[ROAD TO 2050] E-commerce dream and environmental problem as delivery spews carbon

Industry

Published: 08 May. 2021, 07:00 Updated: 08 May. 2021, 14:17

[ROAD TO 2050] E-commerce dream and environmental problem as delivery spews carbon

Coupang’s reusable Rocket Fresh bag used to deliver groceries [COUPANG]

The at-home shopping delivery boom is bad for the environment and could be a problem for Korea as it seeks to meet its carbon goals.

This puts the country in a tough position. E-commerce delivery is seen transforming the economy, creating value and leading to new and better technologies and services. It may also have to be controlled for the sake of its commitment to achieve neutrality by 2050, and for the future of the planet.

As Korea makes huge investments in alternative fuels, efficiency, retrofitting and infrastructure, small trucks zoom through the streets spewing carbon dioxide so that a small package can get to a customer slightly faster. The billions of boxes themselves only add to the problem, creating waste that needs to be transported, burned or recycled.

The number of packages delivered last year jumped 21 percent on year to 3.37 billion – far higher than the 9.7 percent on-year growth rate in 2019.

In response, the relevant ministry has devised numerous plans to reduce carbon in the logistics process – from distribution centers to household delivery.

In September, the Ministry of Land, Infrastructure and Transport published an agenda to distribute 10,000 hydrogen-powered delivery vehicles by 2030. Delivery trucks powered by hydrogen and electricity accounted for only 0.25 percent of all delivery trucks last year.

In January, the ministry said it would invest more than a 100 billion won ($89 million) in research and development to improve delivery infrastructure through 2027. Areas of research include: developing electric motorbikes for parcel delivery; establishing underground transportation; and adopting an authentication system for eco-friendly logistics facilities.

The initiative is still in the initial phase, with almost no infrastructure established yet for relevant companies to join the government initiative. But the government hopes to bring about meaningful change in logistics in coming years with its steady commitment to the project.

Government plans

The Ministry of Land, Infrastructure and Transport is rolling out a number of plans with the goal of achieving carbon neutrality by 2050.

Investing 146.1 billion won in research and development in logistics facilities, technologies and infrastructure are among the priorities introduced. With the fund, the ministry will establish underground transport infrastructure for parcel delivery.

The infrastructure will be based on the existing subway system, but the government is mulling where exactly the parcels should be unloaded and on what kinds of trains the packages should travel.

The subway runs on electricity.

“Under the current law, cargo is allowed to be transported via subway,” said Kang Yoon-jin, a spokesperson for Ministry of Land, Infrastructure and Transport. “The ministry plans to make trains that are specialized for delivering cargo and relevant technologies, like that which lifts cargo from the subway to the ground floor. The trains could run between passenger trains or could only run at nights to prevent the overlapping movement of passengers and cargo to assure passenger safety.”

Kang added that the idea of delivering cargo on the subway had not been tried before because the primary purpose of the subway has been to move passengers. But the increased number of parcels has changed the government’s stance.

Specific details, like the subway stations through which the cargo will pass, have not been determined because it is a seven-year project that just started.

Using the fund, the ministry also plans to develop electric motorbikes that can carry more than 50 kilograms of cargo at once.

The motorbikes are designed to be used to deliver food as well as parcels.

A fully-charged electric motorbike can run around 60 kilometers (37 miles). This forces delivery riders that can drive as much as 200 kilometers per day to charge battery multiple times a day.

It takes around four hours for the battery to be fully charged.

To avoid this inconvenience, the ministry plans to develop a motorbike with a battery that can be switched out, not recharged, at rest areas that are frequently used by the delivery riders.

“More than 20,000 tons of carbon dioxide emission will be reduced annually if 10,000 internal combustion engine motorbikes are switched to electric motorbikes,” said Lee Sung-hoon, a spokesperson for the ministry. “That is on par with creating 2,000 hectares of a pine tree forest.”

The ministry partnered with several research centers, including Korea Railroad Research Institute, to develop the electric motorbikes.

Electric delivery vehicles emit 53.3 percent of carbon dioxide compared to the level emitted by the delivery vehicles run by gasoline, according to data by the Korea Energy Economics Institute.

Establishing charging stations where the batteries can be switched is not part of the ministry’s project at the moment.

“The focus at this point is research and development,” said Kang. “The government could secure extra budget later for building the infrastructure to spread the use of electric motorbikes.”

Apart from the research and development projects, the government plans also include offering a subsidy to shippers to encourage the use of railway run by electricity instead of delivery trucks when transporting cargo between port and distribution center.

Adopting an authentication system that confirms the sustainability and smartness of logistics facilities run by e-commerce operators is another plan to be adopted later this year.

Those who received the authentication can borrow at lower rates.

Market Kurly’s distribution center in Gimpo, Gyeonggi [MARKET KURLY]

Feasibility - Infrastructure

Relevant companies are willing to join the government initiative to reduce carbon emissions. But they argue some of the ideas are unrealistic.

Woowa Brothers, an operator of the largest food delivery platform Baedal Minjok, says electric motorbikes are “unstable.”

“Electric motorbikes are slower, require hours of charging, and their batteries are affected by the cold weather,” said Lee Yoon-seong, a spokesperson for Woowa Brothers, adding it will take some time before they are used much in the delivery industry.

Woowa Brothers, which manages delivery riders through Woowahan Youths, said it does not yet have plans on adopting electric motorbikes by a specific year of date.

“But electric bikes have lower maintenance cost over gasoline-run motorbikes because they don’t require fuel or the changing of engine oil,” said a spokesperson for DNA Motors, which sells motorbikes.

E-commerce operators, which are competing fiercely to expand market share, are making effort to achieve carbon-free logistics centers.

Market Kurly, which started operating a new distribution center in Gimpo, Gyeonggi, in February, said its conveyor belts and sorters at the new center save around 40 percent of electricity use compared to the conventional conveyor belts.

Market Kurly “uses high-efficiency motors that consumes less electricity,” said Kim Soo-jin, a spokesperson for the company. “Installing high-efficiency equipment at the Gimpo distribution center cost around 25 percent more than installing the usual equipment.

Conveyor belts and sorters are used to move products when categorizing and packaging products.

SSG.com has rolled out a trial service to deliver parcels using electric trucks from one of its distribution centers in Gimpo. It currently operates a single electric truck, but it plans to increase the number by the first half of this year.

It has also installed three charging stations for electric delivery trucks.

“Building eco-friendly distribution centers could increase costs because it requires installations of extra equipment,” said Kim Ha-eun, a spokesperson for SSG.com. “Even if the government provides the subsidy, it won’t subsidize the entire cost that a company has to pay additionally to make a distribution center eco-friendly.”

She added, “there should be a social consensus that consumers may have to spend more for the same service if a company engages in eco-friendly activities because building an eco-friendly distribution center doesn’t directly result in improved earnings.”

Feasibility – business model

Coupang says it reduces carbon emission by minimizing the use of packaging.

Under the existing e-commerce model, sellers receive a packaged item from a manufacturer, and then they repackage it before delivering it to the customer.

Under Coupang’s business model, the company directly purchases products from a manufacturer and sends them to customers from its fulfilment centers.

“More than 75 percent of Coupang’s Rocket delivery products are delivered in corrugated boxes or in a single-layered packaging,” said a spokesperson for the company.

Corrugated boxes are made from wood pulp, which is a biodegradable substance.

Coupang says the single-layered packaging is eco-friendly because it reduces the need to use more materials for packaging – though the material is made of plastic.

Coupang also uses a reusable bag to deliver fresh produce – a strategy also taken on by its rivals like SSG.com and Market Kurly.

Customers can either choose to get fresh produces delivered in a paper box or a reusable bag. Those who choose the latter has to leave the bag outside the door after taking out the groceries. Coupang collects the bag the next time the customer places an order.

Inside the bag are ice packs packaged in a paper material. The user just has to drain water and throw away the paper.

Before retailers grew environment conscious, most of them used gel-filled bags, which could release harmful gas like dioxins during incineration.

The density of Coupang’s distribution centers is also reducing carbon dioxide generated in the delivery process. Coupang says 70 percent of domestic population lives within 11 kilometers of its distribution centers, and therefore, drivers travel a shorter distance.

Prof. Seo Yong-gu, who teaches business at Sookmyung Women’s University, says the government’s push on logistics facilities operators to become eco-friendly should be imposed gradually.

“Level of regulations encouraging companies to establish eco-friendly logistics facilities should be differentiated depending on locations of their logistics centers because building eco-friendly distribution usually requires bigger investment,” said Seo. “Logistics centers in metropolitan areas that process more packages should face stricter guidelines than those in suburban areas because they are more profitable.”

BY JIN MIN-JI [jin.minji@joongang.co.kr]