Why Sustainable Delivery Is the Next Battleground for Retailers

By Mark Geden, Head of Strategic Planning at Tribal

Across all retail sectors, whether the business is legacy, traditional, or digital native, home delivery is a central part of their proposition. But it is also one of the most challenging from a business operations perspective. Costly, resource-intensive and at risk of damaging brand trust and loyalty when it goes wrong, delivery is a peak brand moment when customer experience is most connected to the brand. And now, sustainable delivery is a crucial focus as retailers have to improve performance and their ESG targets. Critically, these targets are overwhelmingly consumer generated as they increasingly expect retailers to take environmental concerns seriously and to lead the way in adopting greener practices.

Today, brands and retailers need to consider their supply chains from a consumer mindset to ensure brand loyalty. Environmental concerns are increasingly important to people of all ages; however, research suggests that younger generations, such as Millennials and Gen Z, are particularly tuned into this. What’s more, they are more likely to make purchasing decisions based on environmental impact – a Capgemini Research Institute survey indicated 60% of consumers are hesitant to buy from organisations they perceive to be unsustainable. As this demographic’s purchasing power grows, brands need to consider minimising their environmental harm by optimising last-mile delivery through a variety of methods that will allow them to differentiate their business from the competition.

Switch to electric vehicles or eco-friendly fuel sources

Many retailers are transitioning their delivery fleets to electric vehicles, which produce lower emissions than traditional petrol- or diesel-powered vehicles. For example, Amazon has ordered 100,000 electric delivery vans from the start-up Rivian and IKEA is continuing to invest to meet its aim of 60% of deliveries in UK & Ireland as zero-emission by this summer. Similarly, urban areas are benefiting from electric bike delivery, often being an even more sustainable – and invariably quicker – option than cars or trucks, as embraced by companies such as Postmates and Deliveroo turning to electric bikes for their deliveries. Interactive sat nav systems also open up the ability to optimise, and often reduce, drivers’ routes to help reduce emission levels. And now new markets have opened up by improving sustainability by keeping things more local.  In the UK, the delivery company Gophr partners with local stores to offer same-day delivery in electric vehicles or on bikes, avoiding the extra miles racked up by rivals shipping from central warehouses.

Introduce sustainable packaging

As home delivery increases, companies need to also turn their attention to the packaging used to protect their products. From reducing the size of their containers, eliminating unnecessary layers, to introducing biodegradable materials, retailers are experimenting with various options to make packaging more sustainable without losing the impact of the unwrapping, or unboxing element. To reduce waste even further, some companies are using packaging made from recycled materials and helping customers recycle and reuse these. Loop, a shopping platform developed by TerraCycle, delivers products in reusable packaging that can be collected, cleaned and used again. This closed loop delivery system is growing in popularity – for instance, Uber Eats has introduced the process, via a trial based in London, so customers can return empty food containers to delivery drivers for recycling. By involving consumers in the loop, brands are helping them feel more invested and involved in the system, so they feel they’re playing their part and the resulting social goodwill can improve customer support and overall experience.

Reducing a brand’s Carbon Footprint

Some retailers are looking to mitigate the environmental impact of their deliveries – one way to go about this is by investing in carbon offsets. For example, Etsy, the online marketplace for handmade and vintage items, has committed to offsetting 100% of the carbon emissions generated by shipping. As a marketplace that doesn’t have direct responsibility for how each seller operates, the business actively takes a cut of seller fees to offset the carbon footprint – this is the most direct way it can contribute. Similarly, IKEA has pledged to become carbon neutral by 2030, and is investing in renewable energy and forest conservation programmes. Carbon offsetting is a tool to be deployed alongside other practices, not just one that should be used as an excuse for in-action in other areas. IKEA is now focusing on becoming carbon neutral, but only after setting out to invest in renewable energy and sustainable sourcing of materials. The practice of pledging and demonstrating this form of social responsibility can give businesses a competitive edge, opening doors to grow customer loyalty and trust.

By demonstrating and expanding environmentally-friendly practices, companies will also positively influence employees in a multitude of ways – from attracting and retaining talent, to fostering a culture of innovation and creativity. In fact, according to one study, 64% of millennials won’t take a job if their employer doesn’t have a strong corporate social responsibility and 83% would be more loyal to a company that helps them contribute to social and environmental issues. Gen Z will be the first generation to prioritise purpose over salary as they seek out employers whose values match their own. So, while brands may be querying and deliberating over whether it benefits them to be more sustainable, the clear answer is yes.

When businesses consider how to construct their brand for the current industry, their reputation around sustainability must be front of mind. Genuine action and investment is becoming a large part of brand equity and is linked to value growth. Companies that the public considers to have a big impact in this area demonstrate a brand value growth of 175% over 12 years, while businesses with a low positive impact show only 70% growth. Sustainability is now an integral part of a company’s reputation.

Delivery is the final moment in the purchase experience a customer has with a retailer, and how a business behaves at this stage will have a lasting impression. So, when considered holistically, investing in, and proudly promoting, a truly sustainable delivery service has the potential to add value across total experience – from retaining and inspiring employees, to  attracting and converting customers.