Scope 3 Reporting To Test Breakbulk Operators

By Iain MacIntyre

As the state of California moves to enforce Scope 3 disclosures, companies across the breakbulk supply chain face a complex reporting reality. Read on to find out who’s impacted and how to prepare effectively.

From Issue 6, 2025 of Breakbulk Magazine

(6-minute read)

California’s new climate-related disclosure laws are reshaping the reporting requirements for large companies operating in the breakbulk sector within the state, particularly in regard to identifying external Scope 3 greenhouse gas (GHG) emissions.

Businesses operating in the state with annual revenues of over US$500 million will need to disclose their climate-related financial risks and consequent mitigations on a biennial basis, starting early 2026. Those with annual revenues of over US$1 billion will need to disclose their Scope 1 and Scope 2 GHG emissions from mid-2026, and Scope 3 from early 2027.

Scope 3 reporting is inherently more complex than Scope 1 and 2, due to it covering overall supply and value chains. This means indirect upstream and downstream greenhouse gas emissions from sources that the reporting entity does not own or directly control. Examples include purchased goods and services, business travel, employee commutes and processing and use of sold products.

California is currently the only state in the U.S. with binding Scope 3 emissions reporting requirements, but others, including New York, New Jersey, Illinois, Washington and Colorado, are understood to be pursuing similar measures.

Consequently, engineering, procurement and construction companies (EPCs), freight forwarders, carriers and other suppliers serving the breakbulk sector in California must be proactive.

Early Movers

Those that have already begun reporting Scope 3 emissions, can serve as guideposts for the rest of the industry. Carriers such as Hapag-Lloyd are already disclosing their current and future-targeted Scope 1-3 emissions in table form across numerous pages in annual reports, alongside detailed explanations as to how those calculations are reached.

In its 2024 annual report, the carrier outlines that for Scope 3, calculation methodologies are dictated by data availability. “In instances where detailed data was available, such as product units, weights or distances, the metrics were chosen to ensure a more accurate calculation,” it states. “In cases where preferred data was unavailable, the financial spend was used instead.

In case of missing data availability, segment-specific extrapolations are applied by utilizing available data in proportion to the respective corresponding surface.”

The report adds: “For some instances related to Hapag-Lloyd’s own fleet, assumptions are made. For example, when calculating emissions for procured spare parts the emissions were extrapolated for third-party managed vessels based on the data from vessels under Hapag-Lloyd’s own management. This happens based on the premise that the amount of required spare parts is independent of the vessel manager.”

Meghan Toone, regional operations manager at DHL Global Forwarding (Industrial Projects, Americas), confirms DHL’s proactive commitment to meet both “regulatory requirements and customer expectations regarding sustainability.”

“We already publish comprehensive ESG [environmental, social and governance] reporting that aligns with recognized frameworks, detailing our Scope 1, 2 and 3 emissions,” Toone told Breakbulk. “Whether reporting is direct to regulators or through our customers exceeding the US$1 billion threshold, we are well prepared to provide the necessary data and transparency. Our focus remains on building robust systems and processes to respond swiftly and accurately to evolving regulations.

“As part of our Green Logistics strategy, we aim to reduce logistics-related GHG emissions to less than 29 million metric tons CO2e by 2030 and achieve net-zero GHG emissions by 2050.”

Complicated Calculations

However, Toone also observes that compiling such data is no simple feat in the project cargo space, given “every move is bespoke.” She added: “Unlike containerized freight, there are no standard parameters. A turbine shipped by barge requires a very different calculation methodology than a heavy-lift module moved by air or road.

“At DHL, we take a multifaceted approach. We use primary data whenever possible and supplement with emission factors, hotspot analysis and proxy data where needed. Our in-house carbon accounting tools ensure consistency and transparency, but under SB 253, these methodologies must also be documented and auditable. For example, if we estimate fuel consumption for a barge, we must be able to show auditors exactly how that estimate was derived.

“The best strategy balances accuracy with practicality: using the best available data today while continuously refining methodologies as global standards evolve.”

Mark Jacobsen, professor of economics at the University of California, San Diego, concurs that calculating Scope 3 emissions will be a uniquely-complex exercise in the breakbulk sector.

“Some cargo will likely be relatively straightforward to report. For example, there may be a standard number that companies can use for containerized freight,” he says. “More specialized shipments, and smaller companies, are likely to face more difficulty in making sure reporting is accurate.”

Professor Jacobsen even speculates that the new legislation may curtail the availability of heavy-duty trucks to carry breakbulk cargo in California. “Reporting requirements, and perhaps eventual regulation, will mean that companies having cargo moved by truck may face incentives to either reduce the amount shipped or switch to modes that have lower emissions.”

He also sees potential for compliance to have significant cost implications for the sector. “At the moment, I think the requirement is only reporting, though certainly at some point emissions permits could be required to cover Scope 3 emissions. It is hard to guess what permit prices may be like at that time, or how much it would shift the landscape.”

While confirming that compliance reporting does require certain investment, Toone says DHL is fortunate to also be able to build on capabilities already in place. “Over the past decade we’ve invested heavily in carbon measurement, reporting and decarbonization solutions, from sustainable aviation fuel procurement to our GoGreen Plus product offerings.

“Because of this, we see compliance as an extension of our existing sustainability measures rather than an entirely new burden. We already must comply with the EU’s extensive reporting requirements, which have helped prepare us for other regulations introduced in other regions.

“For some in the industry, the shift will involve higher costs, especially if they are starting from scratch. For DHL, it is about scaling systems we already operate. While we prefer not to speculate on exact figures, we believe that enhanced emissions data ultimately leads to better decisions, more efficient supply chains and competitive advantages for customers.”

External Expertise

Even with DHL’s strong in-house expertise in carbon reporting and lifecycle analysis, Toone says the business nonetheless recognizes the value of partnering with external specialists to enhance capabilities.

“For instance, partnerships with fuel suppliers like Neste and engagement through standards organizations such as the Smart Freight Centre, help us improve transparency and align with industry best practices. Engaging external experts is not a necessity for us to comply, but it is an important complement to strengthen assurance and credibility, particularly as regulations like SB 253 raise the bar on auditability.”

Toone concludes that, despite the challenges, businesses need not be fearful of the new California climate-related reporting requirements. “We approach it with confidence and preparation. DHL already reports Scope 3 emissions globally and our systems are evolving in alignment with regulatory timelines.

“The challenge lies in data harmonization across complex supply chains. For example, Scope 3 emissions from oversized or non-standard shipments lack a single, global methodology. Our task is to create traceable, standardized approaches that auditors and regulators can verify.

“With [Scope 3] requirements set to take effect in 2027, we have the time and the expertise to comply. Our decarbonization roadmap — targeting a reduction of 2,000 kilotons CO2e by 2025 — already puts us on a path of measurable progress. We see SB 253 not as a threat, but as an opportunity to further strengthen transparency and support our customers in navigating the transition.”

Nonetheless, the collective California climate change reporting legislation has drawn pushback in certain quarters, with the United States Chamber of Commerce in partnership with other business groups mounting a legal challenge on constitutional grounds. District Court Judge Otis Wright II recently denied the plaintiffs’ motion to block enforcement, but the possibility of an appeal remained at the time of writing.

However, given the momentum toward adopting binding Scope 3 emissions reporting around the U.S. and elsewhere in the world, it appears prudent breakbulk operators will be preparing to stay ahead of the legislative curve.

Iain MacIntyre is a New Zealand-based, award-winning journalist, with lengthy experience writing about global shipping and logistics.

Photo credit: DHL Global Forwarding