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Transport

Methodology (preliminary draft v2)

(Preliminary version – 03/2020)

 

 

Oacknowledgments
authors:
ACT co-founders:

 

 

supported by:
 
Technical assistance provided by:

 

 

 

 

© CDP Worldwide & ADEME 2019. Reproduction of all or part of work without licence of use permission of CDP Worldwide & ADEME is prohibited

 

1. Introduction

 

1.1. Context for the transport sector

The 2015 United Nations Climate Change Conference (COP21) in Paris solidified the global recognition to act on climate change with the political agreement to limit warming to a 2°C pathways, and if possible, a well below 2°C above pre-industrial levels. The ‘Assessing low-Carbon Transition’ (ACT) Initiative measures a company's alignment with a future low-carbon world. The goal is to drive action by companies and encourage businesses to move to a well-below 2°C compatible pathway in terms of their climate strategy, business model, investments, operations and GHG emissions management. The general approach of ACT is based on the Sectoral Decarbonization Approach (SDA) developed by the Science-Based Targets initiative (SBTi) in order to compare a company’s alignment with a 2°C world, the application of which is described in the ACT Framework [1].

[1] “ACT Framework - Version 1.1”, ACT Initiative, 2019

The global transport sector accounts for 20% of energy-related greenhouse gas emissions, composed almost entirely of CO2 from the combustion of oil [2]. Emissions have increased by over 30% since 2000, largely as a result of an increase in the vehicle stock by 300 million over this period. By 2050, emissions of transport sector could reach 12 GtCO2. [3]

[2] "Perspectives for the energy transition - Investment Needs for a Low-Carbon Energy System", IRENA, 2017

[3]  Internationational Energy Agency, “Data & Statistics,” [Online].

FIGURE 1 : TRANSPORT SECTOR HISTORICAL EMISSIONS AND LINEAR EXTRAPOLATION UNTIL 2050 

The increase in transport-related CO2 emissions is almost entirely in line with the increase in energy demand in transport, given the sector’s heavy reliance on oil-based fuels, with every percentage point increase in transport energy demand bringing about a commensurate rise in emissions. One area in which progress has been slow (compared with light-duty vehicles fuel efficiency) is the fast growing freight fleet. Only four countries (Canada, China, Japan and the United States) have introduced efficiency standards for heavy-duty freight vehicles. Facilitating the introduction of such standards in other G20 countries, through international collaboration, would yield important climate, local air pollution and health benefits. On top of that, energy demand for aviation and shipping has grown robustly since 2000 (by 1.4% per year and 1.8% per year respectively), and accounts for around one-fifth of both energy demand and CO2 emissions in transport. Energy efficiency has mitigated further rises in aviation emissions as engines and air traffic management have improved. Regulations for both aviation and shipping still lag behind those for passenger vehicles, but efforts are now being made. For example, the Energy Efficiency Design Index introduced by the International Maritime Organisation, which entered into force in 2013, is the first globally binding energy efficiency standard for shipping; it mandates a minimum 10% improvement in the energy efficiency per tonne-km of new ship designs from 2015, 20% from 2020 and 30% from 2025. In aviation, many airlines, aircraft manufacturers and industry associations have committed to voluntary, aspirational targets that would collectively achieve carbon neutral growth by 2020 and a 50% reduction in GHG emissions by 2050 (relative to 2005 levels).

However, it has to be acknowledged that heavy road transport, shipping and aviation fall among the list of the harder-to-abate sectors (with the cement, steel or plastics industries) [4], as shown on the Figure 1 hereafter.

Figure 1: Illustration of the major harder-to-abate sectors to meet the Paris agreement [4]

[4] "Mission possible: reaching net-zero carbon emissions from harder-to-abate sectors by mid-century", Energy Transitions Commission, 2018

Hopefully, there is also some motive for optimism: in some cities, modal shifts in transport have also played a prominent and increasing role in reducing private car use. In Paris, for example, the introduction of Velib’ and Autolib’ programmes, which make available shared bicycles and electric-powered cars, and the development of bus and bicycle lanes, has contributed to a 25% reduction in car use. Therefore, solutions and levers to reach net zero emission-mobility by 2050 hopefully exist, and some best practices can foster the adoption of the right combinations of solutions through collaborative approaches between companies, cities and countries.Such best practices should rely on 4 strategic imperatives for reaching GHG-neutral mobility, to leverage initiatives either to avoid, shift or improve transport:

  • Imperative 1: Move away from oil and other fossil fuels to focus on very-low-GHG energy
  • Imperative 2: Lower the energy intensity of our mobility patterns (global economy & individual lifestyles)
  • Imperative 3: Prepare the physical and IT infrastructure needed to accompany those changes
  • Imperative 4: Inform, educate and train populations to embrace the transformation

Companies involvement, along with other stakeholders such as public authorities, is key to achieve these four imperatives. Technology will of course play a key-role, but is not necessarily the only one, as for instance the potential to reduce carbon emissions in heavy freight, shipping and aviation through demand-side measures could reach 20%, which is considerably less than in the industrial sectors, but still constitutes a meaningful contribution to emissions reduction [4]. These considerations will therefore be taken into account in the definition of the methodology, through several qualitative indicators (see chapter 5).The Figure 3 below gives some more insight on this.

FIGURE 3: DEMAND MANAGEMENT CAN CUT EMISSIONS FROM THE HARDER-TO-ABATE SECTORS IN TRANSPORT BY 20% BY 2050 [4]

[4] "Mission possible: reaching net-zero carbon emissions from harder-to-abate sectors by mid-century", Energy Transitions Commission, 2018

1.2. Philosophy of the methodology

What matters most when dealing with the GHG emissions of transport is of course vehicles operations.

Therefore, for the transport sector as a whole, a Well-to-Wheel (WtW) approach is used when assessing GHG emissions related to vehicles operations, like the AUTO sector. The WtW emissions reflect not only the direct use emissions from fuel combustion (TtW: Tank-to-Wheel) but also upstream emissions related to fuel production and distribution (WtT: Well-to-Tank), including electricity generation for electric vehicles [5]. The description of GHG emissions considered in this methodology is detailed in section 4. When data on WtW emissions are not available, a TtW approach shall be used taking into consideration WtT regional conversion factors.

[5]  ACT Initiative, “ACT Sector methodology - Auto- Version 1.1,” 2019.

The choice is made to gather all transport sub-sectors into one single ACT methodology. Two aspects justify this choice: (i) many companies have multi-modal activities, and (ii) several assessment modules cover aspects common to all subsectors.

 

2. Principles

The selection of principles to be used for the methodology development and implementation is explained in the general ACT Framework. Table 1 recaps the principles that were adhered to when developing the methodology.

Table 1: Principles for implementation

Relevance - Select the most relevant information (core business and stakeholders) to assess low-carbon transition.
Verifiability - The data required for the assessment shall be verified or verifiable.
Conservativeness - Whenever the use of assumptions is required, the assumption shall err on the side of achieving a 2° maximum global warming.
Consistency - Whenever time series data is used, it should be comparable over time.
Long-term orientation - Enables the evaluation of the long-term performance of a company while simultaneously providing insights into short- and medium-term outcomes in alignment with the long-term.

 

3. Scope

 

3.1 Scope of the document

This document presents the ACT assessment methodology for the Transport (TR) sector. It includes the rationales, definitions, indicators and guidance for the sector-specific aspects of performance, narrative and trend scorings.

It was developed in compliance with the ACT Guidelines for the development of sector methodologies [6], which describe the governance and process of this development, as well as the required content for such documents.

It is intended to be used in conjunction with the ACT Framework, which describes the aspects of the methodology that are not sector-specific.

[6] “ACT Guidelines for the development of sector methodologies - Version 1.0”, ACT Initiative, 2018

Scope of the Transport sector

The Transport (TR) sector includes transport operators and providers of transport services, both for passengers and goods. Transport sub-sectors covered are listed in the Table 2 below, along with their NACE classifications(1). NACE Classification is a good starting point to describe the transport sector as the distinction is made between passenger and freight. Indeed, most often, transport companies are specialized either in passenger or freight transport. Moreover, the metrics to be used in terms of low-carbon pathways differ between passenger and good transportation (e.g. passenger.km or tonne.km).

(1)   “Removal services”, “Postal activities under universal service obligation” and “Other postal and courier activities” are already included in the categories listed in the table.

This ACT Transport methodology should be used to assess companies within the subsectors listed in Table 2. Light-duty vehicles and personal mobility by car are excluded from ACT Transport methodology as they are covered by ACT Auto methodology previously developed [5]

[5]  ACT Initiative, “ACT Sector methodology - Auto- Version 1.1,” 2019.

Transport services by car (such as hail-riding services, car-sharing services or taxis) are not covered by ACT Transport methodology for now, but could possibly be included in a future version of the methodology, when data relative to this type of passenger transport are available (low-carbon benchmarks for instance) and also when business models of such companies become more mature.. All other types of vehicles are included in the ACT Transport methodology: trains, ships, airplanes, trucks and heavy-duty vehicles, all vehicles for public transport (metros, tramways, buses, coaches…).

The case of multimodal companies is described in section 6.1.

Table 2 : Transport sub-sectors in ACT TR Scope

(2) Nace Class 49.31 covers all urban and suburban public transportation modes : bus, tramway, metro

(3) NACE Class 49.41 includes both class 49.41A Interurban freight transport by road, and 49.41B Proximity freight transport by road.

Specific Case of Sub-Contracting

The case of sub-contracting is also covered by the methodology, since a company whose activity is mainly to provide transport services (not operating vehicles itself) is also fully concerned by the low-carbon transition, by its capacity to influence all the downstream value chain of transport. It particularly applies to the freight transport sector, and particularly road transport within it. The weighting of some modules varies depending on the subcontracting used or not by the company. This choice is justified by the fact that some data cannot be collected by the company when the transport service is subcontracted (e.g. on material investments) and that other responsibilities arise when subcontracting a service (e.g. engage the subcontractor on a low carbon pathway). The way the methodology addresses this issue is detailed in the subsequent chapters.

 

Specific Case of Aviation

For almost all subsectors listed in the table above, the metrics to be chosen for calculating the decarbonisation pathways is obvious (either passenger.km or tonne.km).

However, because of the nature of air transport, cargo is often shipped alongside passengers which makes the case of aviation industry a special one (and to a certain extent, the same holds for sea and costal passenger transport) [7]. The choice of the metrics is then not straightforward and makes the assessment a bit more complex.

[7] “GLEC FRAMEWORK FOR LOGISTICS EMISSIONS METHODOLOGIES”, Global Logistics Emissions Council, 2019

Actually, the International Air Transport Association (IATA) provides an allocation method of GHG emissions for passengers and freight (IATA RP 1678)  [8] The allocation key recommends use of a standard weight of 100kg per passenger (including luggage) plus 50kg per available seat. In this approach, it is assumed that fuel usage is proportional to weight. So passenger fuel usage is the ratio of total passenger weight to total weight multiplied by the total fuel used. In the framework of ACT TR, we therefore recommend that airlines apply these guidelines to compute GHG emissions related to passengers transport on the one hand, and freight transport on the other hand. The correct ratios will then respectively be in gCO2/RPK (revenue passenger kilometer) and in gCO2/FTK (freight tonne kilometer), according to the correct weight-based allocation.

[8]  IATA, “RECOMMENDED PRACTICE 1678 – CO2 EMISSIONS MEASUREMENT METHODOLOGY,” 2014.

 

4. Boundaries

➔ NOTA BENE
  • Hereafter, the term “emissions” will refer to all GHG emissions (not only CO2) which shall be measured in CO2 equivalent.
  • ACT provides guidelines concerning the scope and boundaries of the sector covered by this methodology to determine which type of GHG emissions are included or excluded. However, it does not provide tools and databases to measure and compute these emissions. In particular, the choice of emission factors does not fall under the responsibility of the ACT methodology. ACT recommends using standard emission factors recognized in the sector. As such, some recommendations but not prescriptions may appear in this document.
  • Benchmarks used in this methodology are based upon emission factors of fuels, and not from aggregated emissions factor in tonne.km or passenger.km for the modes covered by the methodology. hence they are less sensitive to changes. Common emission factors are compatible with the benchmarks.

Emissions linked to the energy used by vehicles in operation are the main emissions source to assess for the transport sector, be it emissions of direct combustion of fuel in the vehicle engine, or emissions linked to the production of energy (electricity, hydrogen, upstream of fuel…). Well-to-wheel (WtW) emissions corresponding to energy usage are considered, to account for the upstream part of the energy value chain (Well-to-Tank – scope 3 as defined by the GHG Protocol(4) [9] and ISO 14069) and not only the energy usage itself (Tank-to-Wheel – scopes 1 and 2, as defined by the GHG Protocol [9] and ISO 14069). The WtW perspective is essential to cover the case of electric propulsion, very common for some transport sub-sectors (rail, urban transport) and that will increase in others over the coming decades (land transport, inland or sea water transport). Figure 3 illustrates the decomposition of emissions in the WtW perspective.

 (4) The scopes defined by the GHG Protocol shall not be confused with the scope defined within the ACT methodology. The former refers to the reporting of GHG emissions by a company, whereas the latter refers to the kind of companies covered by this methodology.

[9] “GHG Protocol - Technical Guidance for Calculating Scope 3 Emission”, WRI & WBCSD, 2011

 

Figure 4: Well-to-wheel emissions

 

Emissions from vehicle manufacturing are not taken into account in this methodology since they are only significant compared to emissions of the use phase, in case of a low-carbon transport modes. In order to decarbonize the transport, the first priority is to shift from fossil-fuelled vehicles to low-carbon ones. The manufacturing emissions shall be added to future versions of the methodology as they will represent an increasing part of the carbon footprint of transport.

 

Une image contenant capture d’écran Description générée automatiquement
Figure 5: GHG Emissions from Aviation

 

Emissions from the construction, maintenance and operation of transport infrastructures is not taken into account in the boundaries of ACT TR. It excludes railways, airports, port terminals, roads, stations. The rationale for this exclusion is that ACT TR aims at assessing the transportation practices in operation. Infrastructures have a lower capacity to change once they are built. Moreover, the impact of infrastructure construction varies a lot depending on the mode, whether it is a ground transportation mode requiring infrastructures all along the travel pathway (roads, railways, urban transportation network) or a transport mode requiring infrastructures only for departure and arrival points (airports, ports).

Eventually, this simplification choice is supported by some major industrial referentials in the transport sector, such as the Global Logistics Emissions Council (GLEC) framework [7]. In that case regarding freight transport, the GHG emissions embedded in the manufacturing of vehicles and construction of infrastructures is not accounted for, neither for rail, road, air or inland waterways.

[7] “GLEC FRAMEWORK FOR LOGISTICS EMISSIONS METHODOLOGIES”, Global Logistics Emissions Council, 2019

Subcontracting is a common practice in the transport sector, especially for freight. The ACT Transport methodology wants to focus on emissions from vehicles and the transport service performed, no matter of the scope it is accounted in. Indeed, subcontracted services are accounted in scope 3 of the company, but must be reported in ACT Transport methodology with the same importance as a similar transport operation performed by the company’s own fleet.

Nevertheless, in that case of subcontracting (in the freight sector mostly), there is a known issue of data availability. To tackle it, a recent sectoral initiative by the GLEC provides a framework which allocates roles to the transport chain players according to their data access [7]

[7] “GLEC FRAMEWORK FOR LOGISTICS EMISSIONS METHODOLOGIES”, Global Logistics Emissions Council, 2019

In case of subcontracting : 

  • Transparency is low
  • Information may be harder to obtain and verify
  • Change may be difficult

In case of owned fleets: 

  • High level of transparency
  • Simpler data collection
  • Easier to enact change

The following tables (Table 3, Table 4, Table 5) summarize the emissions boundaries for each sub-sector, with more details on what to consider for each activity of the scope.

Table 3 : EMISSIONS BOUNDARIES BY SUB-SECTOR (1/3 - RAIL, ROAD, URBAN AND SUB-URBAN)

(5)   Raw materials production, transport to production plant, transformation, transport to market, conditioning and distribution

(6)  e-Fuels stand for electro-fuels. They are also called Power-to-Liquids or Synfuels. These are hydrocarbon liquid fuels produced synthesizing hydrogen from electrolysis and CO2. Synfuels can be zero-carbon if the electricity input is zero-carbon and the CO2 from direct air capture.

Table 4 : EMISSIONS BOUNDARIES BY SUB-SECTOR (2/3 - SEA AND INLAND WATER)

 

Table 5: EMISSIONS BOUNDARIES BY SUB-SECTOR (3/3 - AIR)

➔ Emissions excluded from the boundaries of ACT Transport
  • Emissions from energy that is not consumed by vehicles (e.g. warehouses, offices, …)
  • Other scope 3 emissions: staff commuting, professional travels, waste disposal, purchase of goods and services (other than transport services of course), capital goods (other than vehicles)
  • Vehicles manufacturing emissions
  • Infrastructure construction and operations
  • Refrigerant fluid leakage

RATIONALE AND GUIDANCE

Decarbonization of the transport sector is one of the major transitions in any low-carbon scenario. Raw materials and manufactured goods are transported around the globe. Personal mobility is expected to keep on increasing. Therefore, it is crucial to put the transport sector at the heart of a low-carbon transition.

Most of the emissions in the value chain of the Transport sector happen during use phase due to the combustion of fossil fuel to power vehicles. The main focus of the ACT project will therefore be on how transport operators intend to reduce their fleet emissions between now and 2050.

The way to achieve such reductions depends on the mode, the levers of decarbonisation being somewhat different. Here are some examples:

  • For road freight [10] [11]:
    • Systemic improvements in operations and logistics can reduce growth in road freight trucking activity and improve the on-road efficiency of truck operations (ex : GPS to optimise truck routing, driver training, use of on-board, real-time feedback devices that monitor the on-road fuel economy of trucks) and a wide range of measures to improve the utilisation of vehicles to maximise load.
    • Other measures, including autonomous trucks or the “physical Internet” – an open, shared and modular system wherein all physical assets used in goods delivery are shared across companies – could transform the road freight operations entirely, but face higher barriers to implementation.
    • Similarly, many vehicle efficiency technologies pay back their higher capital costs through fuel savings within only a few years (ex: aerodynamic retrofits, low rolling resistance tyres). For new trucks, additional technologies exist for reducing idling and for improving vehicle efficiency (ex: use of lightweight materials, improvements to truck engines, transmissions and drivetrains).
    • Finally, the use of alternative fuels and alternative fuel trucks could help achieve key energy and environmental policy goals, such as diversifying the fuel supply of road freight and reducing CO2 and air pollutant emissions. Natural gas, biofuels, electricity and hydrogen are the main alternatives to oil.

[10] “The Future of Trucks - Implications for energy and the environment”, IEA, 2017

[11] “Towards Road Freight Decarbonisation - Trends, Measures and Policies”, International Transport Forum, 2018

  • For shipping [12]:
    • Maximum deployment of currently known technologies could make it possible to reach almost complete decarbonisation of maritime shipping by 2035.
    • Alternative fuels and renewable energy can deliver much of required reductions. Advanced biofuels are already available in limited quantities. Gradually, they should be complemented by other natural or synthetic fuels such as methanol, ammonia and hydrogen.
    • Wind assistance could reap additional reductions. The first electric ships provide transport for short-distance routes.
    • Technological measures to improve energy efficiency of ships could yield a substantial part of the needed emission reductions.
    • Market-mature options include, among others, hull design improvements, air lubrication and bulbous bows.
    • Finally, operational measures such as ship speed reductions, smoother ship-port interfaces and increased ship size could achieve further important emission reductions.

[12] “Decarbonising Maritime Transport - Pathways to zero-carbon shipping by 2035”, International Transport Forum, 2018

  • For aviation [4] [13]:
    • Through more efficient operations: more than a third of the planned 
emissions reductions could come from efficiency improvements, in planes themselves (mass reductions, more electrical aircraft, aerodynamic improvements, etc.) and in operations (including via better air traffic management, but also at air carriers level)
    • Through breakthrough innovations on aircraft configurations : battery electric and hydrogen-based planes may well play a role
in short to medium-distance flights, and for an increasing range of plane sizes. Multiple plane designs are now being developed, with some experts believing that battery- or hydrogen- powered lights might become feasible for planes up to 100-seater ying 300-500 km. Radical airframe redesign could in principle make even longer- distance hydrogen-powered flight possible.
    • Sustainable Aviation Fuels: the best current assumption is that, in the foreseeable future, international aviation will continue to rely on energy sources with a combination of gravimetric and volumetric density which can
only be delivered by liquid hydrocarbon fuels.
That’s why most of the emissions reduction will have to come from a switch to low-carbon fuels, or Sustainable Aviation Fuels 
(SAF), sourced from a variety of renewable
and recycled feedstocks. In order for aviation fuels to be considered sustainable and not
need to be offset, the fuels will need to meet
ICAO’s sustainability criteria. These low-carbon alternatives are
signi cantly more expensive than traditional jet
fuels, putting industry adoption and SAF production
capacity development at risk. However, many
airlines have concluded long-term offtake
agreements with SAF suppliers and different
airports have agreed to supply SAFs through
hydrant systems.

[4] "Mission possible: reaching net-zero carbon emissions from harder-to-abate sectors by mid-century", Energy Transitions Commission, 2018

[13] “Reducing CO2 emissions from International Aviation”, International Transport Forum, 2016

 

  • For rail [14] [15]:
    • More low-carbon electricity : as rail is the only mode of transport that is widely electrified today, it is uniquely positioned to take advantage of the growing role that renewable forms of energy are playing in electricity mixes. Many railway operators take this further, ensuring that they source their energy from renewables, thus reducing the overall carbon intensity of the transport services they offer. Worldwide, rail operators and infrastructure managers are increasingly taking advantage of the land they own to reduce dependence on the grid by operating their own renewable energy production means (Japan Rail-East, SBB CFF FFS, ÖBB, Santiago City metro, etc.)
    • Better occupancy : trains operating high loads that minimise emissions per train-kilometre, thanks to efficient electric motors and a low-carbon power mix.
    • High passenger or freight throughput : to facilitate maximising the emission savings for every passenger/tonne-kilometre switched from road and aviation to rail
    • Railway energy efficiency improvements : as a result of progression in diesel technology combined with operational improvements, though the curve may already be flattening out, because practical limits on train length and axle loading are being approached. Improvements to rail efficiency through more electric traction are possible.
    • Alternatives to diesel : electric batteries (inc. hybridisation), green hydrogen fuel cells, biodiesel (from different feedstocks and processes), compressed or liquefied biogas are as many solutions to replace diesel for rail transport.

Beyond the reduction of fleet emissions through technological means, the transition of the transport sector will also imply a rethinking of the way mobility needs are encouraged and answered in society. Transport operators are challenged to present their views on modal shift, and how they see their role evolving in scenarios that imply a different client need or behaviour. Emerging business models are potential opportunities that companies will have to seize to engage in a low-carbon economy. Reversing the trend of growing emissions, especially for sub-sectors developing very rapidly (such as aviation or freight road transport), can also be addressed through new services encouraging optimized mobility, even non-mobility, like the energy performance services sold by Utilities today.

[14] “The Future of Rail - Opportunities for energy and the environment”, IEA, 2019

[15] “A vision for railways in 2050 ”, International Transport Forum, 2010

 

THE SPECIFIC CASE OF CARBON OFFSETTING

Carbon offsets are avoidance or reductions in emissions of carbon dioxide or greenhouse gases made by a company, sector or economy to compensate for emissions made elsewhere in the economy, where the marginal cost of decarbonisation proves to be lower.  [4].

[4] "Mission possible: reaching net-zero carbon emissions from harder-to-abate sectors by mid-century", Energy Transitions Commission, 2018

Currently, the sector placing the most importance on carbon offsets is the aviation sector. Indeed, its decarbonization strategy assumes that it will achieve flat emissions (from international flights) by purchasing carbon offsets from 2021 until 2035, only later achieving emission absolute reductions within the sector itself. The scheme is known as Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) [16] It comes on top of other measures related to energy efficiency and operational improvements.

[16] “Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA)”, ICAO, 2018

In the ACT TR methodology detailed in this document, the proposed low-carbon pathways are largely based on the IEA modelling (see §5.3). Practically, the IEA calculates carbon budgets for the different sectors of the economy (namely power production, transport, buildings, heavy industry, etc.) excluding the use of offsets [10] [17]. This is based on the rationale that the IEA’s economy-wide carbon budget is allocated between sectors in a cost-effective way and that emissions reductions in other sectors are already taken into account in the overall carbon budget including effects of land use, land-use change and forestry (LULUCF), which eliminates the possibility of using offsets.

[10]  International Energy Agency, “Energy Technology Perspectives 2017,” 2017.

[17]  Transport Pathway Initiative , “Carbon performance assessment of airlines: note on methodology,” 2019.

Thus, all these elements pledge for a methodology where emissions reductions are assumed to be achieved directly by the company. Therefore, as the emissions intensity benchmark pathways derived from the IEA model do not allow for offsets, the ACT TR methodology does not account for offsets when defining absolute emissions reductions. This is in line with the general ACT philosophy which aims at assessing the low-carbon transition through real emissions reductions.

 

5. Construction of the data infrastructure

 

5.1. Data sources

In order to carry out a company level assessment, many data points need to be gathered which can be sourced from various locations. Principally, ACT relies on the voluntary provision of data by the participating companies. Alongside this, however, external data sources are consulted where this would streamline the process, ensure fairness, and provide additional value for verification and validation.

The ACT assessment uses the following data sources:

Table 6: ACT assessment data sources

Data source Main use
Company data request Primary data source for most indicators.
Contextual and financial information database sources (E.g. Online and press news, RepRisk) Contextual and financial information on company and events related to the company that could impact the ACT assessment
TO BE COMPLETED

Where indicators use third-party data sources as the default option, reporting companies may provide their own data if they can provide a justification for doing so, and information about its verification status, any assumptions used and the calculation methodology.

 

5.2. Company Data request

In accordance with the approach presented in 1. Introduction, the data request will be presented to companies in a comprehensive data collection format. For companies within the scope, the Well-to-Wheel approach (WTW) shall be preferred in any case when assessing direct emissions (scope 1), but also indirect emissions (scopes 2 & 3), to account particularly for emissions released due to the use of subcontracting.

The indicators have been designed in collaboration with transport operators, in order to ensure that necessary data would be mostly available. When no data was available, indicators were designed to encourage companies to set-up a collection process of the information.

5.3. Performance indicators

The choice is made to gather all transport sub-sectors into one single ACT methodology. Two aspects justify this choice: (i) many companies have multi-modal activities, and (ii) several assessment modules cover aspects common to all subsectors. Specificities of each sub-sector will be dealt with details of indicators, with for example specific definitions of decarbonization pathways, time horizons, low-carbon vehicles, business models etc.

Table 7 illustrates the performance indicators used by the TR sector analysis.

Table 7: Performance indicators overview

 

5.3.1. Targets (Weighting: 15%)

5.3.1.1. TR 1.1 Alignment of Transport Service Emissions Reduction Targets (WEIGHTING: 10%)

Description & Requirements TR 1.1 Alignment of Transport Service Emissions Reduction Targets
Short description of indicator A measure of the alignment of the company’s emissions reduction targets with its decarbonization pathway. The indicator will identify the gap between the company’s target and the decarbonization pathway as a percentage, which is expressed as the company’s commitment gap.
Data requirements

To be completed.

The questions comprising the information request that are relevant to this indicator are:

  • See data mapping in TR tool

External sources of data used for the analysis of this indicator are:

  • IEA ETP 2017 background scenario data
  • SDA Transport tool – sectoral benchmark pathway definition
  • ITF Transport Outlook OECD
  • IPCC CO2 emissions from commercial aviation, 2018
  • IATA Economic performance of the airline industry, mid-year report, 2017

 

How the Analysis will be done

The analysis is based on the difference between the company’s target (TScopes{1, 2, 3}) and the company benchmark (CBScopes{1, 2, 3}) 5 years after the reporting year.

For each sub-sector where the company has an activity, the company’s target pathway (TScopes{1, 2, 3}) is the decarbonization over time, defined by the company’s emissions reduction target. To compute T, a straight line is drawn between the reporting year and the company’s target endpoint.

The company benchmark pathway (CBScopes{1, 2, 3}) is the ‘company specific Scope 1+2+3 decarbonization pathway’. See section 6. Assessment for details on the computation of this pathway.

The analysis compares (TScopes{1, 2, 3}) to CBScopes{1, 2, 3}, by assessing the difference between these pathways 5 years after the reporting year. The pathways are expressed in grams of CO2 per unit of activity (intensity measure). The unit of activity for the transport sector Scope 1+2+3 emissions is Passenger.km  or Ton.km . Where necessary, targets are normalized to this activity unit to enable the comparison. The result of the comparison is the commitment gap, shown by the blue arrow on Figure 6 bellow.

To score this indicator, the size of the commitment gap is compared to the maximum commitment gap, which is defined by the business-as-usual pathway (BAUScopes{1, 2, 3}). BAUScopes{1, 2, 3} is defined as an unchanging (horizontal) intensity pathway, whereby the emissions intensity is constant after the reporting year. It is shown by the purple arrow in Figure 6 bellow.

Note: As explained in the Boundaries section (cf. §4), Scope 3 GHG emissions are considered only regarding upstream value chain of energy and subcontracting activities for some companies.

 

Figure 6 : Alignment of future target with company's benchmark - commitment gap

 

CALCULATION OF SCORE:

The score is a percentage of the maximum commitment gap. It is calculated by dividing the company’s commitment gap by the maximum commitment gap (taking all values 5 years after the reporting year):

The score assigned to the indicator is equal to 1 minus the commitment gap and is expressed as a percentage (1 = 100%). Therefore, if TScopes{1,2,3} CBScopes{1,2,3} is equal to zero, and hence the company’s target is aligned with the sectoral benchmark, the maximum score is achieved.

Rationale TR 1.1 Alignment of Transport Service Emissions Reduction Targets
Rationale of the indicator

RELEVANCE OF THE INDICATOR:

Scope 1+2+3 Targets are included in the ACT Transport assessment for the following reasons:

  • Targets are an indicator of corporate commitment to reduce emissions and are a meaningful metric of the company’s internal planning towards low-carbon transition.
  • Most emissions of the transport sector lie within the responsibility boundaries of the sector. Target setting is therefore a very powerful tool to increase control over these emissions and drive their reduction.
  • Targets are one of the few metrics that can predict a company’s long-term plans beyond what can be projected in the short-term, satisfying ACT’s need for indicators that can provide information over the long-term.

SCORING RATIONALE:

Targets for each sub-sector are quantitatively interpreted and directly compared to the low-carbon benchmarks for the sector, using the company’s benchmark, build from the company’s current level of emissions at reporting year and converging toward the 2050 value of the sectoral benchmark relevant for this company, which is further explained in section 6.1. Sector Benchmark.

Targets are compared to the benchmark directly, and the relative gap is calculated compared to the business as usual pathway. The gap method was chosen for its relative simplicity in interpretation and powerful message, which aligns with the UNEP’s narrative of the global commitment gap of the UNFCCC Climate Agreements [9]. The simple percentage score also needs no further computation to become meaningful on its own, as well as be useable for aggregation in the performance score.

[9] “GHG Protocol - Technical Guidance for Calculating Scope 3 Emission”, WRI & WBCSD, 2011

To ensure comparability of the scores and replicability of the measurement, targets are compared to the benchmark at a fixed point in time, similar to all companies. This is necessary, because the method interprets linear decarbonization pathways from the targets, while the decarbonization pathways are nonlinear. Therefore, the measurement gaps would vary over time if the time of measurement was not constant, and an undesired precedent would be set for reporting only targets with short-time horizons.

5 years after the reporting year was chosen as the reference for this measurement, as it is far enough in time to make a meaningful measurement of the company’s future pathway, while close enough to be able to include the typical short to medium time scale of present-day company targets.

The targets and the benchmarks are specific to each sub-sectors because companies define targets by sub-sector of activity.

For multimodal companies, scores obtained for each target will be aggregated by weighting proportionally to emissions that are covered by each target.

 

5.3.1.2. TR 1.2 Time Horizon of Targets (Weighting: 3%)

Description & Requirements TR 1.2 TIME HORIZON OF TARGETS
Short description of indicator A measure of the time horizons of company targets by sub-sectors. The ideal set of targets is forward looking enough to include a long-term horizon that includes the majority of a company’s vehicles lifetimes, but also includes short and mid-term targets that incentivise action in the present.
Data requirements

The questions comprising the information request that are relevant to this indicator are:

  • See data mapping in TR tool

External sources of data used for the analysis of this indicator are:

  • Default values for the lifetime of vehicles

The benchmark indicators involved are:

How the Analysis will be done

The analysis has two dimensions:

  1. A comparison of: (a) the longest time horizon of the company’s targets, and (b) a default value of lifetime of vehicles composing the fleet of the company.
  2. The company has interval targets that ensure both short and long-term targets are in place to incentivise short-term action and communicate long-term commitments.

Aggregate score - Dimension 1: 50%, Dimension 2: 50%.

 

DIMENSION 1 - TARGET ENDPOINT (50% of the score):

The company’s target endpoint (Te) is compared to a default value of lifetime for each type of vehicle composing the fleet of the company.

The company’s target endpoint (Te) is equal to the longest time horizon among the company’s targets, minus the reporting year:

Default values  are defined as follows:

 

If the company operates several modes, it can either:

  • Set targets by modes, and so a separate analysis is done for each mode: of each modal target is compared to the respective
  • Set aggregated targets and so is compared to the longest lifetime . The horizon gap is used to rate the company on the time horizon relevance of its most long-term target.

The company’s target endpoint is scored according to the following scoring table:

  

Note: In case of subcontracting, the company is free to change subcontractors easily, therefore the company is more flexible. However, a change in subcontractors, while remaining in the same transport mode does not change the time scales the company should be considering when setting targets. Therefore, the definition of this indicator is valid for companies subcontracting the transport service. A modal shift has possibly larger impacts on the business model and translates into a new situation of the company, for which a new assessment may be more relevant.

DIMENSION 2 - INTERMEDIATE HORIZONS (50% of the score):

For each sub-sector, all company targets and their endpoints are calculated and plotted. To get full score, the company must not have time gaps larger than 5 years between targets horizons, starting from the reporting year as baseline.

The company’s targets are compared according the following scoring table:

 

An example is illustrated in Figure 5.

 

Figure 5 : Examples of horizons of intermediate targets set by the company and corresponding scores on dimension 2 of the indicator 1.2

 

FOR ALL CALCULATIONS:

Targets that do not cover > 95% of the company’s sub-sector activity-related emissions are not preferred in the calculations. If these types of targets only are available, then the score is adjusted downwards equal to the % coverage that is missing. Figure 6 graphically illustrates emissions covered by the targets:

Figure 6 : Illustration of Emissions Covered by Targets that are Considered for Calculation

 

Rationale TR 1.2 TIME HORIZON OF TARGETS
Rationale of the indicator

RELEVANCE OF THE INDICATOR:

The time horizon of targets is included in the ACT TR assessment for the following reasons:

  • The target endpoint is an indicator of how forward looking the company’s transition strategy is.
  • Depending on the transport sub-sector, fleet vehicles can have a long average lifetime, which implies large amounts of CO2 emissions in the future. Therefore, emissions targets are to be set with time horizons long-term enough to cover the lifetime of the fleet vehicles.
  • Aside from communicating long-term commitments, short-term action needs to be incentivised. This is why short-time intervals between targets are needed.

SCORING RATIONALE:

The score of this indicator is tied to how the target timeline compares to the lifetimes of the company’s vehicles portfolio (or the vehicles on which its transport services depend when subcontracting to transport companies). The company has a ‘horizon gap’ if its targets do not include a significant part of its fleet portfolio or do not go up to this lifetime.

 

5.3.1.3. TR 1.3 Achievement of Previous Targets (WEIGHTING: 2%)

Description & Requirements TR 1.3 Achievement of Previous Targets
Short description of indicator A measure of the company’s historical target achievements and current progress towards active emissions reduction targets. The ambition of the target is not included in the performance indicators.
Data requirements

The questions comprising the information request that are relevant to this indicator are:

  • See data mapping in TR tool
How the Analysis will be done

For the performance score, this indicator is assessed on two dimensions, whereby companies achieve the maximum score if:

Dimension 1: The company has achieved all previous emissions reduction targets with a target year in the past 10 years.

Dimension 2: The company is currently on track to meet an existing emissions reduction target, whereby the ratio between the remaining time period and the level remaining to target achievement (Progress Ratio p) is not lower than 0.5:

The highest score is attained if p is 1 or higher. A percentage score is assigned for any value between 0.5 and 1.

 

AGGREGATE SCORE - DIMENSION 1:  25%, DIMENSION 2: 75%

FOR ALL CALCULATIONS:

  • Companies which do not have targets with target years in the past but only with target years in the future are not assessed on dimension 1, but only on dimension 2.
  • Targets that do not cover >95% of (i) ‘Scope 1+2 emissions for propulsion energy’ or (ii) ‘Scope 3 upstream value chain of energy, or subcontracted activity’ are not preferred in the calculation of dimension 2, but are not penalized, as other indicators already penalize for not having a large coverage in the target.
  • If the company has multiple targets in different scopes that can be assessed according to the above criteria, then the score is an average score based on the progress ratios of all targets assessed.

The performance score does not assess the ambition level of previous targets, and therefore dimension 1 has only a low weight in the final performance score. This information is also qualitatively assessed in the analysis narrative, which will take another look at the following dimensions:

  • Achievement level: To what degree has the company achieved its previously set emissions reduction targets.
  • Progress level: To what degree is the company on track to meet its currently active emissions reduction targets.
  • Ambition level: What level of ambition do the previously achieved emissions reduction targets represent.
Rationale TR 1.3 Achievement of Previous Targets
Rationale of the indicator

RELEVANCE OF THE INDICATOR:

The historical target ambition and company performance is included in the ACT TR assessment for the following reasons:

  • The ACT assessment looks to the past only to the extent that it can inform on the future. This indicator is future-relevant by providing information on the organizational capability to set and meet emissions reduction targets. Dimension 1 of this indicator adds credibility to any company claim to commitment to a science-based reduction pathway.
  • Indicators 1.1 and 1.2 look at targets into the future, setting a theoretical view of the company. Dimension 2 of this indicator adds value to the analysis by doing a concrete comparison of the company’s current performance against their targets in the reporting year.

SCORING RATIONALE:

Quantitative interpretation of previous target achievement is not straightforward. The performance score thus makes no judgement of previous target ambition and leaves it to the analysis narrative to make a meaningful judgement on the ambition level of past targets.

  • Dimension 1 of the performance score will penalize companies who have not met previous targets in the past 10 years, as this means the company has lower credibility when setting ambitious science-based targets.
  • Dimension 2 uses a simple ratio sourced from existing CDP data points (CC 3.1e) in order to compare targets. The threshold 0.5 was chosen as it allows companies some flexibility with respect to the implementation of the target, but it does have the ability to flag companies that are definitely not on track towards achievement. When p is lower than 0.5, the company needs to achieve more than twice the reduction per unit of time than the target originally envisioned.

 

5.3.2 Material Investments (Weighting: OWN Fleet = 30% or Subcontracting = 0%)

 

MODULE RATIONALE

The module 2 “Material investments” deals with investment of the company in new vehicles for its fleet. The module applies only in the case where the company operates its own fleet. If the transport service is subcontracted to another company, this module does not apply, and analyst shall refer to module 4 “Sold product performance” instead.

In the case the company is operating its own fleet and also subcontracting part of the transport service, both modules 2 and 4 should be evaluated. The final score is the aggregation of the score of each module, weighted by the emissions of each: % of total emissions by the company’s own fleet vs. % subcontracted.

No threshold is used to trigger the assessment on either module 2 or module 4 or both.

 

5.3.2.1. TR 2.1 Trend in Past Emissions Intensity (WEIGHTING: OWN Fleet = 4% or Subcontracting = 0%)

Description & Requirements TR 2.1 Trend in Past Emissions Intensity
Short description of indicator

This metric assesses the alignment of the company’s recent emission intensity trend for scopes 1+2+3* emissions with the trend of its decarbonization pathway. The recent emission intensity trend is computed over a 5-year period to the reporting year (reporting year minus 5 years).

* Scopes 1+2+3 here cover only emissions from energy usage, from the upstream value chain of energy.

Data requirements

The questions comprising the information request that are relevant to this indicator are:

  • See data mapping in TR tool

External sources of data used for the analysis of this indicator are:

  • IEA ETP 2017 background scenario data
  • SDA Transport tool – sectoral benchmark pathway definition
  • ITF Transport Outlook OECD
  • IPCC CO2 emissions from commercial aviation, 2018
  • IATA Economic performance of the airline industry, mid-year report, 2017

The benchmark indicators involved are:

 

How the Analysis will be done

The analysis is based on the difference between the company’s recent (reporting year minus 5 years) emissions intensity trend gradient (CRScopes123) and the company’s decarbonization pathway trend gradient (CBScopes123) in the short-term (reporting year plus 5 years).

CRScopes123 is the gradient of the linear trendline of the company’s recent Scope 1+2+3 emissions intensity (CRScopes123).

CBScopes123 is the gradient of the linear trendline of the company benchmark pathway for emissions intensity (CBScopes123). The company’s benchmark is defined from the company’s current emissions on reporting year, and from the sectoral benchmark presented in section 6.1

Figure 7 illustrates the various curves and trends used in this indicator.

Figure 7: Comparison of trend in past emissions and trend in company's benchmark

 

The difference between CRScopes123 and CBScopes123 will be measured by their ratio (rT). This is the ‘Scope 1+2+3* Transition ratio’ which is calculated by the following equation, with the symbol ′ used to denote gradients:

If the transition ratio is a negative number, it means the company’s recent emissions intensity has increased (positive CRScopes123) and a zero score is awarded by default. If the company’s recent emissions intensity has decreased, the transition ratio will be a positive number. The value of the ratio is capped at 1, which represents the maximum score. A score is assigned as a percentage value equal to the value of rT (1 = 100%).

Rationale TR 2.1 Trend in Past Emissions Intensity
Rationale of the indicator

RELEVANCE OF THE INDICATOR:

Trend in past emissions intensity is included in the ACT TR assessment for the following reasons:

  • The trend shows the speed at which the company has been reducing its emissions intensity over the recent past. Comparing this to the decarbonization pathway gives an indication of the scale of the change that needs to be made within the company to bring it onto a low-carbon pathway.
  • While ACT aims to be future-oriented, ACT does not want to solely rely on projections in a way that would make the analysis too vulnerable to uncertainty. Therefore, this particular indicator, along with projected emissions intensity and absolute emissions, forms part of a holistic view of company emissions performance in the past, present, and future.

SCORING RATIONALE:

While ‘gap’ type scoring is preferred for any indicator where possible, this indicator only looks at past emissions, and would therefore require a different baseline in order to generate a gap analysis. Thus, instead of a gap analysis, a trend analysis is conducted. An advantage of the trend analysis is that it does not require the use of a business-as-usual pathway to anchor the data points and aid interpretation, as trends can be compared directly, and a score can be directly correlated to the resulting ratio.

In this indicator the two trends compared are not measured over the same period: the actual performance of the company is measured over the past 5 years before the reporting year, while the trend of the company benchmark is measured over the future 5 years after the reporting year. The rationale of comparing two different periods of time is the following:

  • The benchmark trend shows the path the company should direct itself quickly, while the close-past trend shows what the company has been able to achieve lately. Because of inertia to change, the company future performance is likely to be similar to its past/current performance. Comparing the two periods of time highlight the credibility of the company’s ambitions, assessing whether the changes needed can be smooth, or have to be radical.
  • The choice of minus 5 years / plus 5 years is motivated by the fact that 5 years is long enough to build a trend and smooth possible annual variations, while also remaining short enough to capture the current dynamic of the company and the short-term actions needed. It is a relevant time scale comparing to companies’ business projections.

 

5.3.2.2. TR 2.2 Alignment of Past Performance with Carbon Budget (WEIGHTING: OWN Fleet = 4% or Subcontracting = 0%)

Description & Requirements TR 2.2 ALIGNMENT OF PAST PERFORMANCE WITH CARBON BUDGET
Short description of indicator

This metric assesses the alignment of the company’s recent absolute emissions for scopes 1+2+3* with the past carbon budget. The recent emissions and carbon budget are measured over a 5-year period to the reporting year (reporting year minus 5 years).

* Scopes 1+2+3 here cover only emissions from energy usage, from the upstream value chain of energy.

Data requirements

The questions comprising the information request that are relevant to this indicator are:

  • See data mapping in TR tool

External sources of data used for the analysis of this indicator are:

  • IEA ETP 2017 background scenario data
  • SDA Transport tool – sectoral benchmark pathway definition
  • ITF Transport Outlook OECD
  • IPCC CO2 emissions from commercial aviation, 2018
  • IATA Economic performance of the airline industry, mid-year report, 2017

The benchmark indicators involved are:

 

How the Analysis will be done

Use past data on emissions for the assessed company and compare it to the sector benchmark. Basically, one should calculate the blue area of the graph in Figure 8, multiplied by the company’s activity during the corresponding years. Then, compare this area to the carbon budget during the same period. This indicator would absolutely need to be a ratio as company are very unlikely to provide data for the same period.

Figure 8: Comparison of past performance and carbon budget defined by sector benchmark

 

Rationale TR 2.2 ALIGNMENT OF PAST PERFORMANCE WITH CARBON BUDGET
Rationale of the indicator

RELEVANCE OF THE INDICATOR:

So far, the remaining carbon budget is calculated from the company SDA benchmark (that is, pink + yellow areas in Figure 9). However, as most of the companies are starting above the carbon intensity sectoral benchmark, the aggregated area under each company’s current benchmark multiplied by their activities is very likely to be much higher than the aggregated carbon budget for the sector. For a company starting above the sectoral benchmark, not only has it consumed a carbon budget surplus in the past (blue area), but with that definition it would also benefit a higher absolute carbon budget than a company aligned. Hence, to calculate the carbon budget specific to each company for this indicator, one should use the sector benchmark, that is, only the pink area (multiplied by the company’s activity), rather than any company’s benchmark, that includes an unjustified carbon surplus in yellow.

Note : this new indicator has to be experimented during the road-test of the methodology.

 

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Figure 9 : Illustration of past performance and carbon budget

 

 

5.3.2.3. TR 2.3 Fleet Locked-in Emissions (WEIGHTING: Own Fleet = 15% or Subcontracting = 0%)

Description & Requirements TR 2.3 FLEET LOCKED-IN EMISSIONS
Short description of indicator A measure of the company’s cumulative GHG emissions from the reporting year to reporting year + 15 years from existing and planned fleet. The indicator will compare this to the emissions budget entailed by the company’s decarbonization pathway. The vehicles to be considered for the calculation of this indicator are the same as the ones defined by the scope (section 3.2) and limited to the boundaries defined in section 4.
Data requirements

The questions comprising the information request that are relevant to this indicator are:

  • See data mapping in TR tool

External sources of data used for the analysis of this indicator are:

  • IEA ETP 2017 background scenario data
  • SDA Transport tool – sectoral benchmark pathway definition
  • ITF Transport Outlook OECD
  • IPCC CO2 emissions from commercial aviation, 2018
  • IATA Economic performance of the airline industry, mid-year report, 2017

The benchmark indicators involved are:

 

How the Analysis will be done

The analysis is based on the ratio between the company’s emissions from existing and planned fleet for the 15 forthcoming years after reporting years (Locked-in Emissions from fleet LEF (yr+15)) and the emissions budget entailed by the company’s carbon budget (B(yr+15)) over the same period of time. The investment plans won’t need to go as far as yr+15, or they can go further depending on the mode. Typically, a truck put into service in 2025 will still operate in 2035-40, an aircraft delivered in 2025 will still fly in 2050, etc.

 

LEF (yr+15) represents the total cumulative emissions implied on the period of operation of currently active and confirmed planned fleet vehicles that are going to be commissioned in the near future. If unknown, the commissioning year of vehicles is estimated from investment plans.  

LEF (yr+15) is calculated by taking the area under the company’s future locked-in emissions curve. This curve in turn is derived from the company’s intensity pathway for its transport services CI, multiplied by the transport activity AT:

 

Figure 10 illustrates locked-in emissions of one vehicle and of the whole fleet.

 

Figure 10 : Computing Locked-in emissions from fleet

B (Yr +15) is calculated as the company’s carbon budget up to reporting year + 15 years, which is derived by taking the area under the absolute emissions reduction curve. This curve in turn is derived from the company benchmark pathway (CBT) by multiplying it by transport activity AT :

The company’s benchmark is computed from the company’s current emissions at reporting year and the level of carbon intensity defined by the sectoral benchmark presented in section 6.1. The carbon budget is illustrated in Figure 11 bellow.

 

Figure 11 : Carbon budget derived from the company's benchmark

Depending on the data availability, the computation of these areas may not be as straightforward as the equations shown and will be done by approximation, but the principles will hold.

The locked-in ratio (rLB) is illustrated in Figure 12, and calculated as follows:

 

 

Figure 12 : Illustration of the locked-in ratio

To be able to give a score regarding the amount of carbon budget consumed, the level of activity performed with the fleet needs to be taken into account. Therefore, in a similar way to locked-in emissions, the level of activity that the company is able to perform thanks to the vehicles in its current and planned fleet, per year. It is called the secured activity and is illustrated in Figure 13.

Figure 13 : Secured activity by the fleet

The secured activity is compared to the level of activity projected by the company up to reporting year + 15 years. If the company does not have any projections or not up to reporting year + 15 years, it will be considered that its market share will remain constant and its activity will evolve at the same rate as the sector and sectoral projection of activity are used (see section 6.1). The company’s projected activity is illustrated in Figure 14.

FIGURE 14 : PROJECTED ACTIVITY

 

The secured activity ratio rSA (yr+15) compares the secured activity up to 2050 AS (yr+15) with the projected activity up to 2050 Ap (y+15). It is illustrated in 

 

 

Figure 15 : Secured activity ratio

 

CALCULATION OF THE SCORE:

rSA is used as a threshold value for the scoring:

 

CASE OF FLEET COMPOSED OF LEASING VEHICLES

If the company operates leased vehicles the locked-in emissions are calculated up to the end of the longest leasing contract instead of to reporting year + 15 years, as illustrated in Figure 16 below.

Figure 16 : Locked-in ratio in case of leased vehicles

 

Rationale TR 2.3 FLEET LOCKED-IN EMISSIONS
Rationale of the indicator

RELEVANCE OF INDICATOR:

Locked-in emissions are included in the ACT TR assessment for the following reasons:

  • Absolute GHG emissions over time are the most relevant measure of emissions performance for assessing a company’s contribution to global warming. Furthermore, the concept of Locked-in emissions allows a judgement to be made about the company’s outlook in more distant time periods than ones of the investment plans.
  • Analysing a company’s locked-in emissions alongside science-based budgets also introduces the means to scrutinise the potential cost of inaction, including the possibility of stranded assets.
  • Examining absolute emissions, along with recent and short-term emissions intensity trends, forms part of a holistic view of a company’s emissions performance in the past, present, and future.

SCORING RATIONALE:

When a vehicle (aircraft, ship, train, truck or other vehicle) reaches the end of its estimated lifespan, no replacement is assumed because those decisions have not been made yet. Our methodological choice is that the locked-in emissions calculated are the locked-in emissions of committed (existing and planned for the near future) fleet vehicles only. Therefore, the indicator describes the proportion of the company’s carbon budget that will be used up by committed activity.

Unlike the ‘gap’ and ‘trend’ comparisons done in all other quantitative indicators, this indicator compares two areas: that of the carbon budget until reporting year + 15 years and the locked-in emissions until reporting year + 15 years. It is expected that companies will save a reasonable amount of their up-to-reporting year + 15 years carbon budget, especially if the end-of-life date of the fleet vehicles considered for the computation of the locked-in emissions is before reporting year + 15 years. Indeed, new investments in fleet will be made in the future to replace decommissioned vehicles and engage additional GHG emissions.

When the company exceeds its full carbon budget up to reporting year + 15 years with only vehicles considered for the computation of locked-in emissions on the reporting year, the situation is highly problematic: hence, the resulting score is zero.  

When the company uses a high amount of its up- to-reporting year + 15 years carbon budget with current and planned vehicles, compared to the activity that these vehicles enable to perform, it will have to compensate in later periods by strongly improving its carbon intensity to remain within its carbon budget. This is called carbon budget displacement, which makes the company’s actual decarbonization pathway steeper than the original benchmark. There is a dimension of risk from inaction here. The company will then have less flexibility in its future strategy of investments. Therefore, there is a rationale for intermediate scoring levels that magnify this level of risk due to lack of flexibility in the future.

Two cases are observed for the scoring:

rSA≥1 :This is the case where the fleet enable to perform more activity than what the company projects. This is a situation of overcapacity. This situation should be extremely rare.

rSA < 1 : The current and plan fleet up to 2050 does not cover all the activity projected up to 2050, so further investment will be needed. Therefore, part of the carbon budget should be kept for further investments. If rLB≤rSA the company consumes its carbon budget at lower rate than the level of activity it will be able to perform so it gets maximum score of 100%. A leeway of 10% is allowed before the score drops to 0% when rLB≥1.1. In between these two values, a linear decrease of the score is applied.

 

5.3.2.4. TR 2.4 Share of low-carbon Vehicles and Energies (WEIGHTING: Own Fleet = 7% or Subcontracting = 0%)

Description & Requirements TR 2.4 SHARE OF LOW-CARBON VEHICLES
Short description of indicator

A measure of the company’s investment share in low-carbon vehicles as compared with the operating share required in the sector under a low-carbon scenario. The definition of low-carbon vehicles is given in the glossary.

Low-carbon energy purchase strategies for ICE vehicles are also taken into account (e.g. biogas for NG vehicles, sustainable biodiesel for trucks, green hydrogen for ships or airplanes, etc.)

Data requirements

The questions comprising the information request that are relevant to this indicator are:

  • See data mapping in TR tool

External sources of data used for the analysis of this indicator are:

  •  

The benchmark indicators involved are:

How the Analysis will be done

The analysis is based on the ratio FLCV(t) between the number of low-carbon vehicles in the company's fleet (including the number of conventional vehicles that are operated with low-carbon propulsion energy) and the total number of vehicles, as described in the investment plan, for year t. Conventional ICE vehicles operated with low-carbon energy are accounted for, proportionally to the share of low-carbon energy used in those vehicles (ex: if the company plans to purchase 20% of sustainable biodiesel for its diesel-fuelled vehicles in 2025, then we will consider 20% of these diesel-fuelled vehicles to be low-carbon, and considered as such in the calculation below).

The fleet ratio FLCV(t) is calculated as follows:

This ratio is then compared to the sub-sector low-carbon vehicles and energies operating share in a low-carbon scenario SBLCV(t).

SBLCV(t) is represented in the graph:

 

CALCULATION OF THE SCORE:

The ratio rLCV(t) is computed for each year of the investment plan, and the average value for the whole investment plan is kept.

If rLCV is 1 or higher, then the company invests at the desired rate into low carbon vehicles and will be assigned the maximum score (100%). If rLCV is lower than 1, it gives the score for the indicator.

Rationale TR 2.3 SHARE OF LOW-CARBON VEHICLES and energies
Rationale of the indicator

RELEVANCE OF THE INDICATOR:

Share of low-carbon vehicles is included in the ACT TR assessment for the following reasons:

  • Emissions intensity pathways in the transport sector cannot be met without a change in engine technology, and material investments in such vehicles are a straightforward measure of how this change is incorporated in the business model.
  • All low-carbon scenarios found in the literature (see §9 Sources) include a significant share of annual sales in 2050 coming from low-carbon vehicles. A company’s commitment to new technologies is therefore a strong indication of its commitment to a low-carbon future.
  • A change to low-carbon propulsion energy significantly decreases GHG emissions. Conventional thermal vehicles can still be operated by the company using low-carbon fuels. The effort to switch to a different fuel supply needs to be accounted for.

Refer to the Glossary for a definition of ‘low-carbon vehicle’.

SCORING RATIONALE:

The scoring measures the gap between levels of penetration of low-carbon vehicles among the fleet, as recommended for a low-carbon scenario, and the levels planned by the company through its investments. If the share of low-carbon vehicles for each year of the company’s investment plan is not available, an average value provided by the company shall be considered and compared to the sector benchmark for low-carbon vehicle share at the average horizon of the investment plan.

5.3.3. Intangible investment (Weighting: 5%)

 

5.3.3.1. TR 3.1 R&D in LOW-CARBON vehicles and energies (WEIGHTING: 2%)

Description & Requirements TR 3.1 R&D in low-carbon vehicles and energies
Short description of indicator

A measure of the ratio of R&D investments in technologies for low-carbon transition. The indicator identifies the ratio between the company’s R&D investment in low-carbon vehicles and energies, and total R&D investments.

Technologies for low-carbon transition include: alternative powertrain vehicles, systems of production and/or distribution of low-carbon energies (to detail in the Glossary)

Data requirements

The questions comprising the information request that are relevant to this indicator are:

  • See data mapping in TR tool
How the Analysis will be done

The analysis is based on the ratio of the company’s ‘annual R&D expenditure on vehicles and energies for low carbon transition’ (CAPEX MR&D low carbon) to the company’s ‘total annual capital expenditure in R&D’ (CAPEX R&D).

The ratio is defined as the ‘mitigation R&D intensity’ ratio (D) or:

A maturity matrix is then used to assess this indicator, depending on the value of the ratio D.

 

Rationale TR 3.1 R&D in low-carbon Vehicles and Energies
Rationale of the indicator

RELEVANCE OF THE INDICATOR:

R&D in low carbon vehicles and energies is included in the ACT TR assessment for the following reasons:

  • To enable the transition, the transport sector relies heavily on the development of low-carbon technologies to replace its currently high-emitting propulsion systems. R&D is the principal proactive action to develop these technologies. Transport operators can participate to pilot projects with vehicles manufacturers.
  • R&D is also one of the principal tools to reduce the costs of a technology in order to increase its market penetration.
  • Aside from technology, transport operators can also invest into R&D on operational practices to optimize the carbon impact where they have direct responsibility.
  • Lastly, the R&D investment of a company into non-mature technologies and practices allows for direct insight in the company’s commitment to alternative technologies that may not currently be part of its main business model.

DEFINITION OF R&D:

The term R&D covers three activities:

  • Basic research is experimental or theoretical work undertaken primarily to acquire new knowledge of the underlying foundation of phenomena and observable facts, without any particular application or use in view.
  • Applied research is also original investigation undertaken in order to acquire new knowledge. It is, however, directed primarily towards a specific practical aim or objective.
  • Experimental development is systematic work, drawing on existing knowledge gained from research and/or practical experience, which is directed to producing new materials, products or devices, to installing new processes, systems and services, or to improving substantially those already produced or installed.

R&D covers both formal R&D in R&D units and informal or occasional R&D in other units.

SCORING RATIONALE:

A maturity matrix is used for the rating of this indicator. To obtain the best score, a company should use a majority of its R&D investment for low carbon developments.

5.3.3.2. TR 3.2 Investments in digital solutions for transport optimization (WEIGHTING: 1%)

Description & Requirements TR 3.2 INVESTMENTS IN DIGITAL SOLUTIONS FOR TRANSPORT OPTIMIZATION
Short description of indicator An evaluation of the level of equipment of the company in digital solutions optimizing the transport service, leading to GHG emissions reduction.
Data requirements

The questions comprising the information request that are relevant to this indicator are:

  • See data mapping in TR tool

External sources of data used for the analysis of this indicator are:

  •  

 

How the Analysis will be done

The company will describe the software and other digital solutions that it is equipped with. It will also provide proofs of GHG emissions reductions associated if any, and explain its participation in projects with developers of digital solutions, if any.

A maturity matrix will be used to score the company.

Rationale TR 3.2 INVESTMENTS IN DIGITAL SOLUTIONS FOR TRANSPORT OPTIMIZATION
Rationale of the indicator

RELEVANCE OF THE INDICATOR:

Investments in digital solutions are included in the ACT TR assessment for the following reasons:

  • In addition to investments in vehicles, companies can optimize the transport service investing in digital solution.
  • The development of such services is encouraged, and companies can collaborate with software developers to improve existing solution and quantify the GHG emission reduction associated

SCORING RATIONALE:

The following maturity matrix is used to assess investments in digital solutions.

 

 

TR 3.3 Investments in Human Capital – Training of Employees (WEIGHTING: 2%)

Description & Requirements TR 3.3 INVESTMENTS IN HUMAN CAPITAL – TRAINING OF EMPLOYEES
Short description of indicator An evaluation of the level of training of employees about climate related issues.
Data requirements

The questions comprising the information request that are relevant to this indicator are:

  • See data mapping in TR tool

External sources of data used for the analysis of this indicator are:

  •  
How the Analysis will be done

Two dimensions will be assessed

  • The share of employees receiving a climate-related specific training
  • The share of training costs relative to climate-related trainings

A period of 5 years before the reporting year will be considered to evaluate these shares. A maturity matrix is used to score the company.

Some examples of climate related trainings are given in the following list :

  • Training on eco-driving
  • Training on maintenance of low-carbon vehicle
  • Training on maintenance to improve carbon efficiency
  • Training on transport planning, routing and optimization for GHG emissions reduction
  • Training on climate-change general issues
Rationale TR 3.3 INVESTMENTS IN HUMAN CAPITAL – TRAINING OF EMPLOYEES
Rationale of the indicator

RELEVANCE OF THE INDICATOR:

Investments in human capital are included in the ACT TR assessment for the following reasons:

  • The transition of the transport sector is facilitated if all actors are engaged in it. Companies need to take their teams onboard, rather than leave their employees behind.
  • GHG reductions can be obtained through better operational practices, and training is needed to change practices
  • Training teams on climate related subject can empower them to initiate GHG emissions reduction projects
  • Training should be available broadly in the company to engage everyone and build a common purpose within the company

SCORING RATIONALE:

The best score is obtained if climate related specific trainings are available broadly in the company for the majority of its employees.

Best score is also obtained if the training is significant, that is to say if the costs of such trainings are significant enough. A period of 5 years before the reporting year is considered to evaluate the share of employees receiving climate related trainings, and the share of training costs associated.

The following maturity matrix is used to assess investments in digital solutions.

 

5.3.4. Sold Product Performance (Weighting: Own Fleet = 0% or Subcontracting = 30%)

Module Rationale

This module is relevant only when all or part of the transport service is subcontracted. It stands as a mirror of the “Material investments” module when the transport service is performed by the company’s own fleet. The transport service performance is a proxy for the material investments of the subcontractors of the company. It assesses the performance of the transport service that is being subcontracted.

In case of the activity is performed with the company’s own vehicles, this indicator is not applicable (see module “Material investments” in the latter case).

5.3.4.1. TR 4.1 Trend in Past Emissions Intensity (WEIGHTING: OWN FLEET = 0% OR SUBCONTRACTING = 4%)

Description & Requirements TR 4.1 Trend in past emissions intensity
Short description of indicator

This metric assesses the alignment of the company’s recent emission intensity trend for scope 1+2+3* emissions with the trend of its decarbonization pathway. The recent emission intensity trend is computed over a 5-year period to the reporting year (reporting year minus 5 years).

* Scopes 1+2+3 here cover emissions linked to the transport service that is being sub-contracted (only emissions from energy usage, and from the upstream value chain of energy.

Data requirements

The questions comprising the information request that are relevant to this indicator are:

  • See data mapping in TR tool

External sources of data used for the analysis of this indicator are:

  •  

The benchmark indicators involved are:

 

How the Analysis will be done

The analysis is based on the difference between the company’s recent (reporting year minus 5 years) emissions intensity trend gradient (CRScopes123) and the company’s decarbonization pathway trend gradient (CBScopes123) in the short-term (reporting year plus 5 years).

CRScopes123 is the gradient of the linear trendline of the company’s recent Scope 1+2+3 emissions intensity (CRScopes123).

CBScopes123 is the gradient of the linear trendline of the company benchmark pathway for emissions intensity (CBScopes123). The company’s benchmark is defined from the company’s current emissions on reporting year, and from the sectoral benchmark presented in section 6.1

Figure 17 illustrates the various curves and trends used in this indicator.

Figure 17 : Trend in past emission and company benchmark

 

The difference between CRScopes123 and CBScopes123 will be measured by their ratio (rT). This is the ‘Scope 1+2+3* Transition ratio’ which is calculated by the following equation, with the symbol ′ used to denote gradients:

If the transition ratio is a negative number, it means the company’s recent emissions intensity has increased (positive CRScopes123) and a zero score is awarded by default. If the company’s recent emissions intensity has decreased, the transition ratio will be a positive number. The value of the ratio is capped at 1, which represents the maximum score. A score is assigned as a percentage value equal to the value of rT (1 = 100%).

Rationale TR 4.1 Trend in past emissions intensity
Rationale of the indicator

RELEVANCE OF THE INDICATOR:

Trend in past emissions intensity is included in the ACT TR assessment for the following reasons:

  • The trend shows the speed at which the company has been reducing its emissions intensity over the recent past. Comparing this to the decarbonization pathway gives an indication of the scale of the change that needs to be made within the company to bring it onto a low-carbon pathway.
  • While ACT aims to be future-oriented, ACT does not want to solely rely on projections in a way that would make the analysis too vulnerable to uncertainty. Therefore, this particular indicator, along with projected emissions intensity and absolute emissions, forms part of a holistic view of company emissions performance in the past, present, and future.

SCORING RATIONALE:

While ‘gap’ type scoring is preferred for any indicator where possible, this indicator only looks at past emissions, and would therefore require a different baseline in order to generate a gap analysis. Thus, instead of a gap analysis, a trend analysis is conducted. An advantage of the trend analysis is that it does not require the use of a business-as-usual pathway to anchor the data points and aid interpretation, as trends can be compared directly, and a score can be directly correlated to the resulting ratio.

 

5.3.4.2. TR 4.2 Alignment of past performance with carbon budget (WEIGHTING: OWN Fleet = 0% or Subcontracting = 4%)

Description & Requirements TR 4.2 ALIGNMENT OF PAST PERFORMANCE WITH CARBON BUDGET
Short description of indicator

This metric assesses the alignment of the company’s recent absolute emissions for scopes 1+2+3* with the past carbon budget. The recent emissions and carbon budget are measured over a 5-year period to the reporting year (reporting year minus 5 years).

* Scopes 1+2+3 here cover only emissions from energy usage, from the upstream value chain of energy.

Data requirements

The questions comprising the information request that are relevant to this indicator are:

  • See data mapping in TR tool

External sources of data used for the analysis of this indicator are:

  • IEA ETP 2017 background scenario data
  • SDA Transport tool – sectoral benchmark pathway definition
  • ITF Transport Outlook OECD
  • IPCC CO2 emissions from commercial aviation, 2018
  • IATA Economic performance of the airline industry, mid-year report, 2017

The benchmark indicators involved are:

 

How the Analysis will be done

Use past data on emissions for the assessed company and compare it to the sector benchmark. Basically, one should calculate the blue area of the graph in Figure 18, multiplied by the company’s activity during the corresponding years. Then, compare this area to the carbon budget during the same period. This indicator would absolutely need to be a ratio as company are very unlikely to provide data for the same period.

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Figure 18: Comparison of past performance and carbon budget defined by sector benchmark

 

Rationale TR 4.2 ALIGNMENT OF PAST PERFORMANCE WITH CARBON BUDGET
Rationale of the indicator

RELEVANCE OF THE INDICATOR:

So far, the remaining carbon budget is calculated from the company SDA benchmark (that is, pink + yellow areas in Figure 19). However, as most of the companies are starting above the carbon intensity sectoral benchmark, the aggregated area under each company’s current benchmark multiplied by their activities is very likely to be much higher than the aggregated carbon budget for the sector. For a company starting above the sectoral benchmark, not only has it consumed a carbon budget surplus in the past (blue area), but with that definition it would also benefit a higher absolute carbon budget than a company aligned. Hence, to calculate the carbon budget specific to each company for this indicator, one should use the sector benchmark, that is, only the pink area (multiplied by the company’s activity), rather than any company’s benchmark, that includes an unjustified carbon surplus in yellow.

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Figure 19 : Illustration of past performance and carbon budget

 

5.3.4.3. TR 4.3 Subcontracted service Performance (WEIGHTING: Own fleet = 0% or Subcontracting =22%)

Description & Requirements TR 4.3 Subcontracted service performance
Short description of indicator This indicator is a qualitative assessment of the degree of knowledge the company has about its subcontractors’ performance, and about the subcontractors’ performance itself. 
Data requirements

To be completed.

The questions comprising the information request that are relevant to this indicator are:

  • See data mapping in TR tool

External sources of data used for the analysis of this indicator are:

  •  

 

How the Analysis will be done

The analysis will look at the following dimensions:

  • If the company has a good forecast on the subcontracted activity
  • If the company is able to determine future emissions from its subcontractors, and if the intensity follows the decarbonization pathway
  • If the company knows the investment strategy of its subcontractors
  • If the subcontractors fleet include low-carbon vehicles
  • If the subcontractors carry out actions of GHG emissions reduction on its vehicles and on operations

The analysis uses the following matrix:

Actions eligible for the dimension GHG emissions reduction on material” are the following:

  • Fuel efficiency devices
  • Preventive maintenance
  • Speed limitation devices
  • Predictive cruise control devices
  • Real-time fuel economy monitors (linked to driving methods)
  • Tire pressure monitoring systems
  • Low rolling resistance tires
  • Improvement of ship hull surface / hull cleaning
  • Air lubrification of the hull
  • Waste heat recovery from ship engine or exhaust gas
  • Reduce weight of internal equipment and interior design in aircrafts

Actions eligible for the dimension “GHG emissions reduction on operation” are the following:

  • Eco-driving
  • Routing optimization
  • Load factor optimization
  • Reduction of empty runs
  • Improve backhauling
  • Speed regulation with Intelligent Speed Adaptation
  • Platooning
  • Re-timing urban deliveries to off-hours
  • Co-loading
  • Speed limitation in shipping
  • Participate in smoother ship-port interface to reduce waiting time of ship and optimize berths planning
  • Onshore power supply for ships in ports

Other actions than the ones listed above may be eligible, if judged relevant by the analysts.

  • For each action reported, the company shall describe:
  • The type of action
  • The goals
  • The implementation process
  • The monitoring of the action
  • The results obtained for the reporting year
Rationale TR 4.3 Subcontracted Service Performance
Rationale of the indicator

RELEVANCE OF THE INDICATOR:

This indicator stands as a mirror of indicators 2.3 and 2.4 assessing material investments of the company about its fleet, but here it assesses the performance of the subcontractors. It is necessary that the company investigates about its subcontractors’ performance, especially if a large part of the activity is subcontracted, because its own performance depends on it. Through this indicator, the actions carried out by the subcontractors to reduce their GHG emissions are assessed, along with investments made that will shape future levels of emissions. Some focus is made on the capacity of the company to collect data from its subcontractors, because it is the first necessary step toward a full picture of its carbon impact, and it shows commitment for a low-carbon transition.

SCORING RATIONALE:

This indicator is assessed by a maturity matrix, because companies subcontracting their transport service face a lack of data from their subcontractors. None the less, this indicator encourages companies to dialogue with their subcontractors and to set up a data collection process. Therefore, high levels of the matrix correspond to the ability to collect data that would be necessary to compute indicator from module 2. The aim of this indictor is to value companies that have subcontractors with good carbon performance, so the highest level of the matrix corresponds to subcontractor’s performance aligned with the decarbonization pathway.

The various dimensions of the maturity matrix are weighted as follows:

Spot contract is a common subcontracting practice in the transport sector, and it makes data collection very difficult for companies. Therefore, the maturity matrix of this indicator shall be used only to score subcontractors under “long-term” contract. The score obtained is then adjusted with the share of GHG emissions represented by spot contracts. The final score is computed as follows:

It was decided to exclude spot contracts from the assessment with this maturity matrix, as it seemed hardly feasible to collect relevant data from such subcontractors, or to design adequate but nonetheless as ambitious maturity levels as for long-term contract. Having few or poor-quality data should not be an excuse for bad carbon performance.

 

5.3.5. Management (Weighting: 10%)

Maturity matrix contains five levels of evaluation, that are associated to scores given to the company for each indicator. Depending on indicator, it might be possible to obtain only some score. Some of the indicators might be divided into sub-dimension that are evaluated individually before the score is aggregated to obtain the indicator score.

 

5.3.5.1. TR 5.1 OVERSIGHT OF CLIMATE CHANGE ISSUES (WEIGHTING: 2%)

Description & Requirements TR 5.1 Oversight of climate change issues
Short description of indicator The company discloses that responsibility for climate change within the company lies at the highest level of decision-making within the company structure.
Data requirements

The questions comprising the information request that are relevant to this indicator are:

  • See data mapping in TR tool

External sources of data may also be used for the analysis of this indicator.

How the Analysis will be done

The benchmark case is that climate change is managed within the highest decision-making structure within the company. The company situation is compared to the benchmark case, if it is similar then points are awarded.

The position at which climate change is managed within the company structure is determined from the company data submission and accompanying evidence. Three levels of maturity can be reached by the company.

 

Rationale TR 5.1 Oversight of climate change issues
Rationale of the indicator

Successful change within companies, such as the transition to a low-carbon economy, requires strategic oversight and buy-in from the highest levels of decision-making within the company. For the Transport sector, a change in strategy and potentially business model will be required and this cannot be achieved at lower levels within an organisation. Evidence of how climate change is addressed within the top decision-making structures is a proxy for how seriously the company takes climate change, and how well integrated it is at a strategic level. High-level ownership also increases the likelihood of effective action to address the low-carbon transition.

Changes in strategic direction are necessarily future-oriented, which fits with this principle of the ACT project.

Managing oversight of climate change is considered as a good practice.

 

5.3.5.2. TR 5.2 CLIMATE CHANGE OVERSIGHT CAPABILITY (WEIGHTING: 1%)

Description & Requirements TR 5.2 Climate change oversight capability
Short description of indicator Company board or executive management has expertise on the science and economics of climate change, including an understanding of policy, technology and consumption drivers that can disrupt current business.
Data requirements

The questions comprising the information request that are relevant to this indicator are:

  • See data mapping in TR tool

External sources of data may also be used for the analysis of this indicator.

How the Analysis will be done

The presence of expertise on topics relevant to climate change and the low-carbon transition at the level of the individual or committee with overall responsibility for it within the company is assessed. The presence of expertise is the condition that must be fulfilled for points to be awarded in the scoring.

The analyst determines if the company has expertise as evidenced through a named expert biography outlining capabilities. The analysis is binary: expertise is evident or not. A cross check is performed against TR 5.1 on the highest responsibility for climate change, the expertise should exist at the level identified or the relationship between the structures/experts identified should also be evident.

 

Elements of biography outlining expertise might be:

  • Achievement of a course with a focus on climate change
  • Training in climate change subjects by a certified organism
  • Previous experience in an organization specialized in climate change (consulting companies in transition, NGO, …)
  • Supervision of studies to assess climate change impact on business and business impact on climate change
Rationale TR 5.2 Climate change oversight capability
Rationale of the indicator 

Effective management of the low-carbon transition requires specific expertise related to climate change and its impacts, and their likely direct and indirect effects on the business. Presence of this capability within or closely related to the decision-making bodies that will implement low-carbon transition both indicates company commitment to that transition and increases the chances of success.

Even if companies are managing climate change at the Board level or equivalent level, a lack of expertise could be a barrier to successful management of low-carbon transition.

 

5.3.5.3. TR 5.3 LOW-CARBON TRANSITION PLAN (WEIGHTING: 3%)

Description & Requirements TR 5.3 Low-carbon transition plan
Short description of indicator The company has a plan on how to transition the company to a business model compatible with a low-carbon economy.
Data requirements

The questions comprising the information request that are relevant to this indicator are:

  • See data mapping in TR tool
How the Analysis will be done

The analyst evaluates the description and evidence of the low-carbon transition plan for the presence of best practice elements and consistency with the other reported management indicators. The company description and evidence are compared to the maturity matrix developed to guide the scoring and a greater number of points are allocated for elements indicating a higher level of maturity.

Among the best practice elements identified to date are:

  • The plan includes financial projections
  • The plan should include cost estimates or other assessments of financial viability as part of its preparation
  • The description of the major changes to the business is comprehensive, consistent, aligned with other indicators
  • Quantitative estimates of how the business will change in the future are included
  • Costs associated with the plan (e.g. write-downs, site remediation, contract penalties, regulatory costs) are included
  • Potential “shocks” or stressors (sudden adverse changes) have been taken into consideration
  • Relevant region-specific considerations are included
  • The plan’s measure of success is SMART - contains targets or commitments with timescales to implement them, is time-constrained or the actions anticipated are time-constrained
  • The plan’s measure of success is quantitative
  • The description of relevant testing/analysis that influenced the transition plan is included
  • The plan is consistent with reporting against other ACT indicators
  • The scope should cover entire business, and is specific to that business
  • The plan should cover the short, medium and long terms. From now or the near future <5 years, until at least 2035 and preferably beyond (2050)
  • The plan contains details of actions the company realistically expects to implement (and these actions are relevant and realistic)
  • The plan is approved at the strategic level within the organisation
  • Discussions about the potential impacts of a low-carbon transition on the current business have been included
  • The company has a publicly acknowledged 2°C (or beyond) science-based target (SBT)

The maximum score (100%) is assigned if all of these elements are demonstrated.

 

Rationale TR 5.3 Low-carbon transition plan
Rationale of the indicator

The Transport sector will require substantial changes to its business to align with a low-carbon economy over the short, medium and long term, whether voluntarily following a strategy to do so or if forced to change by regulations and structural changes to the market. It is better for the success of its business and of its transition that these changes occur in a planned and controlled manner.

 

5.3.5.4. TR 5.4 CLIMATE CHANGE MANAGEMENT INCENTIVES (WEIGHTING: 1%)

Description & Requirements TR 5.4 Climate change management incentives
Short description of indicator The Board’s compensation committee has included metrics for the reduction of GHG emissions in the annual and/or long-term compensation plans of senior executives; the company provides monetary incentives for the management of climate change issues as defined by a series of relevant indicators.
Data requirements

The questions comprising the information request that are relevant to this indicator are:

  • See data mapping in TR tool
How the Analysis will be done

The analyst verifies if the company has compensation incentives set for senior executive compensation and/or bonuses, that directly and routinely reward specific, measurable reductions of tons of carbon emitted by the company in the preceding year and/or the future attainment of emissions reduction targets, or other metrics related to the company’s low-carbon transition plan.

 

Rationale TR 5.4 Climate change management incentives
Rationale of the indicator

Executive compensation should be aligned with overall business strategy and priorities. As well as commitments to action the company should ensure that incentives, especially at the executive level, are in place to reward progress towards a low-carbon transition. This will improve the likelihood of a successful low-carbon transition.

Monetary incentives at the executive level are an indication of commitment to successful implementation of a low-carbon transition strategy.

 

5.3.5.5. TR 5.5 CLIMATE CHANGE SCENARIO TESTING (WEIGHTING: 3%)

Description & Requirements TR 5.5 Climate change scenario testing
Short description of indicator Testing or analysis relevant to determining the impact of the transition to a low-carbon economy on the current and projected business model and/or business strategy has been completed, with the results reported to the Board or C-suite (CEO, CFO, etc.), the business strategy revised where necessary, and the results publicly reported.
Data requirements

The questions comprising the information request that are relevant to this indicator are:

  • See data mapping in TR tool
How the Analysis will be done

The analyst evaluates the description and evidence of the low-carbon economy scenario testing for the presence of best-practice elements and consistency with the other reported management indicators. The company description and evidence are compared to the maturity matrix developed to guide the scoring and a greater number of points is allocated for elements indicating a higher level of maturity.

Best-practice elements to be identified in the test/analysis include:

  • entire coverage of the company’s boundaries
  • timescale from present to long-term (2035-2050)
  • translation of results into value-at-risk or other financial terms
  • multivariate: a range of different changes in conditions are considered together
  • changes in conditions that are specific to a low-carbon climate scenario
  • climate change conditions are combined with other likely future changes in operating conditions over the timescale chosen.

Maximum points are awarded if all of these elements are demonstrated. Partial points might be awarded in case scenario testing has been carried out by the company even if not achieved.

 

Rationale AU 5.5 Climate change scenario testing
Rationale of the indicator

Changes predicted to occur due to climate change could have a number of consequences for the Transport sector, including increased costs, a dramatically changed operating environment and major disruptions to the business. There are a variety of ways of analysing the potential impacts of climate-related changes on the business, whether these are slow and gradual developments or one-off “shocks”. Investors are increasingly calling for techniques such as use of an internal price on carbon, scenario analysis and stress testing to be implemented to enable companies to calculate the value-at-risk that such changes could pose to the business. As this practice is emergent at this time there is currently no comprehensive survey or guidance on specific techniques or tools recommended for the sector. The ACT methodology thus provides a broad definition of types of testing and analysis that can be relevant to this information requirement, to identify both current and best practices and consider them in the analysis.

Scenario stress testing is an important management tool for preparing for the low-carbon transition. For businesses likely to be strongly affected by climate change impacts (both direct and indirect), it has even greater importance.

 

5.3.6. Supplier engagement (Weighting: 15%)

 

5.3.6.1. TR 6.1 Engagement of subcontracting transport companies with low-carbon transition (WEIGHTING: 8%*Share of GHG emissions linked to subcontracted activities)

Description & Requirements TR 6.1 Engagement of subcontracting transport companies with low-carbon transition
Short description of indicator This indicator assesses how the company has implemented instruments to influence or enable subcontracting companies to invest in solutions for a low-carbon transition in order to reduce their carbon intensity, or otherwise shift or select subcontracting companies based on their emissions performance.
Data requirements

The questions comprising the information request that are relevant to this indicator are:

  • See data mapping in TR tool
How the Analysis will be done

The analysis assigns a maturity score based on the company’s demonstration of engagement with its sub-contractors, expressed in a maturity matrix. Best actions to be identified include the following:

  • Carbon intensity of the transport service provided by subcontractors is a criterion for the choice of a sub-contractor by the company.
  • The company demonstrates that it encourages its subcontractors to reduce their GHG emissions
  • The company monitors the emissions evolution of the transport service provided by its subcontractors

Maximum score is obtained if all of these elements are demonstrated.

 

Rationale TR 6.1 Engagement of subcontracting transport companies with low-carbon transition
Rationale of the indicator

RELEVANCE OF THE INDICATOR:

This indicator is relevant only in the case where part of the transport service is sub-contracted to other transport operators. It evaluates the company’s ability to engage its subcontractors in the low-carbon transition, particularly through their material investments, operational excellence or modal shift.

SCORING THE INDICATOR:

Because of data availability and complexity, a direct measure of the outcome of such engagement is not easy in the current context It is often challenging to quantify the emissions reduction potential and outcome of collaborative activities within the supply chain. Therefore, the approach of a maturity matrix allows the analyst to consider multiple dimensions of sub-contractors’ engagement.

The weight of this indicator ranges from 0% in case of transport service 100% operated by own fleet, to 8% in case of transport service 100% subcontracted.

 

5.3.6.2. TR 6.2 Engagement with vehicle manufacturers (WEIGHTING: 2% + 8%*(1-Share of GHG emissions linked to subcontracted activities))

Description & Requirements TR 6.2 Engagement of vehicle manufacturers
Short description of indicator This indicator assesses if the company has a strategy, ideally governed by a clear policy and integrated into business decision making, to influence, enable, or otherwise shift vehicle manufacturers choices and behaviour in order to reduce GHG emissions of their products.
Data requirements

The questions comprising the information request that are relevant to this indicator are:

  • See data mapping in TR tool
How the Analysis will be done

The analysis assigns a maturity score based on the company’s demonstration of engagement with vehicle manufacturers, expressed in a maturity matrix. Successive levels into this matrix represent a more advanced level of engagement that works towards a collaborative effort to manufacture energy efficient and low carbon vehicles. The performance of the vehicles directly impacts the company's ability to reduce its GHG emissions.

A company that is placed in the ‘aligned’ category receives the maximum score. Companies that are at lower levels receive a partial score, with 0% assigned for having no engagement at all.

This maturity matrix is indicative but does not show all possible options that can result in a particular score. Companies’ responses are examined by the analyst and then placed on the level in the matrix where the analyst deems it most appropriate.

Rationale TR 6.2 Engagement of vehicle manufacturers
Rationale of the indicator

RELEVANCE OF THE INDICATOR:

The major part of a vehicle GHG emissions are due to technological choices in motorization, aerodynamics, weight etc. Therefore, transport operators’ levels of emissions are highly dependent on the choices made by their vehicles’ manufacturers. It is thus crucial for the Transport sector to engage with vehicle manufacturers to accelerate a shift toward more carbon efficient vehicles. This indicator assesses the proactiveness of the company towards manufacturers on GHG emissions issues.

SCORING THE INDICATOR:

The weight of this indicator ranges from 2% in case of transport service 100% subcontracted, to 10% in case of transport service 100% operated by own fleet.

5.3.6.3. TR 6.3 Engagement with infrastructure operators (WEIGHTING: 5%)

Description & Requirements TR 6.3 Engagement with infrastructure operators
Short description of indicator This indicator assesses if the company has a strategy, ideally governed by a clear policy and integrated into business decision making, to influence, enable, or otherwise shift infrastructure operators’ choices and behaviour in order to reduce GHG emissions of the transport system.
Data requirements

The questions comprising the information request that are relevant to this indicator are:

  • See data mapping in TR tool
How the Analysis will be done

The analysis assigns a maturity score based on the company’s demonstration of engagement with infrastructure operators, expressed in a maturity matrix. Successive levels into this matrix represent a more advanced level of engagement that works towards a collaborative effort to move to a low-carbon transport system, encompassing vehicle usage and infrastructure.

A company that is placed in the ‘aligned’ category receives the maximum score. Companies that are at lower levels receive a partial score, with 0% assigned for having no engagement at all.

This maturity matrix is indicative but does not show all possible options that can result in a particular score. Companies’ responses are examined by the analyst and then placed on the level in the matrix where the analyst deems it most appropriate.

Rationale TR 6.3 Engagement with infrastructure operators
Rationale of the indicator

RELEVANCE OF THE INDICATOR:

Effort to reduce the use of fossil fuels can also be supported by infrastructure operators. For example, railway electrification, docks electrification in ports to reduce the use of HFO by ships when calling to ports, providing charging stations or biogas supply station for road operators… Companies can engage with infrastructure operators to foster changes needed to move to a low-carbon transport system.

SCORING OF THE INDICATOR:

The weight of the indicator is 5%. It reflects the importance for transport operators to collaborate with infrastructure operators in order to ensure that they can easily shift their fleet to less emissive options.

 

5.3.7 Client engagement (Weighting: 10%)

 

5.3.7.1. TR 7.1 Strategy and activities to influence customer behaviour to reduce their GHG emissions (WEIGHTING: 3%)

Description & Requirements TR 7.1 Strategy and activities to influence customer behaviour to reduce their GHG emissions
Short description of indicator This indicator measures whether the company has a strategy, ideally governed by a clear policy and integrated into business decision making, and activities to influence, enable, or otherwise shift customer choices and behaviour in order to reduce GHG emissions.
Data requirements

The questions comprising the information request that are relevant to this indicator are:

  • See data mapping in TR tool
How the Analysis will be done

The strategy and activities have to mention whether:

  • GHG emissions reduction is part of the goal
  • Customers are engaged either directly through education, collaboration or compensation, or indirectly through company regulation or customer motivation via marketing and choice architecture.
  • It is an active rather than a reactive strategy; a reactive strategy responds only to customer demand for more low-carbon transport offers, whereas an active strategy attempts to change the existing customer demand towards low-carbon alternatives.
  • It is widespread. The strategy has to apply to the majority the activity of the company.
Rationale TR 7.1 Strategy to influence customer behaviour to reduce their GHG emissions
Rationale of the indicator

RELEVANCE OF THE INDICATOR:

Along with technological choices, one of the main drivers for transport operators’ levels of GHG emissions is the demand for transport. This indicator evaluates the company’s strategy to shift transport demand towards lower carbon services, by leveraging modal shift, load optimization, alternative energies use, distance reduction, etc.

SCORING THE INDICATOR:

Scoring this indicator is done on a set of narrative data points that do not have a quantitative interpretation. The maturity matrix shown below is used to assess the company strategy. Each sub-dimension has the same weight (50%-50%) in the final score of this indicator.

5.3.7.2. TR 7.2 Activities to Influence Customer Behaviour to reduce their GHG Emissions (WEIGHTING: 7%)

Description & Requirements TR 7.2 activities to influence customer behaviour to reduce their GHG emissions 
Short description of indicator This indicator measures whether the company has a strategy, ideally governed by a clear policy and integrated into business decision making, and activities to influence, enable, or otherwise shift customer choices and behaviour in order to reduce GHG emissions.
Data requirements

The questions comprising the information request that are relevant to this indicator are:

  • See data mapping in TR tool
How the Analysis will be done

The activities have to mention whether:

  • GHG emissions reduction is part of the goal
  • Customers are engaged either directly through education, collaboration or compensation, or indirectly through company regulation or customer motivation via marketing and choice architecture.
  • Activities are such as marketing campaign, carbon content disclosure of transport services provided. Example: Nudge marketing to promote low-carbon transport services, transparency over the carbon impact of the transport services…
Rationale TR 7.2 Activities to influence customer behaviour to reduce their GHG emissions 
Rationale of the indicator

RELEVANCE OF THE INDICATOR:

Along with technological choices, one of the main drivers for transport operators’ levels of GHG emissions is the demand for transport. This indicator evaluates the company’s actions with clients to shift transport demand towards lower carbon services, by leveraging modal shift, load optimization, alternative energies use, distance reduction, etc.

SCORING THE INDICATOR:

Scoring this indicator is done on a set of narrative data points that do not have a quantitative interpretation. The maturity matrix shown below is used to assess the company strategy.

 

5.3.8. Policy engagement (Weighting: 5%)

 

MODULE RATIONALE

Transport operations are regulated at international, national or local level (e.g. IMO regulations on SOx for maritime transport, limitation of truck transit on specific days on a territory…). However, regulation affecting the sector is usually developed in a consultative fashion due to the need for technical inputs. This allows significant room for influencing these regulations, potentially in a way that is negative for the climate. Since the transport sector is currently a major source of GHG emissions, timely regulation is necessary to ensure that scientific limits are considered and that there is a “level playing field” for businesses in this sector to approach transition to a low-carbon economy.

5.3.8.1. TR 8.1 Trade associations supported do not have climate negative activities or positions (WEIGHTING: 2%)

Description & Requirements AU 8.1 Company policy on engagement with trade associations
Short description of indicator The company is not on the Board or providing funding beyond membership of any trade associations that have climate-negative activities or positions. It should also be considered if the company is supporting trade associations with climate-positive activities and/or positions. The company has a constructive policy on what action to take when industry and trade organisations to which it has membership are found to be opposing “climate-friendly” policies.
Data requirements

The questions comprising the information request that are relevant to this indicator are:

  • TR 8.A
How the Analysis will be done

The list of trade associations declared in the CDP data and other external source entries relating to the company is assessed against a list of associations that have climate-negative activities or positions. If the company is part of trade associations that have climate-positive activities and/or positions, this should be considered for the analysis. The analyst evaluates the description and evidence of the policy on trade associations and climate change for the presence of best practice elements and consistency with the other reported management indicators. The company description and evidence are compared to the maturity matrix developed to guide the scoring and a greater number of points will be allocated for elements indicating a higher level of maturity.

Best practice elements to be identified in the test/analysis include:

  • Having a publicly available policy in place
  • The scope of the policy covers the entire company and its activities, and all group memberships and associations
  • The policy sets out what action is to be taken in the case of inconsistencies
  • Action includes the option to terminate membership of the association
  • Action includes the option of publicly opposing or actively countering the association’s position
  • Responsibility for oversight of the policy lies at the top level of the organisation
  • There is a process to monitor and review trade association positions

Maximum points are awarded if all these elements are demonstrated.

Rationale TR 8.1 Company policy on engagement with trade associations
Rationale of the indicator

See also the module rationale.

Trade associations are a key instrument by which companies can indirectly influence policy on climate. Thus, when trade associations take positions that are negative for the climate, companies need to take action to ensure that this negative influence is countered or minimised.

A policy to govern such interaction is a specific request of the 2015 UNPRI “investor expectations on corporate climate lobbying” document [18].

[18] “Energy Technology Perspectives 2017 ”, IEA, 2017

 

5.3.8.2. TR 8.2 Position on significant climate policies (WEIGHTING: 1%)

Description & Requirements TR 8.2 Position on significant climate policies
Short description of indicator The company is not opposed to any significant climate relevant policy and/or supports climate friendly policies.
Data requirements

The questions comprising the information request that are relevant to this indicator are:

  • TR 8.E

External sources of data shall also be used for the analysis of this indicator (e.g. RepRisk database, press news).

How the Analysis will be done

The analyst evaluates the description and evidence on the company’s position on relevant climate policies for the presence of best practice elements, negative indicators and consistency with the other reported management indicators. The company description and evidence are compared to the maturity matrix developed to guide the scoring and a greater number of points are allocated for elements indicating a higher level of maturity.

Maturity matrix contents may include (decreasing maturity):

  • The company publicly supports relevant significant climate policies
  • No reports of any opposition to climate policy
  • Reported indirect opposition to climate policy (e.g. via a trade association)
  • Reported direct opposition to climate policy (third-party claims are found)
  • The company publicises direct opposition to climate policy (e.g. direct statement issues or given by a company representative in a speech or interview)
Rationale TR 8.2 Position on significant climate policies
Rationale of the indicator

See also the module rationale.

Policy and regulation that act to promote transition to a low-carbon economy are key to the success of the transition. Companies should not oppose effective and well-designed regulation in these areas, but should support it.

 

5.3.8.3. TR 8.3 Interaction with local public authorities (WEIGHTING: 2%)

Description & Requirements TR 8.3 Interaction with local public authorities
Short description of indicator The company has established an effective dialogue with local public authorities to improve low-carbon infrastructures of transport (including active modes), to increase their usage, to optimize freight transport operations, in order to reduce the overall transport emissions of the territory.
Data requirements

The questions comprising the information request that are relevant to this indicator are:

  • See data mapping in TR tool
How the Analysis will be done

The analyst evaluates the description and evidence on the company’s interaction with local public authorities. The company description and evidence are compared to the maturity matrix developed to guide the scoring and a greater number of points are allocated for elements indicating a higher level of maturity.

The scoring will be dependent on the type of company.

Rationale TR 8.4 Interaction with (local) public authorities
Rationale of the indicator Dialogue with local public authorities is key for urban freight and passenger transport. The adaptation of cities to promote low-carbon modes is key in changing modal shares.

 

5.3.9. Business model (Weighting: 10%)

 

MODULE RATIONALE:

In addition to using low-carbon vehicles, a company may transition its business model to other areas to remain profitable in a low-carbon economy. The company’s future business model should enable it to decouple financial results from GHG emissions, in order to meet the constraints of a low-carbon transition while continuing to generate value. This can be done by developing activities outside the core business of the company, even outside the transport domain. If still in the transport domain, the business model shifts identified must not conflict with the changes that are implied by decarbonizing the company’s transport services.

This module aims to identify both relevant current business activities and those still at a burgeoning stage. It is recognised that transition to a low-carbon economy, with the associated change in business models, will take place over a number of years. The analysis will thus seek to identify and reward projects at an early stage as well as more mature business activities, although the latter (i.e. substantially sized, profitable, and/or expanding) business activities will be better rewarded.

Climate scenarios can identify shifts in modes of transport as a component of change in the transportation system that will foster the transition to a low-carbon economy. Companies committed to adapting their business to these predicted changes will be better positioned to take advantage of associated opportunities and successfully transition to a low-carbon economy.

 

5.3.9.1. TR 9.1 Business activities shifting demand from highly emissive to low-carbon modes (WEIGHTING: 4%)

Description & Requirements TR 9.1 Business activities shifting demand from highly Emissive to low-carbon modes
Short description of indicator The company is actively developing business models for a low-carbon future by engaging activities in other low-carbon transport modes, encouraging its clients to question their mobility needs, and the transport mode to meet these needs.
Data requirements

The questions comprising the information request that are relevant to this indicator are:

  • See data mapping in TR tool
How the Analysis will be done

The analysis is based on the company’s degree of activity in one of the future business model areas used to benchmark. Relevant business activity areas for this indicator are:

  • Introducing of more multi-modal activities in its business on a voluntary basis (with low-carbon alternatives)
  • Supporting modal shift to low-carbon alternatives (dedicated offers)

The table below provides some examples for different subsectors.

More examples are provided in the ACT TR tool.

In order for companies to align with a low-carbon future and meet the future mobility needs, it is expected that they pursue at least one of these future business model pathways and integrate them into their strategic plans. The analyst evaluates the description and evidence of the company’s degree of activity in one of the future business model areas for the presence of best practice elements and consistency with the other reported management indicators. The company description and evidence are compared to the maturity matrix developed to guide the scoring and a greater number of points are allocated for elements indicating a higher level of maturity.

The minimum requirement for points to be awarded is that some level of exploration of one or more of these relevant business areas has started. This could include participation in collaborations, pilot projects, or research funding.

Best practice elements to be identified in the test/analysis include:

  • the company has developed a mature business model that integrates one or many of the above elements;
  • the business activity is profitable;
  • the business activity is of a substantial size;
  • the company is planning to expand the business activity;
  • expansion will occur on a defined timescale.

Maximum points are awarded if all of these elements are demonstrated.

If several business models are developed by the company, the final score will be the one given to the most mature business model. The company should not be penalized if it has built a mature business model, and also explores other tracks (which would be scored with a lower score) compared to another company having only one mature business model.

Rationale TR 9.1 Business activities shifting demand for highly emissive to low-carbon modes
Rationale of the indicator See module rationale.

 

5.3.9.2. TR 9.2 Business activities promoting technical and operational low-carbon innovations (WEIGHTING: 2%)

Description & Requirements TR 9.2 Business activities promoting technical and operational low-carbon innovations
Short description of indicator The company is actively developing business models for a low-carbon future by activating technological and operational levers to reduce emissions of the company and the transport sector as a whole, but also by acting also for carbon sequestration.
Data requirements

The questions comprising the information request that are relevant to this indicator are:

  • See data mapping in TR tool
How the Analysis will be done

The analysis is based on the company’s degree of activity in one of the future business model areas used to benchmark. Relevant business activity areas for this indicator are:

  • Accelerating the introduction of alternative energy carriers in the energy mix for transport
  • Challenging the optimization of the transport system to increase the overall efficiency (ex: adapted schedules for freight)
  • Improving the occupancy rate and average load of vehicles
  • Cooperating with other transport services and create a better-connected supply & demand, with mobility hubs
  • Challenging last-km freight, for instance by coupling it with passenger transport
  • Practicing routing optimization (ex: metocean routing for shipping)

The table below provides some examples for different subsectors.

More examples are provided in the ACT TR tool.

In order for companies to align with a low-carbon future and meet the future mobility needs, it is expected that they pursue at least one of these future business model pathways and integrate them into their strategic plans. The analyst evaluates the description and evidence of the company’s degree of activity in one of the future business model areas for the presence of best practice elements and consistency with the other reported management indicators. The company description and evidence are compared to the maturity matrix developed to guide the scoring and a greater number of points are allocated for elements indicating a higher level of maturity.

The minimum requirement for points to be awarded is that some level of exploration of one or more of these relevant business areas has started. This could include participation in collaborations, pilot projects, or research funding.

Best practice elements to be identified in the test/analysis include:

  • the company has developed a mature business model that integrates one or many of the above elements;
  • the business activity is profitable;
  • the business activity is of a substantial size;
  • the company is planning to expand the business activity;
  • expansion will occur on a defined timescale.

Maximum points are awarded if all of these elements are demonstrated.

If several business models are developed by the company, the final score will be the one given to the most mature business model. The company should not be penalized if it has built a mature business model, and also explores other tracks (which would be scored with a lower score) compared to another company having only one mature business model.

Rationale TR 9.2 Business activities promoting technical and operational low-carbon innovations
Rationale of the indicator See module rationale.

 

5.3.9.3. TR 9.3 Business activities engaging clients (WEIGHTING: 4%)

Description & Requirements TR 9.3 Business activities engaging clients
Short description of indicator The company is actively developing business models for a low-carbon future by activating technological and operational levers to reduce emissions of the company and the transport sector as a whole
Data requirements

The questions comprising the information request that are relevant to this indicator are:

  • See data mapping in TR tool
How the Analysis will be done

The analysis is based on the company’s degree of activity in one of the future business model areas used to benchmark. Relevant business activity areas for this indicator are:

  • Proposing innovative contracts to better share costs & benefits with clients on low-carbon services
  • Developing offers to encourage the reduction of distance travelled
  • Developing offers to encourage the reduction of the demand for transport (like energy utilities with energy consumption)

In order for companies to align with a low-carbon future and meet the future mobility needs, it is expected that they pursue at least one of these future business model pathways and integrate them into their strategic plans. The analyst evaluates the description and evidence of the company’s degree of activity in one of the future business model areas for the presence of best practice elements and consistency with the other reported management indicators. The company description and evidence are compared to the maturity matrix developed to guide the scoring and a greater number of points are allocated for elements indicating a higher level of maturity.

The minimum requirement for points to be awarded is that some level of exploration of one or more of these relevant business areas has started. This could include participation in collaborations, pilot projects, or research funding.

Best practice elements to be identified in the test/analysis include:

  • the company has developed a mature business model that integrates one or many of the above elements;
  • the business activity is profitable;
  • the business activity is of a substantial size;
  • the company is planning to expand the business activity;
  • expansion will occur on a defined timescale.

Maximum points are awarded if all of these elements are demonstrated.

If several business models are developed by the company, the final score will be the one given to the most mature business model. The company should not be penalized if it has built a mature business model, and also explores other tracks (which would be scored with a lower score) compared to another company having only one mature business model.

Rationale TR 9.3 Business activities engaging clients
Rationale of the indicator See module rationale.

 

6. Assessment

 

6.1 Sector Benchmark

 

The transport sector is composed of multiple subsectors, as presented in Table 2. A decarbonisation pathway is described for each sub sector and shall be used as benchmark by companies.

Two main sources have been used to produce the decarbonisation pathways.

1. The main source is SDA Transport Tool. The SDA – Sectoral Decarbonization Approach is one approach used by SBT Initiative to define a 2°C pathway. 

The global carbon budget is divided by sector of the economy. Emission reductions are allocated to individual companies according to the sectoral budget. It is a carbon intensity sectoral method. Data in the SDA Transport Tool are based on IEA ETP 2017 scenario and the Mobility Model (MoMo). 

The MoMo is a technical-economic database spreadsheet and simulation model that enables detailed projections of transport activity, vehicle activity, energy demand, and well-to-wheel greenhouse gas (GHG) and pollutant emissions according to user-defined policy scenarios to 2060.

MoMo comprises:

  • 27 countries and regions, which are aggregated into four Organisation for Economic Co-operation and Development (OECD) regional clusters and 11 groups of non-OECD economies.
  • Historical data from 1975 to 2014 (or 1990 to 2014 for certain countries).
  • A simulation model in five-year time steps, for creating scenarios to 2060 based on “what if” analysis and backcasting.
  • Disaggregated urban versus non-urban vehicle stock, activity, energy use and emissions.
  • All major motorised transport modes (road, rail, shipping and air), providing passenger and freight services.
  • A wide range of powertrain technologies: internal combustion engines, including gasoline, diesel, and compressed natural gas (CNG) and LNG; as well as hybrid electric and electric vehicles (including plug-in hybrid electric and battery-electric vehicles) and fuel-cell electric vehicles.

Data from MoMo are not publicly available but are used in SDA transport tool, from which some aggregated results can be obtained publicly (regional results are not available).

 

2. The second source is the ITF Transport Outlook 2019 report by OECD. The ITF Transport Outlook provides an overview of recent trends and near-term prospects for the transport sector at a global level as well as long-term prospects for transport demand to 2050. The analysis covers freight (maritime, air, surface) and passenger transport (car, rail, air) as well as CO2 emissions.

The scenario selected to build benchmarks for ACT TR is the “High ambition scenario”, with the following hypothesis:

  • Intensified pricing disincentives for private car use
  • Restrictions on car use in some city centres
  • Increase urban density, public transit supply and integration
  • Stringent increase on carbon pricing by 2050
  • Rapid electrification of transport and decarbonisation of the power sector, in line with IEA’s EV30 scenario

WORLD BENCHMARKS

Sector benchmark – Passenger rail transport, interurban

This benchmark comes from the pathway “Passenger – Non-urban rail”, SDA Transport tool, Science-Based Target Initiative, 2018. (Based on IEA Mobility Model, 2017)

 

Sector benchmark – Freight rail transport

This benchmark comes from the pathway “Freight – Rail”, SDA Transport tool, Science-Based Target Initiative, 2018. (Based on IEA Mobility Model, 2017)

 

Sector benchmark – Urban & suburban passenger land transport

This benchmark is a combination of 3 pathways from SDA Transport tool, Science-Based Target Initiative, 2018. (Based on IEA Mobility Model, 2017):

  • “Passenger – buses”,
  • “Passenger – mini-buses”
  • “Passenger - urban rail”

The combination is made with respect to the projected share of activity of each category.

 

Sector benchmark – Freight transport by road

This benchmark is a combination of 2 pathways from SDA Transport tool, Science-Based Target Initiative, 2018. (Based on IEA Mobility Model, 2017):

  • “Freight - Medium freight trucks (MFT)”,
  • “Freight - Heavy freight trucks (HFT)”

The combination is made with respect to the projected share of activity of each category.

 

 

Sector benchmark – Sea & coastal passenger water transport

 

No data available in literature yet

 

Sector benchmark – Inland passenger water transport

 

No data available in literature yet

 

Sector benchmark – Sea & coastal freight water transport

This benchmark comes from the pathway “Freight – Maritime”, SDA Transport tool, Science-Based Target Initiative, 2018. (Based on IEA Mobility Model, 2017)

 

Sector benchmark – Inland freight water transport

This benchmark comes from the pathway “Inland waterways”, ITF Transport Outlook 2019, OCDE, 2019

 

Sector benchmark – passenger air transport

This benchmark comes from the pathway “Air transport”, SDA Transport tool, Science-Based Target Initiative, 2018. (Based on IEA Mobility Model, 2017). Total emissions are disaggregated into passenger and freight according to “CO2 emissions from commercial aviation, 2018” (ICCT, 2019), which takes into account IATA recommended practice for the allocation of GHG emissions between revenue passengers and freight [XXX].

The starting point from IEA (2015) is corrected because we consider it as overestimated since no such allocation was made and traffic was underestimated. This correction is based upon data provided in the 2017 mid-year report "Economic performance of the airline industry" (IATA, 2017).

 

Sector benchmark – Freight air transport

This benchmark comes from the pathway “Air transport”, SDA Transport tool, Science-Based Target Initiative, 2018. (Based on IEA Mobility Model, 2017). Total emissions are disaggregated into passenger and freight according to “CO2 emissions from commercial aviation, 2018” (ICCT, 2019), which takes into account IATA recommended practice for the allocation of GHG emissions between revenue passengers and freight [XXX].

The starting point from IEA (2015) is corrected because we consider it as overestimated since no such allocation was made and traffic was underestimated. This correction is based upon data provided in the 2017 mid-year report "Economic performance of the airline industry" (IATA, 2017).

Eventually, air freight transport activity is based on the “ITF Transport Outlook 2019 report” (OECD, 2019) and its forecast is assumed to be in line with that of air passenger transport (same growth rates).

 

OECD / Non-OECD benchmarks

The previous benchmarks at world level have been regionalized according to the ratios available in ETP 2DS scenarios (IEA, 2017). Two different trajectories were computed: the “OECD” and the “Non-OECD” pathways.

The method used to compute these benchmarks is not highly robust because the ratios considered in it are not as disaggregated as necessary, given the number of sub-sectors covered by the methodology. Anyway, it is a first step to get more representative data than just globalized low-carbon pathways.

Please note that this breakdown methodology can be also applied to other group of countries (or countries), as long as they are described in the ETP 2DS scenarios (IEA, 2017).

Sector benchmark – Passenger rail transport, interurban

 

Sector benchmark – Freight rail transport

 

Sector benchmark – Urban & suburban passenger land transport

 

Sector benchmark – Freight transport by road

 

Sector benchmark – Sea & coastal passenger water transport

 

No data available in literature yet

 

Sector benchmark – Inland passenger water transport

 

No data available in literature yet

 

Sector benchmark – Sea & coastal freight water transport

 

Sector benchmark – Inland freight water transport

 

No data available in literature yet

 

Sector benchmark – passenger air transport

 

Sector benchmark – Freight air transport

 

Special cases

 

Case of multimodal companies

No aggregation of benchmark is done for multimodal companies, as targets are usually set by mode. Modal shift as a lever for decarbonisation is not encompassed in this case. Multimodal companies shall report for this indicator as many times as the number of modes they operate, the final score is computed by aggregating the score obtained for each mode, weighted by the level of GHG emissions of each mode.

 

Case of companies mixing passenger and freight transport

 

This case is to be discussed - Same process than the case of multimodal companies, with activity expressed in terms of GHG emissions?

 

 

6.2. Weightings

The selection of weights for both the modules and the individual indicators was guided by the principles of value of information, impact of variation, future orientation and data quality sensitivity. See the ACT Framework [1] document for more information.

As shown in the description of modules and indicators in section 5.3, the weight allocated to some indicators varies depending on whether the company operates its own fleet, or subcontracts the transport service to another company. However, in many cases, the company assessed is actually doing both: some part of the service is carried out internally, while the rest is being subcontracted. For this situation, the company will be evaluated twice for the modules with separated weights: once on the part of own fleet operations, and once on subcontracted operations. The final score will be the average of both scores, weighted by the share of GHG emissions from own fleet operations, or subcontracted operations, respectively.

Table 9: Performance Indicator Weightings

 

The quantitatively scored modules (Targets, Material investment, Intangible investment, Sold product performance) carry 50% of the final weight, and the qualitatively scored modules (Management, Policy engagement, Business model) carry 50%. The indicators within the modules also carry their own weighting.

 

Rationale for weightings

Targets 15%

The targets module has a relatively large weight of 15%. Most of this is placed on alignment of transport service emissions reduction targets, with 10%. This is because this indicator covers the totality of the company emissions, (WTW emissions as well as emissions from subcontracting) and targets are the only quantified metric to asses the ambition of a company.

The time horizon of targets & achievement of previous targets have a low weight of 3% and 2%. The time horizon of targets is a proxy of how forward-looking the company is, which should be coherent with the lifetime of its assets. Finally, the previous achievement indicator measures the company’s past credentials on target setting and achievement, which provides more contextual information on the company’s ability to meet ambitious future targets

Material Investment 30% or 0%

For companies owning their fleet, the focus of the ACT project is on the WTW fleet emissions, and this module captures all indicators that relate to this concept. More specifically, the indicators Fleet emissions lock-in is a way of capturing how the company fleet emissions will evolve in the future. This indicator is a measurement of the company’s alignment with a low-carbon future and receives a strong weight of 15%.

The past performance of the company is also assessed, in an attempt to see if the company recent emissions reduction are aligned with the needed future emissions reduction. The indicator Alignment of past performance with its carbon budget aims at evaluating if the company has emitted more carbon in the past than what it should have. These two indicators weight for 8%, and if the indicator Alignment of past performance with its carbon budget is not kept, its weight will be given to the indicator Trend in past emissions intensity.

Finally, the future outlook of the transport sector is based wholly on the adoption of low-carbon vehicles to replace conventional ICE vehicles. Therefore, the present low-carbon vehicles and energies of the company is a direct measurement of the company’s progress towards this goal. It receives a weight of 7%.

Intangible Investment 5%

Intangible investment is divided in three dimensions that are important for transport sector decarbonization. Low-carbon R&D is one aspect of the decarbonization, but transport operators are not at the forefront of R&D. Adoption of new digital solutions aiming at the optimization of the activity should also be adopted. Finally creating a company culture around the climate change issues should be considered to ensure that everyone is playing its part. Low-carbon R&D weight 2%, investment in digital solutions weights 1% and Investment in human capital weight 2%, The weight is quite low because these investments are quite difficult to quantify and evaluate,

Sold product performance 0% or 30%

For companies subcontracting activities, data on future carbon performance might be difficult to obtain. This module is very important to encourage the collaboration toward low-carbon transport and thus has an important weight. Performance of subcontracted services is future oriented and covers all the aspect on carbon performance that companies should take into account when working with a sub-contractor. The knowledge of subcontracting companies’ environmental performance is essential for companies with a lot of subcontracting as it weights a lot in the future carbon performance of the company. Thus, this indicator receives a strong weight of 22%.

The past performance of the company is also assessed, in an attempt to see if the company recent emissions reduction is aligned with the needed future emissions reduction. The indicator Alignment of past performance with its carbon budget aims at evaluating if the company has emitted more carbon in the past than what it should have. These two indicators weight for 8%, and if the indicator Alignment of past performance with its carbon budget is not kept, its weight will be given to the indicator Trend in past emissions intensity.

Management 10%

Management is a multi-faceted module that makes up 10% of the score, because it incorporates many different smaller indicators that together paint a picture of the company’s management and strategic approach to the low-carbon transition. Going by the principle of future orientation, the majority of this weight is placed on the low-carbon transition plan and climate change scenario testing, which are both weighted 3%. These two indicators provide more information on how this company will specifically deal with the transition, given its unique constraints and opportunities, and therefore provide valuable insights into the company’s planning and narrative towards the final goal.

The other three indicators have a low weight of 1% and 2%, as they are contextual indicators whose outcome can strengthen or undermine the company’s ability to carry out the transition plan and meet ambitious science based targets.

Supplier engagement 15%

In order to decarbonize the transport sector, it is essential that all actors get involved.

First, companies that are subcontracting a part of their activities must ensure that subcontracting companies are tackling the climate change problem and decarbonizing their activities.

To develop the technology required for the low-carbon transition, it is imperative that transport operators involve with manufacturers to identify together the best low-carbon options.

These two indicators weight 10% together, as a company with a lot of subcontracting must first and foremost engage with subcontractors and a company with an owned fleet must engage with vehicle manufacturers in priority.

Finally, changing the the habits, such as modal shift requires that transport operators get involved with infrastructure operators and voice their needs.

This module covers the whole picture for decarbonizing the transport sector and thus as a pretty important weight of 15%.

Client engagement 10%

The client engagement indicator is focused on the company’s efforts to promote low-carbon transport offers to their customers. This is an important aspect, in order to identify companies that make real efforts to make low-carbon activities a significant part of their activity. This module is complementary to the previous one as influencing the demand toward low carbon offers is essential to decarbonization and therefore weights 10%.

Policy engagement 5%

In line with the rationale for the low weighted management indicators, the policy engagement indicators are also contextual aspects that tell a narrative about the company’s stance on climate change and how the company expresses that in their engagement with policymakers and trade associations. The total weight for this module is therefore medium at 5%. Trade associations supported do not have climate-negative activities or positions weights for 2%, company’s position on significant climate policies, weights for 1% and interaction with local public authorities weights for 2%.

Business model 10%

The Business activities shifting demand for highly emissive modes to low-carbon modes indicator includes the aspects that are relevant to low-carbon transport offers but are not currently developed by the company today. It is future oriented by asking the companies in its narrative about certain future directions that the sector can/has to take to enable the transition. It weights 4%, to account for the importance of developing new business to ensure resilience.

Business activities promoting technical and operational low-carbon innovations ask transport operators how they are engaging with the future development that could occur to decarbonize the transport sector. It is important as this can have major impacts on the company’s future business model. It weights 2% because it is complementary to module 3.

The indicator Business activities engaging clients evaluates the business development that could promote innovative low carbon transport offers that are not currently financially possible but could become possible if customers get involved with transport operators. The weight is 4% because it addresses an aspect essential to the development of low carbon transport.

 

7. Rating

 

The ACT rating shall comprise:

  • A performance score
  • A narrative score
  • A trend score

These pieces of information shall be represented within the ACT rating as follows:

  1. Performance score as a number from 1 (lowest) to 20 (highest)
  2. Narrative score as a letter from E (lowest) to A (highest)
  3. Trend score as either “+” for improving, “-” for worsening, or “=” for stable.

In some situations, trend scoring may reveal itself to be unfeasible depending on data availability. In this case, it should be replaced with a “?”.

The highest rating is thus represented as “20A=”, the lowest as “1E=” and the midpoint as “10C=”.

Table 10: Lowest, highest and midpoint for each ACT score type

See the ACT Framework [1] for general information and methodology on the ACT rating.

 

7.1 Performance scoring

A detailed description of the performance indicators and of their weightings for the AU sector is presented in 5.3. Performance indicators.

To be developed (with a diagram like the one below, to be updated)

 

Une image contenant capture d’écran Description générée automatiquement
Figure 20: Example of a display of the performance score broken down by module (the width of the bars is proportional to the module’s weighting)

 

Performance scoring shall be performed in compliance with the ACT Framework. No additional sector-specific issue impacting the performance scoring for this sector has been identified to date.

 

7.2. Narrative scoring

Narrative scoring shall be performed in compliance with the ACT Framework.

The information reported in Module 7 shall be considered with peculiar attention for the analysis narrative and narrative scoring for the AU sector: with this information, the analyst can take a holistic view on the company’s sales efforts to redouble the identification of compliance cars and reward companies who have done real efforts to promote efficient and low-carbon vehicles.

No other sector-specific issue impacting the narrative scoring for this sector has been identified to date.

 

7.3. Trend scoring

Trend scoring shall be performed in compliance with the ACT Framework.

To apply the trend scoring methodology presented in the ACT Framework, the analyst should identify the trends from the existing data infrastructure based on the data points and/or indicators that can indicate the future direction of change within the company.

The table below includes an overview of which indicators/data points could possibly have valuable information about future directions for the TR sector.

Table 11: Relevant performance indicators for trends identification for the AU sector

 

8. Aligned state

The table below presents the response of a low-carbon aligned company of the sector to the 5 questions of ACT:

  • What is the company planning to do? [Commitment]
  • How is the company planning to get there? [Transition Plan]
  • What is the company doing at present? [Present]
  • What has the company done in the recent past? [Legacy]
  • How do all of these plans and actions fit together? [Consistency]
Figure 21: Aligned state for companies in the AUto sector

 

 

9. Sources

[1]  ACT Initiative , “ACT Framework - Version 1.1,” 2019.
[2]  IRENA, “Perspectives for the energy transition - Investment Needs for a Low-Carbon Energy System,” 2017.
[3]  Internationational Energy Agency, “Data & Statistics,” [Online]. Available: https://www.iea.org/data-and-statistics/?country=WORLD&fuel=CO2%20emissions&indicator=CO2%20emissions%20by%20sector.
[4]  Energy Transitions Commission, “Mission possible: reaching net-zero carbon emissions from harder-to-abate sectors by mid-century", Energy Transitions Commission,” 2018.
[5]  ACT Initiative, “ACT Sector methodology - Auto- Version 1.1,” 2019.
[6]  ACT Initiative, “ACT Guidelines for the development of sector methodologies - Version 1.0,” 2018.
[7]  Global Logistics Emissions Council, “GLEC FRAMEWORK FOR LOGISTICS EMISSIONS METHODOLOGIES,” 2019.
[8]  IATA, “RECOMMENDED PRACTICE 1678 – CO2 EMISSIONS MEASUREMENT METHODOLOGY,” 2014.
[9]  WRI & WBCSD, “GHG Protocol - Technical Guidance for Calculating Scope 3 Emission,” 2011.
[10]  International Energy Agency, “Energy Technology Perspectives 2017,” 2017.
[11]  International Energy Agency, “The Future of Trucks - Implications for energy and the environment,” 2017.
[12]  International Transport Forum, “Decarbonising Maritime Transport - Pathways to zero-carbon shipping by 2035,” 2018.
[13]  International Transport Forum, “Reducing CO2 emissions from International Aviation,” 2016.
[14]  International Energy Agency, “The Future of Rail - Opportunities for energy and the environment,” 2019.
[15]  International Transport Forum, “A vision for railways in 2050,” 2010.
[16]  ICAO, ““Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA),” 2018.
[17]  Transport Pathway Initiative , “Carbon performance assessment of airlines: note on methodology,” 2019.
[18]  UNPRI, “INVESTOR EXPECTATIONS ON CORPORATE CLIMATE LOBBYING,” 2015.
[19]  Transport Decarbonization Alliance, “Decarbonising transport by 2050,” 2018.
[20]  ISO, “ISO/TR 14069:2013 Greenhouse gases — Quantification and reporting of greenhouse gas emissions for organizations — Guidance for the application of ISO 14064-1,” 2013.
[21]  International Transport Forum, “Towards Road Freight Decarbonisation - Trends, Measures and Policies,” 2018.
[22]  EU Technical Expert Group on sustainable Finance, “Financing Sustainable European Economy – Taxonomy Technical Report,” 2019.
[23]  ICCT, “CO2 emissions from commercial aviation, 2018,” 2019.
[24]  IATA, “Economic performance of the airline industry, mid-year report,” 2017.

 

10. Glossary

2 degrees (2°C) A political agreement was reached at COP21 on limiting global warming to 2°C above the pre-industrial level (COP21: Why 2°C?). A 2°C scenario (or 2°C pathway) is a scenario (or pathway) compatible with limiting global warming to 2°C above the pre-industrial level. 
ACT The Assessing low-Carbon Transition (ACT) initiative was jointly developed by ADEME and CDP. ACT assesses how ready an organization is to transition to a low-carbon world using a future-oriented, sector-specific methodology (ACT website).
Action gap In relation to emissions performance and reduction, the action gap is the difference between what a given company has done in the past plus what it is doing now, and what has to be done. For example, companies with large action gaps have done relatively little in the past, and their current actions point to continuation of past practices.
Activity data Activity data are defined as data on the magnitude of human activity resulting in emissions or removals taking place during a given period of time (UNFCCC definitions).
ADEME Agence de l'Environnement et de la Maîtrise de l'Energie; The French Environment and Energy Management Agency (ADEME webpage).
Alignment The ACT project seeks to gather information that will be consolidated into a rating that is intended to provide a general metric of the 2-degree alignment of a given company. The wider goal is to provide companies specific feedback on their general alignment with 2-degrees in the short and long term.
Analyst Person in charge of the ACT assessment.
Assess Under the ACT project, to evaluate and determine the low-carbon alignment of a given company. The ACT assessment and rating will be based on consideration of a range of indicators. Indicators may be reported directly from companies. Indicators may also be calculated, modelled or otherwise derived from different data sources supplied by the company. The ACT project will measure 3 gaps (Commitment, Horizon and Action gaps – defined in this glossary) in the GHG emissions performance of companies. This model closely follows the assessment framework presented above. It starts with the future, with the goals companies want to achieve, followed by their plans, current actions and past actions.
Asset An item of property owned by a company, regarded as having value and available to meet debts, commitments, or legacies. Tangible assets include 1) fixed assets, such as machinery and buildings, and 2) current assets, such as inventory. Intangible assets are nonphysical such as patents, trademarks, copyrights, goodwill and brand value.
Barrier A circumstance or obstacle preventing progress (e.g. lacking information on supplier emissions and hotspots can be a barrier to companies managing and reducing their upstream Scope 3 emissions).
Base year According to the GHG Protocol and ISO14064-1, a base year is “a historic datum (a specific year or an average over multiple years) against which a company’s emissions are tracked over time”. Setting a base year is an essential GHG accounting step that a company must take to be able to observe trends in its emissions information (GHG Protocol Corporate Standard).
Benchmark A standard, pathway or point of reference against which things may be compared. In the case of pathways for sector methodologies, a sector benchmark is a low-carbon pathway for the sector average value of the emissions intensity indicator(s) driving the sector performance. A company’s benchmark is a pathway for the company value of the same indicator(s) that starts at the company performance for the reporting year and converges towards the sector benchmark in 2050, based on a principle of convergence or contraction of emissions intensity.
Board Also the “Board of Directors” or “Executive Board”; the group of persons appointed with joint responsibility for directing and overseeing the affairs of a company.
Business-as-usual No proactive action taken for change. In the context of the ACT methodology, the business-as-usual pathway is constant from the initial year onwards. In general, the initial year – which is the first year of the pathway/series – is the reporting year (targets indicators) or the reporting year minus 5 years (performance indicators).
Business model A plan for the successful operation of a business, identifying sources of revenue, the intended customer base, products, and details of financing. Under ACT, evidence of the business model shall be taken from a range of specific financial metrics relevant to the sector and a conclusion made on its alignment with low-carbon transition and consistency with the other performance indicators reported.
Capital expenditure Money spent by a business or organization on acquiring or maintaining fixed assets, such as land, buildings, and equipment.
CDP Formerly the "Carbon Disclosure Project", CDP is an international, not-for-profit organization providing the only global system for companies and cities to measure, disclose, manage and share vital environmental information. CDP works with market forces, including 827 institutional investors with assets of over US$100 trillion, to motivate companies to disclose their impacts on the environment and natural resources and take action to reduce them. More than 5,500 companies worldwide disclosed environmental information through CDP in 2015. CDP now holds the largest collection globally of primary climate change, water and forest risk commodities information and puts these insights at the heart of strategic business, investment and policy decisions (CDP website).
Climate change A change in climate, attributed directly or indirectly to human activity, that alters the composition of the global atmosphere and that is, in addition to natural climate variability, observed over comparable time periods (UNFCCC).
Company A commercial business.
Company pathway A company’s past emissions intensity performance pathway up until the present.
Company target pathway The emissions intensity performance pathway that the company has committed to follow from the initial year on until a future year, for which it has set a performance target.
Commitment gap In relation to emissions performance, the difference between what a company needs to do and what it says it will do.
Confidential information Any non-public information pertaining to a company's business.
Conservativeness A principle of the ACT project; whenever the use of assumptions is required, the assumption shall err on the side of achieving 2-degrees maximum.
Consistency A principle of the ACT project; whenever time series data is used, it should be comparable over time. In addition to internal consistency of the indicators reported by the company, data reported against indicators shall be consistent with other information about the company and its business model and strategy found elsewhere. The analyst shall consider specific, pre-determined pairs of data points and check that these give a consistent measure of performance when measured together.
COP21 The 2015 United Nations Climate Change Conference, held in Paris, France from 30 November to 12 December 2015 (COP21 webpage).
Conventional (technology) In relation to transport vehicles and emissions, conventional internal combustion engines (ICE) are those that generate motive power by burning fossil fuels, as opposed to advanced (low-carbon) vehicle engines such as battery electric vehicles or hydrogen fuel cells.
Data Facts and statistics collected together for reference and analysis (e.g. the data points requested from companies for assessment under the ACT project indicators).
Decarbonization A complete or near-complete reduction of greenhouse gas emissions over time (e.g. decarbonization in the electric utilities sector by an increased share of low-carbon power generation sources, as well as emissions mitigating technologies like Carbon Capture and Storage (CCS)).
Decarbonization pathway Benchmark pathway (See ‘Benchmark’)
Emissions The GHG Protocol defines direct GHG emissions as emissions from sources that are owned or controlled by the reporting entity, and indirect GHG emissions as emissions that are a consequence of the activities of the reporting entity, but occur at sources owned or controlled by another entity (GHG Protocol).
Energy Power derived from the utilization of physical or chemical resources, especially to provide light and heat or to work machines.
Fleet A group of vehicles (e.g. all the vehicles manufactured by a transport vehicles manufacturing company and currently in use by transport operators).
Fossil fuel A natural fuel such as coal, oil or gas, formed in the geological past from the remains of living organisms.
Future A period of time following the current moment; time regarded as still to come.
Primary energy Primary energy is an energy form found in nature that has not been subjected to any conversion or transformation process. It is energy contained in raw fuels, and other forms of energy received as input to a system. Primary energy can be non-renewable or renewable.
Greenhouse gas (GHG) Greenhouse gas (e.g. carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O) and three groups of fluorinated gases (sulfur hexafluoride (SF6), hydrofluorocarbons (HFCs), and perfluorocarbons (PFCs)) which are the major anthropogenic GHGs and are regulated under the Kyoto Protocol. Nitrogen trifluoride (NF3) is now considered a potent contributor to climate change and is therefore mandated to be included in national inventories under the United Nations Framework Convention on Climate Change (UNFCCC).
Guidance Documentation defining standards or expectations that are part of a rule or requirement (e.g. CDP reporting guidance for companies).
Horizon Gap In relation to emissions performance, the difference between the average lifetime of a company’s production assets (particularly carbon intensive) and the time-horizon of its commitments. Companies with large asset-lives and small time horizons do not look far enough into the future to properly consider a transition plan.
Incentive A thing, for example money, that motivates or encourages someone to do something (e.g. a monetary incentive for company board members to set emissions reduction targets).
Indicator

An indicator is a quantitative or qualitative piece of information that, in the context of the ACT project, can provide insight on a company’s current and future ability to reduce its carbon intensity. In the ACT project, 3 fundamental types of indicators can be considered:

Key performance indicators (KPIs);

Key narrative indicators (KNIs); and

Key asset indicators (KAIs).

Intensity (emissions) The average emissions rate of a given pollutant from a given source relative to the intensity of a specific activity; for example grams of carbon dioxide released per MWh of energy produced by a power plant.
Intervention Methods available to companies to influence and manage emissions in their value chain, both upstream and downstream, which are out of their direct control (e.g. a retail company may use consumer education as an intervention to influence consumer product choices in a way that reduces emissions from the use of sold products).
Lifetime The duration of a thing's existence or usefulness (e.g. a physical asset such as a power plant).
Long-term Occurring over or relating to a long period of time; under ACT this is taken to mean until the year 2050. The ACT project seeks to enable the evaluation of the long-term performance of a given company while simultaneously providing insights into short- and medium-term outcomes in alignment with the long-term.
low-carbon ENERGY To be discussed and detailed by energy type
Low-carbon scenario (or pathway) A low-carbon scenario (or pathway) is a 2°C scenario, a well-below 2°C scenario or a scenario with higher decarbonization ambition.
Low-carbon transition The low-carbon transition is the transition of the economy according to a low-carbon scenario.
Low-carbon solution A low-carbon solution (e.g. energy, technology, process, product, service, etc.) is a solution whose development will contribute to the low-carbon transition.
low-carbon vehicle

To be discussed and detailed by mode

Following the general principles detailed in the Taxonomy Technical Report of the EU [XX], the guidelines to define low-carbon vehicles are these ones:

Vehicles powered by biofuels, bio natural-gas or advanced fuels (e.g. electrofuels / synfuels), assuming these fuels have demonstrated a clear GHG reduction compared to conventional fossil-derived fuels, on a full lifecycle perspective. Thanks to policies instruments, that will be probably the case in Europe, but not elsewhere.

Electric, plug-in hybrid, hydrogen-fuelled and ammonia-fuelled vehicles, assuming electricity to generate these energy carriers is low-carbon

Additional vehicles for passenger rail transport:

If direct emissions (TtW) are below 50 gCO2e/p.km until 2025

Additional vehicles for freight rail transport:

If direct emissions (TtW) are below 50% of the average reference for heavy-duty vehicles defined by the Heavy Duty CO2 regulation

Additional vehicles for maritime transport:

Vehicles using wind for propulsion

Additional vehicles for urban freight:

Vehicles using electric/human propulsion (cargo-bikes, pedestrian)

The table hereafter compiles some exclusions to bring more clarification, on a mode by mode basis:

Aviation: biofuels that don't respect the ICAO standards can’t be considered as low-carbon, hence the same for aircraft using them.

Shipping: LNG-powered vessels are not considered as low-carbon vehicles, unless natural gas is replaced by biogas.

Rail: LNG or CNG-powered trains are not considered as low-carbon vehicles, unless natural gas is replaced by biogas.

Road: LNG or CNG-powered trains are not considered as low-carbon vehicles, unless natural gas is replaced by biogas.

Manufacture Making objects on a large scale using machinery.
Maturity matrix A maturity matrix is essentially a “checklist”, the purpose of which is to evaluate how well advanced a particular process, program or technology is according to specific definitions.
Maturity progression An analysis tool used in the ACT project that allows both the maturity and development over time to be considered with regards to how effective or advanced a particular intervention is.
Mitigation (emissions) The action of reducing the severity of something (e.g. climate change mitigation through absolute GHG emissions reductions)
Model A program designed to simulate what might or what did happen in a situation (e.g. climate models are systems of differential equations based on the basic laws of physics, fluid motion, and chemistry that are applied through a 3-dimensional grid simulation of the planet Earth).
Pathway (emissions) A way of achieving a specified result; a course of action (e.g. an emissions reduction pathway).
Performance Measurement of outcomes and results.
Plan A detailed proposal for doing or achieving something.
Point A mark or unit of scoring awarded for success or performance.
Power Energy that is produced by mechanical, electrical, or other means and used to operate a device (e.g. electrical energy supplied to an area, building, etc.).
Progress ratio An indicator of target progress, calculated by normalizing the target time percentage completeness by the target emissions or renewable energy percentage completeness.
TR Abbreviation of the ‘Transport’ sector
Relevant / Relevance In relation to information, the most relevant information (core business and stakeholders) to assess low-carbon transition.
Renewable energy Energy from a source that is not depleted when used, such as wind or solar power.
Reporting year Year under consideration.
Research and Development (R&D) A general term for activities in connection with innovation; in industry; for example, this could be considered work directed towards the innovation, introduction, and improvement of products and processes.
Science-Based Target To meet the challenges that climate change presents, the world’s leading climate scientists and governments agree that it is essential to limit the increase in the global average temperature at below 2°C. Companies making this commitment will be working toward this goal by agreeing to set an emissions reduction target that is aligned with climate science and meets the requirements of the Science-Based Targets Initiative.
Scenario The Fifth Assessment Report (AR5) of the Intergovernmental Panel on Climate Change (IPCC) presents the results of an extensive climate modelling effort to make predictions of changes in the global climate based on a range of development/emissions scenarios. Regulation on climate change-related issues may present opportunities for your organization if it is better suited than its competitors to meet those regulations, or more able to help others to do so. Possible scenarios would include a company whose products already meet anticipated standards designed to curb emissions, those whose products will enable its customers to meet mandatory requirements or those companies that provide services assisting others in meeting regulatory requirements.
Scenario analysis A process of analysing possible future events by considering alternative possible outcomes.
Sectoral Decarbonization Approach (SDA) To help businesses set targets compatible with 2-degree climate change scenarios, the Sectoral Decarbonization Approach (SDA) was developed. The SDA takes a sector-level approach and employs scientific insight to determine the least-cost pathways of mitigation, and converges all companies in a sector towards a shared emissions target in 2050.
Short-term Occurring in or relating to a relatively short period of time in the future.
Stress test A test designed to assess how well a system functions when subjected to greater than normal amounts of stress or pressure (e.g. a financial stress test to see if an oil & gas company can withstand a low oil price).
Scope 1 emissions All direct GHG emissions (GHG Protocol Corporate Standard).
Scope 2 emissions Indirect GHG emissions from consumption of purchased electricity, heat or steam (GHG Protocol Corporate Standard).
Scope 3 emissions Other indirect emissions, such as the extraction and production of purchased materials and fuels, transport-related activities in vehicles not owned or controlled by the reporting entity, electricity-related activities (e.g. T&D losses) not covered in Scope 2, outsourced activities, waste disposal, etc. (GHG Protocol Corporate Standard).
Sector A classification of companies with similar business activities, e.g. automotive manufacturers, power producers, retailers, etc.
Strategy A plan of action designed to achieve a long-term or overall aim. In business, this is the means by which a company sets out to achieve its desired objectives; long-term business planning.
Supplier A person or entity that is the source for goods or services (e.g. a company that provides engine components to an automotive manufacturing company).
Tank-to-Wheel emissions (TTW) Tank-to-wheel emissions refer to the emissions occurring during the combustion of fuel by vehicles.
Target

A quantifiable goal (e.g. to reduce GHG emissions).

The following are examples of absolute targets:

metric tonnes CO2e or % reduction from base year

metric tonnes CO2e or % reduction in product use phase relative to base year

metric tonnes CO2e or % reduction in supply chain relative to base year

The following are examples of intensity targets:

metric tonnes CO2e or % reduction per passenger. Kilometre (also per km; per nautical mile) relative to base year

metric tonnes CO2e or % reduction per square foot relative to base

metric tonnes CO2e or % reduction per MWh

Trade association Trade associations (sometimes also referred to as industry associations) are an association of people or companies in a particular business or trade, organized to promote their common interests. Their relevance in this context is that they present an “industry voice” to governments to influence their policy development. The majority of organizations are members of multiple trade associations, many of which take a position on climate change and actively engage with policymakers on the development of policy and legislation on behalf of their members. It is acknowledged that in many cases companies are passive members of trade associations and therefore do not actively take part in their work on climate change (CDP climate change guidance).
Transport To take or carry (people or goods) from one place to another by means of a vehicle, aircraft, or ship.
Trend A general direction in which something (e.g. GHG emissions) is developing or changing.
Technology The application of scientific knowledge for practical purposes, especially in industry (e.g. low-carbon power generation technologies such as wind and solar power, in the electric power generation sector).
Transition The process or a period of changing from one state or condition to another (e.g. from an economic system and society largely dependent on fossil fuel-based energy, to one that depends only on low-carbon energy).
Verifiable / Verifiability To prove the truth of, as by evidence or testimony; confirm; substantiate. Under the ACT project, the data required for the assessment shall be verified or verifiable.
Weighting The allowance or adjustment made in order to take account of special circumstances or compensate for a distorting factor.
Well-to-Tank emissions (WTT) Well-to-Tank emissions are based on attributional life-cycle analysis studies of fossil-derived fuels (e.g. gasoline, diesel, compressed and liquefied natural gas), biofuels and electricity (based on time- and scenario-specific estimated average grid carbon intensity). Energy use and emissions resulting from pipeline transport are accounted for under “Energy industry own use” in the IEA modelling.
Well-to-Wheel emissions (WTW) Tank-to-Wheel (TTW) and Well-to-Tank (WTT) make up WTW emissions.