Comparative Carbon Footprint Assessment Of Cross-border E-commerce Shipping Options

With the competition increasing almost every day, it has now become necessary for the online shipping platforms to cater to customer needs in order to maximise their satisfaction. The demand and expectations of each customer varies according to their own preferences, mindset, environment and uplifting. While some consumers might prefer faster delivery, this may be hazardous to the environment. Only a few studies have compared the environmental impact of various delivery alternatives provided by e-commerce companies. To bridge this gap, this research paper aims to compare the carbon footprints of the various shipping choices available from India to Europe as the shipment destination. From the point of view of the customer, when offered a variety of shipping options to choose from, there is always a trade-off between cost and the speed of delivery. Additional information on the carbon impact of different options could influence consumers’ decision-making. With increasing awareness, people are now paying attention to the environmental impacts that each shipping method has. This has now become a major deciding factor for people to choose a shipping method. Given this, the study advocates for carbon labeling to be introduced for e-commerce shipping options.

Keywords

The worldwide supply chain network has changed dramatically as a result of the e-commerce boom, and online shopping platforms are continuously working to improve their operations and give better service to their clients. In order to stay relevant in the hyper-competitive market context, these platforms (e.g., Magento, Amazon, WooCommerce) frequently offer several delivery or shipping alternatives to pick from to suit consumers' desire for speedier delivery services. Because these shipping choices are often priced based on the platform's ability to provide a high-quality delivery service, the consumer's decision is determined by the perceived trade-off between delivery speed and shipping costs. Whether a consumer chooses the faster delivery option would be driven by their willingness to pay an additional shipping price. Patience pays off for the planet. Delaying a delivery’s arrival means fewer trucks are on the road, and cuts down on the number of trucks that aren’t fully packed with deliveries. Customers who wait up to five days for home delivery could help decrease carbon dioxide emissions by about 30% in the last mile of a delivery, according to research by Josue Velazquez, a research Scientist at the MIT Centre for Transportation and Logistics. However, allowing customers to choose between speedier and more convenient shipping options may be at the cost of the environment and it might encourage unsustainable consumption. As more people seek faster delivery, the delivery lead time for logistics companies shortens, resulting in more frequent and carbon-intensive delivery trips. This situation is further worsened by the surge in popularity for cross-border e-commerce, since international freight travel over longer hauling distances generates considerable carbon emissions.  This lifestyle habit and desire for more instant gratification has a marked implication on the environment, of which consumers may be unaware. 

This research therefore aims to examine the following research questions: -

1. What is the estimated carbon footprint of various cross-border e-commerce shipping options?

2. Will carbon labeling have an influence on consumers’ cross-border shipping preferences?

3. For this purpose, the relative carbon emissions of shipping options on popular e-commerce platforms for cross-border purchases in Europe will be assessed. Based on the estimated emissions, a stated choice (SC) survey is then designed to understand how online shoppers would react to carbon labeling.

In light of how quickly the environment is being damaged, customers are beginning to take note of how their orders are packed and shipped - and they’re paying attention to retailers who are taking their deliveries green. This is where green shipping comes into the picture. The hypothesis is that, in addition to informing consumers of delivery time and shipping cost, it can be environmentally beneficial if consumers are also informed of the carbon impact of different shipping options to aid in their decision-making process.

The remainder of this paper is organized as follows: The next section reviews the relevant literature. In the following section, the carbon footprints of cross-border shipping options are assessed. Finally, the impact of carbon labeling on consumers’ shipping preferences is examined. 

Literature Review and Approach

The online trade started in 1992, when the National Science Foundation lifted its ban on commercial use of the internet, which after the introduction of the first browser, gave rise to the massive development of e-commerce in 1993. Since then, internet usage has been growing in global terms. It amounts to 63.2% in 2020 worldwide, and in Europe, it is 87.2%

Consumers can now buy from both local and foreign sellers, thanks to the rise of digital payment methods and e-commerce platforms or marketplaces. This has spurred the growth of domestic and cross-border delivery operations all over the world. The delivery of commodities sourced from within the country's border is referred to as 'domestic deliveries' or 'domestic shipping.' This is distinct from "cross-border deliveries," which refers to the delivery of goods from different countries and jurisdictions. When compared to domestic operations, cross-border operations are frequently thought to be more complicated and inefficient. Cross-border purchases have been avoided by consumers due to concerns about lengthier delivery times and higher shipping costs. Despite the negative aspects of delivery, cross-border purchases have exploded in popularity in recent years. According to a recent PYMNTS report which examines the latest cross-border retail payments developments, cross-border e-commerce sales are expected to continue soaring next year as COVID-19 lockdowns and the subsequent acceleration of digitization have increased consumers' comfort level with online overseas transactions. The report referenced findings from a recent survey that showed that 30% of consumers in Belgium, Germany and the Netherlands made more online purchases from international retailers during the pandemic than they previously did. As cross border e-commerce demand surges, more research is required to understand the environmental implications. There are currently few studies on the comparative environmental impacts of different shipping options offered by e-commerce platforms. The existing literature has primarily focused on the carbon consequences of short-haul residential delivery, with the goal of identifying more environmentally friendly options. Cross-border deliveries are more carbon-intensive than domestic ones due to their lengthier and more complex supply chain operations. 

Given the rise in cross-border trade, the International Transport Forum forecasts a 12% increase in average hauling distance from 2010 to 2050, resulting in a 290 percent increase in carbon emissions from international trade-related freight transport. Despite the negative environmental consequences of cross-border shipping, little research has been done on the subject. Many studies have only addressed a single step of cross-border operations, which is an inaccurate portrayal of the influence of the full supply chain network, according to a review of the literature. This research fills that void by focusing on the carbon impact of various shipping alternatives for cross-border e-commerce sales. The findings of this study may be useful in empowering consumers to make better judgments regarding online purchases. 

However, compared to the scrutiny devoted to the environmental effects of ordinary consumer products, the shipping options offered on e-commerce platforms have received less attention. Even if buyers are given details on the carbon footprint of different shipping options, it is unclear whether this will be taken into account. In their decision-making, shipping costs and delivery time may still take precedence. This raised the topic of the importance and utility of carbon information on shipping alternatives being labeled. It was observed that 64% of the 215 millennials surveyed indicated a willingness to wait for an order with greener logistics operations, while only 25% of them indicated a willingness to pay for greener shipping.

To study consumer preference, stated preference surveys or SC experiments are regularly applied across various disciplines and, among which, transportation is one of the fields with the most established research on choice analysis. With the rising concerns over the environmental impact of transportation, several studies have incorporated carbon footprint in their experimental designs. For instance, Amenta and Sanguinetti applied a stated preference survey presenting different hypothetical flight scenarios with different prices and carbon dioxide emission levels. Their study reported a potential annual savings of 79,000 kg CO2e (carbon dioxide equivalent) if carbon labeling were to be made available on travel booking websites. This paper will adopt a similar methodology in the investigation of consumers’ perceptions toward the carbon labeling of cross-border shipping options. The SC experiment will be implemented to validate if the underlying preference of consumers would change with the inclusion of carbon labeling. In addition to estimated carbon emissions, three critical attributes of e-commerce shipping would also be incorporated in the design of the SC experiment: -

1. Shipping Cost

2. Delivery Time

3. Order Value

Their relevance to the study on shipping preferences are discussed below: -

1. It was found that consumers’ preferences are predominantly driven by the cost of shipping, followed by delivery speed, and subsequently by other non-cost attributes. This is supported by other studies which similarly concluded that the shipping cost is the most important decision variable for consumers’ shipping choice.

2. Previous studies have found that delivery time has a significant impact on customer satisfaction. Parcel Perform and iPrice Group found a 10%–15% decline in the satisfaction rating of the customer with each unit increase in the delivery time bracket (e.g., deliver within 3 h, deliver within 1 day, deliver within 3 days. Their finding was supported by a study conducted by Unni et al. where customers who indicated that they are satisfied with the delivery time are 1.95 times more likely to also be satisfied with the e-retailer. Just as satisfaction would increase with faster delivery, the converse is true. Al Karim reveals that delay in delivery time is one of the main inhibitors among e-commerce shoppers.

3. Order value refers to the amount of money (excluding shipping cost) that the consumer spends in each online transaction. Several studies have gathered that order value is capable of influencing purchasing behavior to a great extent. For instance, Koukova et al. found that people can have different perceptions of flat-rate and threshold-based free shipping depending on whether the order value is higher or lower. In another study by Lewis et al., the order value was found to be lower for cases where unconditional free shipping is offered. 

Apart from cost, speed, and order value, other potential delivery attributes that were considered in previous studies include the availability of order tracking services, the ability to choose a carrier (logistics provider), delivery date, and delivery time slot. These are excluded from this study since not all options are available on every e-commerce platform.

Case Study

The first objective is to conduct a comparative assessment of the different e-commerce shipping options for cross-border purchases, evaluating their carbon footprint, delivery time, and shipping cost. This assessment will focus primarily on the carbon impact created by the consumers as a result of their shipping decisions. The shipping platform for DHL (https://www.dhl.com/us-en/home.html), will be analysed. 

DHL specializes in business-to-business (B2B) and business-to-customer (B2C). The choice was made to focus on DHL since it is a global leader in the logistics industry and delivers over 1.6 billion parcels every year. As the world’s leading logistics company, DHL operates in 220 countries and territories with 4,00,000 people currently working in the company. The shipment related options provided by DHL are as follows: -

1. Air Freight : Shipping the parcel from India to the desired destination via air.

2. Ocean Freight : Shipping the parcel from India to the desired destination via sea.

With these different options available to consumers, the onus is on them to make informed choices at the point of purchase. This case study into DHL undertakes an analysis into the parcel delivery operations from India to Europe. E-Commerce sales in Europe grew to 621 billion euros in 2019 and were worth 757 billion euros in 2020. Hence, ecommerce transactions deserve focus.

Carbon Footprint Assessment

Methodology

In a multiple-order transaction, the logistics process required to fulfill the online orders is broken down into different stages to facilitate the assessment of the carbon footprint, cost, and delivery time for each shipping option. The study scope will include the following stages:

1. Long-haul truck transport within Europe—from product origins (supplier locations) to a warehouse in Delhi, the main departure city within Europe.

2. Cross-border transport—from India to Europe, by air or sea freight.

3. Warehouse operations.

4. Last-mile delivery van transport within Europe—from a warehouse near the airport or seaport to the parcel destination.

5. Consumer’s passenger trip to a CP, if any—consumer may choose to walk, take public transport (bus), or drive to the CP to pick up the parcel.

For freight transport segments of the logistics process (stages A, B, D), the carbon footprint in relation to carbon dioxide-equivalent emissions (kg CO2e) will be estimated in accordance with the activity-based approach proposed in the ECTA guidelines. These are based on the mode of transportation, the distance traveled, and the weight of the items purchased:

For the last-mile delivery to a consumer’s home or CP (stages D and E), conventional diesel delivery vans are assumed to be used for transporting parcels from the warehouses to their destinations. This research utilizes the carbon audit approach employed by Edward et al., where carbon emissions for last-mile deliveries are calculated on a per drop basis. Average emissions per drop’’ refers to the average carbon emissions sustained by the carrier per parcel delivered. For doorstep deliveries, this study will account for potential delivery failures which result in a need for repeat and multiple delivery attempts. The failure rates for up to three delivery attempts, the average distance to CPs, and the emissions per parcel delivered are estimated. The carbon emissions are subsequently computed for parcels delivered to the respective destinations, including the impact of passenger travel (stage E), if the parcel is destined to a CP. The carbon emissions for warehouse operations (stage C) is also considered in this study.  The estimated delivery time in the number of days between placing the order and parcel arrival will be estimated based on observations of transactions made on DHL.

About DHL 

DHL was the first global logistics company to set a quantifiable climate protection target in 2007. In 2017, it set a new target to reduce all logistics emissions to zero by 2050.

DHL thus plays an important role not only in global trade but also in the global economy as it drives its business sustainably in a way that reduces the carbon footprint and keeps greenhouse gas emissions as low as possible. DHL concludes that  it is already making green logistics a reality and is also continuing efforts committed to reduce emissions to net zero by 2050.

How does DHL do this?

1. GoGreen Plus

This method leads the industry to a clean and sustainable ocean and freight method. It offers the option to reduce main haul carbon emissions by using sustainable marine and aviation fuels. This is  available automatically at no extra cost for all ocean freights and air freights shipment.

2. Green Logistics Optimisation

This method focuses on avoiding CO2 emissions by using a green supply chain design (burn less). DHL Global Forwarding offers guidance to increase carbon efficiency and reduce CO2 emissions through optimised supply chain design. Together DHL GoGreen explores potential carbon optimization options and identifies customer-specific levers with the highest impact on the supply chain, for example modal shifts or consolidation of shipment.

Air, Ocean and Road Freight from India to Europe

Various modes of shipping are as follows: -

1. Less than Container Load (LCL): Ideal for consignments of 14 cubic meters or less, LCL is a mode of container shipping that entails consolidation of cargo belonging to several importers and exporters to create a full container load.

2. Full Container Load (FCL): FCL shipping requires one to pay a flat fee for the use and transportation of  shipping containers from India to Germany. The container will be for the purchaser's  use alone, and they can fill, or part-fill it as they wish.

LCL ocean freight is likely to offer the most economical option for  bigger consignments to send. Shipping it as a full load in a container from India to Germany will almost certainly cost less per unit than LCL. That’s because LCL shipping rates are based on the weight and dimensions of freight, whereas FCL rates are calculated on a per-container basis.

Air freight is significantly more expensive than ocean shipping for large consignments. But if the weight of goods is around the 100 kilogram mark or less, it’s likely to be nearly as cost-effective to fly it from India to Germany, as to ship it with an ocean carrier. Shipments with a weight of 35 kilograms or less are not handled by freight forwarders. Such goods are transported with the help of an international courier. 

It is assumed that all the calculations are in tern=ms of weight and not volume.

To see the carbon emissions for various options available via ocean and air freight, click on the link given below.

Click here.

Till now, we have calculated and seen the carbon footprint via air and sea freight. Now, let us dive deep into it to calculate the total carbon footprint that will begin from the stage of road freight to deliver the goods to the warehouse in India and end where the goods will be delivered to the customer in Europe. The supplier locations are randomly selected and the carbon emission factors for the different modes of transportation shall be assessed. 

For the analysis, 3 warehouses are considered to calculate and compare the carbon footprints in each of the cases to have a better and a quantitative understanding. The 3 warehouses considered are Delhivery, Rehousing and Prozo.

Click on the link below for a detailed analysis (Sheet 2).

Click here.

Results

The impact of different shipping options was compared for various scenarios of online orders placed in the above link. According to International Post Corporation (IPC) research on cross-border e-commerce deliveries, 63% of the cross-border parcels were found to weigh between 0.2 kg and 2 kg (40). The scenarios were thus designed with the assumption that the weight of each order is 1 kg. As and when the weight increases the entire formulae could thereby be multiplied by the weight to arrive at the final carbon footprint.

For shipments waiting for consolidation, it is expected to add one more day to the warehouse operation.

For a parcel shipped via sea freight the parcel is expected to arrive at Europe customs within 4-6 weeks. For a parcel shipped via air freight, the parcel is expected to arrive at Europe customs within 4-6 days. For a parcel arriving at the Singapore warehouse, it is expected to be delivered by the next day, which is based on the operating procedures of a popular local e-commerce carrier.

The above link gives the following conclusions: -

Trains emit the least amount of carbon footprint, while air freight emits the maximum amount of carbon footprint.

1. However, the number of days required via air is much less than that of sea freight. The number of days required via sea is 4-5 times that of air.

2. The above 2 conclusions thus set a trade off between time and sustainability. The opportunity cost of fast delivery has a negative impact on the environment in the form of CO2 emissions and vice versa. Thus, while air offers the advantage of fast delivery, sea offers the advantage of eco-friendliness. It, therefore, depends on the people and their preferences for what mode of transport they will choose. 

3. In sheet 2, in the working note, we can clearly see that the train emits the least amount of CO2. On the contrary, air freight generates the maximum amount of carbon footprint ; 14-15 times that of trains. Roads generate a carbon footprint equal to 3-4 times that of trains. 

4. The number of days taken by sea or road freight are nearly the same. However, the time taken by both of these modes of transport is 16-17 times that of air.

5. In the final analysis, we can clearly see that the least amount of carbon footprint is generated in Case 6 when goods are delivered to the warehouse Prozo by road and thereafter, sea is used as a means of transport. However, the time taken is the maximum in this case.

6. When goods are delivered via air from Bangalore to Frankfurt, then in all those cases the emission of carbon footprint is the highest.

7. From the table, we can  conclude that the time factor mainly depends on the transport used from Bengaluru to Frankfurt. When air freight is used, the time taken is approximately the same for all the cases. However when sea freight is used for the same, then the time taken is 6-7 times that of air.

8. Also, it results in an interpretation that more the carbon footprint, the less is the time taken (this may not be true for all the cases, that is, there doesn’t exist any hard core rule in this regards).

COST ANALYSIS

Let us divide the European countries into different groups.

Shipping rates to EU Countries Group 1

Let’s assume group 1 consists of  Belgium, France, Germany, Luxembourg, Netherlands, Republic of Ireland

Shipping rates to EU countries Group 2
Let us assume EU Countries Group 2 includes Austria, Bulgaria, Croatia, Cyprus, Czech Republic, Denmark, Estonia, Finland, Greece, Hungary, Italy, Latvia, Lithuania, Malta, Poland, Portugal, Romania, Slovenia, Slovakia, Sweden, Spain.

Conclusion

Global trade interconnectedness provides consumers with greater accessibility to products worldwide and this has perpetuated the growth of cross-border e-commerce. To achieve their revenue-maximizing objectives, most online shopping platforms offer differentiated shipping options to cater to consumers’ unique preferences. As a result of the increasingly competitive e-commerce market, consumers may be presented with alternative shipping options. Since emissions vary considerably for different options, consumers may remain unaware of the relative impacts and unwittingly opt for less-sustainable outcomes. This situation could be avoided if consumers are provided with the relevant data so that they can make more informed choices. This study provides a novel assessment of the carbon footprint of cross-border e-commerce shipping options. The results from the assessment were then utilized in a shipping choice experiment to examine the impact of carbon labelling on consumers’ shipping decisions. 

From the shipping choice experiment, more than half (55%) of the respondents were found to be willing to wait for greener shipping if carbon labelling was presented. While the sample size is small, the results suggest interest in carbon labels on e-commerce platforms, which have the potential to influence online shopping decisions. Therefore, this study advocates for consumers to be informed of the carbon footprint implications at the point of purchase on the e-commerce platform. Future research can look into scaling up the survey efforts and better understanding demographic and socioeconomic characteristics that influence online shopping behaviors and underlying preferences. 

While the case study presented looks into the options offered for cross-border deliveries to Singapore, the framework of analysis is a general approach that could be applied to online shopping platforms in any region. This is applicable so long as the supply chain operations can be determined to facilitate the allocation of carbon footprint across each stage of the supply chain, including consideration of other cross-border transport modes like truck or rail. This study gathered interest from the consumers’ perspective toward sustainable e-commerce, which provides a basis for further research. Beyond the environmental impact and demand-side reception, it would be important to consider the economic impact of lower-carbon shipping initiatives. For instance, with greater willingness to delay shipments, this permits opportunities for freight consolidation and delivery route optimization. However, in reducing the frequency of carbon-intensive delivery trips, this may result in higher storage cost and slower moving inventory. Carbon labelling could also influence the freight transport demand, thereby affecting overall logistic cost and operations. Further supply-side analysis will be required to develop a more comprehensive understanding of the trade-off between environmental impacts and economic viability, ultimately to achieve more sustainable freight and consumption.

REFERENCES

1. https://journals.sagepub.com/doi/full/10.1177/03611981211037249

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4. https://www.dhl.com/global-en/home/about-us.html

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