With the revenue growth of the Postal Industry expected to rise (3.8% growth on average in 2021), so are the GHG emissions linked to the operations of the companies in the sector.

To adhere to investors- and societal demands and to start preparing for the upcoming ESRS changes, considering and understanding how the top ESG performing postal companies approach net zero and TCFD alignment is crucial.

The future of post: Finch & Beak industry benchmark study

In 2021, Finch & Beak featured 19 postal companies in an industry benchmarking study with diverse ESG categories. The main gap identified was the transparent reporting of ESG data. The best performers from the ESG benchmark study were: PostNL, Poste Italiane, bPost, Le Groupe La Poste and Posti, all European based companies. These companies ranked higher in the study, due to ESG disclosure maturity and outperformed competitors on KPIs, like air emissions and renewable energy. PostNL for instance showed lower air emissions and fuel consumption. Poste Italiane and bPost performed well on their recycling rates and Posti conducted LCA studies on e-commerce offering the possibility to assess their environmental impact (beyond GHG emissions).

The Task Force on Climate Related Disclosures (TCFD) developed a framework that aims to help organizations to disclose climate-related risks and opportunities, through four core recommendations, related to governance, strategy, risk management, and targets & metrics. Given the fact that all five of the top-ranked companies from the study are large-scale logistic service providers that have an impact on the environment, it is worth considering how they align with TCFD and progress on reducing their emissions.

Postal companies not yet exploring the full potential of TCFD

Of the five assessed companies, three publicly state to have started their TCFD journey. Although the postal industry is not far along the TCFD alignment-journey, all the companies disclose several elements guided by the TCFD recommendations.

The governance dimension of TCFD aims to provide a clear structure on how climate-related risks and opportunities are managed and discussed at board level. Poste Italiane’s board approves its sustainability strategies and guidelines, including risks and opportunities related to climate change. However, the company does not disclose how the board monitors and oversees the progress measured against goals and targets for addressing climate-related issues.

The strategy element of TCFD, looks at the resilience of an organization’s strategy, and risk management, and considers how a company managed climate-related risks. With regard to this dimension, Poste Italiane outlines four transition risks and one physical risk in detail, which is related to extreme weather conditions. Each risk is classified as medium- or long-term however, the definition of medium or long-term is lacking. The risks also highlight which pillar of the strategy is impacted, as well as the associated impacted capitals (e.g., human, financial), and risks are then addressed through multi-stakeholder forums. The company not only describes the negative impact but also points out which opportunities can be capitalized on, such as better reaction time compared to competitors in keeping the focus on environmental issues.

Le Groupe La Poste discloses two transition risks, three adaptation risks, and one opportunity and highlights the geographical location of impact (France/ Europe) and the company goes even further to state the financial impact of several risks. For the transition risk “impact of climatic conditions on health, safety and working conditions” the company discloses that associated loss of productivity due to heat waves is estimated at €6-10 million by 2035. In addition, the company elaborates on how it adapts to each identified risk, such as systematically integrating flood management procedures into the business continuity plan and investing in protection solutions.

Climate change adaptation actions through lowering emissions is a response that can be seen by the five assessed postal companies, and this is done by setting the right metrics and targets, which is the last element of the TCFD recommendations.

Alignment with science-based targets

Setting science-based targets (SBT) is an important step that companies take in their emission reduction journey and to do this the right tools, and setting measurable targets, e.g., on emissions reduction and energy consumption, is crucial.

While in 2019, four out of the five assessed companies were SBTi members and had targets in place, today all five companies are listed SBTi members. Although the postal companies have a near 1.5°C or a 2°C target, only three companies, Le Groupe La Poste, Poste Italiane and Posti are committed to net zero, with Posti already committing to net zero by 2040. From this it is clear that the postal companies are using the opportunity to demonstrate their alignment with requirements from investors and policymakers to exist in a 1.5° Celsius world through SBT. To reach these climate targets, a clear strategy that is driven by actions to reduce climate-related risks is recommendable.

Scope 1 and 2 are addressed, but Scope 3 is underleveraged

The assessed companies invest in for instance renewable energy to lower their risk of increasing prices related to fossil fuel as well as rising carbon prices. The research shows that all five companies did an inventory of their Scope 1 and 2 emissions and despite average revenue growth of 12% from 2019 to 2021, four of the five postal companies reduced their Scope 1 and 2 emissions on average by 11%, with Poste Italiane, being the exception with a 7% increase in emissions. This goes to show that by increasing the use of renewable energy, companies can address their emissions related to Scope 1 and 2.

Furthermore, postal companies also invest in renewable fuels, and further expand their electric vehicle fleet. PostNL replaced petrol and diesel with cleaner fuels (biogas and HVO100) by 35% in 2021 (8% in 2020) and bPost increased their share of last mile alternative fuel vehicles from 2019 to 2021 by 6%.

Taking a closer look at Scope 3 of the assessed companies revealed that the transparent reporting has increased: in 2019, Posti did not even include Scope 3 in its reporting yet. Based on reporting by the companies, around 80% of the emissions are caused by Scope 3. Consequently, to effectively reduce climate-related risks, postal companies urgently need to reduce emissions related to their supply chain activities. However, none of the companies provide detailed reporting about how to cut Scope 3 emissions. From this, it is clear that climate-related risks and opportunities related to Scope 3 are not fully integrated into the companies’ strategy, risk management as well as metrics & targets.

TCFD alignment will assist postal companies to understand and be aware of their climate-related risks and to grasp opportunities. For overall recommendations on how to approach TCFD and a roadmap with guidelines for the journey, see the recently published Finch & Beak article The TCFD Journey: A Roadmap.

Three key take-aways from the top-ranked industry research companies
 

1. Out of the five investigated companies, two companies align with around 70% of the TCFD disclosure recommendations. This means that the other three companies have either not yet started their TCFD journey or could make more progress with this. The downloadable Finch & Beak TCFD Roadmap available at the top of this article is a useful tool to help organizations identify where they are in the TCFD journey and get them started on alignment.
2. The five investigated companies already report on their Scope 1,2,3 emissions and they all highlight several actions to cut their emissions, with the most common one being to shift to electric vehicles for delivery and invest in renewable energy solutions. So, the postal companies are already integrating parts of the TCFD element metrics & targets, but there is room for more integration of targets into their overall strategies and linking it to their risk management approaches.
3. With around 80% of the emissions coming from Scope 3, and the lack of reduction of the companies’ Scope 3 emissions, it is clear that the importance to engage with supply chain partners to reach their emission goals are overlooked. By accelerating supply chain engagement even further and analyzing and addressing their risks to also consider their stakeholders, is logical and important next step.

Finch & Beak provides TCFD and climate strategy support

At Finch & Beak, our purpose is to accelerate sustainability within the business of our clients. Together with our fellow companies from SLR Consulting, we offer a wide range of TCFD and climate support services.

If your organization is considering expanding your climate scenario analysis, or taking your climate-related financial disclosures to the next level then reach out to Johana Schlotter, at johana@finchandbeak.com or call +31 6 28 02 18 80 to discuss how Finch & Beak can support you.

^{Photo by Mathyas Kurmann on Unsplash}