Environmental, Social & Governance (ESG) reporting is becoming increasingly important to large companies, particularly those that are publicly traded. As a small or mid-sized, privately held trucking company, this may not yet be on your radar. But it should be. Your customers may soon demand it.

Large retailers, such as the Walmarts and Canadian Tires of the world, are under increasing pressure from the investment community and securities regulators like the Securities and Exchange Commission to file ESG reports. These reports measure the company’s performance related to sustainability, social activity, and diversity.

But Jeff Hove, vice-president of the Transportation Energy Institute, takes a broader view of ESG reporting and its benefits, even for transportation businesses not required to create a formal report.

“The best way to describe ESG reporting? Risk management,” he said in an interview. “Managing risks that have a strong potential to financially harm an organization.”

This goes beyond environmental performance alone, and covers initiatives related to driver safety training, sexual harassment policies, human trafficking awareness, diversity employment programs, and workplace safety training, to ensure the company is protecting itself against all forms of risk, not just those related to the climate.

“ESG reporting is risk management planning and is simply smart business that can save the organization a tremendous amount of money, as well as prevent reputational harm,” he said. “That said, many companies will wait until they absolutely have to act. The ‘must act’ moment is at the doorstep.”

Within scope

That ‘must act’ moment may come in the form of Scope 3 emissions tracking, required of large organizations, including shippers. Scope 1 reporting covers a company’s direct greenhouse gas emissions, Scope 2 emissions are ‘indirect’ from the use of purchased energy such as electricity, and Scope 3 covers indirect up- and downstream emissions from partners along the supply chain. This is where truckers can find themselves playing a role.

As publicly traded companies begin to report their Scope 3 emissions, supply chain partners such as fleets will increasingly be asked to report on their own emissions and sustainability initiatives.

“Shippers will be looking to contract with fleets that have stated their emissions and emission reduction activities and goals for improvement,” Hove said.

Sarah Buckle is partner, sustainability and climate with Deloitte Canada. She too says the required reporting of Scope 3 emissions is where trucking companies will be prominently featured within their customers’ ESG reports.

“For publicly traded companies there’s a requirement to report on their Scope 3 emissions, which is through their supply chain,” she explained. “That’s how we’re seeing those requirements impact all sorts of small- to medium-sized businesses that don’t typically need to report. That reporting requirement is coming down from their customers.”

Scope 3 also happens to be the trickiest of the three to report on, since it includes indirect emissions from third-party suppliers. For trucking companies, telematics can be useful in collecting data related to fuel consumption. Initiatives such as driver training, anti-idling, the use of alternative fuels, can all be counted as part of a fleet’s contribution to a customer’s Scope 3 emissions reporting.

“All of that would impact your fuel consumption and, directly or indirectly, your GHG emissions,” Buckle explained.

Large undertaking

Analyzing these aspects of a trucking company’s operations is also beneficial in that it forces the business to evaluate where it stands today and where it can improve in the future. Improvements in fuel efficiency, for instance, go straight to a trucker’s bottom line.

ESG reports themselves, and the data that goes into them, should also be updated annually.

“The concept is, if you start with your baseline, you can start thinking through ambitions. Where do you want to be in a year? Five years?” Buckle said.

Developing a full ESG report is an enormous – and costly – undertaking. Hove said companies looking to do so should designate an ESG professional within the organization to guide that process.

“That person will be responsible for collecting data and updating the ESG report annually,” he said. The Transportation Energy Institute [which merged with its Canadian counterpart, the Canadian Transportation Alliance] has developed an app to simplify the process and reduce the cost.

“Our ESG Integrity and Carbon Avoidance Tracker application, for fleet operators and fuel marketers, was developed by fleet operators and fuel managers,” he noted. “Through industry working groups, we determined what metrics are of primary importance, can be measured, and meet certain ESG reporting frameworks.”

Some of the low-hanging fruit that fleets can harvest to improve their environmental performance include: converting last-mile box trucks to electric; utilizing higher blends of biofuels; reducing employee travel; slashing idling; and incentivizing fuel-efficient driving behaviors.

“I spend a lot of time on fleet electrification, thinking through what vehicles to electrify,” Buckle added. “We’re also doing some work with hydrogen fuel cells with clients.”

A truck fleet that has put in the work and money to develop an ESG report, or any form of sustainability report, should be prepared to take full advantage of the related benefits. This may mean posting it on its website, or at the very least, distributing it to customers and potential customers.

“It should be updated annually, ready for sharing to improve B2B (business-to-business) relationships,” Hove said. “If the company has a social media person, the ESG report will provide good facts and talking points to help improve the visibility of the company.”

That first report will provide a benchmark upon which to improve and help the company’s executives set targets for improvements. Sometimes, Hove said, the company will want to have a second report under its belt so it can show ongoing improvement before promoting its achievements too early.

Honesty and integrity are crucial when reporting emissions, he warned.

“I’ve worked with a number of companies that believe a strong ESG plan is going to attract younger employees.”

Sarah Buckle, Deloitte Canada

“Do not overpromise on goals and do not calculate emissions with a non-transparent model,” he said. “You will be accused of massaging numbers and greenwashing if you are not 100% transparent.”

Visanty Dindial, ESG manager with consulting firm Forvis, said some customers have used the process to win new business through requests for proposals. “The primary basis for which to use it is for stakeholder engagement,” she said. “Understanding what your stakeholders are requiring and providing that information.”

It can also be beneficial when going to the market to raise money, she added.

And then there are the soft benefits as well, like being a more-attractive employer. “I’ve worked with a number of companies that believe a strong ESG plan is going to attract younger employees,” Buckle said. “The younger generation does, earnestly, want to know if they’re working for a company that shares their values.”

Anika Muslawski, a director with Forvis, shares another good reason to have some form of public-facing ESG, or sustainability, report. It allows you to tell your own story.

“A lot of AI tools are coming out in the market, which are scrubbing client sites for ESG data and then providing ratings or rankings against your peers,” she said. “You’re going to be ranked based on what you disclose anyways, so having that data readily available is a way to influence those scores.”

Muslawski added, “An ESG report is a way to tell your own story in a freer way than you can in a lot of financial filings and to demonstrate your company culture. It’s a chance to tell some of those things that indicate growth, or positive returns, without strictly reporting it in the numbers.”