Brown goes green with a smart business model strategy
I have long admired UPS for its continuous improvements in customer value. With a mission to “synchronize the world of commerce by developing business solutions that create value and competitive advantages for our customers,” the world’s largest package deliver company has emerged as a leader in supply chain management services and less-than-full truckload shipping. These additions enable even the smallest of companies to compete with the big boys without distribution issues precluding ever being considered. Indeed, UPS is one of the reasons barriers to entry have fallen in many industries.
UPS argues that logistics (the planning and control of the flow of goods) is intricately linked to sustainability, as the goal of logistics is to use the least resources to transport items from one place to another. In a one-page advertising spread in last week’s Wall Street Journal UPS touts its efforts to reduce its carbon footprint, no small feat for a company whose core business is shipping packages. The ad claims that since 2009, UPS has offered carbon-neutral packaging and shipping options in addition to improving its transportation fleet efficiency and automating all paper processes and using shipping methods like rail with the least carbon emissions.
To date over 80,000 of its 8.5 million residential and commercial customers, according to the ad, have said “yes” to the carbon-neutral offer. UPS helps companies measure the carbon footprint of their entire transportation operations, certifying the process through third party vendors. It then advises on supply chain and distribution network redesign, packaging changes and other ways to manage and mitigate carbon impacts. UPS customers then purchase offsets (matched by UPS up to $1M) that fund sustainable projects like methane reclamation to become carbon neutral.
Transitioning your business models to be on-trend reflects strategic leadership at its best. In doing so, UPS adopted a visionary focus for its sustainability efforts. According to its 2010 Annual Report, UPS aims to “increase economic vitality and environmental sustainability of the global economy by aggregating the shipping activity of millions of businesses and individuals into a highly efficient logistics network.” Its achievements have earned UPS top rating in its industry by 9th overall in the Climate Counts annual rating of the world’s largest corporations on 22 climate-impact related criteria.
UPS’s focus on sustainability makes sense on multiple levels:
First, many UPS customers – from well-known consumer brands to large business-to-business companies to not-yet-well-known Gen X & Y start-ups, have made sustainability a critical part of their brand. The reasons are many: to win customer loyalty, to win the war for talent, and to reduce costs as efforts to reduce carbon footprints reduce costs, largely by eliminating waste. Offering carbon-neutral distribution services advances UPS’ mission of providing its customers with competitive advantage.
Second, UPS’ image in the eyes of its investors and employees is enriched by its own green initiatives. UPS’ alternative fuel fleet is among its industry’s larges and most diverse. Using technology and data analytics, UPS has eliminated 119 million miles from its routes while increasing its served customer base, lowering its costs. Automated systems also reduce personnel costs, making its 400,600 employees highly efficient. If the US fragmented health care system could follow UPS’ lead in information automation, our health care costs would be so much lower!
Finally, UPS is protecting its market position in the event of a carbon tax or other way of incorporating the externalities carbon emissions into prices. Such changes will dramatically increase shipping costs. . UPS is positioning itself to be the lowest cost shipper as transit costs increase; and, UPS will also be well prepared to help its customers redesign their supply chain as the relative costs of longer transit routes increase versus domestic sourcing and production. The rising cost of fuel is already making UPS’ changes look smart.
Sustainability is now viewed as a key driver of innovation. Indeed, the recently deceased renowned strategist C.K. Prahalad Competing for the Future and The Fortune at the Bottom of the Pyramid) argues in his co-authored 2009 Harvard Business Review article that “the quest for sustainability can unearth a mother lode of organizational and technological innovations that yield both top-line and bottom-line returns. That quest has already begun to transform the competitive landscape, as companies redesign products, technologies, processes, and business models.” It’s made UPS one of Forbes’ top ten most reputable companies and Fortune’s most admired company in the shipping industry.
What are you doing to “green” your business models?