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4 Hidden Costs of Sustainable Logistics for Small Businesses

Image credit: Israel Sundseth/Unsplash

These days, there is more pressure than ever on businesses to be environmentally conscious, reduce their impact and do their part to keep the planet healthy. Logistics is a major area of focus for many, with a lot of potential for impact due to traditional transport’s huge fuel and energy requirements.

These aren’t cheap causes, though. Small businesses and startups in particular need to be aware of the costs often associated with sustainability initiatives, since funds can be tight and every dollar counts. Awareness and education can help your small business allocate resources wisely and make the biggest impact possible. As you plan your own initiatives to reduce your carbon footprint, keep these four hidden costs in mind.

1. The cost of new vehicles for the supply chain

Since so much of logistics comes down to transportation, let’s start there. There’s no question that the crop of emerging electric transport options is costlier — up front, at least — than traditional fuel-burning vehicles. Take the Tesla Semi, for example. While it’s not as bad as initially feared, at a base price of $180,000 for the longer-range model, these electric transports are certainly not cheap. That goes double for small businesses, where making the most of a budget is critical to success.

This doesn’t just apply to shipping and big semis, either. Smaller electric cars are getting cheaper, but they still tend to be more expensive than their traditional-fuel counterparts. If your business involves lots of driving or requires multiple vehicles — pizza deliveries, courier services and cab companies, for instance — you could be shelling out a lot to get all vehicles up to standards.

Finally, don’t forget about insurance costs. There are a number of factors that determine insurance costs for vehicles, so there’s no solid rule here. But in general, electric vehicles cost significantly more to insure than those running on fossil fuels — sometimes as much as 21 percent more.

It’s not all bad news, though. Electric cars have already proven themselves to be cheaper to maintain over time than traditional vehicles, and those costs are likely to continue to decrease as the technologies mature.

2. The cost of renewable energy to power warehouses and storage

Logistics isn’t just about transportation; you have to consider storage, as well. If your business requires a significant amount of storage space — say, a small warehouse — you may start to feel the impact of sustainable energy costs. To keep that part of the supply chain environmentally friendly, you’ll need to look at renewable power sources such as solar. Fitting a warehouse building with solar panels is not a cheap endeavor. Although they are cheaper than ever and will likely pay for themselves over time, the upfront cost can be significant.

The same is true for businesses such as bakeries and restaurants that need to power large coolers and freezers for food storage. Generating enough solar power to operate these types of storage units is no small feat, and it’s likely to require a hefty investment in panels.

There’s also the point of energy storage. If you want to run your operations exclusively on renewables, you’ll need a way to store excess energy for when the sun goes down. Batteries are the most reliable way to store excess energy, so don’t forget to include those as you evaluate the costs of moving to renewables.

3. The cost of lost productivity while transitioning to new infrastructure

As you’re planning out your sustainability strategy, make sure to consider the indirect costs of upgrading existing equipment. For example, if you already have a small fleet of vehicles in use for your courier service and decide to replace them with electric vehicles, not only will you need to purchase those new vehicles, but you’ll also have to sell the existing ones, which is going to cost time at the very least.

Another catch to consider is downtime due to installations. If you’re switching to solar power at the office, there’s a decent chance there will be some disruption to the working environment while the panels are installed and wired. Plan for that. It might make sense to lease an off-site workspace for the installation days — otherwise, you might be fighting with reduced productivity from noise and other interruptions.

Time is often a small business owner’s most valuable and scarce resource, so protect it!

4. Increased costs from sustainable vendors

Lastly, one major cost that may not be immediately obvious is the possible increase in rates from vendors that are also converting to carbon-neutral solutions. As businesses transition to sustainable models, they may prefer to use vendors that share these values. Those vendors may need to increase the prices of their goods and services to cover some of the rising costs on their own side of the fence, though.

This higher spending could trickle down the supply chain and cause your own expenses to increase, at least in the short term. Over time, it’s likely that everything will level out, especially considering that clean energy is becoming cheaper than other options in many areas. Just know that it might take time.

Moving your small business logistics infrastructure to a cleaner model is important, but it’s also a major undertaking. It’s critical to be aware of the costs so you can make smart decisions and move toward a place that’s good for both your business and the environment.


Parker O'Very is a freelance writer who writes about finance and insurance, automation and consumer technology. He is a graduate of Brigham Young University.

[Read more about Parker O'Very]


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