Erste Asset Management

Battle of the logistics giants (Engagement)

Battle of the logistics giants (Engagement)
Battle of the logistics giants (Engagement)
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Engagement is of great importance for Erste AM’s sustainable investment approach. It combines own initiatives with collaboration on a national and international level. The structured engagement process is based on the “EAM Engagement Guideline” which determines issues, approach and procedures.

Does the warehouse of an online retailer look like that of a brick and mortar retailer, or like the distribution centre of a logistics company? This is a question the German trade union ver.di has been arguing about with online giant Amazon for years. The resolution of this question is relevant for the specific collective agreement, as one would come with slightly higher wages than the other one. Amazon claims it is overpaying the current agreed wages anyway. It is unclear who will win this one. But more strikes during Christmas business are very likely.

Therefore, we did not only involve logistics experts in the talks around this ESG Letter edition, but also online retailers. We want to work out how our parcels make it under the Christmas tree.

Little willingness from listed retailers to provide information

That being said, the willingness displayed by the sector to engage in discussion was sobering. Of the mail order companies we contacted, the unlisted German Otto Group aktiv was the only company to actively enter into a dialogue with us. Neither Zalando nor Amazon were interested in talking to us. In fact, Amazon has rejected numerous requests by shareholders for a transparent handling of sustainability criteria in the past. While this is a sign of continuity, it is also one of the reasons why we have excluded the company from our sustainable investment universe.

By contrast, Otto already has transparent sustainability reporting in place.

In addition, the company also demands appropriate social and environmental standards in the management of its supply chain and extensive transparency about the factory structures in which products of its own brands are manufactured

The logistics company of Otto Group, Hermes, is also one of the first companies in the sector to subject all German sub-contractors to annual audits with respect to the working conditions of their deliverers. If problems have been detected and another audit does not show any improvements, the contract with the sub-contractor is terminated.

With regard to our engagement, we can see decidedly better results in terms of working conditions in the logistics sector than in the online retail sector. While Österreichische Post AG holds its sub-contractors to similar standards (please also refer to the company of the month segment), only few companies, e.g. Fedex, include external employees in their accident data.

The development of Deutsche Post in this area is also worth noting. In the past, the company has been involved in labour law infringements and conflicts with unions in Latin America. Not the least due to long years of engagement by a coalition of German-speaking investors has this issue meanwhile been resolved, and according agreements have been signed with the respective unions. Due to this success, Erste AM has taken the company back into its sustainable investment universe.

Data as a future topic also in logistics

Whereas practically all logistics companies report on their efforts in the environmental area (N.B. Fedex even illustrates their financial effects on the company), the issue of data (protection) has proven even more interesting within the framework of our talks. To Österreichische Post AG, the personal data of its recipients are a crucial element for product development, even though the company is not excessively outspoken about the marketing solutions that are based on these data. Otto points out that it can mine about 250 data sets from the connection of its customers to the company’s servers. However, the company also insists it does not trade these data, but only uses them to inform its (better) understanding of its customers and to fight fraud.

Interestingly, this approach offers both – financial and environmental benefits: a reduction in returns to sender, and the resource-efficient organisation of the flow of goods. If the desired product is already close to the customer at the right time, transportation routes and emissions from air freight can be reduced drastically. Perhaps local online solutions such as the Shöpping e-commerce platform of Österreichische Post AG are a sustainable alternative to the extremely CO2-intensive model of Asos that delivers via air freight even from the UK to Australia.

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