A Tipping Point for Last-Mile Sustainability
When it comes to last-mile freight and logistics, do you think the COVID-19 pandemic resulted in higher or lower carbon emissions? With millions of people suddenly stuck at home, it’s no surprise that people began ordering a lot more stuff online. You’d expect that to mean a lot more delivery vehicles making a lot more trips and emitting a lot more carbon. But an unexpected thing happened. The carbon footprint of last-mile delivery got smaller.
Why? The pandemic radically accelerated local fulfillment – storing stock as close to consumers as possible. Even before COVID-19, Amazon relied on a local fulfillment strategy to meet its Prime delivery promises. Likewise, many brick-and-mortar retailers had already developed capabilities for omnichannel fulfilment using their stores or other local inventory options. The pandemic accelerated such strategies by three to five years. Sheer necessity changed consumer behavior and retailer operations, unintentionally making the last mile more sustainable in the process.
Building upon that strategy could have a big impact. Accenture and Frontier Economics developed a robust economic model that showed local fulfillment centers could reduce last-mile emissions by up to 26% by 2025 in places like Chicago, London, and Sydney. The closer the fulfillment center is to the consumer, the more feasible low/no-emission last-mile delivery modes such as electric vehicle, bicycle, or even pedestrian become.
We’ve Reached a Tipping Point
Maintaining those gains and improving them won’t be easy or automatic. In fact, the entire last-mile ecosystem is at a tipping point. It could create a faster, cheaper, and greener last mile, or it could go the other way. With no interventions, we can expect a 32% jump in carbon emissions from urban delivery traffic by 2030. That won’t make consumers happy. They expect convenience, speed, and sustainability at the right price.
Doing it all will take work and investment. It will require a willingness to cooperate in unconventional ways with others in the freight and logistics ecosystem, including competitors. It will also require transparency, even if it means sharing unflattering carbon footprint data. No single entity can solve this problem alone. We need all ecosystem players to work together in ways they never have.
Creating a more sustainable last mile will require the ecosystem to collaborate on three fundamental activities:
- Incentivizing greener choices. This involves developing incentives and “choice architectures” that encourage consumers to receive deliveries in more sustainable — yet convenient — ways, and ecosystem players to make green investments.
- Rethinking asset use. This means repurposing, retrofitting, and sharing assets like stores, infrastructures, and fleets — while investing in green technology and evolving regulations to support these innovative approaches.
- Harnessing data and analytics. This refers to acting on real-time insights into consumer preferences and purchasing patterns to innovate and optimize inventory and route management for a smaller last-mile carbon footprint.
Incentivizing Greener Choices
Most consumers don’t know how their e-commerce decisions affect the environment. To improve last-mile sustainability, the ecosystem must change that. We must provide delivery choices and transparently identify the environmental impact of each. There’s reason to believe that many people would then choose the greenest options. Research shows that 43% of consumers are more likely to choose retailers that offer more sustainable delivery options.
For a greater impact, we can go beyond awareness and options by offering added value or discounts to consumers who, for example, choose to pick up their own packages at nearby fulfillment centers.
Incentivization, however, should go beyond consumers. Governments could offer tax incentives to delivery companies that invest in greener fleets or develop greener route management practices. Cities could make recharging electric delivery vehicles more convenient by investing in charging infrastructures.
Greater transparency could also help. For example, quantitatively displaying the carbon footprint of each delivery option. This would require an investment in data and analytics (see below). It would also require a willingness to display how bad certain options are for the environment. Such transparency could play a significant role in reducing carbon emissions.
Rethinking Asset Use
Every delivery organization invests in infrastructure, technology, people, and vehicles. This often leads to competing, yet redundant networks. To make the last mile more sustainable, it’s time to reduce that redundancy and start repurposing assets with sustainability as a priority. Delivery companies could eliminate costly redundancies and reduce emissions by providing access to each other’s networks, including fulfilment and open locker and pick-up/drop-off locations. Governments could encourage such asset sharing by creating points at the outskirts of cities where deliveries are concentrated for all carriers. Retailers can continue transforming their brick-and-mortar stores into omnichannel fulfilment hubs that support shopping, collecting, and returning deliveries. Dying shopping malls and other unused or underused urban spaces could become multi-tenant fulfilment hubs.
Harnessing Data and Analytics
Better data and analytics make local fulfillment even more sustainable by predicting who will buy what, where, and when, so retailers can stock the right SKUs locally. Combining local fulfillment with route optimization could further reduce emissions by up to 9% in the cities we studied. In fact, our model shows that when route optimization is applied alongside local fulfilment, delivery vehicles drive 87 million miles less. These are just two of many ways data and analytics could improve last-mile sustainability. As mentioned, data and analytics could also enable greater transparency of the environmental cost of transporting each individual item a consumer buys.
Developing the necessary insights would require analyzing a mix of internal and third-party data, social listening, and monitoring local trends and events. Cross-ecosystem data sharing via the cloud is key to making it happen.
Getting the full value of data and analytics will require systems that have not yet been created. The next step could be getting all members of the ecosystem to agree on standards for measuring environmental impact. Then, we’ll need to persuade leaders to make commitments and invest in being able to do the necessary calculations and share the results with the right stakeholders. Yes, this will likely involve an initial period of uncomfortable transparency, but when consumers and B2B buyers see authenticity and a commitment to do better, they will proudly do business with those companies.
This is the time to make commitments to and investments in improved sustainability. Will we build on the unintentional gains COVID-19 brought, or will we let our carbon footprint grow?
Sarah Banks, Managing Director, Global Freight & Logistics Lead, Accenture
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