Will sustainability and faster deliveries kill express profits?

We are observing two simultaneous revolutions in customer behavior: consumers are getting used to have everything delivered within hours of placing an order and at the same time, people are demanding higher environmental awareness from their preferred brands. Buyers are now more inclined to make a purchase based on a brand’s values and any negative publicity on the news or social media platforms can have an impact on sales. Here’s the irony: consumerism is harmful for the environment. Everyone is more conscientious about what we purchase and who produced it but we also want to make the most “sustainable” decisions with the goal of reducing the global carbon footprint. This means lowering the number of items we produce and consume but the opposite is taking place, customers are demanding more same or next-day deliveries and free-return options. Express delivery options have a higher environmental footprint than planned deliveries, which are optimized to deliver as many packages using fewer resources. Even though there are steps taken to reduce operating costs for the company, the end result is that a planned delivery is much less harmful to the environment compared to an express delivery. Consumerism and expedited deliveries are only expected to rise so business are being forced to adopt sustainable delivery logistics solutions that make the last-mile process more ecofriendly. Market research shows that there is an emerging trend as e-commerce shoppers are willing to consider greener shipping options as long as this does not alter shipping costs. Customers are starting to recognize that one person delivering one package in a partially full vehicle is not the best environmental solution. But what are the express companies’ commitments when it comes to sustainability? Amazon, DHL, UPS and FedEx all have long-term ambitious goals to use renewable energy, aviation bio fuel, implement reusable packaging and increase their electric vehicles fleet. Amazon plans to reach 50% of all shipments with net zero carbon by 2030 while DHL is committing to reduce all logistics-related emissions to zero by 2050. FedEx and UPS have made significant investments to increase fuel efficiency by expanding the number of electric vehicles in their fleets. Sustainability reports have become more comprehensive. This year Amazon has started reporting carbon emissions for the first time, although we note the company provides little reference that would give insight into the carbon efficiency of its operation. Without reference metrics absolute numbers are meaningless. We see three pillars to achieving continued financial viability in the face of increased sustainability requirements that affect both the cost, revenue and marketing side of the business: Costs : reduced cost and increased sustainability go hand in hand. Similar to the model of continuous improvement pioneered by Japanese auto companies, the focus needs to be on continuously improving operational practices but through an environmental lense? Rather than asking, for example, whether a shift from courier based delivery to retail outlets is cheaper, companies should also calculate and document the extent to which such a shift reduces emissions. Revenues : offsetting emissions comes at a cost and without commensurate increases in revenue, margins will suffer. Companies need to actively push customers towards products that provide offset opportunities and “penalize” options that do not. While companies need to take a lead, ultimately the consumer should be making the choice. Lastly, companies should not be shameful about promoting the breadth of their activities to do the right thing. But that also requires being quantitative about the effects of individual actions as well as providing insight on how a company is tracking against targets. Environmental regulations and consumer expectations are forcing changes in this competitive industry and while some businesses are not willing to make changes, others are embracing them to develop more sustainable value propositions. We have seen that the major express companies are positioning themselves to become leaders in green logistics by expanding their sustainability agenda and help customers achieve their own climate protection targets set by the United Nations Framework Convention on Climate Change (UNFCCC). Nevertheless, last-mile delivery remains a huge challenge in the e-commerce world from an economical and environmental standpoint. As demand for environmentally-friendly operations grows, we will see companies coming up with innovative ways of making the last mile eco-friendlier while remaining financially viable. Guillermo Ochovo is an analyst with Cargo Facts Consulting . He can be contacted on gochovo@cargofacts.com.

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Will sustainability and faster deliveries kill express profits?

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Will sustainability and faster deliveries kill express profits?

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International express growth will moderate, but continue to outperform air cargo.

European Express traffic growth will accelerate, driven by international cross border traffic

Related Posts

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