Multi-echelon distribution strategy in which freight is delivered to customers via intermediate depots rather than using direct shipments is an increasingly popular strategy in urban logistics. This is primarily to alleviate the environmental (e.g., energy usage and congestion) and social (e.g., traffic-related air pollution, accidents and noise) consequences of logistics operations. This paper presents a comprehensive MILP formulation for a time-dependent two-echelon capacitated vehicle routing problem (2E-CVRP) that accounts for vehicle type, traveled distance, vehicle speed, load, multiple time zones and emissions. A case study in a supermarket chain operating in the Netherlands shows the applicability of the model to a real-life problem. Several versions of the model, each differing with respect to the objective function, are tested to produce a number of selected key performance indicators (KPIs) relevant to distance, time, fuel consumption and cost. The paper offers insight on economies of environmentally friendly vehicle routing in two-echelon distribution systems. The results suggest that an environmentally friendly solution is obtained from the use of a two-echelon distribution system, whereas a single-echelon distribution system provides the least-cost solution. (C) 2014 Elsevier B.V. All rights reserved.