Scope 3 emissions and concerns for trucking industry
New rules proposed by the Securities and Exchange Commission regarding disclosure of climate-related risks and greenhouse gas emissions could greatly impact the trucking industry. FreightWaves’ Alyssa Sporrer writes, “The rules, proposed in March, would require SEC registrants to disclose information about scope 1 (direct), scope 2 (indirect) and scope 3 (supply chain) greenhouse gas emissions.”
Scope 3 emissions could have an outsize effect on smaller carriers. The Owner-Operator Independent Drivers Association (OOIDA) comments that “over 90% of carriers operate 10 trucks or fewer and nearly 50% of businesses are single-truck carriers.” A major challenge will be resources, as smaller fleets lack the back office staff compared to large publicly traded companies and investor or customer pressure could add additional operational costs.
Investors believe adding climate-related risks and impacts to reporting will allow financial markets greater ability to price and act accordingly. The investors are largely adapting to pressure from environmental, social, governance (ESG) initiates, whose funds are gaining in popularity due to increasing interest from groups like pension funds, university endowments and some central banks.
What this means for trucking companies is that the customers they haul for as well as the investors on their boards will expect greater visibility into their greenhouse gas emissions. This greater attention could provide opportunities for large fleets that are pioneering partnerships with electric vehicle manufacturers but could also create headwinds if activist board members push for costly emissions reduction programs. For smaller carriers, the extra paperwork and regulatory requirements from the customers they haul for could add additional operational costs and back office headaches.
Retailers and manufacturers, seeking ways to show emissions reductions, could also require their carriers to take part in or report their emissions for future freight contracts. Freight brokerages, attempting to offset emissions, could prioritize lower-emission carriers at the expense of owner-operators or fleets with older equipment in order to meet investor demands. Overall the impact will be worth watching, as the implementation of the rules and their impact remain to be seen.
FMCSA debates if a load board should register as a broker
The FMCSA is clarifying what a freight broker is and whether a load board should be required to register with federal regulators. The Transportation Intermediaries Association (TIA) , a major freight broker lobbying group, argues that load boards should be left alone.
Chris Burroughs, VP of government affairs for the TIA, argues, “These load boards essentially serve as an ‘information marketplace’ for entities in the transportation industry,” adding, “TIA firmly maintains that load boards should not be considered to be brokers, as they are technology companies providing data and serving all entities in the marketplace.”
OOIDA agrees. President and CEO Todd Spencer argues that a load board isn’t a broker “as long as they are only displaying information and not processing money between shippers and motor carriers.”
FreightWaves’ Todd Maiden writes that major proponents of classifying load boards as brokers include trucking safety groups that argue that load boards are not doing enough to address illegal double brokering by load board scammers. FreightWaves even reported earlier on how some of these scammers operate extensive and elaborate double broker schemes with multiple fake motor carrier numbers and office locations.
A big issue appears to be frustration with the inability of load boards to adequately address these concerns. David Dwinell with Truckalocity noted, “Websites … let brokers and carriers double broker loads (as well as lie and mislead other businesses regularly). If you complain, the load boards say whatever they want and claim they’re not responsible or involved.”
I’ve experienced this issue firsthand as a freight broker. Carriers could double broker your load or they could leave false negative reviews in an attempt to damage your reputation. Given the dramatic increase in both internal and external load boards, it appears the FMCSA is trying to catch up to the 21st century.
Market update: Cass Index points to weak freight volumes
Freight shipment volumes appear to be softening, according to recent data, but transportation spend remains high. The Cass Freight Index expenditures component, a measure of the total amount spent on freight, rose 8.8% month over month in spite of the fact that shipments were down 2.6% and rates up 11.7%.
According to the shipment component for June, there was a decline of 2.3% year over year compared to a 2.7% year-over-year decline reported in May. The report adds that a shift in inventory, once a major tailwind for freight demand, is currently neutral, and runs the risk of becoming a considerable headwind if consumer demand continues to decline.
A sentiment survey released Wednesday by Morgan Stanley points to a weakening freight market. Ravi Shanker, an analyst at Morgan Stanley, commented in the report: “While the extent of the decline signals something more than just a ‘normal’ destocking-driven transportation slowdown (i.e. 2019) but less than a broad recession (i.e. 2008/09), as one broker put it, we expect ‘tumultuous times ahead’ either way and look to next quarter for more definitive signs of its ultimate magnitude.”
Data from the Cass indexes is useful as Cass (NASDAQ: CASS) is a major provider of payment solutions and processes around $37 billion in freight payables annually for customers.
FreightWaves’ SONAR spotlight: Contract load volumes drop 3% compared to last year
Contract Load Acceptance Volume — USA SONAR: CLAV.USA Seasonality View
Summary: The Contract Load Acceptance Volume Index (CLAV) shows an expanding gap between this year and the last but has been relatively flat since the start of June. The CLAV has averaged over 3% lower than 2021 levels after coming out of the July Fourth holiday week. CLAV is an index that measures accepted tender volumes and is currently showing carriers are hauling 3% less accepted contracted load volume than at this time last year. Whereas the truckload spot market has already eroded significantly, it has taken much longer for contract volume to show real deterioration, which started in late May/early June. Even though contract load volumes are showing annualized weakness, those loads are being hauled at approximately 13% higher rates, excluding fuel.
The Routing Guide: Links from around the web
J.B. Hunt adds transload service in the West (FreightWaves)
OOIDA tells agency that broker transparency is crucial (Landline)
Los Angeles port boss: Fix rail service or risk ‘nationwide logjam’ (FreightWaves)
Project44 cuts 5% of global workforce, plans for ‘engineering-first’ focus (FreightWaves)