Climate Costs Mount as Retailers Compete on Fast Delivery

December 23, 2019 // Financial Times

By Leila Abboud and Camilla Hodgson

As the end of this year’s holiday shopping frenzy nears, increasingly environmentally conscious online customers are taking to the internet to complain about waste.

“Can you please explain this ridiculous surplus of packaging used to ship a tiny box of pointe shoe ribbons? WE CANNOT!!! TOLERATE! WASTE LIKE THIS!!” tweeted one Amazon user.

Another pointed out the irony of ordering a shampoo bar to cut down on packaging only to have it arrive wrapped in plastic in a giant box.

Amazon’s customer service team dutifully replies to complaints. But another aspect of the company’s online shopping business puts more pressure on the environment than packaging: the ever-faster delivery speeds offered under the loyalty programme Amazon Prime.

Since April, customers who pay for an annual Prime subscription — £79 a year in the UK or $119 in the US — can get one-day delivery for qualified items, halved from the earlier two-day standard. Some items are even available the same day.

Given Amazon’s clout with roughly 40 per cent market share in US retail and 30 per cent in the UK, rivals such as Walmart, Target and John Lewis have also sought to accelerate their own deliveries, conditioning consumers to expect speed.

This trend is leading to an increase in greenhouse gas emissions from ecommerce, research indicates, not only among retailers but also at the logistics companies and postal services that deliver to your doorstep.

Shorter delivery times often mean more use of air freight instead of overland travel, and they give logistics companies less time to optimise routes.

Across its operations, Amazon emitted 44m metric tonnes equivalent of carbon dioxide last year — roughly the same as Denmark. Emissions at logistics company UPS rose 6 per cent last year to 14.6m tonnes from a year earlier, in part because of increased reliance on aircraft.

“The problem isn’t buying online — it’s how the delivery is implemented and how packages come to our door,” said Anne Goodchild, a transportation engineer at the University of Washington’s Supply Chain Transportation and Logistics Center.

“The delivery companies have no incentive to group them together, or don’t have time to do so while aiming for shorter deadlines, so we’re seeing a proliferation of trips being made.”

The Trouble with Last-Mile Delivery

About 35 per cent of Amazon’s packages were being delivered with one-day shipping as of August, according to Rakuten Intelligence, more than triple the number from two years ago.

So-called last-mile delivery, or a product’s transit from warehouse to its final destination, has become more complex as the number of deliveries to homes has surged.

Routes have become more atomised, with more stops in residential areas, and multiple delivery attempts are often needed since people are not home to receive parcels. Returns drive up emissions further.

Cities such as New York and London have tried to stem the tide by imposing restrictions on daytime deliveries and creating low-emissions zones in city centres that ban certain vehicles.

The choices customers make when shopping online can also have an impact on the carbon footprint of the purchase. Decisions to opt for slower delivery, to bundle more items into an order, or to “click and collect” at a local shop all reduce emissions.

A study by consultancy Bain & Company found that by doubling the average number of items purchased per ecommerce transaction and avoiding split shipments, retailers can reduce average per-item emissions by 30 per cent.

Walmart is trying to nudge shoppers into making greener choices with its so-called smart cart technology, which shows customers which items are available from the same fulfilment centre. If they choose these items, they get next-day delivery for free.

Turning to Electric Vehicles and Other Solutions

Jenny Davis-Peccoud, a partner at Bain, said that retailers were only starting to figure out how to manage their emissions from digital retail. “This is an emerging issue as companies are seeing online sales really growing.”

In Europe, Ikea aims to make 100 per cent of its delivery vehicles electric by 2025, and move more long-distance transport to trains and ships instead of trucks. Deliveries in five of its biggest cities — New York, Los Angeles, Paris, Amsterdam and Shanghai — will be fully electric by next year.

But the problem’s complexity means “you can’t fix just one thing”, said Juvencio Maeztu, chief financial officer of the main Ikea retailer, Ingka Group.

The logistics companies that deliver parcels are also working to reduce their carbon footprint. UPS has more than 10,000 alternative fuel and electric vehicles, which make up about 8 per cent of its global fleet, and offers delivery by electric bikes in 30 cities.

In a north London depot, UPS has worked with a local utility on a smart grid to charge and operate 65 electric vans. “We’re experimenting with all these things to figure out what works where,” said Peter Harris, UPS director of sustainability in Europe.

Amazon, for its part, disputes the notion that its rapid deliveries are less sustainable. “Although it’s counter-intuitive, the fastest delivery speeds generate the least carbon emissions because these products ship from fulfilment centres very close to the customer,” said a spokesperson.

But Thorsten Runge, a former Amazon executive now at last-mile logistics company PostTag, pointed out that sending parcels to urban delivery hubs “adds another step” to an item’s journey, while new warehouses will consume power. “It’s not a foregone conclusion that urban delivery hubs solve the problem,” he said.

In September, amid rising pressure from employees to do more to tackle global warming, Amazon pledged to reach net zero carbon emissions by 2040 and said 80 per cent of its energy would come from renewable sources by 2024. It also promised to add 100,000 electric vehicles to its fleet.

But Eliza Yu-An Pan, a former Amazon employee and member of the pressure group Amazon Employees for Climate Justice, said the company’s emissions disclosure was “not transparent enough nor complete”.

That makes it hard to judge progress. “Nobody knows except within Amazon,” she said.

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