3PLs Remain Committed to Sustainability Despite Recession

Despite the global recession of 2008 and 2009, many large third-party logistics (3PL) companies increased their respective commitments to developing greener practices and building environmental sustainability programs during that time, according to a new report. The report is based on key findings from the 2008 and 2009 “3PL Provider CEO Perspective” surveys, which interviewed 35 third-party logistics company CEOs across North America, Europe and Asia-Pacific whose companies were responsible for generating approximately $60 billion in revenue each year.

The report, authored by Robert Lieb, professor of Supply Chain Management at Northeastern University, and sponsored by Penske Logistics, indicates that “a corporate desire to do the right thing” is by far the most important reason to commit to sustainability initiatives; “pressure from customers” ranks second. According to the surveys, CEOs were not only dedicated to providing customers with more environmentally-friendly services, but also to applying such practices internally within their organizations, employing a variety of tactics: from reducing company-printed materials to using windmills at distribution centers for electric-power generation.

Corporate dedication to sustainability programs yielded overwhelmingly positive results for 28 out of the 35 CEOs surveyed, including reduced operating expenses, positive impacts on company employees, substantial savings in fuel costs, and even reduced fuel costs by 40%, as noted by one CEO. Six CEOs report that company sustainability efforts led to increased business with both existing and new customers. However, despite these investments, most CEOs note that sustainability is very infrequently a determining factor in either extending existing contracts, or securing new 3PL business.

“Compared with other industries, 3PL service providers are ahead of the game,” says Lieb. “They appear to be planning for the long-term by recognizing emerging customer preferences and providing services consistent with them, even in the current market downturn.”

Further insights into this year’s research findings are outlined in additional detail below:

Reasons for Establishing Sustainability Programs
The 2008 survey sought to determine the most important reasons the 3PLs had established sustainability programs by asking the CEOs to indicate the three most important reasons for doing so.

“A corporate desire to do the right thing” was by far the most important reason to establish sustainability programs, with 24 out of 39 CEOs ranking it as the primary reason.

Ranking second was “pressure from customers,” with seven out of 39 CEOs ranking it as the primary reason.

Other reasons cited for establishing sustainability programs were “a desire to enhance the company’s image,” “a desire to attract green customers” and “competitive pressures.”

Importance of Sustainability Issues in the Sales Process
The 2008 survey attempted to determine how often existing or potential customers raised sustainability requirements in their contract discussions with 3PLs.

CEOs stated that on average 21% of existing customers and 20% of potential customers raised sustainability issues in their discussions with the 3PLs.

Three CEOs said these sustainability issues were frequently a major determining factor in contract discussions with 3PLs.

36 CEOs indicated that sustainability issues were very infrequently a major determining factor in contract discussions with 3PLs.

CEOs were also asked what percentage of their companies’ existing contracts included sustainability performance metrics; the average response was 2.5%.

Continued 3PL Commitment to Sustainability
None of the CEOs involved in the 2009 survey had scaled back their company’s commitment to sustainability goals as a result of the recession.

63% of CEOs surveyed reported expanding the existing sustainability programs during the previous year.

71% of CEOs surveyed indicated they had launched completely new sustainability initiatives during the same time frame.

Most Important Short-Term Sustainability Challenges Faced by 3PLs

Sustainability challenge

Total weighted points*

Balancing sustainability efforts with customer expectations for low-priced 3PL services

55 (10)

Identifying appropriate environmental benchmarks/targets

48 (6)

Establishing sustainability priorities within the company

47 (9)

Generating accurate company information related to current sustainability practices

22 (4)

Developing an organizational sensitivity to sustainability issues

10 (1)

*Number of “most important” mentions in ( )

Survey Design
In 2008, 39 CEOs completed surveys via an Internet-based questionnaire. Companies participating in the annual survey include: Cardinal Logistics, Caterpillar Logistics Services, CEVA, DSC Logistics, DHL Exel Supply Chain, Genco, Kuehne + Nagel Logistics, Landstar, Menlo Logistics, NYK Logistics, Panalpina, Penske Logistics, Pittsburgh Logistics, Ryder, Schenker, Schneider Logistics, Transplace.com, UPS Supply Chain Solutions, UTi, Wincanton and YRC Logistics. In total, these companies are responsible for generating approximately $60 billion in revenue.

In 2009, 35 CEOs completed surveys via an Internet-based questionnaire. Companies participating in the annual survey included: Cardinal Logistics, DSC Logistics, DHL Exel Supply Chain, Genco Supply Chain Solutions, Kuehne+Nagel Logistics, Landstar, Menlo Logistics, Panalpina, NYK Logistics, Penske Logistics, Pittsburgh Logistics, Ryder Integrated Logistics, Schenker, Schneider Logistics, Transplace, UPS Supply Chain Solutions, UTi Integrated Logistics, Caterpillar Logistics Services, CEVA Logistics and Wincanton.

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