Climate Change: Edging the UK towards its last letter?
Climate change is having a marked impact on Royal Mail Plc's services – this post explores some of the remedial efforts taken by the company to remedy the situation.
Climate Change: Edging the UK towards its last letter?
Sending letters since 1516!
Royal Mail PLC is the UK’s largest universal postal service provider, supporting customers, businesses and communities across the UK. Royal mail operates under a “one-price-goes-anywhere”, six-days-a-week service on a range of letters and parcels to more than 35 million addresses across the UK – the Universal Service agreement. The Group delivers around 1.1 billion parcels and 15.6 billion letters. Royal Mail PLC is a key component of the UK’s economic and social infrastructure, providing services to private individuals, companies and communities and employing c.160,000 people. In October 2013, Royal Mail successfully floated on the London Stock Exchange and was subsequently admitted into the FTSE100. Around 700,000 members of the public bought shares in Royal Mail.1
The challenge: Rising costs and hazardous conditions
Increased flooding, rising sea levels, more intense weather events, and changes in temperature and precipitation patterns disrupts Royal Mail’s ability to provide mail service and increase costs for maintaining infrastructure. These issues jeopardise the universal service agreement and endanger the lives of the thousands of employees that work for the business. Operations are most affected by extreme weather events which can delay and disrupt mail delivery. 1 Given that 6.2 million people in the UK lives by the coast areas, sea level rise driven by climate change puts many of the service’s facilities and staff at risk.
Strengthening the operation:
Royal Mail’s existing planning for disruptions to mail delivery includes the preparation and response to these events. Climate change adaptation initiatives seek to identify how long-term planning and collaboration across functions can reduce the costs associated with extreme weather events. This includes infrastructure design, network configuration, and creation of common resources that help decision-makers take the changing climate into consideration. Further, Royal Mail’s climate adaptation planning must take into account not just the cost to rebuild a facility after a weather-related event, but also downtime, equipment loss, availability of backup processing support and other significant cascading effects. 1 2 3 The objective of Royal Mail’s adaptation process is to avoid or minimise these damages. Examples of key events include: changes in the severity of damages related to extreme storm events, sea level change, extreme rain, and temperature changes that lead to temperature-related health risks and infrastructure damage. 3
The key is to minimise operational downtime and to regain full site restoration and repair. Royal Mail’s action response plan provides standardised procedures for natural disaster planning, initial response, mitigation, and facility repair. Ongoing revision is informed by actual experience with such situations in order to learn from exteme weather conditions and fluctuating temperatures that pose difficulties to Royal Mail employees.
CSR at the forefront of company KPIs:
- Royal Mail’s managers’ bonuses are now linked to its Corporate Balanced Scorecard performance, which consists of 12 performance indicators. One of the metrics on the Scorecard is Total UK Costs. This includes the cost of energy and fuel used to power its buildings and vehicles. Royal Mail sets annual targets for cost reduction and links managers’ bonuses to achievement. 2
- Gas and electricity budgets are decentralised to local operations teams to help drive “accountability, empowerment and performance improvements”. 1
- A large proportion of managers’ bonuses are also linked to the number of delivery offices that undergo modernisation during a year. Modernisation includes removal of private and other support vehicles from logistics operations in favour of a more efficient, modern fleet. 2
- Environmental management forms one of the ten pillars in Royal Mail’s World Class Mail (WCM) programme. WCM is a system that delivers and defines efficiency, safety and quality in the workplace. All mail centres and delivery offices have now started using WCM, which is audited across the group. Audit points are awarded for carbon emissions performance, which is measured per km travelled in the Network and Distribution business unit. 1
- Royal Mail joined the Logistics Carbon Reduction Scheme to strengthen its commitment to reducing carbon from UK roads. The LCRS is a recording and reporting system for emissions from road transport. The scheme demonstrates the efforts of Royal Mail to cut carbon emissions and contribute to national carbon reduction. 5
Next steps in long term planning:
- The company needs to invest in weather management resources to better respond to more intense or far reaching events
- Employees need a high level of connectivity to emergency services, and to company disaster mitigation teams in the case of disaster
- Royal Mail’s building portfolio and individual facilities and equipment for climate change impacts need continual upgrades and evaluations (Flood barriers in York and wider North failed in December 2015)
- To further invest in sophisticated equipment to process and sort mail, currently Royal Mail is able to function during occasional weather extremes but this may change as conditions become more extreme 3
Words: 800
Citations:
- Royal Mail annual report: http://ar2015-16.royalmailgroup.com/strategic-report-1.html
- Royal Mail Climate change; Investor sheet: http://www.royalmailgroup.com/sites/default/files/RMG%20CDP%20Response%202014.pdf
- USPS Green initiatives and strategies: http://about.usps.com/what-we-are-doing/green/pdf/CCAP_FINAL_2014.pdf
- S. Postal Service Is Worried About What Climate Change Will Mean For Mail: http://www.huffingtonpost.com/2014/10/31/mail-climate-change_n_6085108.html
This was a really interesting post about a particularly interesting company. Royal Mail’s predicament is unique because it provides what many consider a critical service: guaranteed postal delivery. As a provider of the public good, Royal Mail seems to have a duty to set an example for what business in a world with climate change looks like. In that vein, it was good to see the CSR efforts Royal Mail has undertaken so far but I’m curious whether Royal Mail has considered changing its “one price anywhere” model. While Royal Mail is a victim of climate change, it’s also a contributor to it. Hundreds, maybe thousands of trucks making daily runs across the U.K. contribute in a huge way to global warming. With a one price anywhere model, it’s hard to see how the externalities created by Royal Mail are being internalized either by the customer or the company. Perhaps Royal Mail should consider shifting its vehicles to clean-energy powered models and changing its business model and pricing to better reflect the externalities created by postal mail delivery.
Very interesting post – I think this does a great job at highlighting a key issue with climate change – it affects everyone and every business, not just those that are easy to connect with changing weather patterns etc. The mention of infrastructure (by which I mean public infrastructure such as roads rather than Royal Mail infrastructure such as distribution centres) raises the question in my mind as to who is responsible for maintaining and taking responsibility in these cases – should the government be spending more on climate change interventions? Or is this an issue that gets pushed onto businesses and organisations to deal with on a more individual level?
The rise of e-commerce is going to put additional pressure on Royal Mail to deliver quality service without sacrificing environmental sustainability. In these circumstances the efficiency of delivery routing can play a significant role in reducing emissions. Royal Mail’s weather concerns represent an interesting conundrum, as it is precisely when weather disruptions hit an area that the ability to deliver mail, supplies, and aid becomes of paramount importance! Perhaps advanced delivery technologies such as aerial drones (http://www.flyzipline.com/) or self-driving delivery robots (https://www.starship.xyz/) will provide a pathway to more sustainable options even in the event of weather challenges.
Great post – very well done. I wonder the role that climate change will play in the future of the company given its transition into private ownership. How is management’s track record in the past 5 years compared to the previous 499 years of public ownership? You highlight some good measures that mgmt has taken to link incentives (bonuses) to reduction in costs. I think an effort to get the cost down at the individual employee level shows focus and dedication (did this come about following a comprehensive TDABC analysis?). Excited to follow this story in the future.
Great post on a very interesting topic. I would be curious to see what competitors are doing in the industry. Would there be some benefits of logistics companies coming together to combat this? I’m guessing many of them would be in a similar position and some of the large global ones (DHL etc.) would face the added pressure / risk of coordinating global climate change concerns.
This might be a tangent but let’s grab tea and scones sometime to discuss whether drones might be the answer?
Great post! The steps Royal Mail is taking are measurable, attainable and appear to be properly incentived (read: they might actually be effective at achieving their goals). A lot of companies adopt shadow goals or have vague programs aimed at making a dent in their eco-impact but it appears RM is taking this seriously. I’d be interested to know how these steps are being received by investors and if doing the right thing has been met well even though it might be more capital intensive up front.