Last Thursday, in commemoration of Earth Day, Penske Logistics, Dr. Robert C. Lieb, Professor of Supply Chain Management at Northeastern University, and Dr. Kristin J. Lieb, Assistant Professor of Marketing Communication, Emerson College, issued the “Third Party Logistics Sustainability Report.” The information is based on the 2008 and 2009 annual survey of forty 3PL CEOs conducted by Lieb and Lieb. The report contains a lot of interesting information, so I recommend that you request a copy. But at the risk of oversimplifying the findings, here is my key takeaway:

3PLs are making investments in “green” initiatives; they are seeing positive results from these investments; existing and prospective customers are interested in 3PL sustainability efforts, but it is not an important factor in their selection process.

3PLS are investing and taking action in a wide variety of sustainability-related initiatives, which the authors categorized into four groups: administrative (e.g., setting sustainability goals for operating units), analytical (e.g., investing in evaluation software, developing environmental KPIs), transportation-related, and “other” (e.g., promote use of LEED warehouses). Based on the detail provided in the report, it appears that 3PLs are most active in transportation-related initiatives, including:

• Experimenting with alternative fuels
• Purchasing more fuel efficient vehicles
• Reducing vehicle mileage operated
• Participating in government-sponsored programs such as the EPA’s SmartWay program in the trucking industry
• Promoting freight consolidation initiatives within the company
• Shifting freight to more fuel efficient modes
• Limiting the speeds at which company equipment is operated
• Sharing vehicles across multiple customers
• Reducing vehicle idling time

3PL CEOs in the 2008 survey reported that about 21 percent of existing customers and about 20 percent of prospective customers raised sustainability issues in their discussions with the 3PLs. Customers are interested in a 3PL’s ability to:

• Support customer efforts to reduce their carbon footprints
• Enhance existing return logistics programs
• Reduce fuel, water and electricity consumption
• Help customers comply with various industry certification programs
• Dispose of hazardous materials
• Develop recycling programs
• Improve the performance of customer vehicle fleets
• Develop renewable energy sources, especially at customer facilities

These findings underscore a point that we have raised in previous postings: sustainability opens the door to new business opportunities for 3PLs (see “Ryder’s Answers to Carbon Disclosure Project” and “A New Business Intelligence Solution…from a 3PL!”).

But as the authors noted, “While the 2008 survey results clearly demonstrated that there was considerable customer interest in discussing sustainability issues with major 3PLs, those issues were not yet playing a major role in either the 3PL selection or retention process, and they were not being significantly reflected in 3PL contracts.”

Based on our research, cost is by far the most important factor in a 3PL selection process (see chart below), a point that was also reflected in the report. The 3PL CEOs ranked “balancing sustainability efforts with customer expectations for low-priced 3PL services” as the most important short-term sustainability challenge they faced.

Factors Important in 3PL Selection Process (Source: "Maximizing the Value of 3PL-Customer relationships," ARC Advisory Group. February 2010; click to enlrage)

The message from customers is clear: We want 3PLs to invest in becoming greener, but we don’t want to pay for it.

The inconvenient truths of “green” supply chain management still remain.