Can a CEP operator afford to ignore ESG concerns?

INCREASING PRESSURE FROM STAKEHOLDERS

Company boards also recognise the importance of ESG and drive their companies towards more sustainable practices.

Adding to that, attracting and retaining talent has become more challenging for CEP companies that do not prioritise sustainability. Younger generations, in particular, want to work for companies that align their values and contribute positively to society.

That’s why businesses in the CEP industry need to prioritise ESG – they simply cannot afford to lose out on the ability to attract and retain top talent.

PHYSICAL RISKS

Climate change is also bringing physical risks leading to disruption of supply chains and increased costs potentially leading to financial losses for CEP companies.

These effects include rising sea levels, increased frequency and severity of extreme weather events, and damage to infrastructure. This can cause supply chain disruptions, delays, and damages to transport infrastructure. CEP companies should take these risks into account and develop strategies to mitigate them.

WHAT DO CEP COMPANIES’ CUSTOMERS WANT?

As mentioned earlier CEP companies face increased pressure from customers and stakeholders to improve their ESG performance.

Prioritising sustainability can lead to a positive image and increased market share. And for those working in procurement, a large part of that means choosing a supplier that prioritises environmentally conscious operations.

If a CEP company can provide a sustainable or at least an environmentally conscious approach to delivery it’ll be a preferred choice for many ecologically conscious companies.

Delivery can be a challenge for these companies, with government research showing that transport is responsible for 27 percent of the UK’s greenhouse gas emissions and 91 percent of that is caused by road vehicles such as vans and heavy goods vehicles (HGVs).

Moreover, 2021 projections based on the ITF’s International Freight show that transport emissions are set to rise by a factor of 3.9 by 2050. This will mean that the current 2,108 million tonnes (Mt) could rise to 8,131 Mt which would drastically undermine worldwide climate and environmental goals.

Therefore, the importance of reducing emissions and implementing environmentally friendly measures has never been more prominent and CEP companies that can provide services in line with that will be preferred.

Here are a couple of things that customers expect from an ESG-aware CEP company:

• Effective last mile solutions
  The CEP company can improve efficiencies and overcome the challenges of operations in the Last Mile through optimised route planning, smarter tracking, and technology integration.
• Greener routes and optimisation
  Dynamic route planning reduces the time between deliveries. This ensures a smoother process and helps the CEP company streamline delivery routes and enhance communication between drivers and recipients.
• Distribution centre consolidation
  Distribution centre consolidation works by making delivery operations simpler. They enable the CEP company to deliver goods in one single transportation shipment, rather than in multiple small deliveries.

HOW CAN CEP COMPANIES APPROACH ESG CONCERNS?

So, CEP companies can no longer afford to ignore ESG concerns. But how can they approach ESG concerns and provide sustainable services benefitting them and their customers?

In the following, we’re looking at how CEP businesses can work with ESG in three ways:

CAPACITY OPTIMISATION

The ‘transport of air’ is one of the unfortunate by products of an industry, where speed often takes priority over most other agendas.

Underutilisation of truck capacity is perhaps even more problematic as politicians and citizens in some of Europe’s largest cities are trying to limit the number of trucks circling the streets.

The CEP industry’s environmental, social and governance performance greatly depends on effective capacity utilisation.

Thankfully, a new solution is on the horizon: AI-powered route optimisation technology that can detect and advise on the most efficient route planning.

The AI-driven systems can analyse an incredible amount of data points and provide route planners with real-time input on how to deliver parcels faster and with less ‘transport of air’.  An intelligent AI algorithm can learn based on past activities and be made available to the operator to support the scheduling, as noted in a study on artificial intelligence in the parcel industry conducted by Lufthansa. 

In fact, by leveraging AI-based machine learning with data, some operators in today’s CEP industry are already positioned to identify situations when it is advantageous to delay certain parcel deliveries until there is adequate capacity in a truck.

The AI-driven route optimisation tools can highly effectively prioritise which items should go out for quick delivery and which should wait.

As a result, companies can get the most out of their trucks and the kilometres on the road while keeping cost per parcel delivery and air transport at a minimum.

LAST MILE DELIVERY

Last mile delivery is the crucial final stage of delivery that affects customer satisfaction, but it can be challenging due to fragmented destinations and sustainability concerns.

To address these challenges, companies can prioritise sustainable transport modes, low-emission vehicles, and route optimisation while also ensuring fair labour practices. Sustainable urban logistics is gaining importance, and companies can invest in hubs and Urban Consolidation Centers to improve track & trace management and responsiveness.

Almost half of all Europeans say they want deliveries to limit their carbon footprint – and the urge is particularly strong among young people.

Increasing numbers of environmentally friendly transport options are emerging to satisfy a rising demand among end-consumers, including bicycles and robots.

And many alternative delivery solutions are also emerging – most particularly PUDO (Pick Up and Drop Off) points and lockers.

In a number of European countries, including the Nordic states, people say they are happy to walk to them to pick up their parcels from a local delivery point.

The Last Mile is an entire ecosystem of parcel, transport, final destination and human specifications that CEP operators need to navigate using a combination of careful operational planning, automation systems with intelligent controls and smart solutions.

This means, there’s room for improvement that can lead to higher profit and lower emissions.

VALUE CHAIN RESPONSIBILITY

While ESG practices cover a wide range of areas, each CEP must find its own recipe for success.

The point is, that CEP companies must move away from ad hoc initiatives toward integrating ESG in the strategy. That will be the next step to make sure ESG is embedded in the day-to-day decision-making, the processes of the company and the entire value chain.

One way of taking responsibility for a part of the value chain is to choose a supplier who is diligent about their impact on the environment.

TAKEAWAY

Thanks to new legislation, financial risk and increased pressure from stakeholders and customers CEP operators cannot ignore ESG concerns any longer.

The good news is that embracing sustainability in the CEP industry presents opportunities to optimise operations, reduce costs, enhance reputation, and ultimately increase customer loyalty.

The sustainability journey is a continuous improvement cycle, and companies should continually strive to improve their sustainability practices by innovating their processes and collaborating with strong partners to meet evolving stakeholder expectations and regulatory requirements.