60% of consumers say that sustainability is an important purchase criterion for them and a third of the population says that climate change impacts what they buy. What’s more, consumers are willing to put their money where their mouths are – for consumer goods, 38% of consumers would pay for more sustainable products and accept a 25% premium on average.
Ignoring these new expectations around sustainability is not an option. Brands that don’t adopt sustainability initiatives will likely lose market share to those that do, especially as younger generations (who care the most about sustainability) get more purchasing power.
Plus, investments in sustainability seem to pay off: sustainable products have been growing 5-6 times faster than conventional products, and in a review of 200 studies on sustainability and corporate performance, 80% showed that stock performance is positively correlated with good sustainability prices.
To remain competitive, brands need to take sustainability initiatives seriously at every step of the supply chain, and do this while continuing to grow and generate profit as a business. This can seem like a big ask, but thankfully, there is a clear and attainable path forward.
Why you need the right partner to build a sustainable supply chain
First, let’s define sustainability. This is the United Nations’ widely accepted description:
Meeting the needs of the present without compromising the ability of future generations to meet their own needs. This includes concern for Environmental Health, Social Equity, Economic Vitality, and the interdependency of each.
As consumers, we can’t possibly vet each daily decision against the above criteria — it would take 45 minutes just to order a cup of coffee! But as business leaders, we have a much greater responsibility to think about these things. To get where we need to be with some urgency, it’s useful to leverage what Marcus Du Sautoy describes as “sustainability shortcuts.” (See his brilliant book: Thinking Better – the Art of the Shortcut in Math and Life)
All of the shortcuts for immediate traction in sustainability rely on one thing: choosing the right partners. That means finding partners that don’t bury the headline of sustainability, but rather lead with it and back it up with actions. It means only selecting partners who can cite specific evidence of sustainability practices in their operations, rather than just making big claims with nothing to back them up.
To understand which partners matter in this context, it’s helpful to follow the physical flow of product through the supply chain, and break the sustainability story into two chapters. Chapter 1 follows the product from the factory to the fulfillment center warehouse or distribution center. Chapter 2 follows the product within the four walls of the fulfillment center warehouse and through Final Mile delivery to the end consumer. Along the way, there are a series of shortcuts that allow you to be an active participant in sustainability instead of a bystander.
Finding the right partners from factory to fulfillment center warehouse
Ready for a mind-blowing statistic? The US logistics industry moves more than 56 tons of freight per person each year. That number calls for over a billion barrels – not gallons, barrels – of oil each year. While sustainability is not just about emissions and fossil fuels, for our industry it still represents the proverbial low-hanging fruit, and it’s something that as business leaders we can’t ignore.
The first step in the supply chain is ocean transportation, which is a relative latecomer to sustainability as a sector. However, today’s Sustainable Shipping Initiative has momentum and the proper charter of low to zero carbon fuels across a number of industry stakeholders. It requires choosing alternative fuels that do not cause problems elsewhere, such as deforestation or human rights issues.
Shortcut 1: At a minimum, you should select an ocean transportation partner that is a member of the Sustainable Shipping Initiative. There are currently eleven members to choose from.
The air cargo sector represents 2% of global carbon emissions, compared with 4% for ocean cargo above. However, we have seen a tremendous uptick in its use during the COVID-19 crisis as companies seek to bypass the infamous congestion at US shipping ports of entry. The International Air Transport Association (IATA) has several sustainability initiatives governing the industry with cross-constituent benefits including Human Rights and Carbon Emissions.
Shortcut 2: At a minimum, insist on partnering with Air Freight providers that participate in the Sustainable Aviation Fuel Initiative (SAF) which can reduce emissions by as much as 80%.
Ground transportation is closer to home for most of us, literally and figuratively, so vetting suppliers should be much easier. However, don’t automatically believe whatever impressive sustainability stats you see in providers’ presentation decks. Ask for tangible evidence that sustainability exists in their day-to-day operations.
For instance, does your ground transportation provider participate in the EPA’s SmartWay Program? What percentage of their fleet is composed of electric vehicles? What percentage of their total deliveries are performed via EVs?
Shortcut 3: Thankfully, there is an abundance of research in this area, along with momentum that feels very real. Aside from the SmartWay program mentioned above, the National Science Foundation’s Center for Efficient Vehicles and Sustainable Transportation Systems (EV-STS) is another great resource. Look for member partners, and consider participating yourself.
Finding the right fulfillment center and final mile partners
Now, let’s talk about how the product gets into the hands of consumers. The parties involved here represent the last touchpoint between you (the brand) and your customer, so a full review is critical.
Warehouse consumables and Material Handling Equipment (MHE)
Warehouses have a higher percentage of consumables than prior supply chain steps, as they are the ones preparing products for shipment to the end consumer. (Consumables bring their own sustainability considerations, such as sustainable pallets and sustainable stabilizing materials. That’s a larger discussion for another article.)
At the warehouse step, there is an array of new factors at play that can affect sustainability: labels (no item is too small), dunnage (void fill for shipping boxes), shipping boxes themselves (overpack for shipment, traditionally corrugate and poly-envelopes), material handling equipment (is it electric or does it create greenhouse gas emissions?) and more.
Shortcut 4: Ask your fulfillment service provider about each of the above areas in detail. Is there a sustainable option for each? Do they insist upon using them for their customers, or are they open to your sustainability suggestions? This nuance is important. Again, have the provider cite specific, current, examples in each of the above areas. The Reusable Packaging Association (RPA) has a library of helpful information on this topic.
An even better shortcut: Partner upfront with a sustainability-first fulfillment provider
Warehouse storage density and the location effect on final mile
Efficient inventory storage is revolutionizing warehousing footprints and the sustainability implications of this may not be obvious. Innovation in storage density is a result of technological advancements in robotics and automation, which don’t require the wide aisles of traditional warehouses and have no limitation on how high products can be stored.
The new world of warehouses without these limitations has led to what the industry calls micro-fulfillment centers (MFC), where “micro” describes the warehouse size, not the fulfillment throughput. These MFCs can match traditional warehouse throughput in a warehouse that’s only 25% the square footage.
Further, robotics and automation allow MFC workers to focus on activities from the “neck up,” as opposed to pre-MFC environments where they were treated merely as hired hands. This addresses a long overdue human rights issue, and a core focus for sustainability.
There is a multitude of environmental benefits to micro-fulfillment:
- Hyperlocal warehouses dramatically reduces shipping distances, cutting carbon emissions
- Less packaging is required because the package travels shorter distances and requires less protection
- Smaller sites are more energy efficient – a smaller space and dense footprint requires less energy
- MFCs can fit into existing real estate locations, bypassing the need for energy-intensive new construction projects
Shortcut 5: Look for fulfillment providers with true MFC locations in urban centers. They’re the ones whose technological innovation will allow them to locate finished goods inventory just minutes away from your customers, rather than days. As a result of their urban locale and proximity to the end consumer, these MFCs have many more green options for final mile delivery. Think: bicycle couriers, electric vehicles, electric scooters, vespas, and so on.
Building a sustainable supply chain is not only essential; with the right partners, sustainable retail is attainable, too. Consumers and future generations are watching – brands must show they are listening and taking clear action.