This is part 2 of a 2-part series exploring strategies that retailers, manufacturers and their logistics service providers came employ to build operations that engage and retain staff and align with corporate sustainability initiatives.
In part 1, we discussed the labor challenges facing logistics operations and offered strategies to drive deeper engagement. In part 2, we’ll explore the role both labor, warehouse, and transportation operations play aligning to corporate ESG goals.
What is ESG?
Environmental, Social and Governance (ESG) have been a top-of-mind topic for C-suite executives for more than a decade. Beyond driving shareholder value, having a well-defined commitment to ESG has become a critical investment criterion for businesses, impacting overall financial performance. A comprehensive ESG strategy affects all areas of the business, from HR, to Operations, to Finance, Marketing, etc. In many cases, a focus on aspects of ESG can deliver quantifiable results such as cost savings.
Applying ESG concepts to logistics can have a significant impact on waste reduction and savings as well as support broader social and governance initiatives.
Why is it important?
Carbon Click highlighted the rise of “responsible investment”. Investors no longer simply review a business' financials, but also look deeply into the company's level of dedication to ESG strategies. ESG can be an important criterion for companies exploring outside investment.
Forbes noted that for mature businesses endeavoring to improve their brand, an ESG commitment can have a positive impact on the perception of the brand and ultimately the bottom line.
Supply chain operations have historically been paper and labor intensive. With multi-part forms, packing slips, check in and receiving documents, new labels applied at each step in the process, etc, moving to a more integrated, digitized process can reduce costs and eliminate unnecessary paper.
Paper is costly, with some estimates that American corporations spend over $120 billion on printed forms, and contributes to a high carbon footprint from production to transport to printing to disposal.
While it may be impossible to eliminate paper from the supply chain, strategic reuse can dramatically reduce the quantity required. One example would be the use of a single adhesive label applied upstream in the supply chain. By transmitting the label data via ASN from the supplier, across the supply chain, to the end delivery location, the paper savings can be multiplied across every node. The added benefit is improved inventory accuracy, pick accuracy and traceability, along with deeper vendor/customer collaboration, something many businesses are striving towards.
The use of advanced automation is the warehouse is becoming more common. Static automation reduces square footage requirements and improves pick density. Electric powered, intelligent robots operating on efficient paths reduce the building’s carbon footprint.
With fuel costs increasing dramatically, improving the efficiency of the movement of fuel powered equipment such as forklifts can deliver both cost savings and CO2 reduction. By efficiently managing and directing assets through the facility, over time, miles of unnecessary travel can be eliminated.
The outbound process of any warehouse includes functions such as picking, packing or loading of trailers for shipment. The higher the utilization of cartons reduces the amount of dunnage required. Trailer loading for the fewest number of trailers and the most efficient cube utilization yields benefits in waste reduction and fuel costs.
Because transportation operations are a primary contributor of emissions, eliminating miles and otherwise reducing the carbon footprint is the responsible thing for organizations to do. According to the U.S. Environmental Protection Agency, growing supply chain complexity means that in less than 20 years the freight transportation segment will produce more emissions than all other transportation segments combined, unless dramatic action is taken. Focusing on more sustainable operations isn’t just the right thing to do — it’s both the smart and profitable thing to do.
Advanced transportation technologies, enabled by AI, can help: based on pre-defined sustainability objectives, optimization engines make smart, environmentally responsible decisions that take trucks off the road, minimize paperwork, reduce waste and support other green initiatives. At the same time, these decisions improve profit margins by optimizing the physical assets productivity while reducing fuel and energy costs.
Creating an Equitable Work Environment
The warehouse is generally an area of diversity. Workers from all backgrounds come together as part of the supply chain process. As mentioned in part 1, engaging and retaining these workers is a critical success factor. From the “Social” component of ESG, fair wages in the warehouse would align to corporate strategies and may include rewards and incentives.
Rewarding warehouse workers through incentives shows a commitment to both the individual employee or a team, as well as alignment with Social criteria.
Transparency in Reporting
While the Governance aspect of ESG typically applies to financial reporting, the data generated and processes performed in logistics operations can contribute to and support corporate governance initiatives. For example, areas such as accurate inventory with a clear audit trail of approvals, controls over directed work in logistics operations, such as the handling and disposal of hazardous goods, and proper inventory rotation to prevent over-purchasing and waste, all contributing to Governance.
Leveraging engineered labor standards that apply quality as well as efficiency to logistics activities ensure adherence to company standards and policies.
Technology Plays a Role
Digital transformation of logistics is critical to aligning to corporate ESG goals. The reduction of paper and fuel usage through automated, optimized, and directed activities or robots, support of a diverse, incented workforce and data transparency, and operations adhering to company standards all contribute to an environmentally friendly operation.