The way we sell our goods has made a major shift in the last decade. Since Ecommerce has started taking a foothold in the buying behavior of consumers, it has steadily risen. With the explosion of Ecommerce during COVID everyone can agree that’s it’s not going anywhere.
While this development has proven to provide lots of opportunities for both companies and consumers, there are also downsides – especially for the environment.
With growing awareness by consumers of the negative impact on the environment, it might be challenging for brands with a focus on sustainability to get on board with the idea of jumping into Ecommerce. In this article, we will explore the emerging trend, and the efforts being taken, towards more sustainable Ecommerce practices and how the biggest Ecommerce player, Amazon, is starting to make progress.
The Opportunity – Ecommerce is Here to Stay
Ecommerce has seen an explosive rise in recent years which has been accelerated even more by this year’s pandemic and its implications on traditional forms of retail (see graphic below).
This also had a surprising influence on the popularity of items which were harder to sell online before – like groceries. Online grocery spending rose from 10.5% in 2019 to 27.9% in March/April 2020 and is likely to remain high long term.
During the past few months Ecommerce has been providing a lot of small businesses the only opportunity to survive and serve their customers when their regular distribution channels were not available anymore.
It should not only be out of necessity during the pandemic that Ecommerce be seriously considered by any business not selling online yet. It’s an excellent business tool that provides the unique opportunity to reach customers that were unreachable before. Especially for brands providing niche products. The possibility to serve customers looking for exactly these kinds of products, wherever they are in the world, opens up a lot of opportunity.
Sustainable Ecommerce – A Contradiction in Itself?
The negative impact of Ecommerce on the environment quickly becomes apparent the more one thinks about the logistics of sending small packages right to each individual customer’s front door. Ensuring the items arrive intact after a lengthy journey requires packaging, at times with multiple layers. Shipping to each customer adds CO2 and then there’s returns, having to get shipped all the way back to where they came from.
To understand how brands can make a change towards more sustainable Ecommerce we have to first look the hard truths in the eye.
Ecommerce packaging currently makes up about 1/3 of solid waste in the US. Depending on the type of product, various materials are required to ship it safely to the customer. All of that packaging usually ends up getting thrown out. This has compounded as shipping has become cheaper and quicker over the last few years. Customers have become used to ordering single items more frequently which has added up to the amount of packaging waste that Ecommerce produces.
Simply seeing the amount of delivery trucks driving around in a city on a weekday, it’s not hard to see that Ecommerce shipping creates a significant amount of CO2. When you generally consider the environmental impact of a shipment, the means of transport matters a lot. Especially as it gets closer to the customer. It has been well-documented that the last mile adds both the most cost as well as the most CO2 in the supply chain.
The nature of Ecommerce leads to a lot of small packages getting delivered right to the front door of the customer instead of bundling them all up in one big shipment to a bigger store, hence increasing the carbon footprint of the total delivery process.
Returned items pose a significant problem, not only economically but also environmentally. The return shipping significantly increases the CO2 costs/item, and a substantial number of returned items get thrown out because they are damaged or cannot be sold for different reasons. This causes additional CO2 expenses from disposal costs and creates significant waste. Each year 5 billion pounds of returned goods end up in landfills.
A Better Way to Do Ecommerce?
Unfortunately, a lot of trends in Ecommerce have put increasing pressure on both environmental and economic sustainability. Customers are expecting ever faster and cheaper deliveries and returns which is leaving companies torn between keeping up with market expectations and keeping their margins in check.
With rising awareness on the companies’ side that this trend cannot continue, as well as customer sensitivity about sustainability issues, an increasing number of Ecommerce companies have started putting sustainability on the agenda.
Patagonia, known for prioritizing the environment in their business practices, pledged to take on designing innovative polybags made from sustainable materials, one of the biggest packaging pressures for apparel ecommerce companies. They have kept their word and started using 100% recyclable polybags since 2020.
Nike has taken on the recycling approach to reduce the amount of waste. They have started reusing cardboard boxes for new deliveries instead of throwing them out. Furthermore, Nike shoes are not coming in shoe boxes within a separate card box anymore and instead only use one box, reducing the amount of waste significantly.
Among all the Ecommerce companies Amazon is by far the biggest and most influential one – often setting standards for the rest of the industry. Nearly half of all delivered packages in the US currently come from Amazon.
Since they have recently made a big sustainability pledge, let’s dive deeper into their attempts so far.
How Amazon is (Slowly) Working Towards Sustainable Ecommerce
Amazon’s Jeff Bezos pledged to make Amazon’s business carbon neutral by 2040 and has already started imposing new regulations to reach that ambitious goal across multiple areas in their operations.
Amazon is working hard at both reducing the total amount of packaging as well as increasing the recyclability of used materials. Their Frustration Free Packaging (FFP) program encourages sellers to use 100% recyclable packaging without using additional Amazon boxes. Furthermore, they are continually working on inventing better recyclable and reusable packaging materials. Over the past 5 years Amazon has already been able to reduce the weight of their outbound packaging by 33%.
‘Shipment Zero’ is Amazon’s program to make all shipments carbon neutral, aiming to reach 50% of that goal by 2030. Measurements put in place include increasing the use of renewable energy sources to power fulfilment centers, decreasing the overall travel distance of the package to the customer and using zero emissions vehicles for deliveries.
In 2019, Amazon packages started their journey to customers 25% closer than shipments by other Ecommerce companies. Considering the impact of the ‘last mile’ this makes a big difference.
While Amazon is known for having one of the friendliest customer return policies, they are also working on decreasing the environmental impact of these returns. Returns weigh heavy on economic sustainability and provide an additional incentive to get lowered.
The biggest lever for avoiding returns is to make sure the customers know as much as possible about the product they are about to purchase. Over the past few years Amazon has started rewarding sellers with higher rankings that describe their items in the most detailed way, using structured product information, a range of pictures as well as size guiding. All of which help to both inform the customer, improve the customer experience and prevent future returns.
Ecommerce is on the rise and there is no going back – it will be the main distribution channel soon. As it comes with a set of environmental pressures, it’s important to evaluate if Ecommerce can be conducted in a more sustainable way – especially for brands that care deeply about sustainable practices.
In this article we have outlined
- Why no company can stay away from the opportunities that Ecommerce brings.
- The harsh truth about the negative environmental impacts of Ecommerce.
- Which actions big companies like Patagonia and Nike have started taking towards a more sustainable version of Ecommerce.
- How Amazon is working towards sustainability with improvements to packaging, shipping & returns.
While it’s important to note that we are still a long way from calling Ecommerce ‘sustainable’ one should acknowledge the rising efforts to slowly turn business practices around and make use of the current initiatives, finding a way to bridge opportunity and ethos.
A big part of that is getting involved. It’s hard to drive change if you don’t participate in the system because the system then has no incentive to care about your needs. The more brands with ‘better’ values participate in the Ecommerce world, the more likely it is that these values drive the necessary change towards more sustainability. Ultimately the economic incentives of serving the needs of sustainable brands might drive big Ecommerce platforms or fulfilment providers to innovate and design new systems to do Ecommerce in a better way. If you think you are too small to make a change, think again. There are many more small brands just like you. Together, you are not so small anymore.
If your brand hasn’t made the shift towards Ecommerce yet, we are more than happy to help you bring your ‘better’ products to more people.