By: Nicholas Stoll
In this blog, I will review the interaction third party logistics (3PLs) have with the sustainability of supply chains in the current business environment.
Sustainability is an increasingly important topic in almost all facets of running and managing a business. Companies are under increasing pressure from their customers to focus on issues threatening the environment, our current and future health and wellbeing, and their impact on their surroundings. Seeing this topic is of heightened importance in the current corporate landscape, it makes sense that the third parties that companies use also match their ideals [1].
Sustainability can be defined in many manners depending on the organization or person doing the defining. Some definitions include ideas like social impacts, to include diversity, equity, and inclusion into their idea of sustainability, but in order to keep this blog post focused and brief, I will focus primarily on the environmental side of 3PLs [4].
Why are 3PLs important when looking at companies’ environmental impact? Well, approximately 90% of domestic fortune 500 companies contract 3PLs to implement their transportation, storage, and other logistic needs. Companies do this for a variety of reasons like not wishing to invest the capital and resources necessary to manage the complex operations of logistical processes which could include constructing warehouses, buying trucks, hiring staff and much more. 3PLs are also specialized which leads to increased efficiency in their work due to their ability to scale and transition more rapidly than internal operations [5]. Now, with this high level of importance to many of the major businesses in the United States, what is the impact of the industry on the planet? The Environmental Protection Agency reports that passenger and freight transportation account for 28% of greenhouse gas emissions as of 2018. As international trade continues to expand in importance in our globally minded business world, these transportation emission number will continue to rise as well. Globally, freight accounts for more than 7% of greenhouse gas emissions [6].
3PLs, as mentioned above, are facing new requirements from their partners to meet certain standards in order to do business with these sustainably focused companies. In order to meet these standards, collaboration is required to meet the goals of both 3PL and business. This collaboration takes many forms, some of which include goal setting, joint projects, capital investments, “as-is” to “to-be” targeted improvement, and others. Some of the most common goals take the form of carbon footprint/emission targets. These targets typically call for a reduction of carbon emissions by some specified date. For example, Target has set the goal of being a “net zero enterprise by 2040 to reduce climate impacts across [their] operations and supply chain.” They even highlight that while they “don’t own or operate the fleets that carry our freight, [they] work closely with carriers, vendors and other partners to help put more efficient processes in place.” In order to meet their sustainability goals, companies like Target are taking measures like requesting carbon footprint assessments from their partners (3PLs) and joining organizations like the EPA’s SmartWay Transportation Partnership [7].
Some of the ways that 3PLs are looking at meeting these new partner objectives are by looking into new technologies. These technologies include electric vehicles which could greatly limit the required fossil fuels for freight transport. Also, eco-friendly packaging and green, energy efficient warehouses are gaining more focus as land fill waste and electricity usage gain scrutiny. Some 3PLs are already taking steps in this direction by using more recyclable materials like carboards in packaging and by updating heating, lighting, and other systems in their warehouses in order to improve energy efficiency [2]. Simple changes like better system management also have big impacts as 3PLs can more efficiently fill trucks, planes, and other transports leading to less needed product movement [3].
Overall, 3PLs are a major player in the ever-developing global business landscape. Their sustainability efforts will undoubtedly impact the future environmental impact of supply chains throughout the world. Through increased pressure from consumers and governmental organizations along with partnership with sustainably minded corporations these organizations can dramatically change the current environmental footprint of the transportation landscape.
References:
[1] https://prismlogistics.com/2020/11/16/sustainability-trends-third-party-logistics-3pl-2020/
[2] https://www.3plcentral.com/blog/how-3pl-warehouses-can-go-green
[3] https://dclcorp.com/blog/supply-chain/3pl-sustainable-supply-chain/
[4] https://www.supplychainquarterly.com/articles/5327-sustainability-esg-and-3pl-customer-relationships
[6] https://www.freightwaves.com/news/how-much-carbon-does-the-transportation-industry-emit-annually
[7] https://corporate.target.com/sustainability-ESG/environment/sustainable-operations
