Sustainability in Last Mile Logistics Real Estate

What is Sustainability in Last Mile Logistics?

Last mile logistics refers to the last step in a delivery process, describing the process of sorting and transportation to the doorstep of the client from a nearby warehouse or storage facility.

This delivery process is in high demand post-pandemic due to the boom in e-commerce purchases during lockdowns, making this an ideal time to assess the opportunity for integrating sustainability policies and green building strategies into the sector as a whole.  

Who delivers a sustainability strategy in last mile logistics?

The various businesses that invest in, construct, and operate the distribution centers as well as the transportation process are all key players in optimizing last mile logistics sustainability. 

A business model that includes real estate Environmental, Social, and Governance (ESG) goals not only upholds a company’s civic duty but also appeals to investors with a preference for sustainable investments.

Transportation is of course a central piece within last mile logistics, and therefore must be closely monitored and optimized to reduce carbon emissions associated with the process however sustainability policies at the construction, fit-out and operations level of these distribution and storage centers should also be factored into a comprehensive sustainability strategy - as we shall see, this can often require a degree of inter-company collaboration (see Prologis as an example of this).

environment in ESG in last mile logistics real estate

From a business model perspective, a real estate ESG strategy is essential to encourage sustainability throughout a last mile logistics enterprise. In addition, investors are often motivated when ESG is integrated into a company’s values and mission statement.

The environmental focus within a last mile logistics ESG strategy can include the storage and distribution centers as well as the transportation related environmental impacts.

Commonly, last mile delivery services make use of a hub and spoke model, referring to the warehouses and distribution centers as the hubs, and the last mile delivery as the spoke of this system.

Therefore, it essential to reduce resource use and emissions associated with the construction of these facilities upfront as well as the subsequent transportation process once operational.

Measurabl is a useful software tool that can help encourage data collection and organization within a company’s ESG strategy. 

social in esg last mile logistics real estate

Social goals tend to be more universal across industry sectors as they focus on employee wellness, inclusivity, diversity, and social impact.

Within last mile logistics in particular, factors such as working hours and the optimization of driving routes should be considered to align company goals of fast deliveries to respectful working hours and employee wellness.

Online software tools such as the Brightest Platform are helpful for outlining and monitoring social performance goals within an organization. 

governance in esg last mile logistics real estate

The governance element of an ESG strategy acts as the overarching management body for a company and focuses on increased transparency and integrity.

The documentation and reporting of ESG goals, associated company risks (including climate risks), data privacy, and codes of conduct will all be included in a governance plan.

To help with the organization and monitoring of governance related ESG goals, Workiva is a useful online tool. 

Building-Level Sustainability in Last Mile Logistics

Although transportation is an essential sustainability consideration in the last mile logistic system (see below), the distribution facilities themselves should be designed to optimize carbon footprint early on.

Strategies such as intentional location choices, energy efficiency, water and waste reduction, and sustainable material use are all essential factors in a building’s carbon footprint; we address each of these in turn below.

Location in Last Mile Logistics Real Estate

The location of a distribution facility is one of the most important building factors and is also directly linked to transportation emissions - in this sense, the hub and spoke model has sustainability baked into it from the beginning as ‘spoke’ locations close to city centres help decrease overall travel times and emissions.

Facility sites can also be shared across different companies to pool resources and therefore decrease resource use. In addition, due to the generally large size of distribution centers, it is important when possible, to choose pre-developed or brownfield sites to reduce land use change impacts (“Elements”).

Energy efficiency in Last Mile Logistics Real Estate

Energy efficiency measures in warehouse and storage facilities are largely similar to other building types.

Lighting efficiency can be improved through LED bulbs and the inclusion of sensor and dimming capabilities.

Facilities that require refrigeration for storage should implement more efficient cooling technologies or utilize renewables to power them to avoid excess energy demand.

In addition, efficient machinery and lifts should be incorporated as the transferring of products is common practice and can be a large source of energy use in these facilities. 

On the exterior, the building envelope could incorporate green or cool roof technologies to lower heating demands and energy loads.

Finally, renewables such as wind or solar energy should be used whenever possible to provide a source of green electricity.

Water efficiency in Last Mile Logistics Real Estate

Water efficiency measures should be considered in both interior and exterior aspects of last mile logistics distribution centers. 

In the interior, low-flow water fixtures should be used in all sinks, plumbing, and restroom fixtures to reduce overall use. In addition, features such as dual flush toilets can be used to reduce water demand.

On the exterior, any landscaping used should be regulated by using low-water irrigation strategies. An approach known as xeriscaping incorporates local flora to reduce the need for watering and maintenance.

In addition, in wetter climates, strategies such as rainwater harvesting or capture systems can be used to collect water and divert it to other non-potable water uses on site. 

Waste management in last mile logistics real estate

Waste should be considered in all phases of the last mile logistics building cycle, as ideally all materials that go into a project can be recycled and used again, closing the loop as part of a Circular Economy. Although a perfect closed loop is hard to achieve, the mindset should be used throughout all waste-related decisions.

Waste should be diverted from the landfill whenever possible, and for the case of last-mile logistic facilities, we will focus on the construction and operations phases. 

In the construction phase, there are massive waste reduction opportunities, as a plethora of material is being brought on site and erected each day.

It is essential to avoid the damaging of materials whenever possible to reduce redundancy, and clearly labeled recycle and disposal bins should be placed on site to track and sort waste when it is produced.

Going back even further, when designing distribution facilities, strategies such as modular construction should be employed to further reduce waste throughout the manufacturing and building processes. 

Once occupied, last mile logistic facilities can implement waste reduction strategies through operations and maintenance.

Efficient, sustainable packaging for products should be implemented, and recycling and organic waste bins should be placed throughout the site to encourage employees to divert waste from the landfills. 

Green & Healthy Materials in Last Mile Logistics Real Estate

Both the exterior shell and the interior fit-out materials should be carefully selected for distribution and storage centers.

To increase project sustainability, building materials should be chosen based on factors such as durability, organic content levels, recyclability, and origin location. 

Life Cycle Assessments (LCAs) should be completed whenever possible to compare the sustainability traits of each material.

Characteristics such as bio-based materials or materials with high recycled content tend to have lower impacts throughout their life cycle. In addition, sourcing locally is a great way to reduce impacts as transportation emissions are greatly diminished. 

Durability and resiliency are equally as important, although their impacts may not be as apparent until later in a building’s life.

Replacement and repair costs are inevitable as a building ages, and choosing materials that last the test of time and are resilient to natural disasters eliminate emissions and costs associated with excessive repairs. 

Sustainable Transportation in Last Mile Logistics

Transportation is one of the most important, if not the most important factor within the last mile logistics system. Accounting for 27% of global greenhouse gas emissions, transportation is an essential aspect of reducing industry’s carbon emissions.

Within urban centers, delivery vehicles have been documented to account for over half of certain emissions, although they compromise a small fraction of total traffic vehicles. Including more eco-friendly last mile delivery strategies can improve both company sustainability and brand image (Lawton).

In addition, the rise in online shopping and the demand for delivery has skyrocketed from the start of the pandemic. Customers expecting and requesting rapid shipping times increases transportation emissions, making last mile deliveries even more detrimental to the environment.

A group of MIT researchers found that fast shipping increases carbon emissions by as much as 15% and bumps up costs as much as 68% (Lawton).

To combat transportation related emissions in last mile delivery schemes, strategies such as more efficient vehicles, routing, alternative pick-up locations, packaging, and loading can all be beneficial. The use of electric vehicles, or other means of transportation such as bicycles, drones, or even robots can be utilized to reduce emissions.

In addition, finding optimized routes for deliveries can increase efficiency and reduce miles driven, therefore lowering both costs and emissions. UPS Transport, for example, has implemented an “On-Road Integrated and Navigation” (ORION) program, that uses an algorithm to find the best route.

This technology has been found to save them around 10 million gallons of fuel and $400 million per year (Kaplan). Finally, the incorporation of centralized pick-up locations for clients can increase delivery efficiency and reduce emissions. 

Some of the often more overlooked upstream strategies related to transportation are equally important considerations for last mile logistic companies. Packaging goods more efficiently using smaller boxes in more functional shapes can allow for denser packing into trucks, and therefore decrease the number of trips needed (Lawton).

Finally, incorporating a streamlined schedule and timing for delivery vehicles to arrive at distribution sites can reduce idle time and therefore reduce excess emissions. 

Examples of sustainability in last mile logistics real estate

There are several companies connected to the last mile logistics space that have introduced sustainable strategies into their ESG business models and building sites.

Prologis, stands out from the crown as an ideal case study. This San Francisco based real estate investment trust invests in warehouses and has a strong sustainability focus, as explained in their 2020 Sustainability Report. 

They place a large emphasis on sustainable buildings and sustainable building certifications, notably using LEED as the goal for all new developed buildings.

Within their projects, as standard they implement strategies such as solar panels, cool roofs, LED lighting with motion-sensors to reduce power usage while capturing data on how the space is used, recycling collection areas, xeriscaping, and local material procurement. They also provide electric vehicle charging stations on site to encourage the use of electric vehicles.

Innovations in the pipeline at Prologis include low carbon building materials to reduce the embodied carbon footprints of carbon-intensive materials and circular building design to incorporate recycled / recyclable materials that can be disassembled at end-of-life and repurposed.

Their PARKlife concept goes even further by improving services and facilities for their staff via security, gaming areas, employee gyms, walking trails and greenery.

Green building and healthy building certifications for last mile logistics real estate

Prologis have a goal of 100% sustainably certified buildings across their global portfolio, as of year end 2020 they had 171 million sq ft of sustainably certified space with LEED, BREEAM, WELL, CASBEE, DGNB and HQE.

Their Datteln, Germany facility was the first logistics facility in Germany and the second in the EU to achieve WELL Building Standard certification.

Sources

“Elements of a Sustainable Warehouse.” Prologis, 13 July 2021, https://www.prologis.com/what-we-do/resources/elements-of-a-sustainable-warehouse. 

Kaplan, Deborah Abrams. “Ups and Amazon: A Tale of 2 Last-Mile Sustainability Strategies.” Supply Chain Dive, 15 Jan. 2019, https://www.supplychaindive.com/news/last-mile-sustainability-strategies-ups-amazon-disclosure/546005/. 

Lawton, George. “10 Strategies for More Sustainable Last-Mile Delivery.” SearchERP, TechTarget, 13 Aug. 2021, https://www.techtarget.com/searcherp/feature/10-strategies-for-more-sustainable-last-mile-delivery.