Sustainability
October 20, 2021

E-commerce and sustainability: mutually inclusive?

Stéphane Botev
E-commerce and sustainability: mutually inclusive?

When was the last time you bought something online? A week ago? Yesterday? This morning? E-commerce has been booming the last couple of years, and the COVID-19 pandemic has only increased our desire to resort to online shopping, while the climate movement has been shedding light on the problematic carbon footprint of our online purchases (especially since the UN Sustainability goals were announced back in 2015). For companies and consumers alike, sustainable solutions matter, and they will matter increasingly with the rising market share of e-commerce. Companies are a sort of ‘litmus test’ to measure our ability to comply with environmental standards, and the extent to which our highly influenceable (but predictable) human behavior can be changed. After all, transformational change in tackling climate change will ultimately depend on humanity’s ability to adopt environmentally conscious behaviors. Let’s delve deeper into how brands are adapting to the market and customers’ demands in offering sustainable e-commerce solutions.

The problem at heart: how exactly do e-commerce companies pollute? 


Many areas have been finger-pointed at when addressing the issue. Those that set themselves apart are packaging, logistics, carbon dioxide emissions from upstream and downstream processes, as well as returns management. From these, packaging and supply chain management are go-to areas with the potential to improve sustainability and carbon footprint for online businesses considerably. Packaging waste and shipping are much-heard but also justifiable criticisms online businesses have to cope with on a daily basis. 

 

Not only is packaging material carbon-intensive, it is often also not designed in the most consumer-appealing way. However, to avoid being overwhelmed with the number of changes a company needs to make in order to become fully ‘sustainable’, small steps are encouraged at first (first looking at sustainable materials, then at manufacturing processes). 

 

In practice, the sustainability problem seems to be one that concerns e-commerce companies as much as consumers in an almost push-pull-like dynamic. For companies, corporate social responsibility has become an inescapable part of their branding. For consumers and clients, aside from their budget, environmental consciousness plays an important role in online buying decisions. The fashion industry in particular, driven by its sheer size,   is greatly affected by sustainability . In the US, the fashion industry is estimated to put 26 billion pounds of textiles in landfills each year according to the EPA. With online sales set to double during the next decade, the environmental impact could be catastrophic if the e-commerce industry does not adapt quickly enough.  


Online buying decisions: numbers and psychological patterns 

 

Numbers are helpful to understand the demographics of customers’ prioritisation in consumption choices. Using these, one can clearly delineate a generational divide. A further angle of analysis includes the psychological aspect of buyers’ consumerism online. It is no surprise that younger generations such as ‘millennials’ appear much more environmentally conscious than older ones such as ‘boomers’. For 70% of millennials, a company’s environmental focus is essential when making a purchase online. Even when age is not a factor of choice in differentiating consumers’ online buying behavior, 57% of global internet users would pay more for sustainable products, and 61% would even go as far as switching to another brand if the competitor is striving to be more environmentally conscious. 

 

The importance of 'sustainability' for different generations

 

Conscious consumerism matters a lot, and will continue to influence e-commerce in years to come. In fact, sustainability is only second to pricing as a factor in purchase decisions. Therefore, customers will often seek to buy from a business which aligns with their values and needs, and that is transparent in product manufacturing across its entire supply chain. On the flipside, a company will seek to respond thoughtfully to consumer demands in a desire to build a more reliable customer base. A caveat worth noting here is that 65% of consumers might feel enthusiastic about eco-friendly products, but only about 26% of consumers of the former convert into sales based on that criteria. To further emphasise this point, a recent study by the Business Sustainability Index found that 74% of online consumers do not know how to identify sustainability products.

 

Existing solutions and ideas to improve e-commerce sustainability 

 

Notwithstanding, the reasons to be optimistic for the e-commerce industry are simple. Multiple solutions do exist for online businesses in their quest to sustainability. Some of them include; introducing reusable packaging, resorting to bulk shipping, ensuring shipping is carbon neutral, implementing a returns program, reducing packaging size, and finally switching from polluting to biodegradable packaging.

 

Not only would these improve the sustainable outlook of a company’s branding, but it would also make sense from an economical standpoint because it lowers storage and shipping costs. A recent study by the Harvard Business School showcased an “Impact-Weighted Accounts Initiative”,  revealing the “true profitability of companies” by taking into account their environmental impacts (following this, some companies’ profits were reduced to zero!). Therefore, increasingly companies are in the eye of the storm when it comes to sustainability.

Asket's impact receipt

Some companies such as Target have started tackling the issue of sustainable packaging by recycling polluting materials into sellable products (toy cars, dog houses, etc.). Others such as Patagonia have become industry examples by introducing Worn Wear, a service that allows used clothing to be cleaned, repaired, and re-sold. While being a clear sustainable solution, it also fits into a marketing strategy, as customers will more easily associate Patagonia with the brand that does not encourage customers to buy new items, but instead to repair used ones. In a similar vein, Starbucks has launched a digital traceability tool powered by blockchain technology, to allow customers to trace the origin as well as the whole supply chain of their coffee beans. 

 

Here, as in many commerce sectors, transparency is key, as it amounts to increased consumer trust. In that regard, no matter what a brand attempts to sell, the notion of sustainability will always sell! Some clear-cut examples are Reformation or  Asket, two highly praised fashion brands that do not sacrifice style for sustainability. A clear message around the company’s supply chain and manufacturing methods is more helpful to the customer than simply throwing sustainability values on a product out there in the hope to capture attention. The company should be giving back to the community, and demonstrating how it contributes to ‘saving the planet’. Therefore, two aspects that will undoubtedly render any online business’s sustainability stance more accurate; 1) Where does your brand stand on sustainability? and 2) How EXACTLY is your brand’s sustainability policy implemented?

 

Conclusion

 

From surveys, a real challenge for customers is to distinguish between real sustainability and what is increasingly deemed as  ‘greenwashing’ (def: disinformation disseminated by an organization so as to present an environmentally responsible public image), as there is no international and consensual standard as to what transparent and reliable green criteria should be. All things considered, both for customers and online businesses competition is fierce, and reputation is truly in the eye of the beholder, as the market is increasingly heading into a technological direction where those who choose to ignore sustainability will simply be left behind (private equity firms invested $9 billion last year in sustainable technologies). Whether it is for you to ‘socially signal’ what your values are all about, or for companies to be perceived as eco-friendly, the pleasure of buying a product and climate consciousness should not be mutually exclusive.