With consumers today showing a preference for retailers and brands that work to reduce their impact on the environment, green logistics is more than a talking point – it’s a growing imperative.
According to an IBM Research Insights report, 57% of consumers are willing to change their eCommerce purchasing habits to help reduce their environmental impact. Companies, in turn, are adjusting their supply chains and logistics systems to meet these new expectations. That transition is slowly happening, as more CEOs place sustainability higher in their corporate priorities.
Still, many companies resist investing in sustainability solutions. In one survey, only 10% of companies said that they distinguished their business and plan to gain more market share based on having the most eco-friendly delivery service. Yet when the right technology and supply chain strategies are implemented, these solutions can actually reduce cost to deliver and boost brand image at the same time. This is especially true for last mile logistics, where retailers and logistics companies can reduce carbon footprint and overhead costs at the same time.
In this article, we’ll take a look at what green logistics is, the concerns that are still keeping these sustainability solutions from widespread adoption, and best practices that every business can adopt to create an eco-friendly delivery service.
What is Green Logistics?
Green logistics is the practice of minimizing the environmental impact of the logistics process. This definition includes the carbon footprint of the supply chain, dealing with waste disposal, packaging, recycling, reducing energy consumption, etc. As environmental concerns have become a higher priority for consumers, more companies are pledging zero-net targets, in an effort to go as green as possible.
A green supply chain includes first, middle and last mile logistics. For all and any stage of logistics operations, the process of going greener is most easily achieved through digitizing processes. Digitization can be used to eliminate the paper trail, and reduce energy consumption through alternative fuels and increased efficiencies.
Are green logistics and reverse logistics the same thing?
This is a common misconception. Reverse logistics is when a product travels backwards through the logistics flow. This can happen for any number of reasons, such as recycling or returns.
While some types of reverse logistics address environmental issues, they do not all relate specifically to logistics practices. For example, if a company delivers a new electronic item or piece of furniture, they may take away the old product for recycling. This is ecologically friendly (and encouraged) but is not in itself about sustainable logistics. In order for the logistics process itself to be considered green, the transportation solution must include efforts to reduce emissions. This may be done by including pickups of various things as part of a driver’s delivery flow. For example, a driver will drop off items with certain customers and will pick up other items on their way back to the factory (or even from the same customer).
Why has green logistics become a priority in the logistics industry?
Freight and the transportation industry have had a major impact on greenhouse gas emissions. Transportation as a sector is the single largest contributor of greenhouse gas emissions in the U.S., standing in at 28%. With the expected increase in online shopping and subsequently last mile delivery, this number is expected to grow to 30% according to the WEF.
Retail supply chains are the biggest contributors to emissions in the logistics industry, ranking in at over 50% of the industry. This isn’t surprising, especially in the aftermath of COVID-19. eCommerce exploded, and packaging volumes soared, even exceeding many logistics providers’ capacity.
While this is alarming, it has caused all of the players in the logistics operations game – including retailers, transporters and consumers – to recognize the importance of adopting green logistics strategy and practices in their supply chains. Retailers and carriers are increasingly taking the Net-Zero pledge together with strategic plans on implementation.
The US was behind in its sustainability efforts until recently, although the re-joining of the Paris Agreement sets the US up to become a force in the industry (which is necessary due to investor demands).
The cost of (not) going green
Retailers and logistics operations that don’t go green will be left behind in the coming years.
This will be a combined effort between companies and logistics providers who will look together to reduce their carbon footprint and therefore have a unique selling proposition (USP) to gain new customers. Not only are consumers looking for ways to reduce their environmental impact personally, many are willing to pay a premium for greener products.
The bottom line? a company that doesn’t adopt green logistics operations will be at a significant disadvantage.
With correct supply chain management, green practices essentially create more efficient processes that reduce energy consumption, which in the long run, reduce costs. This can be seen in delivery routes. When the transportation industry prioritizes sustainability in their operations, they are able to reduce the time and mileage spent performing the same amount of deliveries. This reduction in time also leads to greater drop density (more deliveries are performed by the same driver on the same run) and therefore a lower carbon footprint.
Cutting costs through green logistics
Delivery needs to be greener, but it doesn’t have to be a costly burden. In fact, an environmental focus goes hand-in-hand with reducing supply chain costs. Here are seven ways to ensure that your delivery operations are as eco-friendly and efficient as possible.
7 ways to cut costs through green logistics:
1. Incentivize eco-friendly delivery options at checkout
2. Automate route optimization to increase vehicle efficiency
3. Use order batching to increase drop density
4. Dispatch first to electric delivery vehicles (EV) or an eco-friendly partner fleet
5. Perform hyperlocal deliveries from nearby stores
6. Use bikes for local, urban delivery
7. Digitize the paper trial, from product details to proof of delivery
Incentivize eco-friendly delivery options at checkout
On-demand delivery is incredibly wasteful, with couriers delivering a few items in a vehicle that could easily fit multiple packages. And believe it or not, it’s not always necessary – many customers will choose to save money and get their order a bit later. According to an Accenture Strategy report, 36% of online shoppers are happy to wait longer for free delivery.
Even moving an order from same-day to next-day delivery gives time for more optimized dispatching and routing, and generally results in lower costs for the business.
Incentivizing planned delivery is a triple win: The customer pays less, you pay less, and the environment pays less.
Market your scheduled delivery for what it is: an environmentally friendly delivery service.
Increase vehicle efficiency with automated route optimization
It’s simple: the less mileage your drivers consume on the road, the lower your contribution to greenhouse gas emissions.
Today’s technological advancements in the logistics industry allow for automated route optimization, therefore increasing vehicle efficiency. By creating more efficient routes, costs are cut by needing less drivers and trucks, and energy use is reduced.
Batch goods together for higher drop density
This goes hand in hand with automated route planning. By ‘batching’ or grouping together goods going out to the same area in the same time window, businesses can reduce the number of vehicles dispatched and maximize their energy efficiency.
Use intelligent fleet management to dispatch to electric delivery vehicles (EV) fleets
Using intelligent fleet management, algorithms can prioritize dispatch of an eco-friendly fleet first. This can be done by purchasing EV vehicles, or by collaboration with an EV fleet.
Perform hyperlocal deliveries from stores rather than regional warehouses
While this may seem counterintuitive, hyperlocal deliveries can actually cut costs for retailers by eliminating large shipping fees and distribution center costs. Local ‘ship from store ‘ delivery not both enables faster delivery and lowers fuel costs.
Use bikes for local, urban deliveries
While urgent SLAs leave minimal room for route optimization, there are other ways to keep on demand delivery eco-friendly, starting with making local deliveries by bike or on foot. Bikes may not be the right option for all products, they can be the perfect solution for hyperlocal urban deliveries of small orders. No gas, no emissions, and the delivery person even gets a workout during the job.
Digitize the paper trail
Shipments are full of paper: order details, invoices, and proof of delivery, to name a few. There’s no reason for retailers or logistics companies to be using paper today. Technological advancements and applications make it easy to digitize all operations and cut back on paper costs as well as saving trees along the way.
The challenges of measuring and reporting
How do you measure and report on energy efficiency? Without a way to measure results, it’s impossible to ensure ROI for green initiatives.
In addition to gathering the data, companies must be able to report on their carbon reductions to stakeholders in the delivery flow. For example, imagine sending the following automated message to customers: “Congrats! You’ve saved .5 trees with this delivery!” This is a great way to keep customers loyal and truly feel that they are making a difference by choosing sustainable fulfillment options.
Brands also need to make customers aware of these services. They may choose to incentivize these more environmentally-friendly services by making them the default at checkout. Such services can include slower delivery times, disposal for an older product, sustainable packaging options, return options and more.
Taking action to reach zero waste
While not every organization is running to adopt green logistics strategies, the message from the market is clear: A company that tackles environmental issues in its supply chain will find that it pays to be green.
To successfully create cost-effective, green logistics, businesses must prioritize sustainability in their logistics processes this year, including adopting technology and collaborating with green partners. These steps are essential to making an actual impact, and communicate that impact to stakeholders.
As green logistics becomes a top concern for all involved in the logistics process, companies that incorporate eco-friendly practices will be able to not only please customers but also significantly reduce their fuel costs and carbon footprint, leaving our world in a better place than it is today.