E-commerce and global logistics are increasing at an ever faster pace – creating an impact on the environment. Sustainable offerings and so-called green logistics solutions are slowly emerging, but are still far from being the norm in the industry. One of the main reasons for that is the additional incurred costs and the question if and how to pass these on to the shippers and end consumers. Is there a market yet for profitable green logistics services?
Not only, but also due to effects and restrictions triggered by the COVID-19 pandemic, digital sales have significantly gone up. As a result, e-commerce represents a growing share of the retail market and its exponential growth and demand will impact the logistics and transportation industry as companies will need to be prepared to manage increased volume and delivery expectations.
More freight: higher impact on the environment
However, if the amount of freight transport increases, so does its impact on the environment. Experts forecast that CO2 emissions emitted in freight traffic will amount to more than 8 billion tons per year by 2050. Consequently, considering this impact should be on the agenda of logistics companies’ CEOs. After all, negative environmental events associated with transport, such as noise, air pollutions and greenhouse gas emissions, are gaining public attention, and consumers are starting to put pressure on different players in the supply chain.
Is green logistics really not profitable?
Despite an increasing awareness regarding sustainability among managers of logistics and transportation companies, many still wonder if and how much shippers are really willing to pay for a greener logistics process. In our most recent logistics study, we tried to find an answer to this. Surveying around 100 experts from various logistics segments worldwide, we received interesting results: Most logistics companies believe there is still only a small share of ten to 20 percent of shippers that are willing to pay a premium for green logistics at the moment. This figure probably also differs between countries and regions.
However, from our experience, logistics companies think too pessimistic in this matter and often neglect the view of the shipper and also the end consumer. One large e-commerce shipper recently stated to us: “CO2 neutral shipments are essential to our core customer group and they do criticize us for not offering this service already. I would even say that for us, a partnership with a logistics provider without emission free shipments is not possible in the long-term“. We believe these kind of views will grow significantly in the near future and also begin to change logistics companies’ mindsets.
Small price premium acceptable
But how much are shippers likely ready to pay on top of regular shipping costs? Our survey estimates an acceptable price premium likely to be between three and ten percent on top of the total delivery costs.
We also estimate that this figure will increase over time, as not only awareness but also willingness-to-pay will increase among shippers when they recognize the importance of sustainability.
Overall, these findings lead to the conclusion that logistics companies should consider how they can add more sustainability to their offering. At the same time they need to think about how to market and to monetize these sustainable services effectively, in order to keep their profitability and competitiveness.