Author: Jorge A. Lopera
Vice President, Global Head of Strategy
Consumption and Emissions - A Growth Story
Global retail sales are expected to grow to $27.3 trillion USD in 2022, up 5.0% from 2021. Consumer behavior since 2020 has shifted many of these sales online, as around 20% of total retail sales worldwide will come from e-commerce. Paralleling this growth in e-commerce is growth in carbon emissions. Parcel deliveries are estimated to increase by 78% globally by 2030, resulting in up to 30% greater emissions.
Sustainability - A Common Interest
Having faster, cheaper, more flexible and increasingly more sustainable shipping is a competitive advantage for retailers trying to attract consumers. But demands for sustainability aren’t just coming from consumers - they are coming from governments and financial institutions as well.
Consumers: Consumers evaluate products on a number of criteria. When shopping in a world focused on climate change, sustainability is progressively entering their consideration. Two-thirds of online shoppers claim a brand’s eco-friendly shipping practices influenced a purchase decision. Globally, internet searches for sustainable products have increased 71% in recent years. Companies that are able to infuse eco-friendly practices into their supply chains and communicate this effectively are likely to gain and retain consumers.
Governments: Local governments individually as well as multinational agreements are ramping up regulation on unsustainable practices. The 2021 United Nations Climate Change Conference (COP26) has set the new agenda to accelerate the implementation of the Paris Agreement, directing the world to move towards a sustainable future. The Glasgow Climate Pact, the outcome of the COP26 summit, is an agreement signed by 200 countries, including central bodies, state ministers, business leaders and environmental activists.
30 countries, six major vehicle manufacturers and many global cities have set the goal to achieve zero-emission vehicles by 2040. They have pledged to accelerate the decarbonization of road transport by 2035 in all leading markets. According to a study published by Science Direct, the transportation sector accounts for approximately 20% of all carbon dioxide (CO2) emissions globally, and road transportation accounts for the large majority of those emissions.
Financial Institutions: Private financial institutions and central banks have agreed to realign the outflow of trillions of dollars in achieving global net zero-emission. 450 firms from 45 countries that control $130 trillion USD in assets want their members to set science-based, near-term targets to cut carbon emissions. Some 80% of the investment industry has committed to the Principles for Responsible Investment and have mobilized at least $2.3 trillion in sustainable financing and 94% of banks identify sustainability as a strategic priority.
Supply Chain Sustainability - More Bang for your Buck
According to a report from McKinsey, a typical consumer company’s supply chain creates far greater social and environmental costs than its own operations, accounting for more than 80% percent of greenhouse-gas emissions and more than 90% of the impact on air, land, water, biodiversity, and geological resources. Companies should look to sustainable investments in their supply chains for the greatest impact.
Creating sustainable supply chains is challenging, though many companies have begun adopting sustainable supply chain solutions. Innovative supply chain technologies have made this transformation easier.
Benefits of Sustainable Supply Chains
A sustainable supply chain reduces costs and emissions. Here are a few key benefits eco-friendly operations can have on a company:
Reduced Environmental Impact: The overall goal of sustainability is to reduce the impact that people, governments and companies have on the environment. With sustainable supply chains, companies can significantly reduce their carbon footprint, helping to create a greener world.
Consumer Loyalty & Satisfaction: Consumers worldwide are increasingly concerned about their own carbon emissions and impact on the environment. Companies that can reduce their carbon footprint and communicate this with consumers can deliver a positive brand image and gain a competitive advantage. Companies that execute on their sustainability initiatives are likely to enjoy increases in consumer loyalty and satisfaction as well as increased total revenues.
Costs & Profitability: Sustainable supply chains are efficient supply chains that achieve more with less. By introducing route optimization, green-vehicle fleets and crowdsourced delivery, companies can reduce the amount of people, fuel and effort required to operate their supply chain. The added benefit? Reduced costs and improved profitability. Companies that actively plan with climate change in mind secure an 18% higher return on investment than companies that do not.
Tech-Enabled Sustainability Solutions
Technology is changing the way supply chains are orchestrated by enabling greater predictability, configurability and efficiency, which in turn translates into greater sustainability. Here are a few key tech-enabled innovations that can help companies create greener supply chains:
Loop Optimization: Leverages driver activity data of historical orders to suggest the optimal number of routes within a geofence. This results in an unlimited-scale solution that provides multiple optimized loops and pushes the limits of route performance, generating greater delivery efficiency and reduced carbon emissions because of it.
Green Vehicle Route Planning: Enables customers to design and plan last-mile delivery of products with an intelligent mix of green fleets (cargo bikes, bikes and foot delivery), to achieve on-time delivery ultimately driving high consumer satisfaction with minimal or zero carbon footprint.
Long-Haul Truck Route Planning: Allows carriers to design optimal multi-day, long-haul trucking routes to minimize idling times, avoid roadblocks and reduce fuel consumption. FarEye’s algorithm facilitates long-haul deliveries with multiple drivers to swap driving shifts and meet the legal norms of on-road driving requirements. Carriers can not only achieve sustainability goals but also meet their On Time In Full (OTIF) targets.
Carrier Allocation System: Helps brands select suitable delivery partners for different types of shipments to improve their first attempt delivery rates, minimize delivery re-attempts and damaged goods deliveries, and avoid repeated transport and corresponding carbon emissions. This ensures a higher percentage of first attempt delivery rates to build and sustain a loyal customer base.
Sustainability Dashboard: Provides a visual representation specifically measuring carbon footprint Key Performance Indicators (KPIs) for the customer, helping them understand carbon emissions breakdown by mode, route, carrier. The dashboards are designed to scale to be granular enough to measure package-level emissions. The dashboard also provides the ability to track and control CO2 emissions across all modes of transportation (road, rail, ocean and air) and benchmark third-party carriers and routes with the least CO2 emissions.
FarEye - Orchestrating Sustainable Supply Chains
See how FarEye’s tech-enabled solutions are helping companies worldwide achieve sustainability goals across first, mid, and last-mile delivery. See how FarEye’s tech-enabled solutions are helping companies worldwide achieve sustainability goals across first, mid, and last-mile delivery.