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Study Finds Well-Planned Logistics Real Estate and E-Commerce Can Lower Carbon Footprint of Retail

Prologis, MIT, San Francisco, Seattle
Courtesy of Prologis

By Meghan Hall

Layers of often unnecessary packaging, the fleets of cars, gas consumption: For some, e-commerce and logistics appear as industries that would be immediately deemed as incredibly sustainable or environmentally-friendly. However, a recent study released as a collaboration between MIT and one of the world’s biggest investors in logistics real estate, Prologis, indicates that online shopping can healthily reduce retail’s carbon footprint.

“Sustainability is incredibly important to Prologis and has been part of the company culture for some time. Consumption is really the backbone of our business and e-commerce has been a growing part of that consumption for some time now,” explained Prologis’ Head of Research Melinda McLaughlin. “We wanted to know how much the share shift in the way people were shopping was impacting the overall carbon footprint of supply chains and how to be a part of moving toward a more environmentally friendly future.”

The report’s findings can be particularly relevent given the rapid explosion of e-commerce not only just over the past few years, but 2020 alone. Prologis and MIT indicate that throughout last year, e-commerce remained at peak levels, while U.S. online sales grew upwards of 50 percent year-over-year. Additionally, package deliveries are expected to grow 80 percent over the next decade.

“The pandemic, by shutting down all of those traditional retail options and making e-commerce the much safer option, really pulled forward about five years of e-commerce adoption into a single year,” said McLaughlin. “…Because of the lockdown and the dramatic way that shifted consumer habits overnight, we saw a lot of that growth in 2020.”

E-commerce in the United States also accounted for 20 percent of overall retail sales last season, six percentage points higher than in 2019. 

However, MIT and Prologis found that carbon emissions from online shopping are 36 percent lower than those produced by in-store shopping—a number somewhat unexpected by the research team for its size—and e-commerce was more sustainable than in-person retail in 75 percent of the simulations the study ran. The study also found that the share shift to e-commerce can result in about 2.4 percent fewer emissions per package.

“E-commerce companies use innovation as well as the benefits of scale to improve transportation efficiency,” stated McLaughlin. “That has always been aligned with fewer carbon emissions. [However], the magnitude did surprise me a bit. That is quite a large number.”

Built out logistics networks, which include urban fulfillment centers, can reduce transportation-related emissions by 50 percent, or 10 percent fewer emissions per package. More than 100 vehicle car trips to retailers can be replaced by a single van, notes the report.

The results may be surprising for some, especially those who presume e-commerce would have the opposite impact on emissions. That misconception, according to McLaughlin, is part of the reason Prologis and MIT embarked on the study.

“We knew that this was perception that was out there and I really think it stems from what we as consumers notice, and what we don’t,” said McLaughlin. “…[We all] definitely notice the boxes and the delivery vans…E-commerce is just more noticeable in that way.”

McLaughlin added, “Although we focus on that, it doesn’t tell the whole tale about what’s happening underneath the surface.”

Prologis is already employing several strategies to reduce emissions, and believes such approaches will become increasingly popular. Urban fulfillment centers, which keeps blocks of packages aggregated on larger vehicles until the very last stage of shipping, can prove critical in reducing individual car trips and emissions. Deliveries issued from urban fulfillment centers—rather than outside the urban core—places goods as close as possible to the end consumer and maximizes delivery fleet load.

Consolidating deliveries on a circular route can reduce emissions by 90 percent. Further reductions in emissions can be achieved through delivery vehicle electrification, which can reduce emissions by about 27 percent. New vehicle models have a range of about 200 miles and in the future could handle 90 percent of last-mile deliveries. Advanced analytics and IoT-based solutions including load pooling and dynamic rerouting can reduce emissions by another 10 percent, unit costs by 30 percent and traffic congestion by 30 percent.

In the long-run, effective supply chains can greatly decrease emissions and increase sustainability when planned well. The continued adoption of e-commerce, as well as the benefits of initiatives such as fleet electrification and last-mile logistics real estate will provide incentives for the industry as it continues to innovate.

“We’ve always been focused on development and opportunity in logistics real estate that is going to work for the future of supply chains. Sustainability is an integral part of that future,” said McLaughlin. “…So, Prologis as a company is focused on making sure customers have this logistics real estate…It’s a challenge because these are some of the most difficult environments in which to create–especially to construct—new logistics real estate. But it has a huge payoff not just for the consumers but for the environment.”