This article is an excerpt from: Last Mile Excellence — The Low-Hanging Fruit in Reducing Carbon Emissions
A copy of the full report can be downloaded here.
Carbon Footprint Reduction is Rapidly Becoming the Top Sustainability Goal for Many Enterprises
Retailers’ sustainability efforts are typically very broad, often defined as ESG (Environmental, Social, Governance) goals. Environmental goals include things like reducing carbon and water footprint, pollution, waste reduction/circular economy, and biodiversity. Among these, carbon footprint reduction is rising to the top in priority, as the need to tackle the climate crisis becomes more clear and more critical every year.
Our House is on Fire!
The first installment of the IPCC’s Sixth Assessment Report,1 released on February 28, 2022, provides a comprehensively researched, dire appraisal of the current situation, concluding that climate impacts are already worse than expected, that risks will escalate quickly with each small further increase in average global temperature, that adaption is crucial, and some impacts are already too severe to adapt to.
As the climate crisis becomes more unequivocal, grim, and urgent we expect continued increasing emphasis of public attitudes to more climate change activism, including an increase in the role that a brand’s climate policies and actions play in consumers’ buying decisions.
People Are Demanding Measurable Improvement Now
More and more consumers are demanding that retailers and brands report on their carbon footprint and lower their emissions now. They are increasingly not letting brands off the hook. Consider these data points:
- A study found that 45% of shoppers would stop buying their favorite brands if those brands refused to measure their product carbon footprint.2
- A study by Deloitte found that 42% of consumers have changed consumption habits because of their stance on the environment.3
- Research by Oliver-Wyman4 found that 74% of Americans regard corporate carbon commitments as either “important” or “very important” and more than half of U.S. consumers say emissions commitments will influence their willingness to buy goods from companies.
- A study by Appinio of European consumers found that 50% of consumers pay attention to information on the CO2 emissions of products and over 60% try to buy only environmentally friendly products.
A broad set of research indicates that carbon footprint is playing a significant and increasingly vital role in consumers’ product purchasing decisions and their loyalty to specific brands and retailers. Governments and investors are also increasingly mandating that businesses meet specific GHG (Greenhouse Gas) reduction goals. Here we look at steps retailers can take to address these issues today.
Near Term Carbon Footprint Reduction
Retail’s Ambitious Climate Commitments Require Massive Investments
The IPCC’s 2018 Special Report says that global emissions need to reach net zero by 2050 in order to minimize the chances of exceeding 1.5°C of warming. Many retailers have signed The Climate Pledge, the BRC Climate Action Roadmap, or otherwise have publicly committed to reaching net zero or carbon neutral emissions by 2040 (or sooner) for their scope 1 and scope 2 emissions.5 This includes Amazon, Walmart, Best Buy, H&M, IKEA, Marks & Spencer, Ahold Delhaize, Sainsbury’s, 60 retailers in the British Retail Consortium, and many others.6
Reaching these goals will require massive, sustained, multi-decade investments such as replacing entire private fleets with electric vehicles, installing solar power, retrofitting or constructing new buildings that are much more energy efficient, redesigning packaging, and reducing embodied carbon7 (scope 3) through establishing programs with suppliers to reduce their emissions and building circular economy capabilities into product design and return/reuse processes. While these are all critical investments to reach net zero over the long run, it is also vitally important to do everything possible to start reducing emissions right now — not years in the future. So, what can be done to make an impact within the next 12 months?
Starting with the Low Hanging Fruit
One of the biggest opportunities for an immediate reduction in carbon emissions for retailers and brands is optimizing transportation, delivery, and reverse logistics — in particular truck transport, since the vast majority of U.S. retail goods are moved by truck.8 Even for imported goods, a large portion of their transport carbon footprint is in domestic ground transportation, due to the much higher carbon efficiency of ocean transport.9 There are a variety of techniques for reducing middle- and last-mile carbon footprint, such as:
- Continuous Transportation Optimization Reducing Miles Driven and Carbon Emitted
- Tracking Carbon Emissions, Not Just Miles Driven
- Supporting the Increasing Variety of Delivery Vehicles and Modes
- Leveraging Telematics to Improve Driving Behavior and Vehicle Performance
- Minimizing and Optimizing Returns
- Increasing First-attempt Delivery Rates
- Consolidation and Mix-Mode Strategies
- Integrating Private/Dedicated Fleet Optimization with Purchased Transportation
- Improved Forecast Accuracy and Inventory Optimization for Hyperlocal Distribution
- Encouraging Customer Pickup
In the remainder of this piece, we examine the first three of these opportunities.
Continuous Transportation Optimization Reducing Miles Driven and Carbon Emitted
The route optimization software is used to plan and optimize the sequence of stops for vehicles and drivers in a private or dedicated fleet. Route optimization attempts to achieve the best balance of potentially conflicting goals (e.g., cost, service levels, utilization) within real-world constraints such as travel times, operational constraints (e.g., vehicle size, hours of operation, etc.), and resource availability (e.g., personnel, vehicles, dock doors, etc.). Some route optimization software also includes minimizing carbon footprint as one of the goals that can be prioritized. These tools can make a significant near-term difference in lowering the total carbon footprint for a delivery-intensive organization within months or weeks, for a modest cost (especially compared with major capital outlays such as electrifying a fleet). An example of a system that provides this kind of capability is FarEye’s Intelligent Delivery Orchestration.
Traditionally, optimization was done in a batch mode overnight before the day of the deliveries. As these computationally intensive tasks took many hours, the cutoff time for accepting new orders could be during the afternoon or early evening of the day before delivery. Some systems can now execute continuous optimization, accepting and optimizing each order as they come in, incrementally building out and adjusting routes as more orders arrive. This gives the system multiple days to compute better optimization, resulting in a further reduction in miles driven and carbon emissions, while enabling a considerably later cutoff time for accepting the last orders, since only a small amount of additional computation is needed to incorporate those final orders.
Continuous optimization can also be used in customer-facing websites during order taking. It enables the system to understand which available slots are the greenest, with the lowest number of miles driven and/or carbon emitted. That information can be presented to users, to encourage them to pick those more optimal slots.10
Optimization software and/or collaboration systems may also be used to minimize wasted ‘empty miles’, especially empty backhaul, to further reduce carbon emissions.
Tracking Carbon Emissions, Not Just Miles Driven
It is reasonable to ask, “if a route optimization system minimizes miles driven, isn’t that the same as minimizing carbon emissions?” Minimizing miles driven helps reduce emissions, but it misses many other factors that impact emissions, such as the type and gas mileage of the vehicle, load weight, idling time (e.g., stopped at traffic lights), road speeds, terrain, and many other factors. Different systems vary in the degree of sophistication and granularity with which they consider all the various factors impacting carbon emissions, so this is something worth asking about when selecting route optimization software.
Supporting the Increasing Variety of Delivery Vehicles and Modes
The continual robust growth of e-commerce, along with the demand for ever-shorter delivery times, is driving a fundamental shift in distribution networks to more hyperlocal delivery and micro-fulfillment centers. As well, companies are transitioning their fleets to hybrid and electric vehicles. These two trends have caused the variety of delivery modes and vehicle types to explode. This may include the full variety of vehicle sizes and formats with a traditional internal combustion engine, hybrid, and fully electric drive systems. It may also include delivery via bicycles, on foot, autonomous robots and drones, motorcycles and scooters, and more. A modern delivery optimization system incorporates a wide and easily extensible variety of vehicles and modes, as well as an understanding of the carbon emissions of each.
In Part Two of this series, we look at additional strategies and techniques for making near-term reductions to carbon emissions from transportation, such as improving driving behavior and vehicle performance, minimizing and optimizing returns, increasing first-attempt delivery rates, consolidation, and mix-mode strategies, integrating private fleet with purchased transportation, and forecast accuracy and inventory optimization for hyperlocal distribution.
1 You can find Working Group II contribution to the Sixth Assessment Report here: Climate Change 2022: Impacts, Adaptation and Vulnerability and the IPCC press release for the report here. — Return to article text above
2 See Consumer Demand for Lower-Carbon Lifestyles is Putting Pressure on Business. — Return to article text above
3 From this Wall Street Journal article: Consumers Expect Brands to Address Climate Change. — Return to article text above
4 See Consumers Want Companies to Take a Stand on Climate: And they’re willing to put their money where their mouths are. The rates are even higher for those younger than 40 and for Europeans in general. — Return to article text above
5 Per GHG Protocol’s FAQ, “Scope 1 emissions are direct emissions from owned or controlled sources. Scope 2 emissions are indirect emissions from the generation of purchased energy. Scope 3 emissions are all emissions that occur in the value chain of the reporting company, both upstream and downstream.” Achieving scope 3 net zero is more challenging as it involves parties, measurements, and behaviors beyond the direct control of a company. — Return to article text above
6 Some retailers are being even more ambitious. Tesco has committed to net zero in its operations by 2035. IKEA has committed to exceeding Net Zero and becoming ‘climate positive’ by 2030. — Return to article text above
7 Embodied carbon (a.k.a. embodied emissions) is the GHG emissions from the manufacturing, transport, construction, upkeep, and disposal of building materials. The same concept applies to consumer products. — Return to article text above
8 According to the ATA, 72.5% of the nation’s freight (by weight) moves by truck. We believe for products sold in retail that percentage is even higher, since rail and barges tend to carry bulk commodities. — Return to article text above
9 According to MIT, ocean shipments have about 1/10th the per ton-mile emissions of truck shipments. For an item shipped from Shanghai to LA and by truck from LA to Chicago, 75% of the CO2 emissions are from the 2,000-mile truck leg. Only 25% are from the 6,000-mile ocean leg. Additional truck emissions occur in the final mile distribution. — Return to article text above
10 The retailer may also provide financial incentives, such as a discount for selecting the optimal slots or an additional charge for selecting sub-optimal slots. — Return to article text above
To view other articles from this issue of the brief, click here.