Environmental Impact of E-commerce

Global e-commerce has grown by leaps and bounds since COVID-19 hit us. A lot more users have become comfortable with digital shopping in the last 3 years. Easy and convenient e-commerce offers are addictive, especially when bundled with the feeling of getting a deal or a discount. Many times, customers are induced into buying stuff that was unplanned/unnecessary due to specially promoted events like Big Billion day etc. This is largely due to the FOMO effect. While all this is creating a wow, this causes a severe environmental impact.

Let us look at some facts to assess the situation.

Packaging

  • Products’ packaging contributes in large part to CO2 emissions from producing plastics, polluting ecosystems as well as adding enormous amounts of waste to our landfills.
  • Forest conservation group Canopy estimates 241 million tons of shipping cartons are produced every year from 3 billion trees.
  • In China, statistics from the State Post Bureau showed that the country’s courier handled more than 74 billion parcels in 2021 alone.
  • Riding on the e-commerce and food delivery trends, last year, China’s growth rate of plastic packaging increased from 2.3% in 2020 to 4.4% in 2021.
  • Furthermore, plastic packaging reached over 40% of the entire world’s plastic waste. The amount of waste recycled is only 8.7%.
  • Organizations want their products to deliver in perfect condition. This can result in excessive padding techniques using Styrofoam or additional paper.
  • This does not include other materials like plastic, bubble wrap, and tape, all of which create landfill waste and often are not, or cannot be, recycled, which further causes the environmental impact.
  • A recent report by Oceana, an advocacy organization dedicated to ocean conservation, estimated that Amazon generated 600 million pounds of plastic. packaging waste in 2021 and up to 23.5 million pounds of plastic packaging entered the world’s marine ecosystems.
  • The carbon footprint from electronic devices and Internet use reached almost 4% of total carbon emissions and is expected to become 8% by 2025.

Shipping

  • Shipping emission is another online shopping environmental impact to consider.
  • The transport of e-commerce goods across the world is responsible for a huge portion of CO2 emissions.
  • Emission figures for India are estimated to be 285g CO2 per parcel and 51% share of total delivery emissions, compared to an estimated 194g CO2 and 53% respectively for Europe.
  • One of the major problems is consumers’ desire for convenience.
  • It is estimated that by 2030, the number of delivery vehicles will increase by 36%, reaching approximately 7.2 million vehicles.
  • This will not only increase to about 6 million tons of CO2 emissions, but it will also increase commutes by 21%, as vehicles will take longer to travel due to higher traffic congestion.
  • Faster delivery requirements tend to create an environmental impact situation in which trucks are moving half-empty and leading to high fuel consumption.
  • The transportation and logistics industry is the biggest contributor to CO2 emissions in the U.S., accounting for 29% of greenhouse gases.
  • Modelled research was conducted on the movement of goods from the factory through to the end consumer, termed “last mile delivery” analyzed the carbon footprint of the “last mile delivery” for the three most prevalent types of shopping channels in the United Kingdom -physical stores, “brick & clicks” (when people order online and a physical store delivers the items to them), and “pure players” (strictly online sellers).
  • Three models examined greenhouse gas emissions from the number of products bought, transportation, warehouse storage, delivery, and packaging.
  • The analysis showed that total greenhouse gas footprints per item purchased were higher from physical stores than those from bricks & clicks purchases in 63% of the shopping events but lower than those of pure players in 81% of shopping events in the United Kingdom.
  • In the United States, greenhouse gas emissions from shopping at physical stores were also estimated to be higher than from the brick & click channel, and lower than the pure play channel, on average.

Returns

  • Companies like Amazon have offered free shipping and returns to juice growth and help customers overcome their hesitations about ordering online from the initial days.
  • Giving consumers, the security of being able to return easily the unwanted products has always been indeed a driver for the conversion, and retention of clients.
  • Every year the United States generates 15 million tons of carbon emissions due to product returns.
  • As more and more online retailers, big and small, offer the option to send back goods easily and often free, return rates, especially of fashion items, have skyrocketed, exceeding 30% of all purchased goods.
  • A study on consumers’ behaviour showed that 79% of consumers want free return shipping. In addition, 92% of them are likely to buy again if the items they purchase are easy to return.
  • Also if an item needs to be returned, it takes double the amount of transportation used to get the item to the consumer.
  • Exchanged items result in a tripling of travel time for one item – essentially a tripling of transportation emissions.

Who are the stakeholders? What are their behavioural characteristics?

E-commerce companies
  • All e-commerce companies want to deliver securely and quickly to win and keep the customer’s loyalty.
  • Most major companies receive VC funding at a loss, so growth numbers trump unit economics largely.
  • When compared with winning customers/improving customer service, shipping/packing material/returns/reverse logistics generally take a secondary position.
  • Very few companies present customers with options to consolidate/have the capability to consolidate/urge customers to consolidate.
Customers
  • Customers just want the fastest deliveries, which may have a limited correlation with actual need or urgency.
  • Many customers buy items online frequently — but they only buy a few items per purchase.
  • They are comfortable with ordering frequently depending on convenience, time, need, accessibility etc.
  • However, lately more and more, consumers are leaving behind brands that do not care about the environmental impact.
  • A majority of consumers prefer to buy from and support brands that share their values, especially Millennials and Gen Z.
Government
  • Governments need to consider climate change as a real issue and take the necessary steps to safeguard it.
  • They are responsible for creating policies, formulating strategies to reduce dependence on non-renewable energy sources, adopting sustainable practices, etc.
  • They have to regulate e-commerce players and monitor their activities from packing to delivery.
  • Collaborations and partnerships with NGOs, social groups, and corporates are essential to building a sustainable ecosystem for e-commerce.
  • Governments should research and suggest alternatives for reducing carbon footprint and incentivize organizations and consumers for adopting green technologies.

Ecological Impact of E-commerce

Ecommerce companies
  • Doing the bulk/larger package shipping till the last node.
  • Gaining carbon transparency and understanding carbon footprint is crucial to make operations more sustainable.
  • Retailers should work towards creating a feature to aggregate customer demand.
  • Companies should figure out reusable/sustainable packaging solutions. Retailers can opt for plastic-free packaging like recyclable cardboard boxes to help reduce plastic waste.
  • Also, retailers can avoid using excess packaging and instead use boxes that fit perfectly with the item’s size.
  • Besides shipping and delivery, retailers can conserve energy in their major warehouses, retail outlets, and local stores. For example, turning off shipping and packaging equipment and lightbulbs. This saves energy and also reduces costs on energy bills.
  • Standardization of packing material across e-commerce players such that reusability can benefit from the network effect.
  • A green carrier, such as an electric vehicle or a bike, can help reduce the cost of transportation.
  • Organizing a delivery spot in a specific area could be a solution for retailers who offer delivery services.
  • You can also use discounts to reward customers who choose long delivery times over fast ones.
  • Major carriers including DHL, FedEx and UPS have put climate action high on their agenda. They offer environmental-friendly programs such as paperless invoicing, and carbon-neutral shipping via carbon offsetting. Also, they offer greener shipping options including bikes and electric vehicles.
Customers
  • Customers should try to aggregate demand as much as possible. Each shipment incurs an environmental cost, even though shipping is free.
  • Research has shown that 30% of consumers purposely order more and return unwanted items when returns are offered for free.
  • Customers should try and reduce returns, and exchanges as reverse logistics is more expensive and contribute to more emissions.
  • Pickup at a local store is better than home delivery.
  • This may be a small point – but if all customers in a locality opt for corner store delivery (to which they walk and collect). So that we still can save some amount of fuel.
  • To choose green products, inform, educate, and motivate the customers are necessary, regardless of the high price of the product.
  • Customers need to demand more sustainable items and friendly environmental activities from organizations.
Government
  • Governments need to formulate & improve policies and regulations on sustainability and environmental impact.
  • This includes strengthening the business case and supporting initiatives for green companies-products-environment, digital literacy, and more internet. connectivity, financial inclusion, and ease of doing business.
  • This will result in smart economic growth and compliance with environmental policies.
  • Measures such as banning single-use plastics taken by the Central Pollution Control Board (CPCB) in India are small steps in the right direction.
  • During the transition to alternatives to single-use plastic, CPCB organized workshops for MSMEs to support them.
  • To encourage citizens to partake in the efforts, government pollution control boards and local bodies must organize large-scale awareness drives with the participation of all citizens – students, voluntary organizations, self-help groups, local NGOs/CSOs, RWAs, market associations, corporate entities, etc.
  • CPCB assists State Boards to operationalize advisories issued by conducting meetings to create an enabling support system in India. So that all the Urban local bodies in the respective states can effectively implement the guidelines with their help.
  • To increase efficiency at scale, one can implement multiple digital interventions, such as geotagging apps with complaint-tracking capabilities.

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