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What is urban last mile and why should we care?

If you have ever shopped online and have it physically delivered to you, then congratulations, you have already participated in the urban last mile process! The bad news is, you probably have also contributed to various environmental and social issues such as emission, noise pollution and traffic congestion…

Last mile delivery commonly refers to the “last stretch” of the order fulfilment, aimed at delivering the products ordered online to the final consumer. Driven by urbanisation, rapidly growing e-commerce and customers’ increasing requirements for speed of delivery, the last mile is often described as one of the most expensive, inefficient and polluting part of the supply chain. In e-commerce sector, last mile could account for up to 75% of the whole freight costs. On the other hand, urban transport is responsible for approximately 57% of the greenhouse gas emissions generated by the logistics and transport sectors and 10–15% of vehicles equivalent miles travelled on city streets.

The present COVID-19 crisis has led to a drastic growth of the e-commerce and last mile delivery industry when many choose to shop online in order to avoid crowds. It has accelerated the existing trend towards more online shopping, making the already unsustainable last mile even more problematic. In a few years, last mile deliveries may impose a considerable problem for cities where activities are already competing for space. The negative effects of transport (emissions, congestion, noise and accidents) become critical in cities where people live and work.

That being said, what can be done to reduce the negative impact of last mile deliveries? Here, it is important to bring the concept of sustainability pillars (economic growth, environmental protection and social development) into the picture. The economic pillar refers to the creation of a long-term profitability, the environmental pillar refers to the impact on natural resources and the social pillar refers to the people-related aspects, such as labour rights and social justice. As last mile delivery is fraught with sustainability implications affecting not only the organisation but also larger networks and the environment, those performing the last mile need to consider not only the economic impact, but also environmental and social impact of their activities.

However, a recent literature review on innovative sustainable urban last mile conducted by the Nordic Innovation project i-SMILE shows that rarely any single last mile innovation could fulfil all sustainability criteria. It is thus recommended to create combinations of innovative solutions under different sustainable scenarios (i.e., social-economic, environmental-economic, social-environmental). For example, the combination of micro depots, cargo bikes, parcel lockers and IT solutions would have positive impact on all sustainability indicators. This would, however, require extensive cooperative efforts and commitment from all stakeholders, which is a challenging task due to their heterogenetic objectives.

The main conflict resides in the diverging objectives between public and private stakeholders. Public authorities such as municipalities aim for creating green cities with low pollution and congestion, while private stakeholders including retailers and logistics service providers (LSPs) place their highest priority in economic profitability. Furthermore, consumers want their orders delivered as quickly as possible while expecting to live in a city that has less congestion and pollution. Reconciling these opposing forces is not easy but not impossible.

As a point of departure, firms should integrate sustainability as a central part of their culture and evolve to more sustainable forms of wealth creation. LSPs should innovate their business models in ways that allow the co-existence of profitability and sustainability instead of making profit at the cost of the environment or people’s wellbeing. Focusing on sustainability can lead to a competitive advantage that contributes profitability in a long run. By adopting more sustainable urban freight and alleviating the negative impacts for urban environments, the conflict between LSPs and the city can thus be mitigated. Knowing the sustainability impact of their consumption behaviour, consumers may opt for more sustainable delivery options that allow for longer waiting time and lower emission. As currently consumers’ awareness for the sustainability impacts of logistics services is still low, it is thus imperative to ensure transparency and effective information sharing to enlarge the consumer’s awareness and align objectives among the stakeholders.

On a brighter side, the growth in last mile freight creates new opportunities for innovative business models, which is key to a more sustainable, resource-efficient and safe last mile delivery system in urban areas. The COVID-19 crisis has further accelerated the development speed of sharing economy-based collaborative business models such as UberEats and Foodora. Once again, these scenarios, which are reliant on the sharing of resources and new technologies, necessitate a strong and close cooperation between various stakeholders. Against this context, the i-SMILE project develops, tests and demonstrates new sustainable delivery business models with different stakeholders, and creates a roadmap how to align business priorities with ecological and social priorities. In particular, the environmental value propositions in new business models will be emphasised.

Going back to the beginning of this article, the good and bad news. Now you know that you are perhaps part of an issue that you would like to avoid in the first place. We all live inside one ecosystem, in which the actions of one affect others and vice versa. The transformation towards a more sustainable future will not happen overnight, but we encourage all ecosystem players, including you, to enhance the environmental and social sustainability impact of last mile, one step at a time.

i-SMILE Project