"Going green" has become more prevalent among businesses and customers in recent years. As awareness of the need for sustainability grows, so does the demand for sustainable products and practices.
The e-commerce sector is no exception. Sustainability is becoming increasingly important in e-commerce for a variety of reasons. The ease and convenience of online shopping have led to a massive increase in shopping itself. As the overall demand for goods grows, there's more pressure to produce more stuff people can buy. This, in turn, leads to a steep increase in emissions and waste from manufacturing, transportation, and packaging.
In this blog, we'll look at some things online retailers can do to be more sustainable in their e-commerce operations. Let's get started!
Roadmap to more sustainable ecommerce
Sustainability in business means being mindful of the environmental and social costs of one's operations. It requires looking not just at the bottom line but also at the long-term effects of one's actions on employees, customers, and suppliers.
In order to be sustainable, a company must take steps to reduce its environmental impact, recycle and reuse resources whenever possible, and make socially responsible decisions that are good for both the community and the bottom line.
Many sustainable businesses follow the "triple bottom line" (TBL) framework, introduced by John Elkington, that considers social and environmental responsibility alongside financial performance. This approach assesses the impact of business decisions also on people and the planet, not just profits. People, planet, and profits form the corporate sustainability dimensions, often referred to as the 3Ps of sustainability.
The environmental issues in e-commerce are not essentially different from those in traditional manufacturing and commerce. It is a question of how to grow a business over the long term while reducing environmental impact. Possible actions include using eco-friendly packaging, offering environmentally friendly shipping options, or even rethinking the business model.
In the following sections, we outline the most environmentally problematic areas of the e-commerce supply chain. We will then introduce you to ways your business can improve its environmental friendliness, respond to changing consumer preferences, prepare for more stringent regulations and protect against risks.
Understand the environmental impacts of e-commerce
The global e-commerce industry has been growing steadily over the past decade, and the COVID-19 pandemic has pushed it even further, leading to staggering records in sales. In 2022, the global e-commerce market is expected to exceed $6 trillion in sales, covering 22.3% of the total retail sales.
This growth is driven by a number of factors, including the increasing ubiquity of broadband and wireless internet access, the rise of mobile commerce, and the growth of cross-border e-commerce.
The volumes are so high that it is clear that they have a massive impact on the environment. Before thinking of implementing sustainable business procedures in your ecommerce business, it's essential to understand where the most significant environmental impacts occur in the supply chain.
The problematic nature of our current spending habits
The benefits of online shopping are all about price, speed, and convenience. Shopping online makes it easy for people to buy impulsively without even having to leave their couch. This can lead to people buying more than they need and indulging in unnecessary spending. Or how else would you explain that an average American household possesses 300,000 things?
When we act this way, we increase the burden on our environment. Producing and transporting goods that we buy only for short-term pleasure is at the root of all other problems with online (and other) commerce. We simply can't continue consuming the way we are used to.
Research finds that a single item in the home durables, textiles, and equipment sector generates 122kg of CO2 equivalent during its lifecycle (Meinrenken, C. J., Chen, D., Esparaza, R. A., Iyer, V., Paridis, S. P., Prasad, A., Whillas, E., 2020). Additionally, when consumers receive things they don't want or need, they frequently end up at the back of the garage or in the landfills rather than being donated or recycled.
All of this could be avoided if people took the time to consider their purchases and only bought what they needed. But with online shopping being so easy and convenient, that's often not the case. The "buy now, think later" movement, free return policies, and global sales events like Black Friday don't help us change our habits to be more sustainable.
The issue of packaging
Packaging is essential for protecting goods and representing a brand. Goods sold online often need to be protected from damage during shipping, and good packaging can help ensure that they arrive at their destination in the same condition as when they were shipped. In addition, well-designed packaging can create a positive impression of the brand.
However, there's no escaping that e-commerce has a massive impact on the environment, and much of it comes down to the packaging. In fact, e-commerce packaging is the largest source of greenhouse gas emissions, accounting for 45% of the industry's total emissions.
A lot of e-commerce packaging is made from plastic and cardboard materials. While these materials do the job of protecting goods and delivering brand experiences, the production of these materials requires a lot of fossil raw materials and threatens biodiversity in many ways.
For example, the United Nations Global Forest Resources Assessment (FRA) estimated that 420 million hectares of forest were deforested and converted to other land uses between 1990 and 2020. Moreover, the Great Pacific garbage patch keeps growing, currently covering 1.6 million square kilometers (620 thousand square miles), approximately double the size of Texas.
Shipping emissions
The environmental impacts of ecommerce don't stop at the packaging. The shipping and return of products are responsible for a massive portion of carbon emissions generated by e-commerce. In 2019, according to Statista, e-commerce logistics generated 19 megatonnes of CO2 emissions, accounting for 38% of all greenhouse gas emissions from online shopping. The shipping and return emissions are expected to grow to 25 megatonnes by the end of the decade.
The fast shipment speeds that many customers have come to anticipate are one of the most significant issues in e-commerce logistics. Express delivery options have resulted in an explosion in the number of delivery trucks driving around below their maximum capacity. This leads to worsened traffic jams and higher fuel consumption.
But outbound logistics aren't the only issue in e-commerce. The return of products is one of the most significant emission sources in e-commerce logistics, with a 25% share of the industry's total greenhouse gas emissions.
As many e-commerce companies offer free returns to encourage customers to shop with them and increase customer satisfaction, it comes at an environmental cost and boosts distorted consumption habits. For example, many online shoppers purchase multiple sizes or colors of a product with the intent to return what doesn't fit or that they don't like.
This practice, known as "bracketing", is a major problem in e-commerce not only as a significant source of emissions. In 2020, products worth $102 billion purchased online were returned, resulting in financial losses and completely unused products ending up at disposal or landfill.
Identify ways to reduce these impacts
There are many ways to implement sustainable practices in e-commerce, such as moving from linear models to circular, using recycled materials for packaging, and optimizing order and returns management processes. By taking these steps, businesses can play a role in protecting the environment and creating a more sustainable future.
Offer an alternative for buying
The idea of e-commerce is often based on a traditional linear model, where merchants sell goods to their customers. However, this is a very narrow perspective as there are other ways to commercialize goods that are often more environmentally sustainable and profitable from a business perspective.
Business models based on circularity, such as rental and recurring subscriptions, are attracting more and more interest. It is estimated that circular economy models unleash $1 trillion of new business into the global economy (Harmaala, M., 2021). Such models tackle the fundamental problem: people are buying too much stuff. Therefore, circular commerce models offer a tremendous chance to boost resource productivity, reduce resource dependence and waste, and increase employment.
The traditional linear commerce model is based on a one-time transaction where a company sells a product, and then the product becomes the customer's property. In contrast, circular economy models demand that companies be involved in the product life cycle for longer. For example, in the case of rental models, companies continue to own the product and are responsible for maintaining it in good condition. This creates a closer relationship between the company and the customer, as well as a greater incentive for the company to design and produce durable products with a longer lifespan.
One of the reasons for the slow adoption of circular business models could be that conventional linear business models can seem more appealing to businesses and have a lower barrier to entry. Companies may not know how to implement circular economy solutions or if they will be profitable. To increase the broader adoption of circular business models, there is a need for greater awareness and understanding of the advantages of the circular economy.
Such advantages include capturing new opportunities, meeting changing customer preferences, and dodging market risks related to price fluctuations and supply chains. A paper from Ellen McArthur Foundation points out that the second-hand fashion market is expected to become twice as big as the fast fashion industry by 2030. Moreover, the consumer packaged goods sector is transforming due to increasing regulation, public pressure, and innovation. Companies that fail to adapt are risking their very existence.
While rethinking the company's processes might appear overwhelming, software like Twice makes adopting circular commerce models simple and efficient. Also, there is no point in trying to change everything at once, but perhaps start with a small pilot or in one product category first and expand based on initial experiences and lessons learned.
Reduce, recycle, and reuse packaging
As mentioned, packaging accounts for 45% of all e-commerce emissions. Luckily, there are many sustainable packaging solutions available that are more cost-efficient and effective than using plastic. E-commerce companies can reduce their carbon footprint and save significant amounts of money by optimizing their packaging.
The first step is to reduce packaging. There are many benefits to reducing packaging materials. Perhaps the most obvious is that it reduces the amount of waste. It also helps to conserve resources since fewer raw materials are required to produce the same amount of packaging. All this leads to monetary savings and a positive impact on nature.
The second step to combat the environmental harm e-commerce packaging causes to our planet is to ensure you're using recyclable and reusable packaging materials that will not degrade the environment. Many plastic-free packing materials are available today, made from organic compounds that will decompose over time. Not only is this better for the environment, but it also sends a strong message to customers that your company is committed to sustainability.
Moreover, reusable packaging is another effective way to combat the growing emissions from e-commerce by extending the life cycle of packaging. Many reusable packaging startups, such as RePack, Olive, and LimeLoop, provide two-way shippers made from recycled materials that can last the wear and tear of hundreds of shipments. LimeLoop estimates that replacing all the single-use packages with reusable ones would save 2627.6 trillion liters of water, 429 million trees, and 5.9 trillion liters of oil annually.
Rethink your delivery options
Many retailers are rethinking their distribution strategies in response to customer expectations for faster delivery. While same-day deliveries to customers' doorstep remain a competitive advantage, the greening of the final mile has begun with retailers storing stock closer to customers and transforming stores into fulfillment centers. By storing inventory closer to customers and using stores as fulfillment centers, retailers can reduce their reliance on long-distance transportation and minimize their environmental impact.
In addition to reducing transportation emissions, retailers are also exploring new technologies that can make the last-mile delivery of products more environmentally friendly. For example, electric vehicles charged with renewable energy are becoming increasingly popular for last-mile delivery due to their lower operating emissions. Sometimes, delivery companies use bike couriers and even drones to make last-mile deliveries as environmentally friendly as possible.
As the rapid growth of e-commerce seems to continue, disruptive new technologies driving carbon-neutral shipping will continue to emerge.
Minimize returns and optimize your returns management processes
Returns are a huge issue in linear e-commerce as they cut profits, cost you time and resources, and cause significant harm to the environment. On the other hand, in circular commerce, returns and reverse logistics need to be built into the business model.
Either way, returns are a reality for doing business online, so you should have effective return management processes in place. Let's begin with how ecommerce businesses can minimize the number of returned products and then introduce ways to reduce the cost, waste, and environmental impact of product returns.
The first step in minimizing returns is to set clear return policies that are easy for customers to understand. Be sure to list any restrictions (like "no returns on sale items") and clarify what type of refund or exchange customers can expect.
Second, the content of your product pages must include comprehensive information about the product. For example, write about the product's benefits, features, and common use cases in the product description. Also, use high-quality photos or videos to give your customer a better idea of the product.
It's also important to use data to adjust your product offerings, pricing, or marketing strategy accordingly. For example, if you notice that many customers are returning items because they're the wrong size, you might want to offer size charts on your website. By paying attention to the data, you can keep returns to a minimum and improve the customer experience.
In addition to minimizing returns, online retailers should look into implementing reverse logistics strategies to reduce the cost, waste, and negative environmental impact of product returns. Such strategies can include post-sale recycling, repair services, repackaging, and material harvesting.
Post-sale recycling: Post-sale recycling of goods refers to the practice of providing customers opportunities to recycle the old products they have previously purchased from you. Post-sale recycling helps consumers recycle any unneeded products easily, reduces the amount of waste, and helps to conserve resources.
When recycled products are refurbished or repurposed, it can reduce the need for virgin materials, extend the product life cycle, and reduce the demand for manufacturing new products. For example, H&M has installed garment collecting boxes across its store network from where a third-party partner collects them, sorts them, and, depending on the condition, chooses to resell them second hand, or turn them into other products.
Repair: In a perfect world, products would be built to last a lifetime. However, even the best-made products can break down or become damaged over time. When this happens, many people throw out the broken item and buy a new one. This creates mountains of waste and ultimately drives up the cost of goods.
A more sustainable approach is for companies to offer repair services for their customers. This way, customers can fix their broken items rather than buy new ones. Not only is this better for the environment, but it also saves customers money in the long run. Moreover, it builds brand loyalty and creates a sense of goodwill among customers. In today's disposable culture, repair services offer a more sustainable alternative that benefits both consumers and businesses alike.
Repackaging: In the e-commerce world, "repackaging" refers to restoring returned items to their original condition so they can be resold. This involves inspecting the item for damage, cleaning it if necessary, and then packaging it back up. Repackaging is an important part of the returns management process for many online retailers, as it helps to ensure that entirely usable items can be resold instead disposed of.
Take a look, for example, at Swappie—Europe's leading technology company for refurbished iPhones. While Swappie does all the sourcing and refurbishing of used iPhones, they also sell them directly back to consumers with a comprehensive warranty.
Material harvesting: In product returns management, material harvesting is the process of extracting usable components from returned products and recycling products that are beyond repair.
The goal is to salvage as much material and components as possible so they can be reused in new products. This helps to reduce waste and lower manufacturing costs.
However, material harvesting can be challenging because returned products are often damaged or incomplete. As a result, it is crucial to have a skilled team of harvesters who can carefully disassemble the products and identify which parts are still usable. With careful planning and execution, material harvesting can effectively give new life to returned and recycled products.
Adopting the above processes also creates a strong foundation and a natural continuum for access-based product-as-a-service business models.
Improve the accuracy of your order management
An order management system (OMS) is a critical tool for any business that relies on selling products or services. It helps to track inventory, manage customer orders, and fulfill those orders efficiently. A well-run OMS can save a company time and money while reducing its environmental impact.
Adding more control and accuracy to your order management, you can reduce the waste associated with order processing while ensuring that customers receive their orders faster and with fewer errors. In addition, a more efficient order management system can help you reduce your carbon footprint by reducing the number of shipments made and the distance those shipments travel.
When orders are packed incorrectly or sent to the wrong customers, the resulting returns can significantly impact the environment. Not only does this create additional shipping and packaging waste, but it also consumes energy and resources that companies could use more efficiently. By avoiding mistakes in order fulfillment, warehouses can help to reduce the number of product returns.
As a result, investing in an accurate order management system is not only good for the environment but also good for business.
Conclusion: implementing sustainable practices into your online retail business
Sustainability is becoming increasingly important to businesses and consumers alike. Consumers are interested in supporting companies that operate sustainably and are often willing to pay more for products or services that are environmentally friendly.
Meanwhile, businesses are beginning to realize that committing to a sustainable model can improve their brand image and give them a marketing edge over their competitors. In addition, sustainability can help businesses attract partners, talent, and funding.
However, switching to a sustainable business model is not always easy. It requires careful planning and a dedication to long-term change. But for businesses willing to invest, the rewards can be significant.
Implementing circular models into your business operation is an ongoing process. It's not a massive revamp of everything at once but a series of incremental steps that transform your business, culture, and mindset over time. So, start by identifying the low-hanging fruits and then move to the next. And then the next. Together, we can make a big difference for the environment, fight climate change, and ensure that e-commerce becomes a more sustainable way of doing business.
