Applying the Five Capitals Model to Sustainable Last-Mile Delivery

APPLYING THE FIVE CAPITALS MODEL TO SUSTAINABLE LAST-MILE DELIVERY

22nd October 2020

Should you be applying the Five Capitals Model by Forum for the Future?

When considering a sustainable business strategy, there are a variety of readily available methodologies and frameworks that can be applied. All can help in the successful delivery of your strategy, although some are more appropriate than others depending on the project. One model in particular that we love at Klere, is the Forum for the Future’s Five Capitals Model. The framework offers a simple, yet holistic approach to balancing any sustainability initiative.

Klere, along with a formalised consortium of cross-industry leaders, are undertaking a programme to transform to sustainable last-mile delivery in London, ahead of a potential UK wide rollout. The programme is an interesting example and enhances all the five capitals offering opportunities for greater enhancement in later phases. The consortium includes leading parcel carriers, retailers, software providers, and post-service providers, with interested observation from Government transport bodies.

Why is transformation necessary?

According to Statista, in 2019 the UK appeared to have the largest B2C e-commerce market in Europe, with UK Consumers spending €200b. The e-commerce market also forms a significant percentage of the overall British economy, with 7.94% of GDP attributable to online sales. These figures are expected to grow as more and more retailers go online₃. Adding to this, Covid has generated a 129% week on week growth in Europe and the UK, and research suggests that the pandemic will only further accelerate this growth. A positive knock-on effect is a booming UK Parcel industry – currently, the UK Parcel Market covers 2.6 billion parcels, and this number is growing by 10% each year_.

Growth in e-commerce is creating and compounding several economic, social and environmental issues, and it isn’t sustainable.

Ecommerce-related last-mile delivery substantially contributes to issues such as traffic congestion, air pollution, increased packaging to landfill, and urban noise pollution_,where pressure is already increasing due to urbanisation_.
Traffic congestion increases collisions and casualties. While the congestion charge has had a positive impact overall, there are opportunities to further reduce the hazardous effects of congestion.
Home deliveries, while convenient, can be challenging for consumers who are not at home to receive deliveries, resulting in redelivery inefficiencies and doorstep thefts.
The growth of e-commerce puts economic pressure on our high streets, with bricks and mortar retailers losing out to online sales. The demise of our high streets carries many negative social aspects, as well as financial.

What are we doing?

Borne out of the Mayor of London’s transport strategy, the ‘Delivering London’ initiative was first conceived by Transport for London in 2019. The aim is to transform last-mile delivery to the benefit of the environment, society and business. The key outcome will be a primary ‘out-of-home’ parcel delivery network, therefore substantially reducing home deliveries and the associated negative environmental, social, and economic impacts. Out-of-home will be promoted and incentivised as the default where possible. A reduction from the current 83% home delivery to 50% is the initial target.

The key deliverables of the programme for the initial London rollout will be:

An integrated technology solution for retailers, logistics companies, locker-hubs provider and consumers
A high-density network of carrier-agnostic physical lockers in convenient local locations, such as rail stations or high-streets, which will be accessed via an app-driven QR code (and then released for next consumer once collected)
Expansion of existing collection points on the high street PUDO (pick-up-drop-off, or ‘click and collect’) locations
Expansion of micro-depots and charging facilities to support the greening of the last-mile delivery fleet.

Home delivery will always be needed, but there are substantial benefits across the five capitals in targeting these reductions.

Applying the Five Capitals Model:

Natural Capital enhancement

Reduced use of fossil fuels combustion, as delivery journeys will be shorter to micro-hubs, using fewer petrol/diesel vans. Home deliveries from hubs can be fulfilled by EV and Pedal vehicles
A reduced need for re-deliveries due to customers being out, or parcels being stolen, will further reduce fossil fuel use
Lost and stolen parcels will not need to be reordered and replaced, reducing overall material consumption and landfill in products and packaging. This also creates sustainability benefits and natural capital enhancement across the supply chain

Human Capital enhancement

A reduction in exhaust emissions vehicles will positively contribute to improved health and drive down harmful, and increasingly fatal levels of air pollution
A reduced number of delivery vehicles and congestion-friendly scheduling on the roads is expected to contribute to a reduction in collisions and casualties
Switching to a default delivery from ‘home’ to ‘out-of-home’ is expected to encourage walking, promoting better health
The initiative will create opportunities for employment and upskilling, in design, implementation, and ongoing delivery of the service, e.g. maintaining micro-hubs and software solutions.
Creating secure, convenient locations will enhance consumer experience in parcel delivery. Reduced thefts and missed parcels, and the opportunity to collect multiple parcels, in a place convenient to the customer is anticipated to enhance satisfaction.
Promotion of travel to the high street by creating and expanding existing urban hubs may increase sales on the high street, creating further employment opportunities.

Social Capital enhancement

Promotion of travel to the high street by creating new, and expanding existing urban hubs can enhance communities, and avoid the impacts associated with erosion of the high street, such as a diminishing sense of social cohesion, loss of human interaction and the associated loneliness this can create

Manufactured Capital enhancement

The initiative will provide efficient and sustainable infrastructure in the locker network, and logistics vehicles, through the adoption of sustainable construction materials and techniques
Partnerships and collaboration in the supply chain will enhance infrastructure efficiency and shared value through the use of carrier-agnostic technology.

Financial Capital enhancement

A key component is that the economic business case considers all other capitals. Negative externalities are integrated, and opportunities for shared value are identified.
The wider economic impacts considered on opportunities for high street enhancements and employment.
While there are positive environmental and social impacts, there are also substantial cost efficiencies for business, due to tighter control of delivery, and reduced parcel delivery costs
Retailers, both B2C and D2C, can enhance brand value by participating in the sustainable scheme.

While applying the five capitals model addresses the above, we are always exploring ways that the Programme could further enhance these if the scope was widened. For example,

There are opportunities for consumers to return packaging, or used products to retailers via the network. Encouragement of these behaviours could further enhance natural capital by driving reuse or recycling of cardboard and product materials
Collaboration with retailers on standardisation and improvement in packaging design could encourage long term re-use, enhancing sustainable manufactured capital.

We will be sharing our learnings along the way. Get in touch if you’d like to talk to Klere about how we can help you shape and deliver your sustainability strategy.