Green procurement and urban logistics

Consumers and media are increasingly scrutinising retailers’ environmental and sustainability credentials. The environmental, social and ethical impacts of the whole supply chain, from sourcing, manufacturing and processing through to delivery are all being examined. Retail brands that don’t embrace sustainability as a key element in supply chain strategy, risk falling behind. 77% of FTSE 350 companies now provide detailed disclosures on environmental considerations such as climate change, though only 31% have environmental KPIs (Grant Thornton, Corporate Governance Review 2020).

While consumers want firms to improve their environmental performance, they also seek speed and convenience. Consumers are demanding more same-day and one-hour deliveries. On-demand, and one-package-per-stop deliveries have a much greater environmental footprint than scheduled deliveries, where capacity utilization rates and routes can be optimised. Retailers want to offer customers on-demand delivery options in order to be competitive, but these are typically not the most sustainable. Research from MIT found that fast shipping not only increases costs, it also increases total carbon emissions by up to 15%.

When it comes to order fulfilment and delivery, a conflict arises. Retailers want happy customers, and customers want environmentally-friendly retailers as well as convenient deliveries. But can they have both?

Most major retailers outsource their distribution, warehousing, and fulfilment to a third party logistics firm (3PL). Some retailers will choose to manage the warehousing and order fulfilment and use a delivery partner (or parcel carrier) to handle distribution. Traditionally, contract selection or performance evaluation for 3PL or delivery partners, have been driven by cost reduction and customer service levels, with little consideration given to sustainability and environmental performance measures.

Third-party logistics providers and delivery partners are key to helping companies reach their supply chain sustainability targets and in turn, green credentials are becoming an important tool for 3PLs in securing contracts with retailers.

In January 2021, Mars UK announced its partnership with DHL, which will see the construction of warehousing facilities, as well as the creation of sustainable logistics operations. The partnership is set to reduce Mars’ outbound logistics carbon emissions in the UK by 7.7%. New purpose-built depots will be built at ‘East Midlands Gateway’ and ‘London Thames Gateway’. The new logistics operation will remove a million miles a year from roads, while increasing warehousing capacity by over 50%.

It is not just the larger distribution firms and parcel carriers that are ‘greening’ operations and securing retailer contracts. New, sustainable delivery fleets are entering and expanding within the urban logistics arena in order to capture a share of the growing market for more sustainable delivery models, as retailers look to offer customers greener deliveries. Cheesemonger Paxton&Whitfield use delivery firm Ecofleet, providing a same day delivery service to London-based customers with deliveries dispatched from their shop and delivered via bicycle.

Urban delivery firm Zedify deliver on behalf of online retailers Freddies Flowers and Abel&Cole. Its growing network of 10 ‘hyperlocal’ micro hubs in cities across the UK act as consolidation centres for small items coming into and out of the urban area. Zedify recently announced the opening of a new micro-consolidation hub in Finchley, as the company further expands its sustainable consolidation and delivery service in London. Non-alcoholic beer company Freestar, utilise Urb-it’s Micro-fulfilment centre (MFC) service to hold stock closer to tits local customer base and offer sustainable deliveries across London

In Paris, Urb-it partner with Amazon Logistics, utilising Amazon’s urban delivery hubs to provide a sustainable last-mile delivery service across the city. They also partner with Alibaba Group, providing last-mile deliveries in Paris. Urb-it now operate across several UK cities, offering ship-from-store, ship-from-warehouse and micro-fulfilment services. It works with carriers including DHL and Yodel to offer zero-emissions last mile deliveries.

As retailers and consumers demand higher sustainability standards, behaving more sustainably is becoming critical for 3PLs and delivery partners’ business models. Many 3PLs are working on initiatives such as achieving carbon neutrality, introducing more electric vehicles into their fleets and operating from BREEAM (Building Research Establishment Environmental Assessment Method) certified facilities. 3PLs are competing to enhance their environmental credentials in order to secure new retailer contracts, this is fuelling demand for greener, more sustainable logistics facilities in urban areas.

Much of the current focus is around sustainable transport management initiatives such as electric vehicles, improving fuel efficiency, vehicle scheduling and capacity utilisation. This is particularly critical for the last touch logistics in urban areas. These sustainability initiatives have implications for the building fit-out and amenities that occupiers require, such as EV charging and bicycle racks.

The drive for more sustainable last-mile deliveries is also encouraging more click & collect facilities, either in-store or through collection lockers. Parcel delivery firm DPD are partnering with the Post Office in order to roll out a new click & collect service, which will result in a more sustainable delivery mode, with more parcels delivered to a single location. DPD conducted a review of last-mile delivery and the impact of click & collect on the environment and found greenhouse gases could be reduced an average of 63% in the last-mile delivery when using the DPD Pickup network.

Aside from the impacts of transportation and delivery methods, energy use within warehouses also has a significant environmental impact. Reducing operational costs, including energy bills, is a way for distribution firms and 3PLs to maintain competitiveness, particularly in the face of rising energy costs. Energy efficient floor designs, ventilation systems, renewable energy sources, photo-voltaic cells and LED lighting are all features that enable an occupier to reduce both their operational costs and carbon footprint.

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