involved, letting them give us feedback about our pool of concepts, and this how the partnership that more established and also how we how we grow the solution we're talking today about.

Tom Raftery:

So just to clarify, torsen, your customers, you are working with your customers to implement the Trax solution so that your customers, your then joint customers can see the co2 footprint of their transportation solutions. Is that it?

Thorsten Schmidt:

That's correct. Yes, we're working with atrax team together, and we are helping customers to implement transportation management solution and sustainability solution with atrax data.

Jakob Muus:

Yeah. And just to add to that, what you said, Tom? Yeah, we measured the co2, but we also together find solution for what to do with that co2. But we'll, we'll come to that in a second.

Tom Raftery:

Okay, so why Why are you doing this? Why'd Why are you measuring co2 and transportation? What is a Is there a demand for it and be Why?

Jakob Muus:

I would say the demand is not extremely there yet is really starting to come. I mean, we can usually say six months ago, it was like this, and that. But now I can actually say two weeks ago, things had changed in foreign performance, four months ago, it was different, and so on and so forth, we see that it comes very, very fast. But we've seen until now is that it's been clear for companies, they need to lower co2, they need to decarbonize in all their operations. And one of the biggest and, and the most expensive on a co2 term basis, expensive operations is the transport freight transport for, especially for producing companies and from retailers. And the companies had said, okay, we need to measure co2. But until now, we've seen a lot of proxy management solutions. And without I mean, people saying, Oh, we should just get everything on the railroad, or we should just buy electric trucks, not really thinking about the fact that it's going to be free. Third parties who's going to drive the electric trucks and why should we give them an electric truck. And within the last year, it's become clear to companies that they really can't manage anything they can't measure. And that's where the wave has started to come in, that people have and companies, shippers have all kind of realized in order to get to the next step where we can lower co2, we definitely need to do a measurement of co2 in all our operations, including the transport operations. Yeah, and that's, that's why it's coming at the moment.

Tom Raftery:

Okay, and how are you measuring that co2 yuck.

Jakob Muus:

attracts oui oui enables the exchange of data between carriers and shippers, we work with all five modes of transport. So, inland waterways, sea, road, rail and air. And we gather every time we have the chance to gather real, real data for real consumption on the road or on the sea. We use that for the trip and translate it into the shipments that were on board the vehicle or the other ship and so on and so forth. So we take the data that we get and translate it into a shipment level that then again enables the shipper in cooperation with companies like novago to make sense out of it and allocate it down to the last chocolate bar so to speak.

Tom Raftery:

Okay and Torsten in Novi go You said you've started to roll this over to customers, what what has the reaction been like for those, I assume they're still at the proof of concept stage,

Thorsten Schmidt:

it is still at the proof of concept stage. But we are we are defining our our proof concepts to the customers which which work with us, you know, it's a, it's an innovation project. So it runs under our innovation center. And we actually built different proof of concepts with with with different customers, because every customer has a different let's say, understanding of saving CCU co2, what we can see from an from a consulting perspective or from an SCP perspective, we can see the cost that companies are asking that they want to see it at a at a at a global or company wide KPI that this is now ask, I would say beginning of this year that these requests are coming more in. Also, when you actively talk to customers and say, Hey, we have proof of concept, we're looking into this topic, then you can see immediately that people react right and ask additional questions and the conversations are starting. This is much different than a year ago or even even even two years ago. They were there was almost no response and that question and then no interest to move into into further details. That's a big, big step, what we can see at the moment, whether it's proof of concept is really kind of responding to the interest of the of the of the of the customers, and also starting to answer the questions.

Tom Raftery:

Okay. And is it just that you're exposing the emissions data to them? Or are you saying to them, okay, your emissions are x, if you want to get them down by y percent, do Zed

Jakob Muus:

that's where the magic of our cooperation comes in. When we see attracts, we're really really good at making sense out of the data that we get in and and match the data from shippers and carriers. We're also extremely good at at using AI as a layer on top of it and make sense out a bit and sort of use what we call predictive analytics to say what could have happened down to the shipment level as well. But what we're not good at and that's when muvico are the experts is to say how can the shipper use this to actually make decisions so we're very good at saying this is how it would be if you do it tomorrow but Nova go and Thorsten will be able to say and translate that into supply chain decisions where should you build your next factory that's a that's a thing that that has to do with money time availability, but it also has to do with co2 and we can put this this this norm co2 into it, but also other decisions like like should I put this wait until I have a full truckload or should I send this with the less than truckload load today so procurement decisions all kinds of decisions what we as tracks are not able to do because we were data deliver but what navigo is able to do with the data that trucks can deliver

Thorsten Schmidt:

know that that's right and and Tom you can you can imagine it that we sit with the dispatcher or transportation planner you know together and show them first of all how this proof of concept looks like we are able to include or we are able to show demands you know that the planner has to plan to certain trucks you know, FTL LTL, which kind of trap truck which kind of carrier you are you're using were able to support this I mean as a as a transportation implementation partner. And then on top of it, we can then run also situations with the customer together where we say okay, in that circumstance, what is the best mode? And to answer that question we call so to say the service and the AI attracts to give us certain solutions and give us the co2 consumption are expected to co2 co2 consumption for that specific shipment and the planner and the dispatcher is still the person As the last call, so to say you can choose what he wants to wants to do with which carrier mode of transport etc.

Tom Raftery:

Okay. And is there I mean, amongst consumers, there's a growing demand now for sustainability. Is this something that you know you're going to be you, Thorsten are working with your customers, but are they then going to expose that carbon savings to their to their customers?

Thorsten Schmidt:

That's the plan. Yes. What we see in any discussions is really that customer that companies want to figure out, you know, how to break down the co2 consumption or the sustainability factor to the to the product level, we are able to do it from a transportation management system perspective and Trax is able to do that from an from an measurement and prediction perspective. So we can respond to that. And then customer companies seeing more at the end customer is getting more and more aware of this sustainability factor. I think the media and the politics are doing necessary awareness. But definitely we can we can, we can see that the companies see it also as a differentiator against other competitors. And in the shelf, they want to show how good they are right? And this is where we can help to bring them at this level.

Jakob Muus:

And you have already seen that only makes oat milk has started to do it in order to be able to get away from saying hey, we greener than then the milk. Yeah. But instead of saying we greener than milk, they say this is the amount of co2 you spent when you buy a liter of botley, which again, has forced many Milk Producers, to also put it on. My prediction is definitely that within the next two, three years, we're going to see it on a broad spectrum of products that they have the co2 calculation in the supermarket. And yes, it's going to start with fast moving consumer goods. But to my positive surprise, now I'm back to what happened three months ago, and what happened two weeks ago, three months ago, we only talk to products that are very, very new to the customer in the value chain. But two weeks ago, I had to two requests, both from paper producers, so you see that it goes and it goes down in the value chain, we do see that it's a it's an ask starts maybe with the consumer, but then the business customer pressures it down all the way down to the field or to the mind or where we have the primary goods.

Tom Raftery:

I know it's interesting. And it's it's it's funny that you mentioned Oakley, because I use Oakley barista myself for making coffee. And I tweeted, and I think I instagrammed a picture of the side of their carton during this last summer, showing the carbon footprint details printed on the side of the packet, which I thought was fantastic. And no, I'm not saying the two things are directly related. But when I went to order my groceries yesterday, all of the Oakley products were sold out and they couldn't get. So it's proving to be either very popular, or maybe their supply chain issues are. This is great to to what do you ascribe this sudden interest in sustainability and carbon footprints?

Jakob Muus:

I mean, I again, being being an observer of the market and see how fast it's going. I think what really gave it a temple was when the European Union came out with a new law sftr, sustainable finance. SFC sustainable finance, regulation

Tom Raftery:

I'll say the seeds for climate.

Jakob Muus:

See, I just say if C is for climate C is for doesn't matter. It's the problem. And the good thing about this law is it. It is a financial law. So it says two companies that that are having funds for investing in other companies. If they want to call themselves green, they need to prove that they agree. So when this law that it got sort of snuck in, it came around the most of the lobbies. So it was a surprise for many companies when it really came out because what are the consequences? The consequences are that if you are an investment fund, and you call yourself green, and remember many big and huge investment funds call themselves green all reinsurers are very, very focused on lowering co2. They call themself green. The Norwegian National Pension Fund is green. BlackRock is calling themselves green. And what this new law said was if you call yourself green unit To prove it, and how do you prove that you're green? You ask the companies in which you're invested to come with, with the proof that they're green. And that means measuring the co2 and all the operations and having a plan of how do you want to lower this. So after that law came out in March 2021, we saw a big change away from one sustainability manager and a company who wants to who does it because he wants to help the world, and into actually getting phone calls from the CFO office from the strategy manager's office where it has started to become a bonus relevance for the top management of companies. And that's where it rolls in, where companies have stopped saying, okay, we can just lower co2 just by, by by putting everything on the railroad and into saying, first we need to measure and then we need to make a real strategic plan on how we can lower the co2. Yeah,

Tom Raftery:

I know that. It's interesting, the uptake. And you know, there are lots of different factors. I think, the European Union has also passed a mandate to lower emissions by 55% by 2030, which is going to be hugely, hugely challenging to achieve, but it's legally binding on all 27 nations. So it has to happen. So we're going to see massive, massive changes here in the EU in the next eight years. So it's, it's going to be interesting times, I think,

Jakob Muus:

yeah, definitely. sf, Dr. disclosure regulation. There it was, I'm sorry, I just had a short leg. But yes, it's true that the regulations will come. And we do see that it is really getting away from being a nice to have to need to have a cost of doing business, basically.

Tom Raftery:

Yeah. And I think there's there's, there's a lot around just regulations and compliance because there's also a new law coming into effect, I think, in 2024 in the EU, which says that any company with revenues in excess of 10 million, or with more than 500 employees, needs to measure and report their emissions. And you know, there's going to be more and more legislation like that passed not just in the EU, but in the US in Asia and places like that. Because Because we have to because we have to lower emissions. And because 165 countries or, or more signed the Paris Climate accord. And because cop 26 is coming up in November of this year, and hopefully there's going to be agreements come out of that which will require more legislation, more compliance. So all this stuff is shifting from what was CSR, which was mostly marketing, on behalf of organizations reporting into the CMO. Now it's shifting to compliance and regulation, and it's going to shift over into the CFOs organization. So the rigor that will be applied to the reporting of this kind of stuff is going to be far, far greater. And it will be it will be required to be audited as well.

Jakob Muus:

Definitely. Yeah. Okay.

Tom Raftery:

So from a practical perspective, Jakub the the data, you know, let's say, I have a fleet of trucks, and I know they're using x 1000 litres of diesel per year, or 10s of 1000s, or hundreds of 1000s, or whatever the figure is, is it that you decide how much diesel is used? And that's how you calculate the co2 or how are you calculating that co2.

Jakob Muus:

So the the way people have been calculating co2 over the last couple of years in transport has to has been per ton kilometer. The problem with that is that you don't like there's a huge difference. Like now I only talk about road freight, because road freight is a good example. As I said, in the beginning, we manage all five modes of transport. But road freight is my baby, so to speak, because it's so complex, right. So I'll just give you an example. If we don't know anything about the vehicle that has been driving from A to B, we have to take for granted that it was on a three and a half ton truck that it was driving empty home, that it drove through the city and through the mountains and everything that was bad, so to speak. So we will have to over calculate the amount of co2 spent. If we know a little bit about the truck, just that it was a 40 ton truck, then we can take some other things for granted, we take for granted that it had a fill rate of 60% that it had an empty truck rate empty trip rate of, of 17%. And we can sort of muddle our way in. But everyone who knows trucking and knows these companies that that that move trucks around, they know that they do not drive around empty. So what you will find out is if you really use the primary data, really the trip data, how many how much diesel and co2 did the trucks spend on the trip until he came home again, and what was on board which shipments were on board the truck doesn't matter if we're full truckload or less than truckload and which empty trips that we had and then allocate all the co2 That was spent out to the different shipments, then you will have a very precise measurement of co2. So we have this this default measure where we don't know anything about the truck, we will have an error rate on overestimation of 400%. If we know that a little bit about the truck for instance, which age the truck has, which you engine and has and how big it is, we can have an error rate of 40%. But if we really use the primary data, we have 0% error rate. And first of all, in the short term, it's nice for the shippers because they lower the measured co2 That's nice, they can reach their targets from day one, it is not greenwashing because it's a one time lowering. And it's extremely good for us and extremely good for the cooperation we have with noval if we have the primary data because only then you can make real decisions like I always say how do you want to make strategic decision on the 400% error rate no CFO would ever allow anyone to have predictions on 400% error rate and we shouldn't do it on co2 either

Tom Raftery:

fair enough. Other customer examples you guys can speak to

Thorsten Schmidt:

Yeah, we can we can speak about the industry. So, we have started to show the proof of concept and talk about this this this corporation what what post companies have in the retail industry. So, this is where we where we kind of started to to have selected carriers which are kind of participating in this so that we get primary data into the system and we make decisions you know, the plan or dispatcher makes them decisions based on this data, the data or the transportation planning and DDD the conditions will be so to say decided by the by the planner or by by the dispatcher role and the the transport order you know, which is then executed by real carrier, when we need loads to products is then sent to trucks, trucks will will then do the co2 calculation as a forecast first. And based on this forecast, we can see what is expected after the transport is so to say executed, we get then the real data back from the primary data as a backup describe it. And we will show both data to the to the plan or to the to the company and we have built dashboards, you know which, which allowed us this this, this comparison, that's the first step you know, to towards recognizing measuring co2 and the carbon footprint. But this is just the first step as I said, we want to go further, we want to go further in the in optimizing it. And using this this carbon footprint I co2 data as additional criteria when you run tendering, for example. Or when you sit when you do a carrier selection, or when you do your yearly rate negotiations and carrier, contract renewal process, right, we want to make this data available to not only the dispatch on the planet, you want to make it available for the purchasing department as upset to the CFO to strategic department of a of a company. And I think this is also the direction most of the big companies go right? I mean, they start at transportation because it's it's has a high percentage of the of the of the pollution. But it doesn't, it doesn't start there and doesn't stop there. So companies want to have a dashboard, you know, where you can see everything. I mean, it starts with the probably product which is produced where they can actively, you know, do measurements or actions to reduce it. But then it goes into the transport etc. Where we can help to add our value here and our data.

Tom Raftery:

Super, super. And what about the, you know, competitive landscape? Are there lots of companies like tracks out there providing this kind of data? Or are you all on your own out? There are? How does that look?

Jakob Muus:

I always say to my investors, it's not so much about which competitors do we have today, which are we going to have tomorrow, because we are actually the first ones and the only one still on the market that is able to do this precise and automated allocation of co2 that's also accredited. So it's also accounting proof. So we have this combination. And furthermore, we're also the only ones who was able to make sense out of it and say, to create the predictive analytics so that we can work together with companies like novago to actually make sense for the customer and answer some questions. Some business questions that can make him save co2, of course, but also money. The way I see the market of it, it's settling in. It's establishing itself the co2 measurement market. It was a niche market for a long time. But in the near future, we're gonna see footprint tools that will hang over all operations in a company where you will see a measurement of co2 in scope one two and three were all the operations where all activities will be will be gathered and also there will be made sense out of it let's say what can we do with it and then you will have a carbon visibility tools like tracks that will take for some of the operations will deliver the data you will have from electricity production you will have your electricity provider but for other operations like how do the employees come to work you will need an external tool to help you make sense out of the data. business trips is a good example and we attracts have specialized in delivering the precise data from the transport operations but nothing more. We don't do warehousing we don't do we're not good at those things. We're very very good at delivering the data from transport operations.

Tom Raftery:

Okay, super. Gentlemen, we're coming towards the end of the podcast now Is there any question I have not asked that you wish I had or any aspect of this we've not touched on that you think it's important for people to be aware of?

Thorsten Schmidt:

Yeah, I think Tom you have not asked the question if the data and the measurement is certified. Okay, is

Tom Raftery:

the data certified?

Jakob Muus:

Yeah, as it looks right now, the international standard organization is making the new ISO standard force to emission management and logistics is going to be published in 2022. Until then, the only the only certification that is out there is an accreditation from smart freightcenter that accreditors tools like tracks that we calculate according to the standard and yes, we have the leg accreditation we're very proud of it. Which again, which again makes ensures us and our customers that when we calculate we don't just stick a thumb up in the air and say say a number but that we actually make a real accredited calculation that will also be approved when it comes to like what when it goes up to the CFOs office so to speak super

Thorsten Schmidt:

Yeah, and we're taking this this this data, you know, which have accredited measurements to make it visible across the company and across the supply chain.

Tom Raftery:

Yeah, yeah. No, it is very important because it is going to require a lot more rigor in the future. It will just by by regulation, and it will require it will be required to be audited as well. I'm sure the same way that financial disclosures are definitely right. Okay, we are now winding down the podcast. If people want to know more about NaVi gold or about tracks are about Jakub or about Torsten or any of the topics we discussed in the podcast today, where would you have me direct them,

Thorsten Schmidt:

so for no ego, you can go to our website yubico.com. You will also see us present on LinkedIn on the other business networks and platforms. You can find me on LinkedIn as well or you can write me an email at tossing document@noble.com Super Yaga.

Jakob Muus:

And for tracks its tracks that Ico SEO. And you can also find me on LinkedIn or write me an email on Jacob that moves me us at tracks that eco

Tom Raftery:

fantastic. gentleman has been really interesting. Thanks a million for coming on the podcast today.

Jakob Muus:

Thank you.

Thorsten Schmidt:

Thanks for opportunity to come.

Tom Raftery:

Okay, we've come to the end of the show. Thanks everyone for listening. If you'd like to know more about digital supply chains, head on over to sa p.com slash digital supply chain or, or simply drop me an email to Tom Raftery at sa p.com. If you'd like to show, please don't forget to subscribe to it and your podcast application of choice to get new episodes as soon as they're published. Also, please don't forget to rate and review the podcast. It really does help new people to find the show. Thanks. Catch you all next time.