The sustainable last-mile ecosystem

The imperative of sustainability for the logistics industry: innovation, business models, and brand equity.
11 May 2023
Logistics Industry: Innovation, Business Models, and Brand Equity
William Simpson

Associate Director, UK

jonathan hall

Head of the Sustainable Transformation Practice, Kantar

Graham Staplehurst

Director, Thought Leadership, Kantar BrandZ

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Written for Last Mile Expert’s “Green Last Mile Europe report 2023”, originally published 28th April 2023. LME’s full report can be accessed here
At Kantar, we believe we are living in an “era of disruption”. This directly contrasts with the preceding period, known to economists as “the great moderation”, a period of stability and certainty. In recent years, moderation has been abandoned and disruption comes in faster than ever before, forcing companies to embrace agility and change, or risk becoming obsolete. 
And of course, the biggest disruption of them all – climate change – now looms larger than any other, creating an absolute imperative for action.

The carbon footprint of the logistics and postal industry is large and well documented. It is an energy intensive industry closely linked to economic activity; responsible for moving goods and communication around to facilitate trade. And the last mile in particular, offers sustainability challenges in the sudden dispersal of routes and potentially bespoke nature of each delivery event. It is said to account for 53% of shipping costs and it makes a significant contribution to the industry’s carbon footprint. Innovation in this area is essential.

Looking across the industry, many companies are recognising the importance of climate change. Our proprietary Kantar BrandZ dataset tells us that sustainability is more important to brand equity in the logistics sector than it is in other sectors and its influence has been growing over time. However, we also have evidence that, while actins are being taken, few companies are owning this space in a way that could drive growth for them and their brands.

Sustainability business models offer significant benefits

For businesses that get it right – that understand their responsibilities, act and are seen to act – there are huge financial benefits. For 25 years, Kantar’s BrandZ database has tracked 20,000 brands across 522 categories and in 51 markets worldwide. Its brand valuations have been verified time and again against the financial outcomes of brands and the companies that own them. As a resource, it gives unrivalled insight into how brands build, maintain and lose value.

What we see is that a company’s reputation around sustainability, driven by genuine action and investment (rather than greenwashing!) is becoming an important aspect of brand equity and is associated with value growth. As a rule of thumb, corporate reputation explains almost 10% of a brand’s equity, and sustainability is now the most important aspect of this. 

Kantar BrandZ 2022

Our latest analysis shows that those brands which achieved high scores in Kantar BrandZ consumer perceptions of sustainability and also performed well in an independent audit of their sustainability performance grew substantially, even outstripping the average growth of Kantar BrandZ’s  100 most valuable brands in 2022 (See chart above). 

In a sense, performance on sustainability is becoming table stakes for business – especially as regulation in this area is implemented around the world. But more than that, there is a huge opportunity here that should be grasped. Nowhere is this truer than in the logistics industry.

Exploring the value-action gap: why facts don’t change our minds?

As always, the basis of that value growth comes from consumers – the key question: where are they choosing to spend their dollars? Kantar’s Sustainability Sector Index 2022 found that 97% of consumers are prepared to make changes to their lifestyle to live more sustainably. Some do, but many others struggle to put these aspirations into action. For instance, 68% believe sustainable products come at a premium and 65% say that the increased costs of living prevent them making the more sustainable choices they would like to make. Cutting these numbers by social grade and income shows clearly and unsurprisingly that those with some financial flexibility are more likely to choose these sustainable options; those with less, find it harder.

The point here is not that consumers are not telling the truth; it is that both values and action are part of the equation. This is the famous value-action gap. This tension between how consumers would ideally act and how they actually do act reveals barriers, whether mental, physical or financial, that stop them. In this gap, there are significant benefits to be reaped for those brands that remove frictions and help consumers act in the way they would like to. For the logistics industry, this would mean offering sustainable delivery options at a competitive price.

Indeed, climate issues are seen as an area that consumers the world over identify as a key responsibility for business - and by a large margin! Over two-thirds (67%) believe businesses should take action on the climate, while the next issues on the list for business – pay and working conditions – comes in at a much lower 47%. 

Whose responsibility is it? Kantar’s Sustainability Sector Index 2022

The influence of sustainability on brand equity in the logistics industry

For our BrandZ data, our modelling approach relates the perceptions of brands in the minds of customers to the choices they make in buying decisions, which brands they prefer and how much they are willing to pay for them. Looking across our recent logistics studies, we can compare delivery companies with other categories, among both B2B and B2C brands, in terms of the influence that sustainability has on brand equity.  
On average, the importance of sustainability is higher for logistics brands than for other categories.  It’s still not the most critical factor but its influence has grown over time.  Sustainability aids brands as both a hygiene factor - for many customers it’s something to check off and be satisfied with - and also as a differentiator for a few specific brands.
BrandZ data reveals that only 13% of logistics brands have a strong consumer profile in the area of sustainability. The brands that have successfully promoted their sustainability credentials tend to be smaller businesses, but not all of them.  

One of the biggest with a positive profile is Lotte Logistics, the leader in South Korea.  The company has a full scale ESG program and has a great reputation for treating employees and their partners well.  DHL in Europe is also well regarded and has a particular focus on its environmental responsibility – aiming to reduce its carbon footprint and “striving for clean operations and climate protection”.

In recent years, some of the largest delivery companies have developed well-integrated and impactful ESG programmes and industry bodies such as UPU and IPC have been active in promoting the ambitions and achievements of the industry:

The list goes on as the industry has already made huge investments in this space. Given this focus, someone from within the industry might be forgiven for being amazed that only 13% of brands have developed their sustainability credentials in the minds of the consumer - surely it must be higher! So, what explains the low penetration with the public?

Sustainability swords and shields in the logistics industry

At Kantar, we use a “swords and shields” framework to classify sustainability business investments. At a category level, this framework helps our clients understand what actions are necessary (a hygiene factor, or a ‘shield’ where failure carries risk) and which are genuine “big bets” around sustainability that can be used to differentiate their brand in their category and drive a competitive advantage – these are the brand’s ‘swords’.

Although further research is needed, one trend that may be classed as a shield is becoming clearer – the electrification of delivery fleets. It remains an incredibly important step; indeed, without it, brands will not be seen to meet fundamental consumer requirements. Strides must continue to be made in this area, not least as regulation on combustion engines across Europe will come into force over the next decade or so, but also as it is predicted to offer operational savings over the long-term. However, as every major brand (at least in the UK) is purchasing alternative fuel and electric vehicles, this action alone will not give them the winning edge over their competitors in consumers’ minds.

Even so, we see that sustainable investments made by carriers in the UK (as one national example among the countries we monitor) are being acknowledged by consumers. Most brands that we track have seen their sustainability index increase since we started measurement in 2017 although none is breaking away from the pack. 

The biggest winner here is DHL with an increase of 36. Closely following are dpd, FedEx and UPS who all saw 30 points of improvement. Royal Mail, with a superior brand salience and “feet-on-the-street” delivery model has the highest sustainability index, although it dropped slightly between 2020 and 2023.

 Kantar’s BrandZ Sustainability Index

To summarise, Kantar’s BrandZ data confirms the growing relevance of sustainability within the logistics industry. This trend should not be ignored, and brands should continue to look to leaders and innovators in this area to see what can be achieved, while thoroughly critiquing their own business model for opportunities to innovate. Regulation is coming to force sustainable initiatives, but more than this, consumers expect action and will reward businesses that make it possible for them to meet their own sustainability aspirations. 

Furthermore, the data underlines that the actions of players across the logistics industry are being noticed, but that no major players are currently owning this space in a way that could drive brand differentiation for them. Each company should be asking themselves: “can we go faster with our sustainable strategy and implementation?” If so, they may be able to cement their sustainability credentials with consumers and reap the benefits this will bring

Kantar’s offer in this area

Kantar, the world’s leading data, insights and consulting company has a number of products and services to help operators and marketers in the logistics industry drive sustainability and value for their brands. In writing this article, we have drawn on three specific offers:

Kantar’s Sustainable Transformation Practice brings together expertise and assets from across Kantar to support organisations, both commercial and public, in the definition activation and measurement of sustainability strategies.  We are dedicated to leveraging our human understanding expertise to identify how to move citizens and consumers on the journey from Value to Action. 

Kantar BrandZ ranks the most valuable brands in the world... and shows you how to become one of them. It is the world’s largest, consumer focused source of brand equity insight, which also powers our proprietary brand valuation methodology. Kantar BrandZ brings you industry leading brand valuations, along with research from the world’s most extensive brand equity study: Over 4 million consumer interviews covering 19,250 brands across 522 categories in 51 markets.
Our Specialist Logistics and Postal unit: In the challenging world of post and logistics, tap into Kantar’s expertise to help grow your business, improve your network, and gain visibility of your entire journey. Our suite of innovative insight tools combines operational and consumer data to give our clients the insight they need to make key business decisions. You can explore our offer here.
If you would like to discuss any of the ideas in this report, please contact: 
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