How To Reduce Impact & Create A Positive Footprint In Ecommerce

 

 

Ladies and gentlemen, please welcome Josh Pitman, Priory Direct managing director. This session highlights the scale of the e-commerce delivery network and shows retailers how to minimise the impacts of their supply chains on the planet. Welcome, Josh. 

 

Thank you very much, and thanks to everyone who's made it over to see me speak today. I'm going to talk a little bit about sustainability and specifically in the e-commerce sector. I think it's something that we all need to be aware of, and it's a very fast-growing industry, as I hope to highlight to you. I think you're probably all aware, but I want to talk to you about the impact of that and what strategies are available to potentially mitigate some of that and reduce the impact of that fast-growing industry. So, firstly, this is me. I'm the managing director at Priory Direct. I studied sports science at Aber Uni, and I am interested in sustainability, social consciousness, packaging, and the power of business for good. I spend a lot of time outside with my hobbies, which is why it was natural for me to start focusing on sustainability in my career. Um, Priory Direct is a sustainable packaging retailer in the UK. We supply 21,000 businesses with their packaging. We're a certified B Corp, we're carbon neutral with scope one and two emissions being offset, and we're also focusing on being net neutral by 2030, which is a little bit more complex, takes into account your scope three emissions, total life cycle of your products. We've helped over 6,000 retailers in the UK reduce the footprint of their operations and supply chains, and we've protected over 5 million square metres of rainforest in the last 12 months and given £40,000 to our charity partners. I'll talk a little bit more about that because they're part of the mitigation strategies that I really recommend people consider. So, I've always been told to tell people what I'm speaking about and who I'm from and all of that. So firstly, introduce myself, introduce Priory Direct, tell people what I'm going to say. So, I'm going to tell you how big the UK e-commerce market is because I think a lot of people aren't aware just how big that industry is.

 

I'm also going to talk to you about what the supply chain behind that industry is, how those goods reach us, and just how much waste is being generated in that space. And then I'm going to ask the question, is it sustainable? You might be able to guess the answer to that, and I'm going to talk through the opportunities to improve that. I think all retailers of all kinds can embrace in one way or another, and there is a little space at the end for questions if I don't rush through this too slowly. So just if there's anything you want to ask, please prepare it, and I'll be really happy to take any open questions.

 

So, firstly, how big is the UK e-commerce market? And I think what we'd normally do at this point, I tend to ask people to put their hands up and put them down depending on how long ago it was that they'd ordered online. We normally don't get past six months with any hands still up in the audience. And the truth is that 82% of the UK population ordered at least one product online in 2021. So I might not be telling you anything that's too new because you're probably in that 82%, but the truth is it's a very, very high adoption rate. It's much, much higher than many of the other countries in the EU and the world, and it's very likely to be here to stay because e-commerce has a very, very good retention rate. It's super easy and convenient for goods to be ordered online and to arrive with us. So once you've tried that model, it tends to take more of your share of retail wallet, and it tends to get customers to buy again.

 

So just how that looks in terms of revenue is quite a frightening statistic, really. In 2019, there were £693 billion of e-commerce and digital sales in the UK. That's a very big number, £693 billion worth of online and digital retail. So it's no longer a small industry; the speed of growth is very, very rapid, and it's a large amount of goods and revenue flowing in the UK digitally.

 

In terms of market size in the UK, the trend line there is actual year-on-year growth. So as many of you, if you're retailers, will know, we've had some slower times in 2021 and 2022, but the truth is that growth of market share in e-commerce has continued to grow even through those lower trading periods. What percentage of retail do you think e-commerce represents in the UK right now? So I've given you some reasonably big numbers, but I think for me, it was certainly surprising as to how much that actually represents in terms of UK retail. So again, I'd love to ask people normally what they think is the answer here, and typically people will fall between the 40 and 60 number. Well, the truth is, the highest it's ever been was during the pandemic, which was 38% of total UK retail going through e-commerce. As of October 2022, it's only 26% of retail in the UK going through e-commerce. The reason I think that's very interesting is because if 82% of the population have tried it once and it has a very high adoption rate and repeat purchase rate, then this number is set to grow. It's an opportunity for retailers to grow their reach and their audiences and revenues, but it's also potentially a very big logistical and sustainability challenge.

 

Talking to that point, the UK e-commerce market's expected compound annual growth rate, the percentage growth it's going to achieve every year from now to 2027, is at 21.76%. That gives a predicted industry turnover for e-commerce of £3.347 trillion by 2027. So it's easy to understand that any of the sustainability challenges associated with this market now are likely to get significantly larger over the next five-year period.

 

So I wanted to show everyone a little bit about how those goods get to us because I think as retailers and consumers, we're very used to using the infrastructure that's around us, and as consumers, we're very, very used to clicking the buy button and then a delivery driver arriving at some point at our front door to deliver those goods, normally something we like to moan about. But the size and scale of the operations behind this in the UK are quite frightening.

 

So in the UK, we actually shifted around four and a half billion parcels in 2021, and that is 12 million parcels a day. It doesn't actually flow linearly like that; you know that the Christmas period is when a lot of that happens. But it's 12 million parcels a day on average. That's not an easy number to imagine. And the Courier Express and Parcels Market is set to grow significantly, 9% in volume per year, by 2027, giving a projected UK parcels in 2027 of 6.2 billion or 16 million parcels a day. A very, very significant number of goods moving around and very, very different to traditional retail. It's a lot of final mile single point of delivery journeys with a lot of additional packaging and protection used in that space. So it's a really significant change to our retail mix and specifically to our logistics and supply chain.

 

It's not just the UK that's set to grow; the rest of Europe is exhibiting very high growth rates, and there are some really significant numbers. But given the size of the economies we're talking about here, this gives you an idea of where we are on our e-commerce adoption curve versus some of the other countries in Europe. We have a very, very significantly advanced e-commerce market, and it's really trending in a strong direction.

 

Incidentally, the value in billions of the Courier Express Parcels Market is currently around £33 billion, and it's set to grow to around £42 billion in 2027.

 

The other sort of key thing to understand about how goods move around and how we expect those goods to reach us is the service that they're delivered to us within. And in the UK, in particular, the expectation is very much trending towards next-day delivery, and obviously that has some significant logistical challenges with it. There's a high pressure to move those goods at pace, which leads to some behaviours which are a bit less sustainable, like centralised sorting and multiple journeys for parcels, which we'll explore in a minute.

 

So currently in the UK, we're roughly 62 million parcels going same day, with 1.2 billion parcels going next day and 3.1 billion parcels going on a standard service. The biggest forecasted area of growth is next day, with that ending between 2 and 2.7 billion parcels, and standard service is set to grow, but just not as much as next day. Same day, incidentally, is something that we can see a trend for, and people are predicting more trend for, but they don't see it replacing next day delivery service with convenient windows for a lot of sectors. The truth is, there's not many times that you really need an item the very same day that you buy it, specifically with the sort of purchases that are predominantly exhibitive within e-commerce.

 

Similar profiles across France and Spain as well. France has a much higher reduction of standard, and that's because they have a very high level of locker box infrastructure, which is an in really sustainable model that I'll talk about shortly. Instead of one courier vehicle doing delivery journeys to hundreds of households, it can do hundreds of households and deliveries journeys to one point, and those can be powered by public transport and feet, which is a much more sustainable way to do that final mile delivery piece. So France is really setting a great standard there.

 

The other thing that has a sort of significant bearing on this conversation is where those goods come from and how they reach you. What's interesting is at the minute, we very much fulfil from warehouses in the UK. But with the enabling of data through the internet and through modern platforms, a lot of retailers are now starting to consider using store inventory for fulfilment and giving live access to that inventory to consumers online who would like to be able to see if that product is in their local store and click and collect it, possibly on a same-day basis, and also not potentially taking on the overhead of a large logistics network when small retailers can ship from store, use their own inventory, and take advantage of that disparate model, which is really a software-enabled change. So we do expect to see some fairly significant growth in the front store fulfilment operations.

 

Within the UK at the minute, you know, looking between 11 million parcels delivered like that, going up to sort of 260 million parcels going same day, but again, next day is the highest-growing sector.

 

It's not always just one journey with e-commerce, and I think we've all probably experienced receiving something online that didn't suit our needs or needed a return. In some industries, those return rates are very high. So in apparel, both men's and women's clothing, ranging between 14 and 23 percent of all of those journeys require a second journey through the courier network, a redelivery to that retailer, and potentially another order going out to that customer. So even though these statistics are very large, there's also a significant proportion of returns, and it's one of the big challenges in e-commerce: How do we do that in-store trying experience? How do we make sure that the consumer is getting the right item? And how do we, as consumers, shop with confidence without having a service to allow us return options?

 

So yeah, it's another significant challenge in the market, and specifically, you know, a big challenge from a sustainability perspective. There are also four other common reasons that I'm sure all of us have experienced in one way or another for why there's another journey. So failed first delivery, redelivery required, failed first delivery, collection by customer, that's you going out in your vehicle or your transport to make another delivery. Late delivery, so not delivered within the expected time window, or order lost. And the cost of failed first-time, on-time, and every-time delivery for all three groups is more than £1.6 billion in 2018. So when this system goes wrong, it's such a large system that the footprint of that is quite significant.

 

Another thing a lot of people aren't really aware of is that most parcels, 12 million a day, are doing a journey something like this: They're collected from you or from the vendor, they're taken to a local hub, and then they're shunted from that local hub to a central super hub, where near quite a lot of them now, because we're in the middle of the country. And they're then shunted from that super hub back to a local hub, which then goes from a local hub to a delivery depot, and then from the delivery depot to you on its final mile journey. So the mileage of the average parcel in e-commerce is actually quite surprising. The only freight that doesn't do this is freight within the same postcode, depending on the courier. So if you're local to me, you'd be in a TN postcode. Those local depots will only remove the freight for their own delivery vehicles. Even if you're in the depot next door, you're going to Midlands, you're coming back down, you're going on multiple vehicles. So there's an awful lot of personal mileage. This is incidentally a very efficient way to handle parcels at scale, but with AI and sorting technology, this could easily be significantly changed within the UK.

 

I actually included this because I don't know if any of you've ever seen a super hub. I wonder if the gents could help me play this because I'm not sure what button to hit. This is the DPD superhub five at Hinckley point. It sorts 73,000 parcels an hour. It's a very, very large space and uses an awful lot of energy. But if you look at when we pan left and right, this is from a visit last year. It shows you just the scale and how many of these kinds of operations. So DPD have five of these in the UK, and that's only one courier. A lot of the other couriers have super hubs as well, and they're unbelievably impressive operations. But again, when you click that buy button and it ends up at your door, you're probably not aware that a parcel has been on this journey, been handled in a facility like this, and an awful lot of energy is used to move that parcel around and get it to you. So is it all sustainable?

 

Um, the most tempting answer is just no, but the truth is it's probably a little bit worse, which is that the data available on this sector is really very low and probably too low to draw any amazingly insightful conclusions. But there are some stats that are pretty frightening, which is that we've got 4.1 million licensed vans in the UK in 2019, driving 55.5 billion miles a year. Less than two percent of those are ultra-low emission vehicles as of 2022, so there's an awful long way to go before that's decarbonized. And the actual sub footprint of logistics within the UK and transport is now one of the highest-emitting sectors. As you can see, the blue line and the dip in 2020 wasn't because we've revolutionised our transport sector; it's because of the reduction in transport for a lot of reasons because of COVID-19. So it's a really, really significant challenge. And then, I'm sorry, this is becoming really depressing. I don't want to be. There is a positive at the end, but also, what about the materials, you know? There's an awful lot of packaging waste. I think if any of you have walked around your local area during the last couple of years, you'll see those recycling bins. At least they are recycling bins, but you'll see there's an awful lot of waste being generated by this industry. And again, it's another great opportunity to improve.

 

One significant challenge, and this is something I'd love you all to take away from here as retailers, is to stop using plastic because the infrastructure to recycle it just isn't there yet. It can have a potential to be a good regenerative and reusable material, but at the minute, our infrastructure just isn't there. And specifically when it comes to this, so delivery increases the demand for flexible plastic. And effectively, what we're talking about here is LDPE shrink and stretch films. So that's your poly mailers and your pallet wrap and your flexible soft plastics. 1.5 megatons of that was produced by the consumer sector in 2019. And okay, so is this a problem? We all put our plastic in the recycling bin, and you know just how good is the journey downstream of that? Well, the UK actually on a global stage is pretty good here. So we're achieving something around 50 percent plastic recycling rate in 2020. A lot of that's exported, and the level of responsibility and accountability in that space is interesting. And so we have to question some of these statistics, but the key thing that I want to talk about is LDPE and films. So in the UK in 2019, we generated 665,000 tons of this kind of waste, and the total recycling capacity for that is only 220,000 tons, and of which only five percent is available for the municipal market. So there's only 10,000 tons of recycling available for LDPE from the municipal space, so your poly mailers, your wraps, and films are not being recycled and they're not being recycled anytime soon. So the one thing you can do very quickly is to move away from those materials.

 

Hopefully, some more positive news, but 71 percent of cardboard is recycled in the UK. We're really, really high adopters of paper and pulp recycling. We actually have capacity for 95 percent of all cardboard to be recycled based upon improved consumer adoption. One of the challenges here as well is the cleanliness of cardboard recovery within consumer spaces is worse than in retail space. You know, wet cardboard boxes and curbside collections contaminated with things that people have misunderstood to go in there, it does reduce the recovery rate, but we're ready and able to cope with these materials. And if you can do one thing in your operations in terms of material waste, then I would encourage you to move to paper and cardboard because it's readily recycled in the UK. It can have a repeat journey, a repeat life, and stop the use of virgin materials.

 

So how can you reduce your impact and deliver sustainably? Because hopefully the doom and gloom out a bit, we can give you some ideas as to where you can improve, and what you might be able to do as a retailer. So I've tried to give five focus areas: one is measure your impact, two is choose low carbon delivery, three minimise mileage, four minimise waste, and five build your positive footprint. So I've done a slide for each of these to help us try and come up with some ideas and share some insight as to how you might be able to improve in these areas. First of all, what's measured is managed. I love that quote, and the truth is that until as a business you have a handle on just what your emissions and footprint are, you won't know if the improvements you're making are really affecting the output of your operation. I don't think this means don't start improving until you've measured, but I do think for you to tangibly know that you're doing the right thing, having a framework of measurement is so, so important.

 

There are loads and loads of service providers now providing life cycle assessments for your products and your business. We offer a carbon footprint per packaging item and a carbon footprint audit of people's supply chain is something that we do because we want to be able to say to retailers after we've worked with them, "This is how much we've reduced your impact." Doesn't need to be us, anyone can do this, and really, I'd encourage you to seek service providers or frameworks that you can use. There are also consultancies in specific area experts. It doesn't need to cost a huge amount of money, mostly it'll just need time. Um, and you can already start to estimate your carbon footprint and your waste stream. From there, you can create a roadmap to improve that creates a great consumer story. We work with lots of retailers who are terrified now because of greenwashing to say anything about their operation and how they're improving because it's not perfect where it is now. But actually, we encourage people to say, "Look, we know there are 30 tons of single-use plastic in operation now. We've got that fact. This is how we're going to address it. This is our roadmap." And that creates a great positive PR story all the way along and gives you a good impetus to make those changes within your operation. So get measuring, understand what your waste and your emissions are, and again, you can leverage your suppliers' data here and put pressure up and downstream of your operation to try and get good information. But if you don't try, you won't make any progress there.

 

Oh, I did say sorry there, but you're also likely to help you prepare for the legislation that is very likely to be introduced along the journey towards net neutrality in 2050. The government is pushing for net neutrality, Net Zero by 2015. If you think as businesses that isn't going to come home to roost, then, sorry, that's definitely going to come home to the roost, and you're going to need to be accountable, responsible, and aware of your emissions and footprints. So why wait to be told? If you're prepared and you understand your emissions and you've got a good data collection framework there, you'll be in a strong position when that comes.

 

Choose low carbon delivery. There are lots of providers. DPD offers carbon-neutral delivery. Um, you can also use carriage aggregators like Stuart who use AI to help you choose a better routing for your parcels. And most of these things, if you're using a Shopify platform or a standard out-of-the-box ERP or accounts package, they have very open integrations, and just by integrating them into your eCommerce offering, you can get a whole suite of more sustainable delivery choices without you really having to do a whole load of the hard legwork. Offer click and collect and locker box services. Again, you can use an aggregator like Stuart or MetaPack. They will allow you to integrate with these carriers, but specifically in urban areas, locker boxes are fantastic, and they're really popular with consumers who live in urban areas. So I would consider that as a really good option, and again, you can tell a great story as to the carbon footprint you might be saving by offering that option.

 

Encourage adoption of electric vehicles throughout the supply chain and encourage the use of human-powered delivery and collection. You know, they've got these e-bikes now in cities being really becoming very popular. And also, as I say, collect from store, human power delivery is a really powerful antidote to carbon-heavy delivery options.

 

Minimise mileage. It's pretty simple, but the truth is the carbon footprint of your packaging and materials pale into insignificance when it comes to the mileage associated with moving your products and your packaging around. So use your store inventory. If you've got a store, use it to fulfil. It can be closer to the customer because of click and collect. Reduce final mile travel with locker and collection points. I really like that one. I don't know if you guys noticed, but it's a really good option. Reduce supply chain mileage for products and packaging. Can you make your manufacturer more local? Can you consolidate your sorting, ensure full vehicles are supplying your business? Consider your own mileage. We're all able to remote work now. We all have access to public transport and the cycle-to-work schemes are easy to get involved in. So all of these things can make a difference. And again, the logistical footprint of your business and people is the biggest opportunity to reduce your impact.

 

Improve delivery tracking accuracy and in-flight rescheduling. Again, wasted journeys, non-successful deliveries, and needing to go again is easy to avoid now with good technology. Some providers are better than others here, but you can reschedule your hour window, stop that unnecessary delivery going out, and improve online user experience to minimise returns and wasted journeys. If you're a power retailer, there are so many size widgets now. Compare your sizes to other well-known brands in the market. Help people find the right fit for items so that you don't encourage that downstream return. It doesn't need to be a logistical solution, just making sure you're helping people find the right product is a really good and powerful solution to avoid those wasted journeys. And then right-size your packaging. This is something that's obviously very dear to us, but the amount of shipped air that's in the supply chain at the minute and over-packing, over-padding, it has a hugely significant footprint, and not because of the material, but because of the wasted air. The percentage utilisation of vehicles in that supply chain. If you're shipping boxes and items that are far too large for the packet for the items you're sending, you're adding wasted space to that supply chain, which means more vehicles on the road and more vehicles required to deliver those products. So right-sizing your packaging is great for your wallet and great for the planet. So really encourage you to consider rationalising and getting your packaging right for your items. I think all of us will have bought with a certain very large retailer in the UK and maybe received something in a very large packet that it might not have needed to be in.

 

Minimise waste. I think this is a core sustainability principle regardless of how you look at it, but focus on the adoption of right-size packaging. I've mentioned that. Choose materials that are readily recyclable. I've really, I hope, made it very clear that those plastics aren't being recycled. So if you can choose a material that's more readily recyclable, it will help your consumers handle their materials responsibly. So with a couple of retailers we work with, like Vivo Barefoot, we've put a QR code on the packaging design which shows people where their nearest recycling point is and what their local policy for recycling that item is. Again, you can use technology to enable good handling of your materials, and that sentiment, that consumer experience, is really, really good for your brand in the current times.

 

Push your manufacturers and suppliers to minimise their packaging. We did a fantastic project with the Mayborn Group who own Tommy Tippee and Grow Bag, and they reduced the inbound bulk packaging before the items were going out. It was unnecessary. There was a lot of packaging waste that can be removed by working with your supply chain partners and considering how those items are coming to you before they then go to your consumers.

 

Audit your supply chain and operation for waste materials. As I said, measure what's measured is managed. And then, stop wasting energy is an easy one as well. So you can choose green energy providers. There's not a huge green premium there. And adopt energy-saving technology and practices. Simple things like your sleep cycles on your computers, stuff like this, it all adds up. So again, if you audit it and as a business take a careful responsibility about what you're doing there, it all adds up.

 

And then, build your positive footprint. So this is something I'm really passionate about. I think everybody should have a CSR, a corporate social responsibility, part of their business. The truth is, businesses are here to stay. An awful lot of money flows through them, and we, as business owners and operators and services, really want that to stay. But for it to be sustainable, we have to focus on creating a positive footprint within our business. We need to make sure that our businesses are triple bottom line, that's good for people, good for the planet, and profitable, good for the economy.

 

So, where are the CSR and ESG on your roadmap? Where are your opportunities? And there are lots of ways that everyone can incorporate this into their business. So, I can just share with you what we've done, and hopefully, it gives you some ideas. So, we created our Priority Elements ranges. They're sold in partnership with 1% for the Planet. That means 1% of all revenue through those products goes to environmental charities. Really easy, very low friction on us as a business. It gives a wonderful marker on those packaging which our customers really like, and it feels great to be supporting those kind of operations.

 

Into your business. So how can you build it into your business? Well, we offer to protect 1,000 metres of rainforest with every order you place with us. A lot of people are doing tree planting. Is there a service relevant to your product that you can build into your buying journey? They're really, really popular with consumers. They have a fantastic positive footprint. So why not put some budget aside to doing that? Take it from your marketing budget. You might find that it's actually more compelling to your customers than advertising to them when they're trying to watch YouTube videos.

 

Can you repurpose your loyalty scheme to generate charity donations? So we introduced charity rewards. One percent back of everything you spend at Priory Direct you could use as a discount. That was our loyalty scheme. But we introduced four charity partners and we offered our customers the ability to give that to charity in the checkout instead of just redeeming it as a discount. Some still redeem it as a discount, but an awful lot of that revenue now flows to charity. It was a zero-cost thing to us because we had our loyalty scheme already. It's a great idea that hopefully some of you might be able to take use of.

 

And can you align with a future-proof standard to build sustainability into your business? So, we're a certified B Corp. We think that's the gold standard of being a triple bottom line business. And I hope some of you will have heard of it, but there are now a thousand B Corps in the UK, and it really builds sustainability and a triple bottom line model into your governance. And if you're looking for ideas as to how to start this journey, the B Impact Assessment, which is if you just Google B Impact Assessment, it's a free tool that you can go into, and it has a lot of questions in there that will really make you think and really give you lots of ideas of how you might be able to improve your policies, how you might be able to improve your operation, etc. So, I'd really encourage you guys to lean into that because it will give you a rich resource and lots and lots of ideas.

 

Through these, we've protected over 5 million square metres of rainforest in the last 12 months and raised £40,000 for our charity partners. I'm really proud of that, and I think it's really been a zero-cost exercise for us as a business. So how can you create a triple bottom line in your business is something that I'd like you to think about after this conversation.

 

So, I think I've got through that reasonably quickly. There's a lot of data in there, so sorry for bombarding you with that. Um, if anyone has any questions, I've got another 10 minutes. I'm very happy to answer them. Um, and I'd really like to hear them, so thank you very much.

 

I've smashed it!

 

And if anyone would like to ask me, then if you take my email address at the top there and scan the QR code, that's how you can reach out to us. Thank you very much all for your time.