“There is no ‘Plan B’ because we do not have a ‘Planet B.’ We have to work and galvanize our action.” A now famous quote from UN Secretary-General Ban-Ki Moon that every business is feeling challenged by (or should be).
With such convincing arguments that speak of our need to act urgently to deal with the long-term environmental impacts of how we’ve been living and working, what puts businesses off taking action?
Well, it can be costly. The bottom line is important and is going to influence these decisions despite our good intentions.
Going green for companies has only recently started to become a focus, and one that is based around corporate social responsibility and not opening yourself up to consumer public scrutiny. With greenwashing rumoured as being many brand’s marketing strategy without any real sustainability evidenced, we’re all asking ourselves…
Are e-commerce organization’s really making an effort to go green and set themselves up for a green future?
This has even more relevance today after a year that has seen the global e-commerce industry achieve 28% more growth vs 2019. However, there is one thing that rarely gets discussed and that is the potential commercial benefits to going green.
It goes without saying that going green is not just about profitability and that everyone should be doing their part for the global environment. But I do strongly believe that by showing the commercial upside of going green, this movement might just gain increased conviction.
And it is a discussion that is more relevant to e-commerce companies than ever before.
An e-commerce organization’s P&L is won and lost in its operational cost structure and by operations we mean warehouse and fulfillment overheads. Yes, electricity and energy costs are only a part of that cost structure but with the continued innovations in robotics and machine automation, electricity bills are only going to become more expensive.
E-commerce organisations should invest in solar or wind power run warehousing to become clean energy reliant and ultimately more profitable. If warehousing is in out of town locations, as they normally are, there is adequate space to set up these technologies and governments are increasingly lending financial support and tax reductions to implement such initiatives.
We can also see further technological advancements in solar power boding for even greater savings and powerful electricity for warehousing and fulfillment in the future. Vice versa, traditional fossil fueled energy is becoming more expensive.
Where to start tip!
When either setting up or looking to establish warehousing in ecommerce, companies can look at acquiring or working with 3PLs that have established green technologies. This is an important point as it should be at the forefront of a retailer’s decision to work with a specific partner.
If a company already has warehousing it should be setting a green transformation task force that starts reaching out to green tech companies, such as solar, and investing in a long-term green future.
SWATCH is a good example of this, having invested in their own energy production plants powered by solar and hydropower, which power a large portion of their production and warehousing.
If 2020 was anything to go by e-commerce is taking more market share then ever before and whilst it is expected 2021 will see a drop in sales it is unlikely we will go back to pre-COVID times.
Around 20% of the UKs carbon footprint comes from transportation and an even higher 29% in the US. It has been suggested that e-commerce is an increasing contributor to this and a reason why this number is not dropping.
Free shipping has become an expectation by consumers online and your free shipping thresholds or shipping costs can have a direct correlation to higher or lower conversion rates and checkout abandonment. But offering free shipping comes at cost to organisations, so it begs the question why are companies not moving faster to find more profitable last mile solutions?
In the UK, some electric vehicles are already three times cheaper to run than normal fuel-driven vehicles, which is an illustration of how companies’ long-term profitability can benefit from investment in electric vehicles or even working with logistics companies that are proactively investing in this.
It doesn’t just have to be the Amazons of this world. Other companies can still integrate this into their fulfillment strategies as a long-term cost saving exercise.
Where to start tip!
Obviously a lot of e-commerce organisations do not have the ability or need to have a fleet of electric vehicles, maybe just the Amazon’s of this world!
But Ecommerce organisations can choose the logistics partners that are moving faster or are more advanced in acquiring electric transportation, and grow with them.
For example, UPS has invested in Arrival, a company that makes electric vehicles and they have committed to ordering 10,000 electric vehicles. Start asking companies what their electric vehicle strategies are in the coming years and how they see it benefiting your business in terms of pricing. There will be a point when companies will be able to insist on delivery via electric vehicle, especially for last mile delivery.
Companies have the ability to extract huge amounts of data when it comes to their customers but they also have the ability to obtain data on their supply chain.
When we consider basic elements such as packaging, nothing is more frustrating to consumers then receiving a giant box for a small product but this also comes at a cost when applying volumetric weight pricing from couriers.
Other elements whereby we can learn from data is greater efficiency in the warehouse for product placements i.e. the re-positioning of top sellers to minimize unnecessary use of vehicles or time spent picking. If companies can look at improving supply chain efficiency with data and setting carbon footprint targets, they would not only be able to save costs but also deliver a faster service and build better trust with their customers.
Where to start tip!
First and foremost, it’s so important to keep technology at the forefront of your investment and innovation strategy.
It’s no secret that technology is moving faster than companies can keep up with, but it’s amazing how many companies are still not investing heavily in this space. This is even more relevant now when we think of using data to become more efficient in the supply chains.
First place to start is to look at what areas of your supply chain you are already capturing data, or can. It is not necessarily about the data you have but also the data you need to make better decisions to improve efficiencies.
Once you have a clearer picture on this you will need to then look at implementing a data lake to manage all structured or unstructured data and feed it into BI supply chain analytics software such as SAP, PeopleSoft or SAS. From here you will be able to make data driven efficiencies and ultimately become greener and more profitable.
A Few Stats.
- Electric cars can cost approx 2.5p per mile vs a normal petrol car at 9p per mile, more then 3 times less.
- In terms of ongoing maintenance, studies have shown that an all electric vehicle can be up to 70% cheaper to run then a regular petrol or diesel equivalent.
- Building green warehouse designs and indoor environments can also improve worker productivity and employee health and well-being resulting in greater bottom-line performance.
Yes, going green takes many forms that have not been included in this brief article and I agree that going green is not just about profitability; it is a reality that companies have a responsibility to their shareholders and one way to push this green agenda is to show organisations, especially in ecommerce, the commercial benefits to doing so.
I also want to highlight that this movement will not happen overnight. However, there are long-term gains for e-commerce organizations that use 2020’s growth to start implementing these green investments now.