36 LOGISTICS INFORMATION MANAGEMENT 6,3 What are the correct environmental policies of Smaller companies feel more under threat from cost companies and what actions are they taking? increases, partly because they have done least to meet legislation. European Community legislation is the main force influencing change. Only 19 per cent of companies have a specific "logistics- and-the-environment" policy and only 7 per cent have undertaken work in all of the five key areas surveyed. Going Green: However, most companies have undertaken some work. For these companies, this work is primarily driven by legislation and the desire to reduce costs. There is considerable uncertainty about the commercial benefits The Logistics of responding to many environmental concerns. A large proportion of companies therefore intend to wait until they are forced into action by legislation. Dilemma Under Pressure Extent of Environmental Pressure Companies are coming under increasing pressure to Jan Szymankiewicz accommodate environmental concerns in their business activities. The survey found that companies with larger turnovers are feeling the pressure more severely than Logistics Information Management, Vol. 6 No. 3, 1993, pp. 36-43 smaller companies. Companies operating in the industrial © MCB University Press, 0957-6053 and fast moving consumer goods (FMCG) sectors feel under greater pressure than those in other sectors. The results are shown in Tables I and II which demonstrate the differences by turnover and by type of business. The majority of companies, some 70 per cent of This survey of the members of The Institute of Logistics respondents, feel increased pressure. It is of interest to and Distribution Management was conducted by P-E note that, of all the sectors experiencing environmental International's logistics consultancy practice and its pressure, distribution companies are feeling it least. This environmental consultancy business, David Bellamy is shown in Table I. Associates. The vast majority of companies which responded want to introduce less environmentally harmful There are several reasons for the large difference between logistics activities. However, most feel constrained by the distribution companies and the rest. The first is that, as present business climate. service providers, these companies are principally concerned with responding to customers' contract In practical terms nearly all of the major contributions to requirements. Any environmental concerns are likely to environmental improvement already undertaken also have be those of the customers and will be influenced by the a very significant cost reduction element. Over two-thirds of those surveyed believe that environmental pressure will increase and nine out of ten companies expect to adopt environmentally aware policies within the nextfiveyears. Table I. Companies under Increasing Environmenta Pressures, by Size of Company Compared with industrial, retail and other companies, distribution companies feel under less pressure to respond Size of company Percentage of to environmental issues. Their main concern is to satisfy (£ millions) companies the environmental and contractual needs of their clients. Larger companies are responding more positively to 0-5 50 increased environmental pressure by introducing innovative 6-25 64 policies and training programmes. Waste and packaging 26-100 69 disposal is the major logistics environmental issue facing industry today. 101-250 84 >250 88 Over two-thirds of companies expect operating costs to All companies 70 increase as a result of addressing environmental issues. GOING GREEN: THE LOGISTICS DILEMMA 37 Table II. Companies under Increasing Environmental contractual arrangements. The second reason is that Pressures, by Type of Business distribution companies have been exposed to many of these environmental pressures for the last 20 years. Type of business Percentage of companies Responding to these issues is therefore seen as "business as usual" rather than as a pressure. Third, the distribution Food and drink 69 arena is highly competitive and price sensitive. There are Other FMCG 83 therefore few easy options when seeking environmentally Consumer durables 74 benign operations. Industrial 81 Distribution 53 Sources of Environmental Pressure All companies 70 The clearest single source of environmental pressure on company operations is European Community legislation. Nearly twice as many companies feel that EC legislation is the driving force rather than UK legislation. Table III. Sources of Environmental Pressure Respondents acknowledge that legislation is the main factor influencing their position on environmental matters Source Percentage of companies and that customer pressure, lobby group influences and EC legislation 78 employee concern rank well behind. Table III UK legislation 47 demonstrates the relative importance of the sources of environmental pressure. Customers 40 Pressure groups 20 Tables IV and V examine these sources of pressure and Employees 18 analyse them by company turnover and business sector. The picture they paint shows that company size and business sector have some bearing on the sources of pressure. For example, larger companies are more concerned with responding to pressures caused by EC Table IV. Sources of Environmental Pressure by Size legislation. Small companies on the other hand feel no of Company pressure at all from either their employees or lobby groups. Percentage of companies, by turnover (£ millions) Source 0-5 6-25 26-100 101-250 >250 Again it is intriguing that distribution operations rank lowest in terms of feeling pressure in three of the five areas. The EC legislation 58 74 86 79 82 differences were most pronounced in the lack of pressure UK legislation 33 49 43 47 59 from both customers and employers. This reflects the Customers 17 44 46 42 35 distribution dilemma. How can a highly cost-conscious and 21 32 18 service-responsive industry, which is largely road based Pressure groups 0 23 like distribution, respond to increasing environmental Employees 0 28 14 21 12 concerns? Table V. Sources of Environmental Pressure by Type of Business Percentage of companies, by type of business Source Food and drink Other FMCG Consumer Industrial Distribution EC legislation 76 83 84 73 77 UK legislation 38 44 58 54 43 Customers 48 39 37 46 30 Employees 10 22 32 27 7 Pressure groups 14 28 21 31 13 38 LOGISTICS INFORMATION MANAGEMENT 6,3 Key Issues Most companies acknowledged that eventually they would have to go green but that they would do so only as a result Respondents were asked to highlight what they feel are of legislation and that the process could take five years. the most important environmental issues facing them. Two We asked companies about the timescale over which they clear issues emerge. The first is the disposal of waste and expected to adopt less environmentally-damaging measures. packaging material which a quarter of respondents feel One-third of companies have already implemented some important. A quarter also feel that noise and emission levels environmental policies and they expect to continue with are the major issues challenging logistics operators. further policies in the next few years. By 1997, over 90 per cent of the surveyed companies anticipate having an Other issues are the public perception of road freight, environmental policy. We found that larger companies are the use of precious fuel resources and road more likely to have developed policies already. The few congestion. that believe that action will never be required tend to be small companies with turnovers under £5 million. Table VI shows the full results and their relative importance. The response of companies falls into two categories. There It is interesting to note that the cost of going green and is the corporate response, with the introduction of group the possibility of exploring alternative transport modes initiatives and there is the response at the operational level rank so low, particularly as 71 per cent of companies feel where procedures are introduced to make operations less that further environmental policies will increase costs (see environmentally harmful. The latter covers a wide area of Table VII). Legislation is likely to increase costs to all activity and includes transport, warehousing and companies and so will not adversely affect individual administration operations. companies, relative to their competitors. Thus, companies expect costs to increase but do not perceive it to be a major issue. Table VII. Companies Expecting Environmental Here again there are some differences between sectors. Policies to Increase Operating Costs, by Type Industrial companies feel costs will increase to a greater of Business extent than companies in consumer durables or distribution. Percentage Type of business of companies However, an analysis by company turnover reveals that Food and drinks 69 smaller companies expect to be hardest hit by increases in cost brought about through environmental policies, as Other FMCG 78 shown in Table VIII. Consumer durables 63 Industrial 85 Distribution 63 The Logistics Response All companies 71 We were keen to explore the response of logisticians to this increased environmental pressure. Table VI. Major Logistics Environmental Issues Table VIII. Companies Expecting Environmental Policies to Increase Operating Costs, by Percentage of Size of Company Issues companies Size of company Percentage of Waste and packaging disposal 25 (£ millions) companies Noise and emission levels 23 0-5 75 Public perception of HGVs 15 6-25 85 Fuel resources and utilization 12 26-100 60 Road congestion and vehicle utilization 11 101-250 68 Costs of environmental measures 5 >250 65 Modal selection 2 All companies 71 GOING GREEN: THE LOGISTICS DILEMMA 39 Corporate Response Tables IX and X show the response of companies to the We wished to determine the framework within which increased environmental pressure at the policy level. distribution managers pay attention to the environment. Their personal desire to establish environmentally benign The key findings in the area of policy are as follows: distribution channels is apparent. Yet the commercial • Larger companies are much more likely to have framework within which they can take action presents them undertaken policy work than other companies. with a dilemma. In the main there tends to be little in the way of a policy framework other than one of cost reduction • Companies with a turnover in excess of £250 million for them within which to work. are more likely to have introduced written policy statements, assigned staff to specific environmental responsibility and introduced environmental training. Companies were asked if they had any policies concerning environmental issues. One-third of respondents have no • Companies with a turnover greater than £100 million specific policy. Of the remaining two-thirds only a few, just are more likely to have conducted environmental 7 per cent, had a policy on all the five areas surveyed, audits than smaller companies. namely: (1) company-wide policies; Operational Response We now examine what practical actions companies are (2) specific logistics policies; taking to reduce the impact of their logistics operations (3) training policies; on the environment. This is considered under the following headings: (4) environmental audits; • transport control; (5) individuals with environment responsibilities. • fuel efficiency; Only 19 per cent of the companies have a specific logistics • emission control; environmental policy. There do not appear to be many • warehousing; obvious connections between either business sector or company size and the existence of an environmentally • office and administration; conscious logistics policy. • packaging. Table IX. CompanieswithSpecific Environmental Policies, by Size of Company Percentage of companies with policy, by turnover (£ millions) Policy 0-5 6-25 26-100 101-250 >250 All Company 25 36 40 63 76 46 Logistics 8 23 14 21 24 19 Training 25 31 37 32 65 37 Audits 25 23 31 63 53 36 Responsibilities 50 38 20 42 88 50 Table X. Companies with Specific Environmental Policies, by Type of Business Percentage of companies with policy, by type of business Food and Other Consumer Policy drink FMCG durables Industrial Distribution All Company 45 61 42 65 23 46 Logistics 10 17 32 27 13 19 Training 24 50 63 50 13 37 Audits 31 33 47 50 23 36 Responsibilities 38 56 58 62 43 50 40 LOGISTICS INFORMATION MANAGEMENT 6,3 Transport Control Table XII. Companies Having Specific Fuel Efficiency Policies relating to the life of vehicles are important to far Related Policies more companies than are other aspects of transport which impact on the environment. The policies which are adopted Percentage of companies by many companies tend to be in areas in which there are For at least For all potential cost savings. Areas such as minimizing noise Policy some vehicles vehicles pollution and avoiding travelling through residential districts, which may have cost penalties, are less likely to have been Preventive maintenance 96 91 implemented. Correct vehicle/load selection 87 69 The policies set out in Table XI are concerned with road Route rationalization 81 52 transport and this mode of transport is dominant. Less than 5 per cent of respondents use rail for more than 5 per cent Backloads 68 28 of their traffic. Fewer than 20 per cent of respondents have Aerodynamic body kits 67 14 a process for considering anything other than road Driver training 64 46 transport. Speed limiters 51 14 Reduce unladen weight 39 18 Fuel Efficiency Fuel additives 33 13 Fuel usually accounts for about 20 per cent of the operating cost of a large commercial vehicle. Consequently Driver incentives 26 17 distribution managers have long been keen on obtaining the best levels of fuel consumption. Vehicle technology is itself improving and leading to lower fuel consumption. Increasingly vehicles are being advertised on their fuel efficiency as much as their power. Emission Control The emission of noxious substances through vehicle Transport managers use a wide variety of techniques to exhausts has been a hazard since the development of improve fuel efficiency (see Table XII). Preventive the internal combustion engine. Indeed, there remains maintenance optimizes efficiency. Correct vehicle selection, considerable debate over the relative environmental efficient routeing and minimization of empty running are impact of diesel and petrol engines and catalytic converters. all obvious ways of reducing transport costs. Attaching body Catalytic converters, for example, reduce the noxious kits which increase aerodynamic efficiency of vehicles have gases but increase the emission of carbon dioxide. a proven if limited benefit and are employed by many This then contributes further to the greenhouse effect. companies. Driver training ranks next. The use of However, transport is not the main contributor of these incentives to encourage driver fuel efficiency is employed gases. by nearly a quarter of companies. Regular engine maintenance was accepted by most For the future most companies are giving active respondents as having some benefit on fuel consumption consideration to speed limiters, which will in any case soon (see Table XIII). The introduction of catalytic converters be compulsory for all HGVs, and driver incentive schemes was also adopted by nearly 60 per cent of respondents. based on fuel efficiency. Measures such as using fuel additives which reduce waxing, Table XI. Companies Having Specific Transport Table XIII. Companies Having Specific Emission Policies Reduction Policies Percentage Percentage of companies Policy of companies For at least For all Policy some vehicles vehicles Life of vehicles 81 Minimize travel distance 69 Regular engine tuning 87 71 Minimize travel time 67 Low asbestos brakes 68 26 Avoid congestion 62 Catalytic converters 59 6 Minimize noise pollution 38 Fuel additives 33 13 Avoid peak hours 33 Low sulphur diesel 25 7 Avoid residential travel 30 Vapour recovery units 8 1 GOING GREEN: THE LOGISTICS DILEMMA 41 improve cleaning and cetane levels and may improve fuel Distribution managers are, in the present climate, more consumption by up to 2 per cent are not widely employed. concerned with obtaining tangible operational savings. Just The use of low sulphur fuel is also a matter of debate. over half the respondents have introduced energy efficient Current fuel sources represent a broad spread of sulphur lighting, heating and battery recharging schemes. The content from 0.07 per cent to 0.3 per cent. While there difficulty here is that direct energy consumption typically is an overall trend towards suppliers reducing sulphur accounts for only between 2 and 4 per cent of the total content, the projected reduction in maximum sulphur level cost of operating a warehouse. It is often the case that is thought to be beyond the capacity of present production other cost considerations such as productivity levels take plants. Moreover, whilst it may reduce emissions, low up most of management's time. sulphur fuel is thought to have a detrimental effect on vehicle injection systems, again posing a dilemma for New warehouses are, however, increasingly being designed transport management. to be less environmentally harmful. Nearly all companies consider energy conservation and efficiency in warehouse Warehousing design and almost as many consider noise avoidance The lifespan of a warehouse is typically much longer than procedures. Overall the companies try to use environ- the lifespan of a vehicle. While changes in the environmental mentally sound materials in their fixtures and fittings.- impact of vehicles can be achieved over relatively short periods of time, the same cannot be said about the large Office and Administration amount of old warehousing still being used. Office and administration procedures tend to generate a large amount of paperwork. Nearly 70 per cent of the survey respondents have a policy of either reducing or recycling this paper. Other procedures are, however, less Managers are concerned Table XV. Percentage of Companies Having Specific with obtaining operational Policies in the Office savings Percentage of Policy companies with policy Many general environmental aspects of warehousing are Paper reduction/recycling 69 covered by existing health and safety legislation and Environmentally sound most companies use this as their main policy framework cleaning materials 46 (see Table XIV). Environmental policies concerned with Green purchasing policy 41 the running of existing warehouses are more important Environmentally friendly than those related to upgrading, location and design. This fixtures/fittings 35 is not surprising as it reflects the fact that far more Recycling of toner companies operate warehouses than regularly upgrade or cartridges/ribbons 18 relocate. Table XIV. Companies Having Specific Warehousing Policies Table XVI. Companies Having Specific Packaging Policies Percentage of Policy companies with policy Percentage Policy of companies Health and safety 84 Warehouse maintenance 57 Minimization 70 Warehouse management 54 Warehouse upgrading 45 Choice of materials 62 Warehouse location 39 Re-use 56 Warehouse Recyclability 54 design/construction 35 Returnability 37 42 LOGISTICS INFORMATION MANAGEMENT 6,3 widespread. "Green" purchasing and recycling policies goods businesses have developed faster than other tend to be used by less than half the responding companies business sectors. (Table XV). In practical terms, nearly all the major contributions to Packaging environmental improvement that have already been Three in every four of the surveyed companies are involved undertaken also have a very significant cost reduction in the packaging/repackaging of goods. element, and this is likely to have been the main driver. These include vehicle life policies and the minimization The disposal of waste and packaging was highlighted above of time and distance on the road. Policies which may have (Table VI) as the single most important environmental cost penalties, such as reducing pollution and avoiding concern, cited by a quarter of all respondents. Most residential travel, are much less likely to have been companies have a policy which covers some of the various implemented. elements of packaging (see Table XVI). The most common policy is one of minimizing packaging levels. Other Three out of four of the companies in the survey are companies have policies which cover the choice of involved in the packaging of goods. For these companies materials and the re-use and recycling of packaging. the environmental impact of packaging is important, but Companies which do not currently have a policy are the emphasis here is also on those areas where this can actively exploring the areas of packaging minimization and be coupled with reductions in cost, such as packaging the returnability of packaging. minimization and the use of alternative materials. Aspects which may require additional expenditure, such as returnability, are much less common. Nevertheless, waste Conclusions and packaging disposal is seen by respondents as the major The results of this survey have confirmed that logistics environmental issue facing them today. environmental issues will be one of the most significant factors affecting logistics during the 1990s and beyond. The environment has come a long way from being a matter of peripheral interest and it is now recognized as being a major pressure on costs and performance. The need to respond to environmental pressures is In many areas of logistics this awareness has not been effectively translated into action. In this respect the survey expected to increase has confirmed the findings of a David Bellamy Associates' Research Report Industry Goes Green compiled in 1991. This earlier survey concluded that whilst industrial Over two-thirds of companies are coming under increasing managers are environmentally aware, only a minority felt environmental pressure, and this pressure increases with able to take positive action in a business context and that size of business. Legislation, primarily from the European the ability to take positive action was the main distinction Community but also from the United Kingdom between the leaders and the laggards on the environment. Government, is likely to be the most significant driving force. Customers, employees and pressure groups are Our current survey of ILDM members shows that the seen to be less important in this regard. The timescale development of logistics environmental policies has been for the development of more environmentally-aware slow, and action, where taken, has been in those areas policies is likely to quicken with over 90 per cent of which promise cost reduction rather than increased cost. companies expecting to implement such policies in the The need to respond more rapidly to increasing next five years and 35 per cent expecting to take action environmental pressures is expected to increase. This within the next year. response will be driven by legislation rather than by the requirements of customers, pressure groups and Over two-thirds of companies expect costs to increase employees. Over two-thirds of companies expect these as the result of introducing new policies. Industrial pressures to increase operational costs. businesses are the most pessimistic in this regard while distribution companies believe the cost impacts will be Less than half of the companies have written environ- less significant. mental policy statements and fewer than one in five have a specific logistics environmental policy. Even among the In the field of logistics, managers are in an excellent largest companies, only one in four has a logistics position to take positive action to improve their environmental policy. Industrial products and consumer environmental performance. However, action should not GOING GREEN: THE LOGISTICS DILEMMA 43 be restricted to those areas where cost savings may be immediately apparent. Legislation will force many changes Table Al. Companies by Turnover (£ millions) in the way companies package and transport products. Turnover Percentage Innovative solutions will be required to comply effectively with new laws and environmental implications will be <5 10 required to be integrated into all business decisions. 5-24 32 The ability to be proactive and to improve performance in areas such as packaging will determine which 25-99 29 companies will prosper in the demanding economic 100-249 15 climate of today. >250 14 Appendix: Survey Background All members of the Institute of Logistics and Distribution Management were sent a questionnaire in the middle of 1992. This questionnaire asked members to describe their current Table All. Companies by Business Sector company's environmental policies, to describe their personal and corporate goals towards the environment, to comment on Business sector Percentage the sources of environmental pressure and to predict their own company's response. Food and drinks 24 In all, the respondents to the survey are responsible for 40,000 Other FMCG 15 commercial vehicles, 32,000 company cars, and 1,700 Consumer durables 15 warehouse operations. The majority use road as their main mode of transport. Road accounts for 88 per cent of all their Industrial 21 movements with rail at 2 per cent, air at 4 per cent with the Distribution 25 remainder composed of sea and other means. Jan Szymankiewicz is Managing Director of Logistics Consulting Services, P-E International plc, Surrey, UK.