Social issues become a new logistics KPI

The logistics sector is full of acronyms, from 3PL and LTL to TMS and AMR. Those terms have been around for years, offering a helpful shorthand for concepts like third-party logistics, less than truckload, transportation management system, and autonomous mobile robot.

But supply chain professionals have lately added an array of new abbreviations that seem to apply more to companies’ values and behavior than to the nuts and bolts of moving freight. Press releases and quarterly earnings reports are now peppered with acronyms like ESG, DEI, and CSR.

Although these terms are not brand new, they rarely come up in business conversations. After all, logistics and supply chain professionals might ask, when your basic task is to move a load from Point A to Point B, who has time to discuss things like environmental, social, and corporate governance issues (ESG); diversity, equity, and inclusion (DEI); or corporate social responsibility (CSR)?

And in a year like 2020, companies throughout the logistics sector certainly had their plates full, under pressure to boost earnings, cut costs, and find workers, and do it all while keeping up with the next-day delivery clock popularized by Amazon.

With logistics practitioners sidelined by those business realities, the adoption of policies that focus on ESG, DEI, or CSR has generally been driven by public relations departments looking to buff up the corporate image. For instance, a retailer might boast about using recyclable packaging, a trucking fleet might donate to a tree-planting campaign to combat climate change, or a freight forwarder might tout the number of women managers in its ranks.

But judging by recent trends in business jargon, the intense events of 2020 may have served to convince corporate leaders that environmental and social issues deserve a more prominent role in their decision-making.

Those events seemed to come in three layers, beginning with a historic year for weather, featuring multiple hurricanes, droughts in the Western U.S., California wildfires, and a Texas deep-freeze. At the same time, the Covid-19 crisis revealed the plight of “essential workers,” who continued reporting for shifts at their hourly-wage jobs while many white-collar professionals converted to work-from-home status. And thirdly, the U.S. saw months of political upheaval, sparked by the growing racial justice movement in the wake of George Floyd’s killing by Minneapolis police and compounded by the violent storming of the U.S. Capitol.

As those three waves washed over the nation and changed peoples’ lives, we witnessed a growing number of logistics companies take up the causes of ESG, DEI, and CSR.

We saw freight-forwarding powerhouses like Kuehne + Nagel commit to carbon-neutral less-than-containerload shipments. We saw major players like the Port of Los Angeles back its minority dockworkers as they called for a nine-minute work stoppage to honor George Floyd. We saw companies like Ryder System Inc. offer employees paid time off to get their coronavirus vaccine. We saw business groups like the Retail Industry Leaders Association (RILA) condemn the actions of the Washington, D.C., rioters and demand a return to civil discourse.

The question now is whether those trends will maintain their momentum. Early signs indicate they might. For example, analysts say that global manufacturers have been thinking twice about returning to Chinese factories after pandemic shutdowns, citing not tariff or virus concerns but rather the Chinese government’s brutal treatment of minority populations like the Uighurs.

Adopting more sustainable and inclusive practices is also good for business, especially in a sector with a chronic labor shortage. Recent surveys show that Gen Y and Gen Z workers have a fierce social conscience and won’t even apply for jobs at a company that doesn’t “walk the walk” with its ESG, DEI, and CSR policies.

If so, those are three more acronyms we’ll need to track as KPIs—sorry, I mean key performance indicators—in the business of logistics. And that would be a fitting legacy to the wild year of 2020.