A Green Membership for All

The IIT Madras team participated in Blue Yonder’s Sustainable Supply-Chain at the 10th Inter-IIT Tech Meet, 2022.

Problem Statement:

Across the globe, supply chain models are becoming increasingly efficient and adaptive to consumer demand. With the onset of the Covid 19 pandemic, the models have changed to adapt themselves to achieve greater customer satisfaction. But unfortunately, it has also led to an increased amount of carbon footprint. The problem statement required the participating teams to lay out a comprehensive time-phased, 5-year roadmap proposal with specific initiatives to achieve its end goal of significant carbon reduction.

Proposed Solution:

Carbon labelling, as a means to reduce carbon emissions in the transportation section of the e-commerce supply chain, was proposed as one of the ideas. The idea was validated by conducting an institute wide study.

Context:

About 30% of the emissions are from the e-commerce industry from various facets - raw material transport, customer deliveries, reverse logistics, and other myriad of activities. Consumer demand for short delivery windows has driven companies to compete for faster shipping to clients. Faster deliveries translates into not using full truckload capacities, requiring more frequent dispatch, and in turn, increases transportation cost and CO2 emissions. Recently, Amazon and Walmart along with other major companies have started offering same-day delivery. Same-day and instant delivery are the fastest-growing segments in the last-mile environment, growing 36% and 17% annually, respectively. Amazon, for example, already delivers to 72% of all customers within 24 hours. In doing so, it is the largest emitter of greenhouse gases, with their total emissions amounting to over 60 million metric tonnes of CO2 equivalents in 2020.

About the study:

The study aimed to use customers as partners in reducing the carbon footprint in the aspect of e-commerce logistics.  This was done through collecting data from primary research on their choice of delivery options from e-commerce sites, to find actionable behavioural insights towards reducing carbon emissions.

Methodology used for the study:

The study aimed to find out answers to the following research questions.

• RQ1: Does informing customers about carbon emissions result in them choosing slower deliveries?
• RQ2: Are customers aware that slower deliveries can reduce carbon emissions significantly?
• RQ3: Are customers willing to pay extra for carbon-neutral deliveries?
• RQ4: Will customers change their delivery option to a slower one if they get to know about carbon emissions during checkout?
• RQ5: Will customers opt for Green Membership, an alternative to Prime Membership?

Experimental design

The research design was a randomised, unbalanced and mixed model. The responses were collected digitally, through an online Google form. There were 227 responses in total from all the groups. The respondents were divided into three groups: Control Group, Treatment 1 Group, and Treatment 2 Group. Information about carbon footprint was not shared with the members of the control group. Information about carbon footprint was shared with the members of the treatment group. For the treatment 2 group, the experiment was conducted into 2 steps. In step 1, the information about carbon footprint was not shared with the members. In step 2, the information about the carbon footprint was shared with the same members. The choice to change the shipping option to a slower delivery was offered in step 2.

The effects of confounding factors such as age, income, and natural preference were reduced by ensuring randomization. A unique approach was utilised to ensure randomised group allocation, in which respondents were all asked to choose a letter from three options (P, Q, and R), order of which was shuffled for each respondent.

• P (Control group): Information about carbon footprint was not shared with the customer.
• Q (Treatment 1): Information about carbon footprint shared with the customer.
• R (Treatment 2): Two steps - Choice to change the shipping option was offered in step 2.
• Step 1: Information about carbon footprint was not shared with the customer.
• Step 2: Information about carbon footprint was shared with the customer.

Findings:

• Informing about carbon emissions to the customer makes them choose slower deliveries. Only 6% of customers chose standard delivery without a nudge. Nudge improved this number to 47%.
• About 75% of respondents were NOT aware that slower deliveries can reduce carbon emissions significantly.
• About 61% of customers are willing to pay Rs. 20 extra for carbon-neutral deliveries.
• 64% of customers chose to change their delivery option to a slower one when they were informed about carbon emissions during checkout.
• 55% of customers said they would switch to or opt for Green Membership, an alternative to Prime Membership.
  

Similar studies around the world:

A case study in Mexico suggests that fast-shipping increases the CO2 emissions and costs up to 15% and 68%, respectively. According to a report of the World Economic Forum, delivery vehicles in the 100 largest cities around the world accounted for 19 million metric tonnes of CO2 emissions in 2019. SOMO Report, 2021 states that Amazon is the largest emitter of GHGs. It contributed to over 60 million metric tonnes of CO2 equivalents in 2020 which is a 30% increase from 2018. A study conducted by Singapore University of Technology and Design (SUTD) revealed that of those who chose the fastest shipping option, 56% ultimately opted for a slower delivery time once informed of the corresponding carbon emissions. As per the study of Dotcom Distribution, 47 percent would pay more for same-day delivery despite having no immediate requirement.

Conclusion:

Sharing information about the carbon footprint generated by individuals on their shipping orders reduces carbon footprint by about 10-15%. Optimization of vehicles would lead to significant reduction in cost without losing the business. Customer satisfaction is likely to improve because of emerging trends about environmental concerns. Introducing Green Membership which offers free carbon neutral & sustainable packaging deliveries can reduce carbon emissions significantly keeping customer satisfaction intact. Green Membership and extra charge for carbon-neutral deliveries could be additional streams of income. As for the actionability of the proposed solution, it is extremely high as implementation of behavioural nudges does not require additional infrastructure and can be implemented immediately. Based on the findings, the study encourages carbon labelling for e-commerce shipping options.